Making Choices

This holiday season marks my 16^th month writing this Blog. As I reflect back on the entries, one truth about leadership is prominent among all the topics: Leading is foremost about making choices; the central choices are about behaviors and business matters.  If a leader – directly or through others – makes good choices, then the likelihood of business success is enhanced.  Alternatively, if the leader is prone to wrong decisions, then failure lurks. Unlike baseball, a winning season in the leadership game requires many more wins than losses. The ratio of wins to losses must also trend upward as the degree of impact from a decision increases. For example, strategic decisions often impact an entire enterprise whereas smaller tactical decisions are incremental and easier to absorb if wrong. 

There are notable examples of how decisions have had dramatic effects on organizations. For example, JCPenney CEO Ron Johnson’s decision to retrain customers to accept everyday low prices as a substitution for coupons and large markdowns has proven disastrous, precipitating a drop in revenues of nearly 25% between fiscal 2011 ($17.20 billion) and fiscal 2012 ($12.985 billion). Sales continued to slide through the 4th quarter of the current 2013 fiscal year.  JCP compounded its mistake by installing the new pricing approach without a market test. 

Jamie Dimon's decision, as CEO of JPMorgan, to allow nearly complete autonomy for its Chief Investment Office has also proven a problem for the business and his reputation. He seemed to reduce oversight for this unit, which ultimately led to negative consequences. ¹ Fortunately, Morgan has the resources to weather all the losses and resulting fines. 

Finally, Kodak’s decision not to introduce its creation, the digital camera, because of fears it would cannibalize its film business² is one for the business history books. Their decision to remain loyal to their core business, despite their own research suggesting digital would overtake film,² is a study in how decision-making failed. Today it has emerged from bankruptcy a completely different company, but it remains uncertain if it will survive for the long-term.

All of the above wounds were self-inflicted. Leaders need to make choices, and they make thousands of them. I applaud a leader who can make a call. As a worker, there is nothing more frustrating than being part of a company where the managers and leaders cannot decide on a direction; without making choices, there may be feelings the business exists without purpose. When an organization plays the middle of the road in hopes of keeping all its business options open it also creates conditions for mediocrity. 

Leaders make good and bad decisions all the time. One could say a leader’s job is all decision-making and their choices can have positive or negative consequences. I wonder what organization will be the next victim of inadequate decision-making? I think it is instructive to consider the range of decisions faced by leaders and their impact. 

Consider Yahoo’s recent decision to shutdown small-business websites and e-mail accounts that were previously part of the ATT – Yahoo partnership if the business did not sign up directly with Yahoo by a certain date. They cut these customers loose without providing an electronic means for account reactivation. The only option presented to these customers was a telephone call, but it was either not possible to get through or the phone system hung up on you after a long hold. After approximately 10 days, they rectified the matter with an electronic link to reinstate the accounts and, then a week or so later, reinstated the accounts automatically. Could this poor execution decision sully their reputation to the point of hurting their long-term business prospects? It is hard to know which decisions go viral and can cause serious problems. Does this problem sound like the botched implementation of the healthcare law’s websites? 

Decisions come in small and large varieties. Leaders make thousands of small and big decisions each day with different levels of impact. The following outlines a few decisions that need to be given serious consideration because they are relevant to all leaders:

Behavior

One of the most important decisions a leader can make is how to behave. What makes leading so challenging is the ongoing need to adapt behaviors to a situation and the person(s) being led. Does the situation or worker require a more directive approach or is empowerment optimal?  For example, if a business is in crisis, a more directive style is usually warranted. 

More fundamental to the circumstance the leader finds him/her involved in is the ongoing demeanor and behaviors the leader puts out on a regular basis. Is the leader respectful and friendly, and does he/she engender a positive climate? Does the behavior encourage workers to take the lead and work independently?  How a leader behaves impacts the results of the organization and the corresponding relationship with the followers. High-quality relationships can lead to improvements in performance, citizenship behaviors and job satisfaction.³ Further, the decision the leader makes about what style to exhibit (i.e. transactional versus transformational) has direct influence on the outcomes achieved.³ 

Culture

An organization's culture does not just happen. Leaders can deliberately set the culture or let culture evolve and be defined independently or by others. Culture is defined as "a system of shared meaning held by members that distinguishes the organization from other organizations"^{3 (p. 513)} and can be strong ("intense and widely shared") or weak.^{3 (p. 515)} Leaders can take control of culture by first understanding the existing culture and comparing it to a future desired ideal state. It requires the leaders of a business to answer the question, “What culture is desired?” Culture often emanates from the values of the leaders – what is important to the leader often becomes of importance to the organization. Values can often be inferred by what is measured; what is not measured is usually less important. 

Decision-making Involvement

The degree of worker involvement in decisions is also another important choice. Some organizations operate with a top-down approach whereas others are more inclusive. Workers tend to prefer being part of what is happening. Motivational research explains that knowledge workers are motivated by job autonomy and the pursuit of mastery, and they seek purpose and meaning behind what they do.⁴ Collectively, these three variables influence the degree of motivation; unfortunately, most organizations tend to believe that offering cash incentives is motivational – this may be true for jobs that have set procedures but not knowledge jobs (unstructured work).⁴

 

Organizational Climate

Organizational climate is defined as "the shared perceptions organizational members have about their organization and work environment."^{3 (p. 517)} Climate may be an outcome of the many choices, but climate is a choice; how leaders behave sets the tone for climate. A positive climate increases job satisfaction, involvement, commitment and motivation.³

 

Organizational leaders make thousands of decisions, big and small, in the course of a day. The larger strategic decisions can have grave consequences if they are wrong. The smaller decisions have less impact and therefore its quality is not as important, but these smaller decisions add up. There is a certain set of decisions that leaders always need to address, and they are described above. Leaders will continue to make mistakes as it relates to the choices made; organizations need to establish proper decision processes to prevent negative consequences.

Please feel free to make comments.

References

¹ By Schatzker, E., Kopecki, D., Keoun, and Harper, C., Businessweek, June 14, 2012. “Jamie Dimon's Risky Business.”  Retrieved 9-7-12 from http://www.businessweek.com/articles/2012-06-14/jamie-dimons-risky-business

² Mui, C. (2012). “How Kodak Failed.” Forbes. Retrieved 1-2-14 from http://www.forbes.com/sites/chunkamui/2012/01/18/how-kodak-failed/

³ Robbins, S., & Judge, T. (2013). Organizational Behavior (15th ed.). Boston: Pearson.

⁴ Pink, D. H. (2009). Drive: The Surprising Truth About What Motivates Us. New York: Riverhead Books.