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.
Nonetheless, these groups of decision makers need to find a model on “how to do business” with each other. Someone always says, “let’s vote and use Robert’s Rules of Order for our meeting structure.” If a vote isn’t unanimous (which would be consensus) then at least someone didn’t agree. Will that person, or persons, support the decision of the majority? Or will they take some other form of action that could be less beneficial to the business at large? Losers in a vote don’t normally support the decision wholeheartedly and that can cause 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.
Collaboration is that unanimous vote. It is hammering out the diverse ideas until everyone agrees. Some say it is the gold standard of decision-making. However, it can be a negative in two respects: it takes more time, and it may be a symptom of GROUPTHINK!
Groupthink is a concept that dates back to the 1950’s. In case you aren’t familiar with the idea here is what Merriam-Webster says its means: a pattern of thought characterized by self-deception, forced manufacture of consent, and conformity to group values and ethics.
Wikipedia offers a more expanded definition: Groupthink is a psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity in the group results in an incorrect or deviant decision-making outcome. Group members try to minimize conflict and reach a consensus decision without critical evaluation of alternative ideas or viewpoints, and by isolating themselves from outside influences.
If you are a family business the groupthink theory has to scare you. Can groups get to good decisions if the main goal is harmony and conformity? Where would you find a group more likely to look for harmony and conformity than a family?
Corp!’s Salute to Diversity awards event addressed this issue. You might be thinking that diversity is about races, ethnicities, religions, sexes and sexual preferences all coming together in the workplace. But it is much more than that. Those diverse cultures and thoughts need to come together in the neighborhoods, in our politics, and in decision making.
The keynote speaker at the Salute to Diversity, Joe Gerstandt, co-author of “Social Gravity: Harnessing the Natural Laws of Relationships,” addressed the diversity in decision making. Gerstandt offered some stunning examples of how groupthink has led to terrible decisions probably including the failed launch of the space shuttle Challenger.
Gerstandt’s definition of groupthink hits closer to the bone for family firms: a “mode of thinking that happens when the desire for harmony in a decision-making group overrides a realistic appraisal of alternatives. Group members try to minimize conflict and reach a consensus decision without critical evaluation of alternative ideas or viewpoints.”
Picture the family business executive group. They probably all look alike, dress alike, live in the same general neighborhood, go to the same place of worship, etc. They may even hire mirror images of themselves. Classic GROUPTHINK.
If the underlying reason for maintaining groupthink models is to minimize conflict, then a better solution is to learn how to manage conflict beneficially. It is a novel concept for many, but conflict is how we grow-¦how we see other points of view-¦how we gain and filter new ideas. It has been said that no real relationship exists without conflict.
If you think your business is guilty of group think, you might try the following:
- Summarize your current business decision-making process and who is involved.
- Encourage diverse input and create means to collect that input.
- Be sure to create a diverse management team and empower them to speak freely.
- Include true outsiders on your Board of Directors (Create a Board if you don’t have one).
- Use qualified outsiders to examine your current model and help improve it.
One last thought from Gerstandt’s presentation:
Where do good ideas come from? That is simple-¦from differences. Creativity comes from unlikely juxtapositions. The best way to maximize differences is to mix ages, cultures and disciplines.
-Nicolas Negroponte, founder MIT Media Lab
Rick Segal is the principal at Segal Consulting. He holds a Certificate in Family Business Advising with a Fellows status from the Family Firm Institute. He is the founder of the Family Business Council and its affiliated Study Group. He can be reached at [email protected] or by visiting www.segalconsulting.biz.