By Joost Minnaar and Pim de Morree originally published in Corporate Rebels
In this episode of our Rebellious Practices blog series we will discuss the topic of decision making. Most of us are used to either top-down, authoritarian decision making (by far the most used form within traditional organizations) or with decision making based on consensus (mostly with friends or family). Both kinds of decision making have severe disadvantages (the former can be frustrating for many while the latter can be terribly slow) and are therefore not always an ideal practice for fast moving and rapidly changing organizations. But there is an alternative. We visit more and more organizations that have established a different kind of decision making. A kind of decision making where authority is distributed to higher degree throughout a team or organization. It is often referred to as the advice process.
What is it?
The term advice process was coined by Dennis Bakke, who used it to build his company AES Corporation into a global energy supplier. At its peak, AES realized $8 billion in revenues and employed 50,000 employees with a highly unusual, decentralized business model. Although Dennis left AES in 2002 (and not much of the progressive practices seem to be left), he continued to use the advice process to create Imagine Schools, the largest non-profit charter-school network in the U.S. of which he is still CEO. Dennis Bakke outlines his business philosophy in his best-seller Joy at Work and wrote extensively about the advice process in The Decision Maker.
As Dennis Bakke can describe the process best, we’ll let him and his books do most of the talking.
Why would you do it?
Dennis Bakke: “To make a large organization exciting, successful, and fun, it is crucial to limit the number of people in the home office, central staff, and senior executive offices. Most senior executives seem to believe God or the board created them to make all the important decisions. But every decision made at headquarters takes away responsibility from people elsewhere in the organization and reduces the number of people who feel they are making an effective contribution to the organization.
Remember, joy comes from freedom. When central staff assume the lion’s share of power and control, the people who are operating units don’t get as much excitement and fulfillment from their work. That’s why I introduced the advice process. It’s a very simple, although often controversial, concept.”
Dennis Bakke: “The advice process is my answer to the age-old organizational dilemma of how to embrace the rights and needs of the individual, while simultaneously ensuring the successful functioning of the team, community, or company. It leaves the final decisions to individuals, but it forces them to weigh the needs and wishes of the community. The internet was made to order for our advice process. The kind of wide consultations that I advocate would not be possible in large, dispersed organizations were it not for e-mail.”
How does it work?
The advice process as coined by Dennis Bakke practically looks like this:
- Someone notices a problem or opportunity and takes the initiative, or alerts someone better placed to do so.
- Prior to a proposal, the decision-maker may seek input to gather perspectives before proposing action.
- The initiator makes a proposal and seeks advice from those affected or those with expertise.
- Taking this advice into account, the decision-maker decides on an action and informs those who have given advice.
These simple steps are explained in more detail by Dennis Bakke: “Instead of the boss getting advice and suggestions from people below, the decision maker, who is almost always not an official leader, seeks advice from leaders and from peers. Usually, the decision maker is the person whose:
- area is most affected,
- who initiated an idea,
- discovered a problem,
- or saw an opportunity.
If it is unclear who the decision maker should be, the leader selects an individual to gather advice and make the final decision.
Before any decision can be made on any company matter, the decision maker must seek advice. The bigger the issue or problem, the wider the net that is thrown to gather pertinent information from people inside and outside the company. In my opinion, all issues of importance need advice from the decision maker’s own team. However, members of other teams in the plant or offices should also be consulted. Some decisions are so important that advice is gathered from other plants, divisions, and offices, including the home office. The board of directors should be consulted on the most important issues.
After getting the appropriate amount of advice from colleagues, you always have the unquestioned right to take actions. However, once the action is taken or decision is made, we all look at the results. We use that information to hold you and ourselves responsible for these results. Of course, the whole team, even the entire organization, should join in taking responsibility for what happens, but the individual who made the final decision bears a disproportionate share of that responsibility. ”
Dennis Bakke: “As CEO, I tried to limit myself to one significant decision a year (it usually involved restructuring the organization’s regions and selecting new leaders for various senior positions). I wasn’t always successful, but the discipline of trying made a deep impression throughout the organization. Other leaders tried to follow my example. Thousands of decisions that would have been made by leaders were spread among thousands of other AES employees. For the first time, many AES people felt needed, important, and trusted. In effect, they had become full participants in their workplace.
At AES, we did not always do a good job of carrying out the advice process, especially the requirement to reach beyond the team or business unit where the decision maker worked. Sometimes, the information and analysis provided to the potential adviser was sloppy and incomplete. Even with these weaknesses, the quality of the decisions using this approach was at least as good as those decisions made under more conventional management systems. Probably more important, it made work more interesting and fun for thousands of AES people. “
What happens?
Dennis Bakke: “[…] important things happen when the advice process is used by an individual before making a decision or taking action:
- It draws the people whose advice is sought into the question at hand. They learn about the issues and become knowledgeable critics or cheerleaders. The sharing of information reinforces the feeling of community. Each person whose advice is sought feels honored and needed.
- Asking for advice is an act of humility, which is one of the most important characteristics of a fun workplace. The act alone says, “I need you”. The decision maker and the adviser are pushed into a closer relationship. In my experience, this makes it nearly impossible for the decision maker to simply ignore advice.
- Making decisions is on-the-job education. Advice comes from people who have an understanding of the situation and care about the outcome. No other form of education or training can match this real-time experience.
- Chances of reaching the best decision are greater than under conventional top-down approaches. The decision maker has the advantage of being closer to the issue and will probably be more conversant with the pros and cons than people in more senior positions. What’s more, the decision maker usually has to live with consequences of the decision. Even if the decision maker comes to an issue without fully understanding its implications for the organization, that weakness can be overcome by obtaining advice from senior people.”
Dennis Bakke: “We learn best when we discuss our work with others, make decisions that matter, and find out from others whether what we did was right or wrong. The people consulted along the way are apt to learn even more. The education tool made famous by the Harvard Business School is the “case method”. The uniqueness of this teaching style is that the student is put in the position of the decision maker. Something magical happens to our learning experience when we are put in the role of seeking information because we need it to make a decision. Abstract concepts suddenly become germane and real – and a lot easier to understand.
As effective as it is, the case-study method can’t match making decisions that have real consequences. This explains why apprenticeships programs have been so effective over the years. The design of the AES workplace somewhat accidentally created one of the finest educational institutions around. The opportunity to make important decisions after participating in an intensive advice process helped people learn in an accelerated way.“
What is needed?
Dennis Bakke: “To get most out of the advice process, people inside an organization must share all information. To explain this “no secrets” approach, I said that any piece of information available to me as CEO was available to every person in the company. That was probably more an aspiration than a reality, but the concept is very important. As John Case pointed out in Open Book Management, the decision process is rendered impotent if all information is not made available to people at all levels of the organizations. Part of having joy at work is being “important” enough to have the same knowledge as leaders.”
Disclaimer
Dennis Bakke: “The kind of workplace I describe has one significant drawback. It does not easily accommodate people who cannot operate as creative, responsible colleagues because of mental, physical or emotional limitations. The assumptions underlying the AES ethos do not require a Harvard education or extraordinary physical or mental capacities. But an AES-style workplace requires people who can reason, make decisions, and take responsibility for their actions. Some people have trouble functioning this way.
Most vibrant organizations following the philosophy I am advocating have a small number of people who do not meet the standards of the company. To varying degrees, they tend to be a drag on the organization and its team. Leaders should try to steer them to other workplaces that are more in line with their talents and temperaments. In the end, both the organization and the individual are better off after an amicable parting of the ways.”
Try and fail, but don’t fail to try
Do you feel the advice process might help you and your team to improve the way you work and create a more engaged workplace? Give it a try and let us [the Corporate Rebels] know how it went. If you need any other tips or if you encounter any obstacles, we’re happy to help you out. Good luck and enjoy the experimentation!
Permission to republish granted by the author.
Featured Image/Graphic link added by Enlivening Edge Magazine.
