2Bobs—with David C. Baker and Blair Enns Constrained by Artificial Boundaries
Dec 6, 2023
The podcast explores the concept of bounded rationality and how it affects decision-making within organizations. It discusses the clash between individual department goals and overall organizational goals. It also explores the impact of CEOs and Mavericks within an organization and questions the origin and impact of the 80-20 rule in marketing budget allocation. Finally, it emphasizes the importance of embracing the convergence of disciplines in the design industry and redefining firm positioning based on client's urgent and expensive problems.
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Bounded Rationality Creates False Organizational Lines
- Bounded rationality means people shrink decision contexts and treat arbitrary departmental lines as real.
- This causes staff to optimize departmental goals instead of organizational goals, creating misaligned outcomes.
Department Goals Often Trump Organizational Goals
- Departments often optimize for their own KPIs rather than the organization's mission, which produces internal conflict.
- Large clients with rigid departmental goals amplify procurement and marketing frictions for external firms.
Leaders Must Balance Department And Organization
- Let junior staff use departmental heuristics while leaders balance department aims with organizational objectives.
- Ensure department heads act like CEOs for cross-department alignment rather than defending only their silo.