In large, globally dispersed organisations, a common conundrum for the Chief Executive is where to locate the executive team. Centralised in HQ – all together as one ‘A’ team, or geographically dispersed within their own business unit / functional area?
There are clearly merits on both sides of the equation. When working with a CEO, I’ve typically been agnostic on the issue, preferring to facilitate the thinking as to how the various pros and cons stack up for their unique business. But in this article, I’m coming down on the side of a decentralised executive team and I’ll explain why.
The necessary conditions for any effective executive team
Trying to guess the weight of an ox might be an unlikely place to think about executive effectiveness, but it was this pursuit at a country fair in Plymouth in 1906 where a retired British scientist, Francis Galton, noticed that although no one person guessed the ox’s weight correctly, the average of the 800 strong crowd’s guesses were within 1% of the actual weight. This caused him to reflect that there was a collective wisdom in the crowd that was missing even from the specialist individuals in it.
Fast forward to now and big data is able to aggregate the wisdom of crowds to give us helpful recommendations on our Amazon feed and successful Google search results from billions of potential pages.
In his 2004 book, The Wisdom of Crowds, James Surowiecki noted that within hours of the Challenger disaster, the market ‘knew’ who as responsible. As soon as it happened, the stocks of all four major contractors on the project fell significantly as the market tried to divest itself of potentially toxic stock. But one of the four contractors – Thiokol – was hit hardest. So hard in fact that a trading halt was almost called. The other stocks bounced back, but Thiokol’s continued to fall, closing the day down 12 percent. It was six months before a Presidential Commission revealed that Thiokol was liable: the O-ring seals they made were faulty, causing hot gases to burn into the main fuel tank. The collective wisdom the market had known it immediately.
What if we could tap into this collective wisdom to improve the problem solving and decision making within executive teams? We can.
There are three conditions necessary for the wisdom of a crowd to be viable in an executive team.
- The first is diversity. Is the team made up of people with diverse outlooks, experiences and histories that will uniquely inform how they make sense of the challenge at hand?
- The second in independence. That is, are individual executives able to come to their own views and perspectives without being lobbied by those around them?
- And the third is decentralisation – do team members have local and specialised knowledge?
All three of these conditions are better met with a decentralised executive team.
By contrast, the centralised team, located together and working closely day-to-day can become an echo chamber where everyone sees the world in same way. What you gain in group cohesion you lose in group cognition.
The vital piece …
There is one often overlooked and vitally important characteristic of the wisdom of crowds that’s missing in most executive decision making and problem solving. It’s aggregation. Aggregation is the power to pull the collective knowledge of individual inputs in a way that allows for the best decision to make it to the top of the pile. It’s crucial, but usually missing.
In most executive suites the process usually goes something like this. An item is put on the agenda. No-one is given much notice of it and what’s going to be required of the team members in the meeting. There ensues a generalised conversation about the problem topic, perhaps analysis of supporting data, some more conversation and then a proposal for a specific approach followed by a decision. If the CEO is heavily in favour of one particular option and has made this known, my money is usually on that being the final outcome.
This approach has not aggregated the knowledge of the entire team and no matter what expertise resides in the team, you won’t gain the advantage of the wisdom of the crowd. The deep insights of the thoughtful introvert are often ignored; the annoying way someone takes too long to get to the point leads others to hurry them up without hearing them out; and the ubiquitous jam-packed agenda leaves too little time to really understand an issue. Get it done; that’s what we’ve come to expect. Even if it’s the wrong decision, at least it’s a decision!
In order to tap into the problem solving and decision-making potential of a decentralised executive team, better ways at aggregating the team’s views are needed. There are many aggregation methods to choose from, most based on statistical modelling techniques. But this can be overkill.
How to aggregate the wisdom in your executive team
I believe the following process of aggregation is enough to maximise a team’s collective wisdom for most day-to-day organisational challenges.
- First, pose the issue to individual team members whilst they are in their local area and with enough time for some forethought before the meeting.
- Gather the team members individual perspectives anonymously before the group engages in a discussion about it.
- When the team are together, focus the discussion on what the team knows and the proposed solution that the ‘wisdom of the crowd’ has come up with.
- After the group has explored the subject in depth then (and this is important) make the final decision anonymously through an electronic group decision making tool.
- Of course, the CEO can then have final veto – but at least it will be informed by the team’s collective wisdom.
This type of problem solving and decision making often needs external facilitation to keep the group process moving, but it can be a savvy investment if it creates better decisions by your most senior executives.
There will always be upsides and downsides to where an executive team is located. But having a decentralised executive team affords opportunities to tap into the wisdom of crowds that a centralised team will struggle to emulate. Decentralisation helps the team members have a perspective that is differentiated and broad, and so long as the way the team’s views as aggregated is given due consideration, it can have transformative effects.