Five Steps to Defining an Employee’s Authority

When we delegate authority to an employee, we are actually delegating the power to make decisions. We all want employees who think for themselves, at least when their decisions work out in a way we like. When they don’t, we either chalk it up to the price of experience or forbid the employee from making “those kind” of decisions again.

Trial and error is an expensive training method. Eventually the employee learns the boundaries around his authority, and develops informal guidelines. Defining levels of decision making can save both the boss and the employee considerable grief.

Blanchard and Oncken’s great little book on delegating, The One Minute Manager Meets the Monkey, recommends two levels for delegating employee decision-making authority. “Decide, but ask before acting.” or “Act, then inform me.” While those guidelines are excellent, they still assume that you have some input in defining each decision before it is made. It would be better to teach employees what exactly lies within their authority without asking in advance.

I attended an excellent presentation last week by David A. Ladensohn, a family business dispute mediator. He parsed delegated decision-making authority into five levels that can be agreed between a boss and subordinate in advance. With a bit of editorial liberty and my thanks to David for his permission, I’d like to share them.

Level One: Decide, but ask me first. This is the basic level for mentoring, teaching critical thinking skills, and widening the employee’s vision of his or her impact on other areas. You encourage the employee to develop a solution, but make it plain that it requires your input, and likely modification, before proceeding with implementation.

Level Two: Decide, but check with me first. This is for an employee whose logic you are beginning to trust. You anticipate approving her decisions, but reserve the right to comment. It is an important differentiation to the employee. In Level One you are teaching basic decision skills. In Level Two you are recognizing the employee’s developing ability, but know there are other factors that she might not be aware of.

Level Three: Decide;  just tell me what you are doing. This is again incremental. You are delegating nearly-free authority. The process of informing becomes more casual, because you don’t anticipate having to review the decision-making process or reanalyze the factors that influenced it. You just want to know what is happening, and have a bit of insurance against a big mistake.

decisionsLevel Four: Decide and act; let me know later. This is the first level of truly dedicated authority. The employee has earned your confidence, and only needs to keep you in the loop.

Level Five: Decide and act; I don’t need to know. This can be limited to certain types of decisions. In its broadest interpretation, it should be reserved for employees who fully appreciate their impact on profitability and other stakeholders.

There is considerable value in defining subsets of latitude in decisions and actions. First, it creates a base of reference that both parties understand. It permits differentiation between types and levels of action; acknowledging that all decisions aren’t equal. It provides a means to for both you and the employee to track and recognize progress in decision-making skills. Perhaps most importantly; it says that ongoing development is both normal and an expected measure of managerial ability.

Most employees learn their authority level by the “naval bombardment” method. They overshoot, then undershoot, and gradually zero in on a target. Providing clear definitions of the differing levels can greatly speed up the process.


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Do Titles Make Leaders?

You’ve promoted a great employee beyond his capabilities. He is putting in long hours, but appears unable to keep up with the new responsibilities. In fact, he doesn’t even seem to understand what those responsibilities are, or what they should be. What do you do?

In one of my peer board conversations this week we were handed this issue by a Board member. He knew he had made a mistake, but was faced with the unappealing choice between humiliating the employee or leaving a weak player in a key position. As we talked, I realized that this was in many ways the mirror image of last week’s post (Do Leaders Need Titles?). Instead of an employee seeking a title to convey desired authority, this involved an employee given a title in the hopes that it would convey new job skills.

When a position becomes available, it is hard not to look at the people immediately below it as a potential solution. They are known quantities. They understand the framework of the job and your company culture. They have worked hard, and expect a chance at advancement.

Your controller knows everything about the components of each line item expense, communicates with the bankers, maintains the cash accounts and closes the books flawlessly by the tenth of each month. Why shouldn’t he get a shot at the CFO job?

Your top salesperson slam dunks every product promotion, maintains an enviable gross margin, and almost never loses a customer. Shouldn’t she be given a chance at sales management?

Short puttIn such cases, the employee clearly lacks experience in the role, but might have the ability. You are confident that he or she won’t undermine a new superior (If you aren’t confident, you shouldn’t even be considering the promotion.), but what if the employee perceives it as a door-closing career event? Having lost a key player, can you afford to lose the strongest backup?

There are three questions to ask:

  1. Is it time to upgrade the position? If the company or the job scope has grown, filling it with someone whose only frame of reference is the abilities of the last person who held the job may not be enough.
  2. If the skill set remains roughly the same, does the candidate understand the gap between his or her current abilities and what is needed? Is he or she willing and able to commit from day one to a fire-hose program for obtaining and developing new skills?
  3. Are you trying to make a Hunter into a Farmer, or a Farmer into a Hunter?

If the answer is “yes” to questions one or three, or “no” to the second question, there is no future in trying to work around it. It’s much better to deal with someone’s disgruntlement at being “passed over” than to have the top two positions (the promoted employee’s new job and their replacement’s) both undermanned. Just as a new title does nothing to convey real authority, it also doesn’t upgrade ability.

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Do Leaders Need Titles?

When should an employee be promoted? Over the years, I’ve often had this conversation both within my own companies and with owner-clients. An employee is handling responsibilities above his or her official job description. We naturally want to acknowledge the effort, and a new title sends a strong message of recognition. Why not bestow it as soon as possible?

There are a number of reasons to wait. As selfish as it sounds (and is…), as an owner I want to announce a new title when it causes the least grief for me. I’ve had middle managers ask why we hadn’t yet named a leader in a given department. My answer was “I’ll do it when I’m sure the reaction is “Of course” and a shoulder shrug from everyone who will report to her.” If I have to handle fallout following the announcement, it was probably premature.

Perhaps the team is working on a big project or under an exceptionally heavy workload. Even though one person is clearly coordinating and directing the efforts, the team feels that their accomplishment is a group effort. Singling out one person for recognition right  at that moment might make the others feel undervalued, and upset the group’s chemistry.

lead cyclistIf the employee-leader has only recently stepped up performance, I may want to let them season a bit before making a title change. Leadership is easier when things are going well. I like to see someone go through a few challenges, perhaps dealing with an uncooperative co-worker or a project that’s in trouble, before deciding they can handle it over the long term.

I consider whether the employee has raised his or her game on personal effort, or by coaching and helping others to succeed. I appreciate a hard worker as much as anyone, but individual production isn’t the same as improving the production of others.

Is the prospective promotee making decisions, or merely enforcing already existing processes? Is she solving problems, or referring to higher authority for all the answers? Middle managers love to promote leads or supervisors who come to them for every decision, but that does little to strengthen the organization.

Finally, there is one argument that will always make me postpone a promotion. It’s “He needs the title to get others to do what he says.” For a leadership role (which includes any manager, regardless of level or responsibility), you have to get people to accept your decisions because they want to, not because they have to.

I understand that assigning someone responsibility includes giving them the authority to make things happen. The best leaders, however, take on responsibility first. They evidence a natural authority by figuring out how to get others to cooperate willingly, and to accept direction as being in their own self-interest. Those who need the crutch of titular authority before they accept responsibility seldom advance more than one rung up the ladder.

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Posted in Entrepreneurship, Leadership, Managing Employees | Tagged , , , , , , , , , , | 4 Comments

4 Responses to Do Leaders Need Titles?

  1. Mark says:

    Great post John:

    I fully agree, Promotions are much better received when they are “earned” in the hearts and minds of the peers. Although, this can’t always be the case; it is ideal whenever possible.

    Far too many times in the corporate world I have seen promotions given that were not deserved; ultimately demoralizing key members of the organization.

  2. From my experience a title and $5.95 will get you a cup of coffee at Starbucks. A leader creates an emotional link with his workplace team and excels without a change in business cards.

  3. i agree mostly, John, but where I disagree is where an inappropriate title and/or job spec leads others in the organization to resist and even undermine the efforts of a leader to the point of doing damage. Good Leadership qualities will generally motivate the team and help them see the virtues of the results being sought, but in most organizations, there are those who refuse to see the light and are only interested in protecting their turf and “superior” level in the organization. An appropriate title and job spec makes the role of the leader clear to all.

  4. Linda Christ says:

    Great post and great discussion.
    Shows it not such an easy decision. Different things motivate different people – some the title, some the money and some probably all the recognition

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Iron Rice Bowls and the Impact of Government Funding


There was an interesting editorial item in The Economist that unintentionally says a lot about the impact of government intervention on industry. In the last generation, the average number of working hours needed to purchase an automobile, clothing or other consumer goods has fallen by 50%. There are only three industries that completely defy this trend; healthcare, education and housing.

iron rice bowlFor hundreds of years, the Chinese have sarcastically referred to secure bureaucratic jobs as an “Iron Rice Bowl.” Whether you worked in the Emperor’s Palace or for the Communist Party, being a faceless worker in a large faceless organization may not have brought wealth, but it also meant you wouldn’t starve.

Why are Healthcare, education and housing exempt from long term trends? Since 1973, the purchasing power of the median wage has remained essentially flat after adjusting for inflation. During that time, the real cost of a higher education rose by over 500%. That comes as no surprise to anyone with a college-aged child. The top-tier state university that I attended in the 70’s cost about $3,000 a year for tuition, room and board. Today it is more like $40,000.

Inflation over the same time has raised the average cost of a dollar’s worth of goods to $5.32. A dollar’s worth of medical treatment, on the other hand, now costs $11.21. As a percentage of all goods and services in the nation (GDP) healthcare has risen from 7% to 16% of our economy in that time.

Housing has risen and fallen with the economy, and except for rental rates in major cities is currently considered to be at the high end of the affordable range (around 30% of household income). The US economy as a whole, however, is working through its 8th year of recovery from the subprime lending fiasco and subsequent collapse of real estate values.

The three Iron Rice Bowl industries of healthcare, education and housing are still competitive on a microeconomic scale. Businesses grow and fail. People make fortunes and lose jobs. From a macroeconomic perspective, however, these are industries that the government deems critical for social reasons. That government support has distorted market forces to the point where those three sectors no longer respond to normal supply and demand elasticity.

This is not just a phenomenon of the Obama administration. For forty years successive Federal Governments have embraced the cause of social engineering with tax revenues. The result is a generation of college students laboring under a trillion dollars of too-easy-to-incur debt. It is a health care market that is squeezing wages and business profits. It is a housing market that caused the biggest downturn since the Great Depression. All of these cripple, rather than support, a strong middle class.

During that time Americans have come to accept that government should play a major role in the financial support of the Iron Rice Bowl industries. Perhaps it is time we stepped back and considered the results.

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Posted in Economic Trends, John's Opinions, Politics and Regulation | Tagged , , , , , , , , , , , , , | 11 Comments

11 Responses to Iron Rice Bowls and the Impact of Government Funding

  1. craig eastman says:

    We must never let our guard down.

  2. David Basri says:

    While I completely concur with the article with respect to education and housing, healthcare is a different beast entirely. The United States has by far the least efficient healthcare system of any developed country because of a deficiency of government involvement, not an over-abundance of it.

    By depending on a vastly greater level of market-based forces, instead of control, the U.S. has created a monster. This is because healthcare by definition does not work on market principles. When any individual’s health is at stake they do not care what it costs, they just want to be treated. That means the suppliers have total coercive control over the “market”.

    Can anything realistically be called a market when it a) is difficult or impossible to even determine what a product costs before it is purchased; and b) there is not really choice about whether it should be purchased? Do you operate that way in any other aspect of your life?

    U.S. healthcare has evolved to a level of insanity beyond what even a pure market system might produce. The stakeholders: people, providers, insurers, employers, state government and the federal government all have competing interests. The result is that if you are lucky in terms of employment, insurance, income and location, you might get absolutely world class healthcare. If not, you might get none at all. Meanwhile the entire system thrashes against itself creating unbelievable inefficiency and overhead, resulting in costs 3 to 4 times higher than necessary. Small example: our local hospital system has 12 executives making over a million a year.

    ANY other business operating this way would have been bankrupt a very long time ago. Some things should not be market driven. I submit access to roads, clean water and healthcare for starters.

    I would say, “Don’t get me started. . . .” but too late for that.

    • John F. Dini says:

      Well stated, David, although I don’t entirely agree. Correcting healthcare won’t come from further government intervention. The competing special interests you mentioned hold too much sway over Congress. They will never address the twisted incentives that drive the system, where unnecessary work (both direct care and regulatory) makes everyone more money.

  3. Jeff Shapiro says:

    To take the average working hours concept a step further: (1) the average working hours to purchase an automobile has decreased, yet vehicles haven’t remained static — they’re loaded with many more safety, comfort, and entertainment features today than ever before; (2) a student leaves school with about the same amount of basic knowledge today compared to say the ’70s or ’80s and pays considerably more.

    • Jeff Garvens says:

      Don’t forget (3) healthcare: The amount we SPEND on healthcare is up considerably, but the value we receive is up considerably too. I agree healthcare isn’t a normal marketplace, but 40 years ago we did not have the choice to have life saving and life improving MRIs, Cat scans, organ transplants and many prescription drugs. All of those innovations come with a cost.

      As the slice of our income pie needed for basic needs shrinks, the rest of the pie necessarily grows. If not to healthcare, housing and education, then to where? Smaller homes with larger flat screen TV’s?

      • David Basri says:

        My issue is not with MRIs, medical technology, research or even prescription drugs (though that is also an outrageous “market”), or anything else that directly relates to delivering healthcare. I get riled up over the incredibly high overhead, inefficiency and waste. These are the direct result of competing interests and multiple layers of profit motivated entities exploiting a distorted system.

        For example, billions of dollars are spent annually on prescription drug advertising. That is entirely a function of profit motive, not any objective to improve health. If everyone had access to preventive care on a regular basis, decisions about prescription drugs would be made by doctors and patients discussing someone’s health, not a TV or magazine ad.

        Add to that the fact that a significant portion of the population has limited or no access to healthcare, and the overall situation is just plain dumb.

  4. David Basri says:

    Sadly, your response is entirely correct.

  5. Thanks for introducing me to the Iron Rice Bowl concept. You guys in the beltway and Washington DC area, it is time to listen up!

    When will we bring back an objective money standard, i.e., gold or silver?

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We Can’t Legislate Job Skills

“Why can’t we find enough good people to hire?”

As a consultant to business leaders, I hear this complaint with increasing frequency. From  tradesmen to programmers, and from executives to scientists, we seem to be lacking a workforce with the skills and work ethic that businesses seek.

The Federal Reserve Bank is the only central bank with a dual mission to control both inflation and unemployment. An official from the Fed recently told me that we are presently experiencing a historically high rate of long-term unemployment, simultaneous with the highest number of help wanted advertisements in history. That seems to make no sense.

Self-serving political announcements praise the pace of job creation since the Great Recession, but the numbers are deceiving. The U-3, or “official” unemployment rate, counts anyone who works one hour a week as employed, and ignores those who have given up trying to find a job. The Federal Bureau of Labor Statistics also publishes what is designated the U-6 unemployment rate. Unlike the U-3, it includes those who work part-time but would prefer a full time job, and those who have given up looking but say they would take a job if it was offered. That number still stands at over 11% of the workforce. More than one in ten American workers, or around 15,000,000 people, can’t find a job that supports them satisfactorily.

So why are employers complaining? Has the quality of jobs declined, or are workers less able? The answer is a qualified “yes” to both.

The American middle class has been shrinking for the last 20 years. According to economists, technology is the culprit both here and throughout all of the developed economies. Robots on assembly lines, electronic outreach instead of face-to-face sales calls, and a general thinning of middle management ranks all act as cruel Darwinism. If you don’t have the new skills needed to move up the socioeconomic food chain, you move down. Standing pat for your entire career is no longer an option.

career ladderWhile those who lack the skills to follow the better paying jobs find their lifestyles suffering, employers are desperately searching for employees with the qualifications to fill positions higher on the ladder. Scientists, engineers, accountants and skilled leaders of all kinds are in short supply. Too many of them are part of the retiring over-50 Boomer generation, and the educational system isn’t backfilling the gap.

The employers’ logical answer has been to continue replacing duplicable skills with computers, so they are able to pay even more to those employees who can demand it. Wealth transfer taxes to shore up the middle class don’t really address the underlying problem. In the long run, no legislation has ever defeated the law of supply and demand.

Posted in Business Perspectives, Economic Trends, John's Opinions, Managing Employees, Politics and Regulation, Strategy and Planning | Tagged , , , , , , , , , , , , | 5 Comments

5 Responses to We Can’t Legislate Job Skills

  1. Great article. I agree that the numbers have to be skewed that government is reporting. And I believe our Govt. is the biggest problem. Our Unemployment laws need to be seriously revised. If someone works and then gets seriously sick or injured, it makes sense to help them with unemployment for a longer period of time, because they earned it. We need to address the younger people. We have two MAJOR issues:
    1. Is the fault of our society and their parents — this younger working age generation are spoiled rotten and suffering from a severe case of ENTITLEMENT. I see it every day. Why should they work hard, or even show up to work, when Daddy just bought them a new car, and pays for everything.
    2. It is way too easy to file and collect unemployment, and it lasts too long. I post an ad on Craigslist at least once a month. The amount of responses is usually pretty good. However, I’m lucky if 1 in 6 scheduled interviews even show up. And even then, they usually don’t ever show for the job I hired them for. And I know what their doing — they’re checking off the box that they’re “looking, but can’t find anything” so they can continue receiving unemployment. I can vouch that there are more jobs than people, but it sure doesn’t seem that way.

  2. Nor can we legislate respect, work ethic, self-motivation and personal responsibility. Recently read an article stating we are who we are by the age of 12. Parents are the key to improving the workforce, not the school, government or the day care provider. Children are not possessions like cares or houses. They are a lifetime commitment and one’s enduring legacy of their contribution to society.

  3. Great Article. A subject that is close to my heart, and as a matter of fact, is what made this country so the first place..” The Middle Class”. Where is the middle class, did they just disapear, and the jobs that went with them disapear as well. Is the new generation so spoiled, that they refuse to work? Does it make more finacial sense to go on longterm unemployment, wellfare or disability, than to get a JOB?

    The wriing in already on the wall, just look at the numbers. Who’s fault is it…you might ask….An even better question is how do we FIX it.

    • John F. Dini says:

      The fix is complex and long-term. I see no signs that the entitled class will go away, since their parents are leaving them something like 15 trillion dollars. For many, that points to another generation to follow of kids who never had to scratch to make it. They may look up one day and find that they’ve been passed over. Those who wake up and follow market needs (STEM, trades, non-legal mid-market professionals) will be the new middle class regardless of their socioeconomic background.

  4. Lou Thomas says:

    Great article. Being self-employed, myself as a contractor for 40 years I have to keep up on all of the changes in construction. Many times it is online courses from manufactures. It has to be a personal thing if you want to keep up. People need to be self motivated to get a head in this world.

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