By Richard M. Segal
Sept. 12, 2013
How businesses reach decisions is a fascinating subject. The general thoughts are that there are five common decision making methods: unilateral, majority, super-majority, compromise and consensus. Four of those five require a group of people to come to some conclusion - the issue at hand is how do groups do that? Is one method better than another? By “better” we would expect the method to yield a more constant result that improves our business activity, or in some way enhances the bottom line.
Managers seldom take the time to think about the decision making process as the process is often buried in the corporate culture. This is probably even truer in a family business where the family culture superimposes onto the business culture. Consequently, the most common decision making process in a family firm is a matriarch or patriarch making unilateral decisions! This would certainly be true for most founders. It is a very efficient model as long as the decision maker continues to make good decisions.
Eventually, if the business survives, that decision-making model needs to change. Either the decision maker matures to the point of valuing other’s opinions enough to consult with them, or the company management model changes to encompass more people - possibly a next generation of siblings and their management peers. At this point in a family business life cycle - often called Professionalization - new decision making models must emerge. We find that the management team starts to have regular and routine meetings, and that the ownership forms a real Board of Directors with outsiders that meet to handle the company’s big issues.
Compromise works in many cases - especially for decisions that seem close to resolution or where the differences are small. It allows everyone to buy in and move a process forward. But, a compromise is just that and weather it’s 50/50 or 60/40, etc., it is never 100 percent. Sometimes that’s OK, other times it may be a mistake.