The common perception is that CEOs are the ultimate decision makers in their companies, personally involved in and responsible for every major choice. However, research shows that this is a myth. While CEOs do provide executive guidance, they do not make most decisions directly. Rather, their role involves shaping the decision-making process.
Today we will explore the key arguments around why the view of CEO-as-decision-maker is a myth, and provide more detail into the nuanced reality of a CEO's decision-making responsibilities.
The Reality of CEO Decision-Making
The main thrust of the argument is that CEOs do not actually make most substantive business decisions directly. There are three main reasons for this:
The shear breadth of decisions required across a company makes it impossible for one person to decide everything. A CEO must rely on delegation and processes that engage the appropriate experts.
Direct decision-making is an inefficient use of a CEO's limited time and attention. Their time is better spent providing high-level guidance and making selective interventions when needed.
Overreaching into specific decisions can undermine a CEO's ability to monitor objectively and maintain a broad perspective.
Rather than constantly deciding, CEOs focus their efforts on shaping decisions by designing processes to leverage the full organization, choosing when to provide direct input, and monitoring execution to identify needed adjustments. This selective engagement across the organization's decision-making is a more effective approach aligned to the CEO's role.
Examples of Shaping Decisions Indirectly
To provide more specific illustration, CEOs shape organizational decisions in a few key ways:
Delegation and Processes
A CEO must determine what types of decisions can be fully delegated vs. those that require some CEO-level input. Delegation empowers managers and utilizes expertise across the company efficiently.
An example is a technology company assigning product feature prioritization to the head of product management, trusting her domain expertise. While the CEO monitors progress, she does not decide the product roadmap herself.
The CEO also designs processes bringing the right internal stakeholders together for larger decisions. This facilitates buy-in and high-quality decisions benefiting from diverse inputs.
An example is a CEO establishing a cross-functional committee including sales, marketing, and product heads to decide pricing for a new offering. Rather than decide pricing alone, the CEO created a process relying on the combined insights of the committee.
Rather than constant top-down decisions, CEOs aim to provide input selectively when their involvement adds value. This selective intervention provides guidance while avoiding undermining delegation.
For example, a CEO may choose to weigh in on a particular acquisition target but not on the details of negotiation strategy, which he delegates to the VP of Business Development. This balances delegation with the CEO leveraging his knowledge of the target to inform strategy.
Monitoring and Adjustment
CEOs further shape decisions by monitoring progress on delegated choices and intervening with adjustments or course corrections as needed. If execution veers off track, the CEO has responsibility to recognize gaps and ensure realignment.
For instance, a CEO entrusted her head of sales to develop a new reseller strategy. Upon monitoring early results, she noticed a disconnect between sales incentives and reseller program goals. She worked with the sales lead to adjust incentive structures to better align with the intended strategy. Her oversight identified a needed adjustment to ensure execution.
While CEOs do make some direct choices, the notion of the CEO as the ultimate decider for a company is largely a myth. The scale and complexity of modern enterprises means CEOs must enable decision-making across the organization through smart delegation, institutional processes, selective input, and active monitoring. This empowers others and makes the CEO's involvement more effective when focused on shaping the most crucial decisions. The image of the CEO making authoritative choices on all matters is outdated, replaced by the reality of enabling good decisions across the entire company.
Jonathan H. Westover, PhD is Chief Academic & Learning Officer (HCI Academy); Chair/Professor, Organizational Leadership (UVU); OD Consultant (Human Capital Innovations). Read Jonathan Westover's executive profile here.