THE FOUR KEY AREAS OF ORGANIZATIONAL DECISION MAKING | The Myth of Leadership: Creating Leaderless Organizations

Issues of organizational management cannot be separated from an understanding of organizational strategy and design. Figure 3 shows the four key areas of organizational decision making:

Figure 3: THE SUCCESS CYCLE

Vision ”manifested in the organization's strategic direction
Culture ”manifested in the organization's people
Performance ”manifested in the organization's tactics
Results ”manifested in the organization's operations

Following a brief description, we'll see how each of these key areas can be aligned with a peer council chartered to leverage the competitive advantage possessed by peer-based organizations.

Vision ”Strategic Direction

Strategic direction is determined with a thoughtful eye on the business horizon to create the vision of the organization. The foundation of competitive strategy is aligning an organization's strategic capabilities with the present and future needs and wants of both current and hoped-for customers. The fit between what an organization does best ”its strategic capabilities ”with what customers both need and want determines the strategic portfolio of products and services the organization should deliver. This clarifies the business horizon in the sense that it lets the organization establish in which market segments it wants to acquire superiority in the near future. The following four questions can be of great help in establishing strategic direction (question 1 reveals strategic capabilities): ^[6]

What is your competitive advantage in markets that gives you a sustainable edge over rivals? That is, what is it that you do better than any rival, that is hard to imitate, and that creates value for the customer?
Who are your customers (including hoped-for customers), and what are their current and future needs?
Which products and services will you develop and support, and which not?
How will you contact and deliver to your customers?

Culture ”People

For any strategy to be successful in the long run, first it must be aligned with the basic values and desires of all individuals who have a stake in the life of the organization and create a culture that values people. This includes not only customers and equity owners , but all employees , suppliers, and vendors as well. Luckily, we all share the same basic values and desires as described earlier: freedom and economic security plus a sense of self-worth, connection to something larger than ourselves , and making a contribution to others. This requires that the organization place a high value on open and honest communication. Everyone in the organization needs to have permission as well as the opportunity to talk to anyone else in the organization. This culture of openness and transparency needs to be fostered at all levels of the organization.

Performance ”Tactics

After determining a strategic direction and developing the culture, an organization must focus its energy to engage rivals in the " intelligent clash of wills" in serving customers. Marshaling the troops to meet and defeat competitors through superior performance while creating value for customers is referred to as tactics. It brings the organization's strategic vision into clear focus in the present. It requires transparency and full knowledge of how each employee contributes to strategic and tactical success.

Results ”Operations

Operations is where the rubber meets the road: doing the work and generating results. However, in competition and interaction with others, nothing ever goes as planned. Inevitably, the best strategy and tactical plans break down. Clausewitz, the Prussian military strategist, blamed this on the "fog and friction" of the intelligent clash of wills. So, in the actual performance of an organization's strategic and tactical plans, expect the unexpected. The key to operational effectiveness and success is competence in problem solving and decision making.

The interaction of these four areas of organizational decision making will determine the success or failure of the enterprise. Rank-based organizations have a very limited range of strategies in these four areas due to their limiting organizational decision making to the few rank-based leaders who share the same narrow perspective. It is human nature to define and fix problems in whatever way worked in the past. When conditions change, as they do today at an ever-accelerating pace, past solutions become future problems. Without multiple perspectives and experiences to draw on, rank-based leaders will apply ineffective , outdated solutions to newly evolved problems.

^[6] Questions 2-4 were suggested by Michael Porter's 1996 essay "What Is Strategy?" Harvard Business Review , November-December).