In our last blog post we explored the overarching phenomenon of leadership and decision compression and its close associate, perspective compression. We pick up here with the last two types of common compression we see, information compression and authority compression.
Centralized Decision Making: Information Compression
When the conductor leaves the front of the orchestra to go work with a particular section – let’s say the violins – then the information he is now exposed to is limited to what is happening in and around the violins section. He can no longer experience the dynamics or output of the entire orchestra.
Once in a while and for a short duration, like during a rehearsal, focusing on one section is fine. As a perpetual habit, it can be quite damaging.
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We see this in organizations when senior leaders hold on too tightly to past experiences or knowledge – the marketing director who takes on the role of strategy but fails to expand their thinking beyond what they know, or the new hire from outside who perpetually tries to replicate their past company’s processes and practices regardless of appropriateness or fit with their new organization – are examples.
Another common form of this compression occurs when information is seen as currency within an organization and people hoard it to secure power. This practice hinders the transparency necessary to connect dots and make well-informed decisions.
True insight is generally found at the intersection of critical data sets. When everyone holds onto their respective piece of the proverbial pie, those insights are seldom, if ever, captured.
Decision compression has a profound impact on leaders’ ability to collect, organize, and leverage reliable data to make sound business decisions and can negatively impact centralized leadership.
In organizations suffering from severe decision compression, the sources of data – finance, HR, line reporting – tend to become unreliable as those responsible for creating it become fearful of it being misinterpreted or punishable.
Authority Compression
This is the exact opposite of empowered decision-making. Rather than pushing authority to the level where the best information and insight resides, as in centralized leadership, authority compression forces all decisions up, generally to the very top of the house.
In one extreme case we witnessed a CEO, tired of public resource tug-o-wars, who reverted to making all trade-off decisions across his five, counter-cyclical business units.
With this expedited decision-making, he ultimately was making all decisions related to the deals each business pursued, the pricing strategies for those deals, and the marketing and brand spends for each business.
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It felt to all, and rightly so, that he was single-handedly running all five BUs. This might also feel like arbitrary leadership. To make themselves useful, the BU presidents in turn started going on key customer calls, building brand campaigns, or doing capacity forecasting for operations. And so on.
In our next blog post, we begin to share strategies for combating these types of compression.
A leadership coach can help you fight compression and lead your team more effectively. Book a consultation today.