Do you ever complain that your direct-reports don’t make enough decisions on their own? Do they ever complain about your micro-managing?
In my work with CEO’s and their Sr. Executives over the last 10 years, I often see that that the boundaries and authority for decision-making are blurry or non-existent.
Imagine that Sue is COO at ABC Services Company, and she reports directly to the President, Fred. Over the last couple of years, a Technician, Frank, has made several errors, causing several thousand dollars of rework. Believing that it is her responsibility and authority to hire and fire, Sue terminates Frank and Frank signs a severance agreement. Fred hears through the grapevine that Frank has been fired and was offered that a severance agreement well above the company’s standard was offered. Fred is appalled by Sue’s judgment. Doesn’t she know that he must approve all terminations and severance agreements? Sue is furious that Fred is meddling in her direct area of responsibility. Without clarity on specific types of decisions, these situations are guaranteed to occur.
There are 3 basic levels of authority:
This table illustrates how these types of decisions work for a CEO and COO:
|It’s Your Decision.||I Want Input.||Tell Me About It.|
|CEO||Code 1: CEO decides and doesn’t inform.||Code 2: CEO will decide. Asks for input before decision is made.||Code 3: CEO decides and informs.|
|COO||Code 4: COO decides and CEO does not need to know.||Code 5: COO discusses recommended action with CEO. CEO approval is needed.||Code 6: COO makes decision and informs CEO.|
Dwight Eisenhower allegedly said, “The chief executive only gets the hard decisions. All the easy ones are made by people below him or her.” To ensure that happens in your organization, you can create a list of decision-making authority levels using the codes described above. For example:
|Important Decisions For COO Decision||Code|
|Expenses within budget||4|
|Expenses over $100,000||5|
|Contract approval under $100,000||6|
|Contract approval over $100,000||5|
|Terminations, severance, etc.||5|
|Hires for positions within budgeted salaries and wages||6|
|Hires above budgeted salaries and wages||5|
|Determine total amount of salary increases||3|
|Determining amount of individual raises within allocated amount and consistent with HR policies.||4|
|Firing customers over $100,000 of annual revenue.||5|
|Firing customers under $100,000 of annual revenue.||6|
|Scheduling vacations or approving sick time.||4|
|Determining amount of annual bonus||5|
|Setting annual goals||2|
To create further clarity, you can use the decision codes to clearly state authority levels for decisions that are not specifically listed. For example, assume Sue approaches Fred with a decision that he wants her to make. Frank could say, “that is a Code 4 decision. You make it and I don’t need to know about it.” Or, if Sue is unclear about a decision, she can ask Fred, “What is the decision code on this?”
Think about the hundreds of decisions that are made in your company every day and what’s at stake. Can you afford to be unclear about your authority levels? What benefits would enhanced clarity bring to your organization?