A Framework For Effective Decision Making

As the technical Co-Founder and CTO of Intelligenes, I’ve been involved in all types of decision-making relating to all aspects of business, ranging from the most minor decisions such as where to take the team for lunch to the most critical ones such as which technology stack to work on. All of this decision-making seemed so easy and relevant until the team passed the 2 Pizza Rule (as defined by Jeff Bezos), but as the organization grew, I felt that I was spending a lot of time making the decisions I shouldn’t be concerned about. Hence I worked on a simple (in my humble opinion) decision-making framework at Intelligenes which could help the middle managers in a small firm (less than 50 employees) to decide which decisions to make on their own and which decisions should be made after consulting with the relevant management forum (middle or senior management).

This decision-making framework requires the following prerequisites:

The main goal of a decision-making framework is to allow a manager to ascertain and make decisions on his own. Values serve as the boundaries for decision-making. They help an individual in making decisions when no one is around and in difficult situations. If you haven’t done it yet, schedule a brainstorming session with your middle and senior management team to discover your core values (note I have used the word discover instead of define. Core values are discovered, not defined). To learn more, review the excellent Harvard Business Review Article titled “Building your Company’s Vision” by James C. Collins and Jerry I. Porras.

In your organization, you should already have a basic management structure defined; if not, you can define structure in the following ways:

The senior-most team comprising of C-Level Executives such as CEO, CTO, etc.

Should include all head of departments or functions such as Marketing Manager, Finance Manager,
Operations Manager etc.

All other employees.

Make sure each manager is part of only one team at a time and everyone knows which team they belong to.

This framework divides the decision-making into 3 broad levels:

• Green Zone – Individual
• Yellow Zone – Management Team
• Red Zone – Executive Team

Decisions that have a relatively short impact, from immediate to up to 3 months should be handled by the individual himself. Such decisions could be easily taken keeping in view the organizational values. Examples of such decisions include:

• Assignment/Rotation of Resources on Projects
• Continue / Discontinue Support in absence of Support agreement
• Release of Funds within budget
• Project Costing
• No Risk or Low-Risk Decisions

For decisions that have a relatively longer impact than green zone, (3 months till 1 year) should be discussed among the
Management team. This gives the decision maker a sense of support and the person responsible is able to view the problem
at hand from different perspectives. Examples of yellow zone decisions include:

• Re-Prioritization of Projects
• Changes in Support Terms
• Allocating funds from one budget head to another
• Discounts to be offered to Customers
• Low to Medium Risk Decisions

Red Zone involves decisions that have a long term impact (more than 1 year on the business operations. This zone refers to the high-risk decisions that could significantly alter the business model and operations of the organization. For such
decisions, the Executive team must be consulted. Examples of such high-risk decisions include:

• Project Delivery / Capacity Planning
• Customer Issue which may severely affect the future relationship
• Allocation of funds beyond the budget
• New Opportunities that are not aligned with strategy.
• High-Risk Decisions

It is worth noting here that decisions belonging to any of the 3 zones must conform to the organizational values. No decision should be taken that is outside the boundaries set by the core values.

Here is a table that summarizes all 3 levels:

This framework is designed for small organizations having 3 levels of the organizational hierarchy. It could be easily extended for additional levels by introducing additional zones and decision impacts

As with all models, this is a basic framework and could be further improved. I would be really grateful for your valuable feedback regarding the improvement of this framework.