Optimising decision making

OPTIMISING DECISION-‐MAKING: Why Flat Hierarchies are be?er

© North Delta College 2015

Mathema'cs applied to Business Theory 1

INTRODUCTION

Business Strategy is nothing without proper ExecuOon.

The best insight on the Corporate boardroom table could lead to a minimal response on the day to day field if not properly executed. ExecuOon means your

idea also has hands.

But whereas the hands in the body are directly connected to the brain through nerves we will see in this presentaOon that businesses are far more lethargic. There

is an inner inerOa in any business regarding Decision-‐Making due to improper organisaOonal raOonales.

We will hit here at the root cause of this phenomenon and show why fla?er

organisaOons have be?er response.


SUMMARY


PART 1: WHAT IS DECISION-‐MAKING? A) What is Decision-‐Making? B) Who makes Decision-‐Making C) Why is Decision-‐Making tampered?

PART 3: FLAT HIERARCHIES

PART 2: INITIAL SIGNAL, TRANSMISSION LINES & NOISE A) IniOal Signal & Transmission lines B) Background Noise C) CommunicaOon Breakdown

PART 4: THE SOLUTION: FLAT HIERARCHIES FOR SMEs A) An 100 hundred employee SME B) Ideal organisaOonal diagram C) Cu`ng down on Layers

PART 5: THE SOLUTION: FLAT HIERARCHIES FOR BIG ORGANISATIONS A) A major engineering company with 150 sites B) An organisaOonal proposal C) Why the company is working be?er

FINAL STATEMENT

PART 1: WHAT IS DECISION-‐MAKING?

Decision-‐Making roles inside a company are those roles which determine where the resources of the organisaOon should be used and which opportuniOes in the external environment should be seized. Decision-‐Making is the inner self of the company where the real choices are made and the future of the whole organisaOon constantly re-‐engineered.


What is Decision-‐Making?

Usage of resources

In which direcOons to grow

Decision-‐Making

Picture 1: What is Decision-‐Making

Who makes Decision-‐Making?

Decision-‐Making is the prerogaOve of the leadership, sole, inside an organisaOon. A regular manager doesn’t have it. Managing staff doesn’t mean making decisions. This simple differenOator is emblemaOc. It indicates who the leader is and who the manager is.



Leaders

Managers

PrerogaOve: Making Decisions

PrerogaOve: Organising Resources to execute Decisions

Picture 2: Management & Leadership


Why is Decision-‐Making tampered?


When the leader takes a decision, although the informaOon will first be communicated to his line of immediate managers, the target audience remains at the workers and clerks level. However, the worker or clerk will receive that informaOon, through his own manager. The key points we want to reach in this presentaOon is: -‐  First to understand that this informaOon whence received by the worker or

clerk is seriously tampered without the worker or leader having any knowledge of the adulteraOon.

-‐  And secondly to solve this problem by showing that fla?er organisaOons by cu`ng down on unnecessary fat can re-‐energise a sleeping business structure.

Now we model the whole Decision-‐Making/ExecuOon process by using Applied MathemaOcs, CommunicaOon Theory and Signaling Theory. Decision-‐Making can make use of signaling theory. Taking a decision is like sending an iniOal signal inside the company. The signal at the origin is obviously unadulterated. To reach its target desOnaOon, this signal has to travel through transmission lines linking back the decision-‐maker to the receiver.


IniOal Signal & Transmission Lines

PART 2: INITIAL SIGNAL, TRANSMISSION LINES & NOISE

Source Signal

DesOnaOon Source Node 1 Node 2 Node 3

Picture 4: Transmission Line

Picture 3: GeneraOng a Signal

What is Background Noise?

In any case while travelling, this signal will experience background noise. Background noises are echo chambers encountered on the transmission line which distort the signal. This distorOon while leaving the signal intact, tampers its iniOal content into something far less meaningful or relevant. The key fact is that the real receiver of the signal always catches an adulterated informaOon someOmes very far from the real content of the original signal.



Picture 5: Signal Distorsion

IniOal Signal Distorted Signal

Echo Chamber

Origin of the noise

The noise is always due to redundant nodes inside the organisaOon. As the signal travels from top to bo?om, these nodes are the intermediate hierarchical levels. i.e. layers of middle and senior managers.



Source = Leaders

DesOnaOon = Clerks/Workers

NOISE

Intermediary Managerial Levels

Picture 6: Origin of Noise

CommunicaOon Breakdown

The danger of miscommunicaOon can become so real that in situaOon of crisis the whole system collapses and we reach a breakdown. Strikes, Change Management, BPR… Oien the worker blames the culture of the corporate, while the corporate is labeled as inefficient by Financial media. The managers, in between, have to please both. The whole concept of a Flat Hierarchy is to prevent such situaOons by bringing back the decision-‐making node closer to the ground level.



Flat Hierarchies

Flat hierarchies means the decision making point is closer to the final receiver of the signal. Let us give an example: In a Library weekly reading class of 10 people each member takes turns to organise the weekly readings of the other members. This is a Flat Hierarchy (only 2 levels) , dynamic due to the rotaOve engine in place and fair as everyone gets a taste of leadership.


PART 3: FLAT HIERARCHIES

Picture 7: Flat Hierarchy

?

1 2 3 4 5 6 7

A 100 Employee Company We now return back to businesses in part 4 and part 5 and illustrate how flat hierarchies give the answer to the decision-‐making problem. Let us start with our first sample example. We take the case of an SME with 100 employees doing some web designing for big organisaOons. In its iniOal set up, we find 4 layers of organisaOon. Namely the CEO, the decision-‐maker. Below him, 2 layers of management based on seniority. And below them, the real work done by the clerks.


PART 4: THE SOLUTION: FLAT HIERARCHIES FOR SMEs

Picture 8: Concentric circles of organisaOonal layers

CEO

Workers/Clerks

Nature of the problem

The quesOon now is: why can't the CEO talk directly to the clerks? We will see that creaOng a fla?er hierarchy is a good pracOcal compromise towards this ideal situaOon and can help avoiding the Noise we have been talking about. Why does the CEO want to talk to the clerks directly? The CEO oien remarks that: 1) His decisions do not even reach the ground 2) His base employees are demoOvated even when the driving force of the company is so close to them and 3) Furthermore he has very li?le feedback on what is really happening at the worker’s level.



Ideal OrganisaOonal Diagram



Here is our pracOcal proposal. There are 10 to 15 line managers dealing directly with the clerks. The CEO communicates with these line managers on a one to one basis without any interference in between. There is only one manager in the company reporOng directly to the CEO whose role is to control and drive the employees and replace the boss when he is not there. However, in normal circumstances he never comes in between the CEO and the rest of the workforce. This is how a fla?er organisaOon can solve the adulteraOon of the CEO's decisions.

Picture 9: ideal organisaOonal diagram

Line Managers

CEO Manager

Clerk level

Cu`ng down on Layers

The key idea here is to cut down on fat. i.e. On the redundant managerial layers which exists in every organisaOon. The business is now indeed a one-‐man-‐show. Which is riskier. But on the other hand, it has gained momentum, speed of execuOon and its ability to respond to the environment. It is a pro-‐acOve organisaOon seizing its opportuniOes and which has boosted employee moOvaOon as there is a closer contact to the life source of the organisaOon: the decision-‐maker.



A Major Engineering company with 150 sites


Now, our second example to the problem of reducing noise on hierarchical lines. Our chosen company is a leading engineering company in the UK with more than 150 sites across Europe and headquartered in London. Its organisaOonal structure is such that each site is headed by a Branch manager with limited contact with the London headquarters. Is it possible to streamline this structure so that decisions are executed more efficiently?

PART 5: THE SOLUTION: FLAT HIERARCHIES FOR BIG ORGANISATIONS

Head Quarters

Picture 10: a mulOnaOonal London Branch

Frankfurt Branch

Birmingham Branch

Paris Branch

Nature of the Problem

The most fundamental difficulty here is that the base employees on the sites oien have problems with the Branch manager. They find them too young, inexperienced, bossy and out of touch with ground realiOes. For Headquarters similarly, the main obstrucOon to decision execuOon remains the Branch manager. Very poor leadership skills, inability to understand headquarters decision and oien very poor performance too despite all the KPIs (Key Performance Indicators) given to him.




An OrganisaOonal Proposal

Let us come with the following proposal.

Don't change anything to the structure, just change the way the business at a local level is approached. Every Branch Manager should run his site as a standalone business. With its own sales

team, its own procurement people, and a separate balance sheet. Become a profit centre in your own right.

Headquarters would then just maintain brand image, share best pracOces, and pool resources to each site.

This is very close to the franchise business model and is how one cuts down on site managers doing nothing and headquarters just amassing profit on a business model created 150 years ago.


Picture 11: the new model

Franchise

Business 2

Business 3 Business 1

Why the Company is working be?er

Once again, there is a fla?ening effect by franchising the mulOnaOonal. On the Branch manager's side, instead of following merely KPIs, he is now a businessman in his own right. Head of a cash generaOng unit instead of following indicators that do not trace business iniOaOve and creaOvity. On the Corporate side, headquarters focuses on the real strengths of the organisaOon, such as brand image and a historical legacy of best pracOces and strategises on the real needs of a major organisaOon such as streamlining the Supply-‐Chain instead of purely dictaOng policies. Franchising by fla?ening re-‐dynamises the decision chain. Mathema'cs applied to Business Theory 19

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Final Statement

We have thus shown that in every organisaOon, there are redundant nodes which generate noise on any decision made by the leaders. This Noise generaOon is situated quite high in the hierarchy ladder. Therefore, contrary to common belief, the obstrucOon to implemenOng a strategic vision is rarely at the office clerk level but at the intermediate managerial levels. The best way to solve this problem is to fla?en the organisaOon and get rid of those extraneous layers. Businesses are not meant for giving a career to funcOonally redundant brains but to exploit every possible opportuniOes and turn them into sales.


FINAL STATEMENT

Optimising decision making

Business

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