How do we help Managers develop Decisional Thinking?
We recognize that decision making is an important requirement for a Manager. A document on Delegation of Authority developed by me in an organization I worked for as the head of Finance function, can give some ideas, on how we could help in promoting Decisional Thinking among Managers.
This topic is also relevant from the angle of Internal Financial Controls, which are Policies and Procedures, adopted by the company for ensuring orderly and efficient conduct of business. Decision Making Process is a key element in “Orderly” conduct of business.
It was a company offering Process Engineering Solutions and executing Turnkey Contracts. It had good focus on processes and was ISO Certified. I picked up the ISO Procedure Manuals of the company, starting with Marketing, listed on my whiteboard, all the decisions taken, as appearing from the manual, function-wise. I covered Marketing, Operations, Purchase, Personnel (HR), Administration Finance and Secretarial. Having listed all the “Decisions” as I could gather, from the ISO Procedural Manuals, I asked each of my colleagues, who were Functional Heads, to review and add/ edit to any of the decisions listed.
Examples of such decisions, in Marketing were, Bid / No Bid, Approval of Price for Quoting, Giving reduction in price during negotiations, Accepting the Order received from the Customer, and so on. Keeping a separate sheet for each function, I listed all the decisions relating to a function, one below the other as the first column. I added 3 more columns to the same document, and used each column for a group of Executives as the Column Heading. These Groups were “Manager / Sr. Manager”; “General Manager / Vice President” and “Managing Director”. For each of these Groups of Executives, individual authority limits were provided, against each decision item.
For example, “Approval of Price for Quoting” could be “up to Rs Rs 5 lacs” with “Manager / Sr. Manager” ; “up to Rs 50 lacs” with “General Manager / Vice President” and above Rs 50 lacs could be with “Managing Director. There were also items without reference to monetary limits. One of such examples was "Quoting for Unproven Technology" authority was given only to the Managing Director. I was aware of an instance where the company conducted successful lab test, quoted and accepted a job with performance commitments, but failed on commercial scale. This prompted me to place authority for such items only with Managing Director.
In the case of HR, if I were to give examples, it could be “Employment Offer” up to Asst. Manager Level, could be with “General Manager / Vice President”. Manager Level & above could be with the Managing Director. That company was open to rehiring employees, who were with them earlier and left. Such authority was also given to the Managing Director only.
Delegation of Authority, or Authority Matrix as it is called in organizations, may focus mainly on authority like approval of expenditure, Purchase Order or Cheque signing and the similar. It may not cover many important decisions taken by the organization.
An exercise of the nature described above can bring to surface what are the important decisions taken, and whether they are taken at the appropriate levels in the organization. This would prompt people concerned to think on decisions they take and would help them strengthen their decisional thinking.
For some more articles from me, please see my blog at www.operationstomoney.com.
Thank you for your attention.
Tulasi S Sastri
FCA, CISA