“Authoritative and pragmatic look at how to make the right calls”

Book review: Who’s in the Room? by Bob Frisch
By Julian Birkinshaw
February 1, 2012

In a world where chief execs have made some appalling blunders, this authoritative and pragmatic look at how to make the right calls impressed Julian Birkinshaw.

Executive decision-making is under a great deal of scrutiny. Behind every corporate meltdown – from RBS and BP to News International – lies a top executive who got it wrong, and behind him or her is a failed decision- making process. I recently read the FSA report on the failure of RBS and it spoke of ‘underlying deficiencies in management, governance and culture which made it prone to make poor decisions’. No arguments there. But it does lead one to wonder how RBS, and many other companies as well, ended up with such poor decision-making.

With this context in mind, I picked up Bob Frisch’s Who’s in the Room? with great interest. Frisch knows his stuff – he has worked as an adviser and executive for 30 years, on his own and at the top of major consultancies such as Accenture and Boston Consulting Group, and he’s worth listening to.

Frisch’s big idea is simply that the senior management team is not actually a decision-making body. Such teams ‘are not good at making big decisions’ and for most important decisions a small group of trusted advisers (the ‘kitchen cabinet’) is actually more effective.

So, when your CEO seems to be spending a lot of time talking to people who aren’t even on the organisational chart or is frequenting the golf course, Frisch’s advice is: relax. The CEO is just gathering the opinions and evidence that will allow him to come to the right view.

In the first part of the book, ‘From Problem to Portfolio’, Frisch reviews the typical senior management team make-up and decision-making processes of large organisations. He wants us to drop the psychologists and the team-building courses, which don’t actually make people work together more effectively. And he wants those on the senior team who are not in the loop to get over it – they have a valuable role to play, but that doesn’t mean they have to weigh in on every decision.

I particularly liked his analysis of the tensions that make the senior team an almost unmanageable body. Is it a group of specialists speaking from their own area of expertise or are they all supposed to be taking the CEO’s general management perspective? Are they speaking for their constituencies or for themselves? Are some more important than others because of the value they create?

Most teams, in my experience, don’t have good answers to these questions, and this can lead to real trouble, not to mention frustration and disillusionment when major decisions have to be made. One piece of evidence in the book is very revealing. When asked how clear the decision-making process in their company is, the average answer from CEOs was 5.6 out of seven, the average for other team members was 3.9 out of 10.

So what’s the solution? Frisch’s answer is prosaic but probably correct: he says there is no best way. CEOs need to consult different groups of people for different types of decisions. The teams and committees they put in place are like a suit of clothes, tailored to meet their particular style of operating, and flexible enough to cope with a wide variety of issues. Of course, we still need a senior management team and a board of directors, but they shouldn’t be surprised when they end up nodding through most decisions – ‘waving at the train as it moves through the station at high speed’.

The second part of the book, ‘The Senior Management Team Unbound’, addresses the obvious follow-up question: given that the senior management team doesn’t actually make the big decisions, what does it do? The answer is three critical tasks: developing a shared view of where to go, prioritising the initiatives needed to get there, and managing the dependencies across those initiatives.

There were some useful suggestions here – I particularly liked the advice for dealing with initiative overload – but, for the most part, this was standard stuff that has been covered many times before.

Frisch’s world view is a little unsettling. It rings true and it has a pragmatic quality that I cannot argue against. But for those who want greater accountability among their corporate leaders, it is a minefield. When the FSA picked over RBS’s formal governance systems and its auditable records, the quality (or not) of Fred Goodwin’s kitchen cabinet did not get a look-in. For external regulators, the formal structures are what matters, whereas for Frisch these are less critical. So, if we buy his arguments, it means putting even more faith in our top executives. The implicit model is: trust us, give us freedom to act, and we will make the right decisions. It usually works. But when it doesn’t, it can backfire horribly.

– Julian Birkinshaw is professor of strategy and entrepreneurship at London Business School