Well-founded business priorities are the essence of successful commerce. They embody a firm's strategy and are expressed through all key actions made by the company. It's normal for upper management to insist on making business decisions, largely because they want to hold fast to these priorities. Upper-level employees generally believe that, if you let lower-rung employees make decisions, it becomes difficult to enforce the right choices that support overarching company strategies — even worse, employees might take actions that undermine these strategies.
What management may not realize, however, is that the centralization of decision-making actually poses a far greater danger to the proper enactment of business priorities. This is especially true in a middle market company, which is at the painful crossroads of increased business complexity and restricted resources. By learning how to delegate responsibility, accountability, and authority, companies can make better use of human resources, improve customer service, and solve problems and operate more efficiently.
Decision-Making Bottlenecks
The decision to empower workers to make decisions is a rational approach to business challenges, since management often has limited time to influence every action and requires more time to focus on strategy. In the case of middle market companies, they have higher volumes of business than small companies, so executives and owners don't have the capacity to handle all issues with customers. A midmarket firm also doesn't have the resources of a large company to create an extra layer of management to supervise all interactions with customers and suppliers.
If management is always needing to sign off on decisions, this can create a constant bottleneck for a company. This may lead to slower resolutions when it comes to solving disputes and taking care of customer issues, which in turn may anger said customers or clients and potentially shorten the life-span of important relationships.
According to a study in the Harvard Business Review, what builds customer loyalty is not over-the-top service but rather a reduction of the effort that customers put into resolving issues, and a large part of that effort revolves around timing. The longer it takes to fix something, the more energy the customer invests and the more damaged the relationship can become. Therefore, it's important for companies to create a mechanism that allows employees to resolve disputes. As a result, you help shorten the time it takes to resolve problems, leading to increasing customer satisfaction and loyalty.
The Importance of Properly Trained Employees
Promoting autonomous customer service is all well and good, but many executives worry about giving employees too much power in dealing with problems. Their concern is that employees might make poor choices that undermine company priorities or values. The solution lies in properly training employees.
Employee training, whether of new or long-serving employees, has long been a significant concern for middle market companies. As Deloitte has noted, training was the top choice for business investment in talent among midmarket firms last year. Clearly, skills are a major aspect of making solid business decisions, but so is understanding management priorities and expectations — this is where training can make a big difference. As consultancy firm Tracey Fieber Business Solutions points out, the "biggest problems that occur from employee empowerment are often the result of confusion in the workplace." When new employees take on responsibilities (or older employees are promoted and take on added duties), this can lead to inconsistent decision-making, but helping them to understand and operate based on business priorities can make the difference between "successful employee empowerment" and "lackluster performance down the road."
Setting Metrics and Boundaries
Another important step for fostering employee understanding of strategy, as Rob Carey explains for the National Center for the Middle Market, is to create key performance indicators. Setting KPIs and teaching them to employees helps staff members to comprehensively understand what's important to enacting the company's strategy.
Don't assume that giving employees power is an all-or-nothing process. Mac McIntire, president of management consulting firm Innovative Management Group, suggests considering employee empowerment on a case-by-case basis. As McIntire explains, there are three zones of employee responsibility and action: one zone includes all normal day-to-day expectations of an employee; the second zone is where an employee is given the power to "make decisions or take independent action without seeking further guidance or approval"; the third zone reflects situations where decisions require management input. Set clear definitions of these three zones to your employees so that they can recognize when the right time is to make their own decisions and when management should be involved.
To make your business more efficient, the goal is to increase that second zone for employees as much as possible. The more responsibility for decisions and actions that you can pass along to workers, the more time you've freed up to address strategic and tactical issues, and that's a win for any company.
Erik Sherman is an NCMM contributor and author whose work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, Newsweek, the Financial Times, Chief Executive, Inc., and Fortune. He also blogs for CBS MoneyWatch. Sherman has extensive experience in corporate communications consulting and is the author or co-author of 10 books. Follow him on Twitter.