When making a decision, two heads can be better than one, but two – or even more – perspectives are definitely better than one, especially in today’s dynamic and widely different global markets. These authors call it ensemble decision making and they describe the three steps for making it work.
How do decisions get made at the top of global companies? With individual leaders at the top of global organizations increasingly unable to grasp the full complexity of the firm’s worldwide operations, the task more now than ever falls to groups of leaders at the top.
That poses a challenge, however. To be properly informed about risks and opportunities in diverse markets, these leaders need to form a group that is itself diverse in terms of its viewpoints, perspectives, experiences and expertise. Ideally, members would be geographically distributed as well. And at the same time, this group needs to be perfectly synchronized – able to work together to deliberate, solve problems, make decisions and direct the global organization. These two imperatives – for group diversity on the one hand and for synchronization on the other – are often in conflict. The more perspectives and viewpoints at the table, the more disagreements and conflicts a leadership group might expect.
The way for groups of leaders at the top to overcome this difficulty is to lead together as “leadership ensembles” – groups of leaders who are flexible enough to configure themselves according to the type of decision that is needed. Just as a cellist takes on different roles depending on whether he or she is playing with a quartet, a chamber orchestra, or a full orchestra, so too with today’s leaders. For example, a group of leaders may need to debate a controversial change in company direction, draw on close relationships to quickly ratify a decision or discuss a range of possible solutions to a problem. Each activity requires a different ensemble configuration. This article describes and discusses four patterns of global decision-making.
Leadership ensembles: The global decision makers
Consisting of the top one or two percent of executives and experts at a company, ensembles bridge a host of differences – in language, culture, time zone, experience, and more. They also make it easy for groups of leaders to configure themselves according to the task at hand. Sometimes, consensus is the goal; at other times, tough debate is required. In some cases, it’s critical for the team to make a decision; in others, the decision has been made, but leadership needs to absorb it and explain it far and wide.
Consider how top leaders at global beverage giant Diageo routinely change depending on the group’s objective. Gareth Williams, head of HR, notes that when the executive team gets together to assess the company’s performance and operations, the agenda is often a routine one, involving a fairly predictable array of faces around the table. But when their discussion turns to the question of future growth, the composition of the group changes to include regional executives. The group’s behavior shifts as well, with more viewpoints expressed. For example, a series of discussions examining consumer and value-creation dynamics through a diverse set of quantitative and qualitative data ended up challenging team members’ past assumptions. Top leaders decided together to make a shift in strategic intent and investment, targeted at the emerging middle classes in the world’s high-growth markets.
As this example suggests, effective ensemble leadership teams are characterized by three defining attributes, which we also identified in our research findings. First, rather than perfect a single decision-making routine and establish fixed governance roles for the sake of speed and efficiency, they exhibit disciplined agility. That is, they enlist the widest array of perspectives while also maintaining discipline and speaking with one voice. Second, rather than react to events as they unfold, they exercise foresight and strive to change before they are forced to respond to events outside their control. They can’t just strategize about the future, they have to own it—by bringing the best insights and most important future-oriented perspectives into their discussions. And third, the best ensemble leadership teams apply synthetic intelligence—making sense of massive amounts of information by asking the right questions, embracing paradox and reconciling contradictory points of view.
Four patterns of ensemble decision-making
In our leadership ensembles research, we interviewed more than 50 top-level executives. This helped us identify four general blueprints for decision making which successful ensembles can follow. While these blueprints can be shifted to match the company’s environment and growth strategy, we found that many top leaders often fall back on a default framework that influences how they work together.
The global leadership ensembles we studied varied on two dimensions:
First, leaders generally emphasize either issues of talent and culture or structure and process.
Second, they generally either seek to create a highly integrated organization, with standards that apply everywhere, or they prefer to allow local operations to maintain a high degree of autonomy.
While these dimensions represent a continuum rather than binary choices, they suggest four relatively distinct patterns that frame decisions at the top.
1. Incubators: Ensembles that apply this blueprint value a cohesive corporate culture and see themselves as stewards of the values and behaviors that will generate future success. They make acquisitions with care, emphasizing cultural fit with any new addition.
Ajay Piramal, executive chairman of India-based Piramal Group, explained that as his top leadership group contemplates expanding into new areas such as financial services and real estate, “It’s very important for us to think through what we should do, what in our experience generally has succeeded in the past, and what we need to avoid. [We now] spend much more time thinking about the key values our new businesses should have and the principles for those businesses.” The leadership at Piramal follows through on this concern. “We have a half-day session with newly acquired businesses to lay out the guiding principles and the rules we want to follow. This is so new people who joined us understand clearly where we stand and the sorts of boundaries in which they will be working.”
An incubator blueprint is the preferred choice of ensembles whose companies are growth-oriented and branching into new markets, but aren’t looking for rapid entry or first-mover advantage.
2. Diplomats: Ensembles that apply this blueprint pursue outcomes through a process of give-and-take among local businesses, and between local businesses and headquarters.
“We’re working to establish more global practices,” explained John Mahoney, chief financial officer at the office supply retailer Staples. But rather than dictate change, his leadership’s role is “to challenge: When things are going well, what is it that’s driving that? Is it something that works because it’s tailored to the local markets? Or is it something that the management team should adopt as one of our common, more global practices?” Mahoney notes that the global leadership at Staples “may be fairly certain about the right way to do things, but we may go back and forth between being directive and being cooperative. We’re working to make sure the strategic decisions in the local markets get made properly and get executed properly and with the full support and cooperation of the local market operators.”
Ensembles may often operate as diplomats when expanding globally, and not just to access new markets, but also to integrate new talent and new ideas. They are more concerned with the quality of management and less concerned with speed and efficiency in the short term.
3. Engineers: This type of blueprint wants, above all, to optimize the organizational structures and processes that tie their firms together. Here, ensemble leaders view changes to processes and structure as the most immediately useful tools at their disposal – tools that will ultimately build and foster a single culture across the firm.
Ian Cheshire, group chief executive of the world’s third-largest home-improvement retailer, Kingfisher, is focused on driving a more common product mix across the company’s stores. To do so, Kingfisher restructured the way that regional functional heads interact. “In our effort to have a common product range,” Cheshire explains, “we decided to create a global network among local businesses, who decided which categories to carry.” Ensembles that apply an engineering blueprint often prioritize consolidation of operations ahead of understanding local innovations or enhancing local autonomy.
4. Directors: Ensembles taking this approach want decisions to be made by those who are closest to the operations involved. They therefore see great value in keeping many decisions local and, like engineers they focus on using processes and structures to delegate responsibilities.
The Toronto-based hotel chain Four Seasons has had to learn faster than most other companies what kinds of decisions need to be “contracted out” to local managers. According to former CEO Katie Taylor, “We came to realize that you couldn’t take a North American focus and transplant it elsewhere. In our business it’s very important to understand the cultural nuances of all the different locales.” This ethos runs up to the top of the organization, where Taylor, who in late 2010 took over her role from the company’s original founder, was focused on building a clear separation of labor when it comes to decision-making. “My role as CEO has by definition, got to become less tactical,” she explained. “It’s going to free me up to spend time thinking about and doing things that are longer ranging and more important for Four Seasons’ future success.” Ensembles that take this approach prefer to make decisions quickly and if possible, keep decisions local.
Adopting the right framework
Global leadership ensembles can improve their decision making significantly by following these steps:
Step 1: Understand which blueprint leaders prefer
A useful starting point is for top leaders to explicitly articulate a preferred approach. For many of the companies we interviewed, the approach they were taking was often based on an unspoken agreement among top leaders rather than an informed conversation of benefits and drawbacks.
Step 2: Continually assess how your preferred blueprint helps or hinders your organization’s goals for global expansion
Frameworks for decision making can and should shift and change as firms evolve and new global and local market pressures emerge. In other words, this is not a one-time decision but an ongoing calibration.
Step 3: Understand the connection between the blueprint and the way the ensemble operates
When deciding how to work together, top leaders should make an explicit link between their decision-making blueprints – that is, how the ensemble relates to the firm – and the way that leaders themselves come together as an ensemble at the top. This link not only ensures that the leadership ensemble is most usefully aligned with the imperatives of the global enterprise, but also helps clarify and resolve some of the inherent contradictions when an ensemble of leaders take the helm together.
In today’s dynamic business environment, collaborative decision-making is often more effective than a “Lone Ranger” type of approach. Applying what we refer to as ensemble decision-decision making and following the three steps we describe will generally lead to decisions that are more effective.