At the Uncertainty Project, we explore models and techniques for managing uncertainty, decision making, and strategy. Every week we package up our learnings and share them with the 1,000+ leaders like you that read this newsletter!

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Power and Decision Rights

When people collaborate to make decisions, there is an invisible force-field that has an outsized impact on the results. It is often felt, more than it is seen and heard. But it’s there, and your contributions and participation in the decision making process are shaped by it.

I’m talking about power.

Within an organization, power is the ability to influence others. Specifically, the ability to influence someone to do something that they would not do, without the presence of this power. It is also related to the ability to control resources (one’s own and others’), without social interference - meaning those with power require less social support to make and drive decisions involving resources.

Since all decisions involve the allocation of some kind of resources (Ullman, 2016), there is a strong relationship between organizational power and decision making.

It’s just not something we talk about much. We prefer to think of decisions as rational, systematic things that can be harnessed into egalitarian processes.

The real world is messier than that.

Let’s dive deeper into the relationship between organizational power, authority, and decision rights. First a refresher on what is meant by decision rights:

A decision right is a declaration of the specific choices a leader can make, without the approval of others. It is allocated decision authority, applied to a subset of the organizational scope. The intent is to empower people to make the decisions that drive outcomes.

Our premise is that when decision rights are vague or unclear across an organization, power dynamics will play a greater role in decision making, for better or worse.

Where does power come from?

Over 60 years ago, researchers at the University of Michigan outlined these sources of social power (French and Raven, 1959):

• Legitimate Power: derived from the position a person holds in an organization’s hierarchy

• Expert Power: derived from possessing knowledge or expertise in a particular area

• Referent Power: derived from the interpersonal relationships that a person cultivates with other people in the organization

• Coercive Power: derived from a person's ability to influence others via threats, punishments or sanctions

• Rewards Power: derived from the ability of a person to influence the allocation of incentives in an organization

Legitimate power is the authority that comes with a specific leadership role, or position in an organizational hierarchy. But power and authority are subtly different, since power can derive from different sources of strength, yet yield similar influence.

How does power help an individual with decision making? One argument is that having power allows the individual to make choices with less inhibition and therefore leverage more of their free will (Weber, 1914). But if, as Stanford biologist Robert Sapolsky wrote in his new book, Determined: A Science of Life Without Free Will, “we are nothing more or less than the sum of that which we could not control – our biology, our environments, their interactions” (Sapolsky, 2023), then maybe free will isn’t really a thing? But that’s no fun, so let’s stick with Max Weber’s take.

A little bit more history

When Cyert and March wrote their landmark book, “A Behavioral Theory of the Firm” (1963), they built on the work of Herbert Simon to shift away from the rationalized and systematic decision making models that believe that conflict can be resolved with economic incentives, models that had sparked the field of decision science. Instead, they said that in practice, “managers make decisions based on a combination of intuition, experience, and analysis.”

They believed a main problem was that while individuals have goals, collective groups did not. They advocated for the creation of organizational goals, that would be negotiated amongst leaders, since there was no such thing as a singular “organizational mind”.

To support these negotiations, they saw organizations as coalitions of leaders that establish goals through bargaining, internal goal-setting systems (like modern OKR systems), and continuous adjustments to these agreements, based on actual experience.

This concept of the coalition brought the idea of political actors to the fore. The coalition was a group of individuals, for example leaders of different sub-units or business units, that was temporal and informal in nature.

Coalitions are different than groups or teams:

• Coalition: a set of individuals who, despite their persistent differences, work together to pursue a mutually beneficial goal.

• Group: any collection of individuals who share something (even something tangential) in common

• Team: a collection of individuals sanctioned by the organization and assigned a common goal

Vertical and Horizontal Decentralization

A leader with “legitimate power” can decentralize some of that authority by giving some decision rights to a subordinate, like a direct report. But when multiple leaders, running different parallel sub-units with different (and sometimes competing interests), are all reporting into that single leader, it can get messy.

Vertical decentralization refers to the delegation of authority directly downward. Horizontal decentralization does not allow higher-ups to institute or retain “power over” decision rights, that could permit them to overrule decisions made by peers. Processes help divide up the work and align decisions amongst the peers.

With horizontal decentralization, traditional bureaucratic decision making approaches start to break down.

Coalitions and political behaviors are necessary, when there are differences in preferences and differences in beliefs about what actions will produce what outcomes. They add, “even the most objective indicators are open to different interpretations. When organizational participants derive different meanings from the same set of details, no bureaucratic decision procedures will unambiguously decide the issue.”

This is where power dynamics emerge. In a horizontally decentralized setting, the distribution of power across the sub-units is not equal. Michael Crozier has argued that leaders will leverage “zones of uncertainty” within the organization to reinforce or diminish their autonomy, and therefore their power. Parts of the organization that grapple with the uncertainty that is most critical to its function present a rich field for actors to play the political games, since this uncertainty is a signal for economic opportunity.

The value of decision rights and the effects of power

In their paper, “The Intrinsic Value of Decision Rights”, Bartling, Fehr, and Herz (2014) set out to determine whether decision rights carried not just extrinsic, or instrumental value, but intrinsic value as well. They explained, “the ideas of autonomy, freedom, and liberty derive their intuitive appeal - partly - from an assumed positive intrinsic value of decision rights.”

Through their research, they confirmed that decision rights offer more than just instrumental value. And the implications are far reaching, they suggest. It can offer insight into “why managers value power, why employees appreciate jobs with task discretion, why individuals sort into self-employment, and why the reallocation of decision rights is often very difficult and cumbersome.”

Interestingly, they also found that the intrinsic value of decision rights increases proportionally as the stakes of the decision increases. People value making big decisions, intrinsically. But they also found that when there is a conflict of interest, decision rights are still valued instrumentally, but not intrinsically. They argue that when interests are aligned, making these “comfortable” decisions provide intrinsic value. But uncomfortable decisions, while still needed, offer less of a reward.

So the decentralization of decision rights is a way to cultivate this intrinsic value across an organization.

Another (more recent) paper explored the ways that power shapes decision making, when the uncertainty is high and there are few good options. In “Avoidant Authority: The effect of organizational power on decision-making in high-uncertainty situations” (Shortland, et al, 2023), researchers explored how power can drive two opposite effects into decision making, under conditions where a leader is looking for a “least-worst option” (e.g. think situations like public policy on COVID responses).

They had noticed that one theory, the “approach-inhibition theory of social power”, stated that holding power would lead to more decisiveness and a strong action orientation. But another theory, from naturalistic decision making research, stated that holding power can do the opposite - driving leaders to avoid decisions!

They enlisted (pun intended) a group from the US Armed Forces (of various ranks, to proxy for power) to participate in their study of decision making across a set of hypothetical “least-worst” choices, under great uncertainty. They found that when faced with difficult decisions, those with higher positions of power made avoidant choices (i.e. suffering from decision inertia, possibly driven by loss aversion). Surprisingly, this effect was stronger when the individual had domain experience with the decision!

The status quo can be very strong indeed, when faced with nothing but bad choices.

What the future holds

In their book, “Power and Prediction”, Ajay Agrawal, Joshua Gans, and Avi Goldfarb outline how they see artificial intelligence impacting decision rights in organizations. In general, they say that AI should not be expected to yield insights. Instead, it will improve some kinds of decisions. The trick is figuring out which kinds of decisions.

They define a decision as:

• A prediction, followed by

• A judgment

Predictions are where AI is changing the world, but judgments - “the knowledge of the trade-offs in value, generated by different options” - remains the realm of humans.

They argue that up until recently, good decision making required skills in both prediction and judgment. The boundary between the two was blurry, but that was okay. As AI offers superior predictive capabilities, though, it is driving a “decoupling of the two pieces of a decision, the prediction and the judgment. As AI improves predictions, then the decision rights will move to those with the most skills in judgment.”

This shift will drive a shift in internal power, within an organization.

The shift will be resisted by those currently in power, and may or may not result in a centralization of decision rights. It will depend on the context.

In general, the shift should be driven by “decision efficiency”, which depends on good judgment skills, as well as other factors:

Decision Efficiency (key factors)

• Access to important information

• Skill level, especially judgment of tradeoffs

• Incentives aligned to what’s best for the organization

• Coordination of impact across related decisions and their impacts

In their take, “Those who confer judgment ultimately decide and thus have power.”

Harnessing power for good

Here is a list of tactics (i.e. “power moves”) that you’ve likely seen used by those with some amount of power. Let’s think about how improved clarity on decision rights can mitigate the negative effects of these tactics.

• Controlling Access to Information 

  • Concern: When information is not open across the organization, it can hamper decision making.

  • Explore: When decision rights are clarified, discussions of “information rights” and openness are easier.

• Controlling Access to Specific People 

  • Concern: When gatekeepers protect their staff and access to teams, it can strengthen the walls of the silos.

  • Explore: When decision rights are clear, then involving others - and giving them specific roles in the decision making - can be seen as mutually beneficial.

• Selective Use of Objective Criteria 

  • Concern: Controlling the decision criteria can control the decision. Providing the interpretation of the data can silence alternative interpretations.

  • Explore: Decision rights convey the responsibility of building the criteria, and the accountability for the decision itself.

• Controlling the Agenda 

  • Concern: Stifling dialog for a specific decision (or keeping it off the meeting agenda completely!), is another tactic to influence results.

  • Explore: Those accountable for decisions can control the related agenda, instead of begging for time on someone else’s meeting.

• Bureaucratic Gamesmanship 

  • Concern: When those executing the decision making processes don’t have “skin in the game” for the execution or results, then policies can be abused to influence the results (e.g. redundant deliberation).

  • Explore: When those with decision rights also drive the decision practices (within a supporting decision architecture), the incentives are aligned for results.

• Coalitions and Alliances

  • Concern: With horizontal decentralization of decision rights, coalitions will be inevitable and needed.

  • Explore: Use decision rights to clarify who “owns” which kind of decisions. When interests overlap, these rights can be rotated over time, to improve perceptions of fairness.

Power structures are shaping your organizational decisions today, for better or for worse. Do you need to act? If employee engagement surveys point to frustration with “how decisions get made” or suggest “too much politics and too many power plays”, then maybe it’s time to explore ways to improve the shared understanding of decision rights across the organization.

By making decision rights more explicit, the balance between organizational power and delegated authority can be re-tuned, and then (continuously) refined.