The Two Headed Coin

CHAPTER 10The Top of the Pyramid: The CEO as Integrator of Strategy and Risk and the Board as the Fourth Line of Defense

Previous discussions in this book have focused on a misalignment between the organization and its target market; consequently, it is important to focus on governance that strives for alignment of all organizational activities to achieve the goals of the organization.¹ Fundamental to the formal alignment is the allocation of decision rights. It is this allocation that achieves the delicate balance between the forces of centralization and decentralization. As noted previously, this balance is not static but dynamic—and, as has been noted to both of us many times, market forces matter. So do internal cultural and political forces. Achieving balance is a dynamic not a static problem. Put simply, although strategists balance risk and return, their fingers push the balance toward returns in conflicting situations, whereas risk managers push the balance toward pricing risk.

Maintaining this balance to achieve higher performance requires a culture that promotes dialogue and the recognition of the importance of differing views and roles. We are not Pollyannas saying that everyone will be happy: both of us have been parties to decisions with which we disagreed. But we could live with the decision, because we knew our voices had been heard and could understand why the decisions were made. It is the shared values of the organization that allow for diversity and commitment ...