Last time we looked at the Advice Process as a simple (in principal) 4 step decision making technique -

• Decide who should decide

• Make a proposal

• Seek advice

• Decide.

While the process itself is very simple, getting it working in most organisations is very tricky because it completely upends a number of pretty baked in cultural conventions - use of hierarchical authority, undermining consensus to get your own way, lack of trust requiring approvals and so on. The existing culture will fight this process every inch of the way. But, if the organisation is really serious, really puts some resources into this and pushes it forward, it can act as a significant catalyst to cultural change. By changing the way decisions are made, the cultural conventions around decision making can be transformed.

Last time we looked at some of the problems organisations face around decision making using traditional top down or consensus based techniques. We also introduced the idea of collaborative non consensus as a decision making technique - where everyone can discuss the decision but not everyone has to agree to the decision for it to be ratified. These can range from fairly simple systems where people can say “yes”, “no” or "can live it it" which allows them to raise an objection but not veto the whole decision, right up to fairly involved systems based around the idea of principles and objections - objections based not on just not liking an idea but on violating some fundamental principle that the organisation lives by.

While principled systems work well for organisations that are deeply in touch with their principles, other organisations may need a more structured approach. One such approach is the Advice Process which was developed at an organisation called AES many years ago and was documented in Frederic Laloux's wonderful book Reinventing Organisations. The Advice process is a simple, structured decision making process that involves 4 steps -

• Deciding who decides

• The Proposal

• Seeking Advice

• The Decision

Probably the least understood (or most misunderstood) lean principle is "decide as late as possible". I have seen it used to justify all sorts of weird decision-making policies that generally involve never making decisions, because surely as late as possible means leaving it until the absolute last possible moment, or even later. I have seldom, if ever, seen it applied correctly. So let's take a look at this principle and see what it really means.

The other way to express this principle is "defer decisions until the last responsible moment". There are two points of confusion here. The first is what is the last responsible moment? The other is what exactly do we mean by deferring decisions? Let's look at the last responsible moment. What is the last responsible moment? Does it mean the absolute last minute? Do we leave all decisions until we are absolutely forced to make one because otherwise the whole endeavour will fall flat? No. That makes no sense at all. Leaving decisions until they are forced upon you is hardly being responsible. Does it mean making decisions early because that's the responsible thing to do? Again, no. Making decisions early isn't using the last responsible moment. The last responsible moment is a really hard thing to define, so let's not try. Let's re-word it instead. The intent of the last responsible moment is to make decisions with the maximum possible information.

There has been a lot of talk at work about increasing empowerment and employee engagement. The common complaint I get from management is that "we have empowered our people but they just won't make use of it". It's a common story. Management gives empowerment but nothing at all happens. Things go on as they did before - everyone looks to management for direction. No one takes initiative. No one takes ownership. No one is empowered.

Empowerment takes more than a few words from management. You can't just tell people they are empowered and lo and behold, they are empowered. Empowerment is something people can't be given. They need to take it, it isn't something you can give. It is something people need to become. Management can't give empowerment. What they need to do is create an environment that allows people to become empowered.

So last time I talked about large companies and some of the reasons why they make sub-optimal decisions. Not bad decisions, but ones that aren't as good as they could be. The main reason for sub-optimisation was centralisation of decision making and the main reason for centralisation was the need for control. In particular the control on spending money. With no central control of funding, anyone could spend a bunch of company money and the company would soon be broke.

If decentralised decisions are more optimal because the person making them has more information than someone further from the coal face, but centralisation is required for spend control, what are large companies to do? Are they doomed to make sub-optimal decisions forever? Fortunately, no. There are ways of maintaining centralised control of spend while allowing decentralised decision making about where to spend money. There are, in fact, many ways to do this and we will look at one of them now. I'm calling it outcome based funding; I'm sure the financial folks have a fancy, official name for it, but outcome based funding will do for now.

Everyone who has ever worked for a large company knows that they make really silly decisions. Completely illogical decisions. Decisions so monumentally ridiculous that you wonder how the company actually manages to survive as a going concern, let alone turn a profit. It's seemingly obvious to everyone in the organisation, except the senior executives who are making the decisions. Good projects aren't funded, bad ones are. Good teams or departments are restructured but poorly performing ones aren't. Opportunities are lost. How do they continue to make money with all these bad decisions? And why do smart executives continue to make them?

The answer of course is that big companies very seldom make truly bad decisions. What they make are a lot of very sub-optimal decisions. Decisions made are seldom illogical, there is a lot of reasoning that goes into them. Unfortunately, that logic and reasoning is based on very poor information. The decisions they make are good enough to stay in business and continue to make significant amounts of money. They just aren't the best decisions possible. The real question isn't "how can companies still make money while making poor decisions" but "how much more money could they make if they made better decisions". Looking at the reasons why companies make sub-optimal decisions can point us to ways to make better ones.