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Saturday, April 13, 2024

The delegation dilemma

Birgit Breitschuh explores the rut many CEOs often find themselves in through short-term fire-fighting

The need to manage dramatic technological and social change, cope with the uncertainty and disruption from seemingly never-ending geopolitical shocks (from war to pandemics to global warming), and all the while deliver strategies to grow turnover and profits are the unenviable challenges CEOs face today.

It is a huge task, one that is so vast that it needs them to share the load and have their teams of talented people handling the day-to-day and indeed bigger challenges so the senior team can focus on making the really important strategic decisions they are paid the big bucks to get right…or so you would think.

However, the main challenge I and my colleagues repeatedly see across dozens of FMCG companies is CEOs not having enough courage to empower their most talented future leaders. This leaves them exhausted through constantly making all the decisions…whether important or not.

Recently the concept of the “servant leader” has become fashionable, and one of its (not unique) elements is that leaders need to be a coach and mentor to foster leadership in others. I see too many CEOs as having seemingly taken the wrong end of the stick and are servants to their managers, spending their precious time and energy fixing the problems others should be solving!

CEOs and their senior leadership teams know they need to be focussed on the small number of big decisions that really matter, not consumed with perpetual fire-fighting nor micromanaging their middle managers – yet these latter two are the comfort zone for too many CEOs.

Part of this is because generally CEOs want to be supportive and help their team. When there is a problem they feel they need to find a solution, particularly in organisations where it is cultural for people to “pass the monkey”. Finding solutions helps them feel they are creating value, although it is in fact disempowering to their executives and managers.

There is also the ultimate knock-on impact: everything else they should have been doing is deprioritised when they jump in to solve someone else’s problems.

It is not difficult for CEOs to recognise when a new style is needed. Which is just as well as few people in their team will have the bravery to tell them they are too hands-on.  However, getting out of it is the difficult part. And the more your people have been conditioned to pass you the monkey, the harder it is to change.

One step could be to stop accepting the monkey, and start insisting anyone with an issue comes armed with options and recommendations.  It’s certainly a start, but it doesn’t tackle the core problem… not only are you still making too many decisions, but the problems are worse when they reach you because tough decisions are not being taken earlier by middle management.

In fact, the key for CEOs to have the confidence to delegate more decision-making, and also the key for helping middle managers be willing to make tough decisions earlier, is to have a clear and robust process to thoroughly test problems, their consequences and bring forward thought-through recommended actions. It also demands a clear strategic direction, and the path to get there, as the framework.

One well-known approach used by many large FMCG businesses is Integrated Business Planning (IBP), and there are other approaches too.

Typically, elements of this include ensuring a business has its own template approach so that each time everyone knows what is needed, and that there is a the realistic integrated business plan covering such things as what are the options, resources needed, impact on operations and other departments.  Managers are armed with the necessary data and a good understanding of priorities in order to do this. There also needs to be set boundaries, and clarity on who is impacted and therefore needs to be involved, as well as authorisation levels.

This shouldn’t simply mean the decision is sent to the CEO with more paperwork!  It should instead mean that decisions are made lower down in the organisation and the CEO can have the confidence not to be involved as she knows that decisions are being made by well-informed middle managers within a clear framework, and will be escalated up if impact is of significance.

Let me give an example of how this can work. Many organisations will have a procedure where the CFO needs to sign off a salary of, for example, £50,000 or more. Yet shopfloor decisions costing millions will have no clarity around them.

In one instance of this, at an FMCG client, an order was rushed through at a large discount to make the quarter’s numbers. Not only wasn’t it very profitable, but it also had a massive adverse impact, including meaning the business was not able to fully meet the orders for several strategic accounts.  Consequently its CEO was dragged into extensive firefighting and meetings with dissatisfied customers.

Some might see this as a reason for the CEO to henceforward micromanage such decisions…. no accepting biggish orders without the CEO’s sign-off!  Clearly, this is the wrong conclusion as it just adds more burdens for the CEO and more disempowerment for managers.

The impetus to accept the unexpected order to make the quarterly target is a great example of artificial behaviours that are set at the top, combined with a lack of process controls to identify its consequences up front.

Instead, if there had been a framework for the middle managers to agree a realistic plan and cascade that for order management, involving decisions around deviations from plan based on their impact, and clarity on when to escalate the decision, a very different choice might have been made.  And even if it wasn’t different, the management would at least have understood the consequences they would be facing.

The example reflects our experience at numerous businesses – 90 percent of the problems that consume CEOs’ precious time could have been prevented had there been a process and managers been empowered to make tough decisions earlier in the process.   And for this to be done systematically it requires a thorough and standard approach across the management team, a strategic roadmap with clear priorities, and clear boundaries on when to escalate.

An example of the difference is rather than the managers simply having a weekly call to discuss managing the details of the problems they face right now from a lack of inventory, the senior leadership team should pre-empt this by getting their managers anticipating potential bottlenecks in the whole supply chain, considering impacting factors driving shortages, running scenarios and decisions on the viable plan as a group, and implementing changes ahead of time, before major problems occur that drag in the CEO. Short-term problems have limited options and should be prevented wherever possible due to their cost and resource implications.

At one international FMCG company we are working with, the number of significant operational and financial decisions taken by the senior team went from 100 percent to about 10 percent within just a few months of them reinvigorating their IBP process to encourage greater empowerment for its middle management. The managers seized the opportunity despite the firm’s past top-down command and control approach.

But such change needs to come from the very top, and it is particularly hard for anyone below the CEO to raise with them that they are too involved in day-to-day decisions.

The good news is that in my experience middle managers are usually very open to a new and more empowered group approach. There may well be some that are resistant, but this usually relates back to them doubting that the CEO really means it… once it becomes clear this is the new way of doing things, even the doubters come on board!

Birgit Breitschuh is a Partner at Oliver Wight EAME

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Birgit Breitschuh
Birgit Breitschuh
Birgit Breitschuh is a partner at leading consultancy Oliver Wight EAME which has been helping FMCG companies, including the world’s largest ones, successfully transform since 1969. https://oliverwight-eame.com

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