The process of corporate decision making – ( 5)


Corporate decision making happens at various levels in organizations and can be top down or bottom up. The difference between these two styles of decision making is that the top down decision making is done at the higher levels of the hierarchy and the decisions are passed down the corporate ladder to be implemented. On the other hand, bottom up decision making is done by giving autonomy to the middle managers and the line managers to take decisions based on the conditions and circumstances existing in their teams. In many organizations, what we see is a top down decision making in the realms of policy, strategic focus, direction in which the organization has to proceed and bottom up decision making about the day to day running of the teams.

It needs to be remembered that the middle management is often called the “sandwich” layer because they have to implement the decisions made above and at the same time have to decide about how to run the teams and have to communicate them to the lower levels as well.

The point here is that in any process of corporate decision making, the actual implementers play a critical role since the best laid plans of the top management can go awry in case there is no commitment from the middle management. Hence, many organizations organize off site meetings at resorts and other places where the senior management briefs the middle management about the decisions that they have taken and how it would impact the organization.

Corporate decision making is also characterized by consensus or the lack of it. Like in the real world, corporations often have power centers and groups that have their own agendas and hence arriving at a consensus can be cumbersome for the CEO or the Chairman of the Board of Directors. It is because of this reason that many corporations witness periodic restructurings with regards to organizational structure and with regards to turnover among the top management. In recent months, Infosys has seen rapid and often turbulent situations in the company because of the power struggles at the top as well as lack of consensus among the top management about the direction that the company ought to take.

The other aspect related to corporate decision making is that many organizations thrive on leaders who have a “halo” around them and hence decision making is smooth because the rival power centers often concede to the leader’s charisma or his or her ability and vision. Again, Infosys has seen this happen when with the retirement of its legendary founder, N R Narayana Murthy; the company is going through a bad phase with competing factions jostling for control. Abroad, Apple is an example of a company that relied on the halo effect of its founder, Steve Jobs and once he passed away, there is some uncertainty about the way the company should take in the market.

In conclusion, corporate decision making is successful as long as there is a “glue” to bind the organization together in the form of charismatic leaders or an organizational culture that values coherence and imposes stability. Once any of these conditions are removed, then the organizations fall into a self-defeating trap wherein the process of corporate decision making is impaired leading to the loss of competitiveness of the company.
An important concept in the field of decision making is the OODA Loop or the Observe-Orient-Decide-Act loop. This refers to the strategic advantage that a decision maker gets over his or her opponent when he or she observes the situation and orients themselves and then decides and acts accordingly. This concept was introduced primarily in combat and strategic warfare where it was believed that a combatants “edge” over his or her opponent happens when the OODA loop is fully functional. The term and the concept were proposed by the military strategist and member of the United States Air Force, Colonel John Boyd. The theory underlying the OODA loop is that decision making within our minds happens according to the way in which the recurring loops of observation, orientation, decision and action happen in response to a situation. The basic premise is that decision makers must be agile and alert to the situations and have a clear head and cool mind to take a decision lucidly and cogently.

The diagram above describes how the OODA loop works in real life situations. The inputs from the environment are taken by means of information, interaction with the environment and the circumstances that unfold with the interaction. Then the orientation to the situation happens by means of the individual’s internal processes and the perceived expectations along with his or her own conditioning. Then the next stage where the decision has to be taken takes over where the information from the situation meets the individual’s thought processes leading to decision making capabilities. Finally, the decision leads to the action where the decision is actualized and made operational. The important thing to remember about the OODA loop is that feedback is an integral component of all stages with information flowing back and forth between the individual and the situation.

The point to note is that the OODA loop calls for exemplary mental and physical fitness (the latter more so in actual combat situations). The need for this fitness is that the decision maker ought to seize the situation and then comprehend the same along with an ability to take quick decisions on the spot depending on the way the situation unfolds. Though the concept was introduced in the Armed forces, this is being regularly applied in the corporate world as well. The reason being that the OODA loop and the concept of decision making that it imply is a sound idea and something that can be used to improve the decision making process.

In the hectic corporate world, there is often no time to lose especially when quick decisions have to be taken and hence the OODA loop provides a good basis to the decision making and the way in which the decision makers can go about their decision-making process. In conclusion, the succeeding articles would look at each of the components of the OODA loop in detail and the concept would be discussed thoroughly and comprehensively.

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