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Decision-making
Decision-making is the heart and sole of effective organizations. Historical Foundations for the Second Principle of Process Management

In the late 1700s in his book The Wealth of Nations, Adam Smith coined the phrase Division of Labor to explain specialization of manual labor. The Second Principle expands that concept into the realm of decision-making. Since decision-making is the heart and soul of effective organizations, the Second Principle is crucial for far-reaching success.

The Wisdom of the Second Principle Division of Labor is the framework for all aspects of decision-making. It must be clearly understood to separate the strategic, tactical, and policy decisions. Operations makes the tactical decisions of running the facility. Management makes the strategic decisions of assessing the facility’s suitability for the job. Executives make the policy decisions of providing the vision for the business.

Division of Labor drives the decision-making process. It dictates who will be in charge of the different kinds of decisions (policies, strategies, or tactics). We are doomed to failure if we do not grasp the Division of Labor.

Policies provide the vision to guide the organization. Executives must develop and define this vision. This vision must be communicated so that the strategists can build a facility that supports the policy vision. Capability is a major strategic issue associated with management, customer, and sales concerns.

Tactics are defined as “accomplishing the goal using available means.” Control is a major tactical issue associated with operational duties. Operations makes the tactical decisions of running the provided facility.

Tactical execution is required for strategic decisions to be effective. If operations fails to correctly run the facility, no strategy will work. Our strategic decision-makers must count on our tactical decision-makers to do their job, for only then can the strategic decisions be effective. Many strategic options are available, but they will work only if the operation runs smoothly.

What not to do is just as important as what to do Second Principle violations must be understood and avoided in order to make effective decisions. The harder a decision-maker works with improper instructions (violating the Second Principle), the poorer the performance. Quality will degenerate. As an example, when operations violates the Second Principle on an extremely capable process, we will make the machine appear less capable than it really is. Instead, we must run the machine to its own personality, as correctly and consistently as possible.

You can’t do it alone Understanding who is responsible for each task is key to a successful organization. If operators try taking on every role, they risk not being successful in any role. Violating the Second Principle by clouding the responsibilities of management with those of operations, leads to chaotic decision-making. The strategic decision-maker can only ask operations to do what the facility is capable of doing. In this way, we can hold operations accountable for correctly and consistently running the provided facility. Management must never abdicate their responsibility to provide a capable facility.

When policy, strategic, and tactical personnel do their jobs, they form a team. The proper support information must come together to build a finely honed partnership that allows for good, effective, clear decisions. Operations must count on the executives to provide a clear vision and management to provide a proper facility for the mission. Policy, strategic, and tactical decision-makers must trust that each will step up and take responsibility for the job. Then each can focus their energies on brilliantly executing their decisions, trusting the others will do the same.