Decide Better!

Yesterday on CNN I made the point that CEOs are responsible for the decisions their organizations make. This seems surprising to many, including BP’s outgoing CEO Tony Hayward. He has the attitude that he wasn’t responsible; in fact he characterizes himself as a “victim” in an odd way. Others even question whether he is being used as a scapegoat.

Let’s be clear: a CEO is responsible for the decisions his company makes. He is responsible for setting the tone at the top. He is responsible for making sure that the appropriate decision processes are in place throughout the company. He is responsible for designing the appropriate incentives that lead to the right decisions. He is responsible for making sure organization structures (functional and cross-functional) are in place for the best decision making. He is responsible to put the right people in place to make major decisions, and to ensure that they are trained and skilled in making these decisions. He is responsible to identify what decisions expose the company to major risks, and ensure that these risky decisions are contained. Tony Hayward failed on many of these.

And this responsibility for decisions is also replicated throughout the organization. The VP of manufacturing is responsible for all of the manufacturing decisions. The VP of oil drilling is responsible for all of the drilling decisions. The VP of finance is responsible for all of the financial decisions. However, this does not mean that those above are relieved of their responsibility as decisions flow down through the organization. They share the responsibility, but it always rises to the top. That’s where the buck (or pound) stops.

In my 2009 book, Business Decisions, I discussed the importance of business decisions and how they should be made. Lately, I’ve been talking about what I call the Decisive Corporation – businesses that consistently make the right decisions. BP is not an example of a Decisive Corporation; they are a case study of what can happen when the CEO abdicates his responsibility for the decisions of his company.

In my 2009 book, Business Decisions, I discussed the exceptional decision made by Ford in November 2006 to borrow $23.6 billion to get the cash necessary to weather the storm of a potential business downturn. The company mortgaged everything, including its logo. It wasn’t forced to borrow the money; it made a strategic decision to be prepared. Yesterday, Ford announced that it made a $2.6 billion profit, its fifth consecutive profitable quarter. Its two major domestic competitors, GM and Chrysler, were forced into bankruptcy. Increasingly, businesses are being separated between those that make good decisions and those that don’t.

Ford is a good example of what I like to call The Decisive Corporation. The Decisive Corporation knows when and how to make the right strategic and operational decisions throughout its entire enterprise. Like Ford, it makes strategic decisions in anticipation of an opportunity or potential threat. Too many other businesses make decisions only when forced to confront an immediate threat or as part of their annual planning process, which usually only focuses on budgeting decision for the upcoming year. They simply overlook or never get around to thinking about the critical strategic decisions.

Ford also made other important decisions after Alan Mulally joined the company in October 2006. He revamped the organization and some of its major processes to be more decisive. This resulted in getting new products out faster and improving its manufacturing and sales strategies. A leader like Mulally doesn’t make all the decisions – instead he shapes the business into a Decisive Corporation.

I’ve recently completed research on what makes a Decisive Corporation and will be launching a series of seminars on it in October. It is a combination of the right organization structure, effective business processes, and the competencies of groups and individuals to make decisions. Decisive Corporations, such as Ford, will succeed in the future – others will flounder or fail in the face of a much less forgiving economy.

As a life-long Red Sox fan, it’s difficult for me to admit that I admired George Steinbrenner, but I did. While many saw him as meddling, I have to give him credit for stepping in and making decisions – good or bad. In many ways he was the paramount example of a decisive executive – maybe to the extreme, but still a great example. When he arrived in New York on Jan. 3, 1973, he said he would not “be active in the day-to-day operations of the club at all.” Having made his money as head of the American Shipbuilding Company, based in Cleveland, he declared, “I’ll stick to building ships.” That didn’t last very long. He made virtually every decision for the New York Yankees.

When he was not phoning his general managers and managers with complaints or advice, he meddled in the smallest matters of ballpark maintenance. Mr. Steinbrenner changed managers and general managers with abandon. As the owner of the Yankees, 22 managers have come and gone, many (such as Billy Martin) more than once. Lou Piniella once called him “a great guy, unless you have to work for him.”

George Steinbrenner was well aware of his management style. “Some guys can lead through real, genuine respect,” he told Cleveland magazine. “But I’m not that kind of a leader.” He likened himself to George Patton: “He was a gruff son of a bitch and he led through fear. I hope I don’t lead through fear, and I would hope it was more love and respect, but maybe it isn’t.” He made all of the decisions and everyone knew it, including George.

He even promoted this “I make the decisions” persona as a recurring character on “Seinfeld”. Steinbrenner, the character, had a penchant for making poor decisions, including trading Yankee players unfavorably, cooking jerseys, scalping box tickets, and cancelling an important meeting because he couldn’t get his beloved eggplant calzone (naturally, this was George’s fault).

For more than 30 years, Steinbrenner lived up to his billing as “the Boss,” a nickname he earned and clearly enjoyed as he ruled with an iron fist. In my book Business Decisions, I write about decisive and indecisive executives. He was decisive – good or bad – and I admired him for that.