Significant strategic decisions require thorough discussion before reaching agreement on the appropriate course of action. But how much agreement is enough? A recent article in the online magazine Knowledge by INSEAD (READ IT HERE) tackles the question of voting on major strategic decisions and how many need to agree before the decision is considered approved. Spoiler alert: the article doesn’t ‘specify a number but does provide extremely useful insights into how people vote.
Often there are high thresholds for approving major projects (often 67% or 75%), but this can be fraught with issues, particularly if the people voting are competing with each other for scare company resources. It is not uncommon for the threshold to be lowered (say to a simple majority) in order for projects that may yield significant results to get approval. But the authors research has found there is an unintended consequence to this – “individuals [become] more conservative about how they vote and reluctant to voice their support.” The research also indicates that when people realize the difference their individual vote can make, they “begin to scrutinize proposals more carefully and become less inclined to approve new investments, even those with strong potential for success.”
In searching for why this may be the case the evidence found “that a high threshold makes individuals more relaxed about how they vote, while a lower threshold causes them to be significantly more cautious.” This impact was found to be quite substantial because more power has been given to individual decision-makers who feel they don’t have enough information to make the right call.
The article does provide some suggestions for organisations to think about different approaches to the dilemma:
- Implement a straw poll:
This non-binding decision indicates where everyone stands and can give opportunity to “gain confidence and insights that may help them make more informed decisions.” - Don’t disclose the approval threshold:
Potentially “decision-makers focus on the projects potential rather than engage in strategic voting by considering how much influence their vote has.” Hopefully, people are then more objective. - The “Golden Ticket”:
Don’t alter your voting rules, but rather “occasionally give managers a “golden ticket” to trigger the go-ahead for projects that appear risky by they believe have potential for significant impact.”
It is a very interesting and practical article well worth reading in its entirety, and which challenges management “to reflect on how to make decisions,” a process that is often assumed but rarely evaluated.