What Interests Do Stakeholders Have in Decision Governance?

Anyone contributing to or living with decision outcomes is a stakeholder in decision governance. How decision governance works will depend and influence the interests of these stakeholders.

If we know who the stakeholders are, when designing decision governance, then we need to know their interests, so that we can make sure these are met through the decision process. For example, if some stakeholders require insight into all information used for decision making, then we can design governance to ensure they have the right to access this information, or we can choose not to do so, and consciously take the risk that their interests will not be met.

This text is part of the series on the design of decision governance. Decision Governance refers to values, principles, practices designed to improve the quality of decisions. Find all texts on decision governance here, including “What is Decision Governance?” here.

When decision governance stakeholders are known (see the text here), making and changing decision governance requires us to understand and predict interests of these stakeholders in decisions that we are aiming to govern. If we ignore their interests, we take the risk that the decision governance will lead to decisions that do not satisfy their interests, or if they do, this is only by accident.

A stakeholder’s interests refers to a variety of information about what a stakeholder considers to be desirable during decision making, and as outcomes of decisions. Interests covers information about

• preferences over options that may be considered during decision making
• options to exclude altogether from decision making
• preferences over risks
• properties of desirable outcomes
• preferences over outcomes
• preferences over decision guidelines, rules, processes, that is, over parameters of decision governance
• all of the above as a function of preferences of other stakeholders, i.e., I will prefer X if they prefer Y, otherwise I’m fine with Z – of the like
• incentives that stakeholders as a function of their actions during decision making, and depending on the outcomes of decisions

Although the list is long, there will be more and less important interests, and the effort should be invested mainly to identify what matters, rather than be comprehensive. What matters will depend on

• their past behavior, or what mattered before you considered changing how decisions are made and what their roles were
• tests or pilots that you put in place to test your hypotheses about what matters to them
• you can always ask them, but actions may differ from what they say, and it is common that much will be missed

Example: Decisions about the level of risk associated with financial instruments in the subprime mortgage crisis

In the text on who stakeholders may be, here, the example I used the subprime mortgage crisis of 2007–2008 as an example, and specifically the decision process that leads to the evaluation of risk of collateralized debt obligations (CDO). It is worth reading that text first. Table 1 is a summary of incentives of various stakeholders in that decision process, and consequently stakeholders for its governance.

For each stakeholder, we can see the parameters that may be worth considering when designing decision governance. For example, we can design processes which emphasize or deemphasize risk, require longer term versus shorter term realization of outcomes, and so on.

References and Further Reading

• Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Academy of Management Review, 22(4), 853–886.
• Donaldson, T., & Preston, L. E. (1995). “The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications.” Academy of Management Review, 20(1), 65-91.
• Freeman, R. E., Wicks, A. C., & Parmar, B. (2004). “Stakeholder Theory and ‘The Corporate Objective Revisited.’” Organization Science, 15(3), 364-369.
• Jensen, M. C. (2002). “Value Maximization, Stakeholder Theory, and the Corporate Objective Function.” Business Ethics Quarterly, 12(2), 235-256.

Decision Governance

This text is part of the series on the design of decision governance. Other texts on the same topic are linked below. This list expands as I add more texts on decision governance.

Introduction to Decision Governance

1. What is Decision Governance?
2. What Is a High Quality Decision?
3. When is Decision Governance Needed?
4. When is Decision Governance Valuable?
5. How Much Decision Governance Is Enough?
6. Are Easy Options the Likely Choice?
7. Can Decision Governance Be a Source of Competitive Advantage?

Stakeholders of Decision Governance 

1. Who Is Responsible for Decision Governance in a Firm?
2. Who are the Stakeholders of Decision Governance?
3. What Interests Do Stakeholders Have in Decision Governance?
4. What the Organizational Chart Says about Decision Governance

Foundations of Decision Governance

1. How to Spot Decisions in the Wild?
2. When Is It Useful to Reify Decisions?
3. Decision Governance Is Interdisciplinary
4. Individual Decision-Making: Common Models in Economics
5. Group Decision-Making: Common Models in Economics
6. Individual Decision-Making: Common Models in Psychology
7. Group Decision-Making: Common Models in Organizational Theory

Role of Explanations in the Design of Decision Governance

1. Explaining Decisions
2. Simple & Intuitive Models of Decision Explanations
3. Max(Utility) from Variety & Taste
4. Expected Uncertainty to Unexpected Utility
5. Perceptiveness & Experience Shape Rapid Choices

Design of Decision Governance

1. The Design Space for Decision Governance
2. Decision Governance Concepts: Situations, Actions, Commitments and Decisions
3. Decision Governance Concepts: Outcomes to Explanations
4. Slow & Complex Decision Governance and Its Consequences

Design Parameters of Decision Governance

Design parameters of decision governance, or factors that influence decision making and that we can influence through decision governance:

• Factors influencing how an individual selects and processes information
• Factors influencing information the individual can gain access to

Factors influencing how an individual selects and processes information in a decision situation, including which information the individual seeks and selects to use:

1. Psychological factors, which are determined by the individual, including their reaction to other factors:
   1. Attention:
      • Attention Depends on Stimuli & Goals
      • Motivated Reasoning: How To Detect And Mitigate Its Risks
   2. Memory:
      • Selective Memory Can Be Desirable
   3. Mood
   4. Emotions:
      • Emotions Mediate Decisions Always and Everywhere
   5. Temporal Distance:
      • Why Perception of Long Term Outcomes Should Be Influenced First?
   6. Social Distance:
      • Increased Social Distance (Over)Simplifies Explanations
   7. Expectations
   8. Uncertainty
   9. Attitude
   10. Values
   11. Goals:
       • Goals: How Goals Shape Decisions
       • Goals: How Goals Form and Change
       • Goals: Factors That Stabilize and Destabilize Goals
       • Goals: Factors Influencing Goal Selection
       • Goals: How to Improve Alignment to a Team Goal
   12. Preferences
   13. Competence
2. Social factors, which are determined by relationships with others:
   1. Impressions Of Others: How They Influence Decisions And How To Regulate Them
   2. Reputation
   3. Social Hierarchies:
      • Social Hierarchies: Why They Matter for Decision Governance
      • Social Hierarchies: Benefits and Limitations in Decision Processes
      • Social Hierarchies: How They Form and Change 
      • Power: Influence on Decision Making and Its Risks
      • Power: Relationship to Psychological Factors in Decision Making
      • Power: Sources of Legitimacy and Implications for Decision Authority
      • Power: Stability and Destabilization of Legitimacy

Factors influencing information the individual can gain access to in a decision situation, and the perception of possible actions the individual can take, and how they can perform these actions:

• Governance factors, which are rules applicable in the given decision situation:
  1. Incentives
     • Incentives: Components of Incentive Mechanisms
     • Incentives: Example of a Common Incentive Mechanism
     • Incentives: Building Out An Incentive Mechanism From Scratch
  2. Rules
     • Rules-in-use
     • Rules-in-form
  3. Institutions
• Technological factors, or tools which influence how information is represented and accessed, among others, and how communication can be done
• Environmental factors, or the physical environment, humans and other organisms that the individual must and can interact with
  1. Detail: Level of Detail Can Influence Probability Estimates

Change of Decision Governance

1. Public Policy and Decision Governance:
   • What is the Role of Public Policy in Decision Governance?
   • Dynamics of Public Policy Development
   • How Does Public Policy Influence Decision-Making?
2. Compliance to Policies:
   • Adapting a Decision Process to Comply with a Policy
   • How a Decision Process Can Create Evidence of Compliance
3. Transformation of Decision Governance
   • Punctuated Equilibrium: How to know if a Decision Process is ready for disruption
   • Policy Windows: What They Are And When They Occur
4. Mechanisms for the Change of Decision Governance
   • Incrementalism: What it is, and when/how to implement it in decision governance
   • Governance Dynamics: Change Driven by Cases and Principles
   • Governance Dynamics: Case-Based Development of Decision Governance