Decision Rights for Organizational Acceleration

When COVID-19 was declared a pandemic in early 2020, companies were compelled to accelerate their digitization and digital transformation efforts in order to address new business needs.[foot]Microsoft CEO Satya Nadella, for instance, remarked in Microsoft’s April 2020 quarterly earnings call that “we’ve seen two years’ worth of digital transformation in two months.” Similarly, a McKinsey executive survey indicated at the end of 2020 that COVID-19 had expedited companies’ digitization efforts by three to four years and the share of digital products in their portfolios by seven years. Jared Spataro, “2 years of digital transformation in 2 months,” Microsoft 365 Blog, April 30, 2020, https://www.microsoft.com/en-us/microsoft-365/blog/2020/04/30/2-years-digital-transformation-2-months/; “How COVID-19 has pushed companies over the technology tipping point—and transformed business forever,” Strategy & Corporate Finance Insights, McKinsey & Company, October 5, 2020, https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-covid-19-has-pushed-companies-over-the-technology-tipping-point-and-transformed-business-forever.[/foot] Demand for online services and sales had increased globally,[foot]“Global e-commerce jumps to $26.7 trillion, COVID-19 boosts online sales,” UNCTAD News, United Nations Conference on Trade and Development, May 3, 2021, https://unctad.org/news/global-e-commerce-jumps-267-trillion-covid-19-boosts-online-sales.[/foot] curbside and contactless pickup had become a necessity, and much of everyday life—from work to education, healthcare, and social engagements—had become virtual. In response, companies took advantage of digital technologies to create and enhance solutions that could fulfill these new demands.

Doing this quickly meant that companies’ reliance on their organization chart and established ways of working gave way to empowered teams that crossed functional silos to lead the way forward. Teams identified root problems and customer needs and then collaborated to develop solutions that delivered results at speed. Yet with approved COVID-19 vaccines now being rolled out across the globe, the return of business as usual (and with it, a slower organizational pace) looms large. In this briefing we address how companies can sustain the momentum of empowerment that has helped them operate and innovate faster during the pandemic.

Go Fast—by Going Together

A popular proverb says that those who want to go fast should go alone; those who want to go far should go together. Companies, however, can go much faster and farther when they involve the entire organization (every team, function, unit, and leader) in sensing, responding to, and shaping the changes in their business environment—provided that the company clearly establishes decision rights and corresponding guardrails.

In 2020, MIT CISR research showed that companies that empowered cross-functional teams with clear decision rights[foot]Clear decision rights specify (1) who has the authority and accountability for key decisions in the organization and (2) how to resolve uncertainty regarding decision making when it occurs.[/foot] outperformed their command-and-control counterparts on net profit margin, revenue growth, and revenues from offerings that were introduced in the past three years.[foot]N. van der Meulen, “Decision Rights Guardrails to Empower Teams and Drive Company Performance,” MIT Sloan CISR Research Briefing, Vol. XX, No. 8, August 2020, https://cisr.mit.edu/publication/2020_0801_DecisionRights_Meulen.[/foot] Because of their proximity to customers and operational activities, empowered teams can rapidly sense and respond to business opportunities and challenges. In addition, empowered teams don’t lose time developing consensus across teams, units, or levels of seniority; and due to fewer handoffs, they avoid long wait times, duplication of effort, and work falling through the cracks.

Creating an empowered decision-making environment, however, is a process that takes time and attention. Companies cannot bring about empowerment by decree. Instead, our research has found that senior leaders and supporting units need to collectively foster empowerment by establishing four decision rights guardrails: Purpose in Action, Democracy of Data, Minimum Viable Policy, and Resources to Run.[foot]For a full overview of the four decision rights guardrails, see N. van der Meulen, “Decision Rights Guardrails to Empower Teams and Drive Company Performance.”[/foot] These guardrails are enabling constraints by which teams can operate with greater meaning, competence, direction, and impact, ensuring that teams can safely accomplish their chosen objectives at an accelerated pace.

Mars provides an inspirational example of a company that fosters empowerment by establishing decision rights guardrails that focus the entire organization on delivering on its purpose faster.

Mars’ Approach to Becoming One Hundred Times Faster

Mars, Incorporated (Mars) is a family-owned company with more than a century of history in providing products and services in pet care, food, confectionary, and personalized nutrition.[foot]This description of Mars is based on N. van der Meulen and C. M. Beath, “Mars’ Recipe for Creating Value One Hundred Times Faster,” MIT Sloan CISR Working Paper No. 450, July 2021, https://cisr.mit.edu/publication/MIT_CISRwp450_MarsCreatingValue_VanderMeulenBeath.[/foot] Employing over 130,000 Associates in eighty countries, the company relies on a decentralized decision-making structure with an egalitarian spirit.[foot]Mars defines the relationship between its business and people in the Associate Concept, which embodies the company’s egalitarian spirit, sets expectations for Associates and the company—and is the basis for Mars terming its employees Associates. For more information, see “The Five Principles: Responsibility,” Mars, Incorporated, https://www.mars.com/about/five-principles.[/foot] Autonomous decision making by Associates has long been guided by the company’s Five Principles,[foot]First codified by the Mars family in the early 1980s, Mars is guided by five principles that form the foundation of how the company conducts its business. The Five Principles are Quality, Responsibility, Mutuality, Efficiency, and Freedom. Each principle is deeply embedded in the company and has been clarified and communicated in detail. For a full description, see “The Five Principles,” Mars, Incorporated, https://www.mars.com/about/five-principles.[/foot] and centers on an actionable purpose for each business segment that provides teams with meaning and direction.

In 2017, the company embarked on a digital transformation journey with an emphasis on accelerating the company. Its leadership team recognized that achieving this company-wide objective meant the transformation could not be driven solely by Mars’ Digital Technologies unit. Instead, every Mars Associate—from factory floor workers and veterinarians to brand managers and supply chain planners—would have to be involved in the transformation. Mars’ goal was to help every Associate become one hundred times faster.

Rather than implementing a top-down digital transformation program that pushed new technologies, methodologies, and training programs to Associates, Digital Technologies started by fueling Associate interest and excitement around developing three core digital capabilities that could improve team competence and impact:

1. Practicing user centricity—interacting directly with customers (or the end user closest to the customer) and applying design thinking—to identify problems and unmet needs
2. Leveraging data and analytics to solve these problems
3. Employing automation to reuse and scale solutions

Combined, these capabilities constitute the Mars Digital Engine—a three-step process that empowers teams through guardrails that bring decision making and initiative execution closer to the customer. The Digital Engine democratizes data[foot]Companies that democratize their data enable employees with access to—and the means to make sense of—the data they need to make evidence-based decisions.[/foot] through greater customer understanding and data science competence, enabling teams to better sense and interpret changes in their environment. In addition, it reduces teams’ need for resources such as scarce digital talent, enabling the teams to respond to changes faster and with greater impact.

Forming and Federating Capabilities

Mars follows a company-devised “form and federate” approach to its digital capability development: it first forms capabilities within the Digital Technologies unit, and then federates them company-wide to be applied as close to the customer as possible. This federation effort began as grassroots movements led by small groups of skilled Digital Technologies Associates. By working closely with teams across the entire company, these groups inspired Associates to learn more about and practice user centricity, analytics, and automation. Only after each movement gained traction with Associates did Mars create additional structure (e.g., courses, events, governance, tools) around it to guide its organization-wide application.

A seven-person User Centricity group, for instance, worked directly with teams in design thinking sprints to reframe existing customer problems and identify new ones. The group also organized coaching clinics and workshops, and so-called Where did you eff up this week?-sessions where teams could be vulnerable and learn from each other’s experiences. Participation in these sessions grew quickly, and led to the creation of fifteen local user centricity clubs across the company’s various regional markets. Within three years, Mars trained more than 20,000 Associates in design thinking through direct participation in over 1,000 sprints. Those Associates that want to further develop their abilities can become certified design thinking practitioners via courses offered through the company’s learning and development platform.

Mars’ enterprise architecture has become geared for speed as well, with modularized business, data, and infrastructure components supercharging the Digital Engine. This enables teams to rapidly (re)configure components for local solutions, while the Digital Technologies unit ensures security and compliance of the components via required processes and controls. In its policies, Digital Technologies takes the overall interdependence of teams’ initiatives into account, sacrificing speed of some individual teams for speed across the entire company.

Scaling Local Initiatives to Accelerate the Enterprise

Digital Technologies leverages the central architecture group’s view into all of Mars’ sprints to identify local initiatives that have great potential within—or even across—business segments at an early stage. The unit can then surface such initiatives to senior leaders for further development into top-down strategic transformation programs with dedicated resources. By 2020, Mars had identified fourteen of these funded programs. Each program focuses on streamlining efforts in either company-wide domains (such as strategic revenue management), or in specific business-segment areas (such as the patient hospital experience within Mars Petcare).

Most initiatives are eventually linked to one of these fourteen funded programs. Yet the company encourages teams to leverage the Digital Engine capabilities to continuously identify new ideas and customer needs to address, even if the resulting initiatives do not align with an existing transformation program. This way, Mars ensures that all Associates can continue to help the company operate and innovate faster.

Succeed at Speed

Faced with an uncertain future, companies can no longer operate via control and long-term prediction. Instead, they need to be able to sense and respond to changes in their business environment faster than ever before. Mars had only just begun to accelerate when the COVID-19 pandemic broke out, but with a company-wide focus on speed already in place, Mars’ empowered Associates were able to adapt to fast-changing customer needs and business changes quickly. Today, the company continues to look for ways to go faster. It does this by forming key digital capabilities, federating them throughout the company, and establishing shared guardrails around them so that local teams with the decision rights to solve customer problems are truly empowered to do so.