TL;DR:

This is a document I prepared for personal use as I work to become a better steward of DAOs in part due to my work as an operator at Wildfire, an emerging metagovernance DAO already active across the web3 landscape.

I hope to receive feedback and to contribute to some standardization of approaches, thereby enabling us all to spend less time wondering about approaches and more time building better products and communities. Who knows - maybe this will help grow a momement towards Decision Hygiene in web3 and elsewhere. Wouldn’t the world be a better place if we made better decisions?

In short, differentiating between tactical and strategic decisions improves the governance process. These two can be differentiated by breath, duration, mission consistency, and org health. Generally, members closer to the project can determine whether to take tactical action or share for a strategic decision. If it is strategic some then frameworks such as those used at Amazon could be used to improve the decision.

This is very much a practioners guide for those writing and reviewing proposals - focusing on approaches to expedite and improve decision making.

Introduction: 

There is substantial literature on the inherent challenges of delegated management structures. Common examples include workers' representatives reporting to a central organizing committee, professional management reporting to a board of directors, and technical working groups reporting to a technical operating committee. DAOs of course offer us additional technologies and approaches including the use of distributed, trustless, and transparent mechanisms to identify consensus. 

Rather than review the history of ad hoc and formal governance structures, this guide is a tactical guide to stewards attempting to do a great job supporting web3 organizations.  However, there are three frequently discussed principles that I have found useful in considering approaches to decision-making:

• Tactical decisions should be decentralized
  • In short, for most decisions, those closest to the decision are far better suited to make a decision than an external set of “professional decision makers” or even an independent crowd.  
• Strategic decisions should be considered by a broader group
  • In any organization, there are decisions that can have impacts across the group and that are largely irreversible. These are the sorts of decisions that for a variety of reasons should be considered by a broader group.  
  • Strategic decision-making is as much about gaining alignment and sharing the decision criteria as it is about making better decisions.  
• Humans are often not rational in their decision-making
  • Irrespective of whether a decision is tactical or strategic in nature, care should be taken to address the inherent irrationality in much of human reasoning. Thinking Fast and Slow is perhaps the most well-known explanation of the failures of human reasoning and of approaches to improve these decisions.

Decision sorting:

Well-functioning organizations apply common decision-making techniques.  The use of common decision-making techniques has a number of advantages including:

• Alignment:  if members of a community know how decisions are made, they are more likely to accept the decisions as in the best interest of the community.  This unlocks the energy of contributors as they focus on their areas of contribution instead of worrying about the efficacy of decisions.
• Inclusiveness:  all organizations have shadow hierarchies, ways in which informal structures influence decisions. A clear and objective decision-making process seeks to counter these informal processes because too often these can be bastions of irrationality, bias, and gatekeeping. By comparison, a well-designed decision-making process helps decision-makers and the broader community to make rational decisions irrespective of any personal biases of participants.  
• Scalability:  a well-understood decision-making process also helps new community members to more quickly get up to speed.  This is particularly important for fast-growing organizations and those that are geographically distributed. 
• Better decisions:  last but not least, a better decision-making process should result in better decisions.

As implied above, the first step of a simple decision-making heuristic is to sort the problem into the type of decision - is it a tactical decision or a strategic decision.  

At one level this question can become tautological - strategic decisions are those that should be broadly discussed whereas tactical decisions can be best addressed by an informed individual or small group. So if a small group feels that they’d like a decision they are considering to be more broadly discussed, then likely it is a strategic decision. 

Other criteria to apply when determining whether a decision is tactical or strategic in nature include:

• Breadth of impact
• Duration of impact
• Consistency with the stated mission, values, and strategy
• Health of organization

The first two criteria, breadth and duration of impact, should be self-evident.

Seemingly tactical decisions that are not consistent with an organization's mission, values, and strategy should be treated as strategic decisions. Examples of such decisions may be withdrawing support from a favored non-profit or other cause or reducing funding for a particular initiative such that the chances of success of the initiative are materially reduced.  At a certain point changes in incremental support become a shift in strategy. These decisions should be addressed as strategic decisions.  

The health of an organization is another often overlooked criterion to consider when sorting decisions into tactical or strategic decisions. For example, a decision that allocates $1 million dollars in a manner that is consistent with the strategy of the organization and that will not otherwise obligate the organization beyond the planning horizon may be treated as a tactical decision by an organization if that organization has liquid reserves 100x or greater than the allocated amount. However, that same decision made the day after a hack in which the cash reserves of the organization have been stolen would naturally be more strategic in nature.

Example decision-making approaches: tactical decisions

As mentioned above, good decisions are typically made by those closest to the activity in question. If a decision is tactical in nature and does not require strategic analysis then a directly responsible individual (“DRI”) typically could make the decision. The role of the rest of the organization is to trust and support that DRI.  GitLab has an interesting explanation in their handbook about the importance of the DRI here.  

One of the first considerations as a steward when being asked to consider a decision is whether that decision does seem to be a decision worthy of strategic decision making and hence something we should hope to see subject to broad debate and an on-chain vote. In DAOs and similar open communities, transparency will be the rule. However, simply because a decision is open for conversation does not necessarily mean that as a steward we should insist on in-depth explanations if that decision is tactical, and not strategic.

A second consideration is whether a common decision-making approach is being followed.  For the reasons explained above, a common approach has a number of benefits in addition to improving the quality of the decisions being made.  

The following are a few common decision-making approaches that may be useful.  An in-depth explanation of each is outside of the scope of this document.  As a steward, it may be that our primary concern is to simply be aware of what approaches are being used in a DAO or similar organization.

ME/CE - mutually exclusive, complete exhaustive is an approach credited to the first female MBA that McKinsey ever hired, Barbara Minto. The basic idea is to pause and think carefully about how to bucket all of the alternative decisions.   

Criteria first and then categories - this approach holds that there is as much an art to arriving at how we should judge a decision as there is in putting into buckets the alternatives.  Also, by working on what the criteria for a decision should be before discussing alternatives we may avoid some common cognitive biases including confirmation bias. This is also a useful way to divide the work of analyzing a decision; for example, someone could lead in the drafting of potential criteria whereas another contributor would work on categories and yet a third would focus more on weighing the alternatives based on the criteria. If an individual is performing all steps of the decision then allowing some time to pass between each stage can serve a similar purpose.  

ROI models - Another common approach in businesses in which the unit economics and other drivers of outcomes are well understood is to have an independently managed decision model.  A decision-maker in this case would determine, for example, whether additional spending on outreach makes sense by modeling their results in the already accepted model and comparing it to a threshold level. There are a lot of problems with extreme quantification of decision making - especially as many of the most important determinants of having a positive impact such as building and preserving an inclusive culture are hard to quantify. Nonetheless, for a certain class of problems, it is arguably necessary and fundamental.  

Example decision table using the criteria first and then categories approach: for treasury diversification where the goal might be in this example to have 10% of the treasury be comprised of liquid & non-correlated assets:

There are a lot of ways this analysis could be improved. Hopefully, it serves as a basic example of an algorithm that can be used either for tactical or strategic decision-making.  This particular tool can be useful in discussions because it can encourage a focus on drivers of decisions and on an analytical approach as opposed to debating outcomes of the decision.

Example decision-making approaches: strategic decisions

Strategic decisions should be approached with at least the same rigor and structure as important tactical decisions. The same tools that help in tactical decision-making can also assist in strategic decision-making. In addition, however, because these decisions are considered by a broader group, communication with that broader group becomes critical.  

The purpose of this communication is to enable individuals participating in the decision-making process that are not as close to the subject of the decision as others to be able to make valuable inputs to the decision.  A few suggestions as to the content of this communication, focusing on proposals reviewed by DAOs:

• Start with context:  Before getting into the details of a decision, it is important to update those participating in the decision about the overall progress of the organization. In particular, quickly reiterating the key objectives of the organization and performance towards those objectives can be helpful. Financial and user satisfaction metrics are typically provided as well. This context can sometimes be provided via a dashboard that is updated on a monthly or similar basis.
• Why now: Whereas tactical decisions typically arise from the day-to-day operations of the organization and cannot easily be delayed, strategic decisions are often more voluntary in nature. If there is a pressing reason for the decision to be taken immediately, that could be explained.
• Risk factors: Strategic decisions are naturally riskier than tactical decisions. What are these risks and how will they be managed, if possible, during implementation?
• End with context: How will the organization look vs. key objectives when the decision is made?  This is typically where the purpose of the proposal is reviewed. What are the benefits to the organization and how will this proposal further our mission?

Practical steps for building a strategic decision-making process:

During the growth of an organization, the decision-making process becomes increasingly critical.  In the case of DAOs and other organizations where the members of the organization expect to be consulted on many decisions, it is especially important that the approach to decision making itself be documented and subject to collective decision making.  As a first step, a document with the process including sorting of decisions amongst strategic and tactical decisions and reference to common decision-making approaches can be authored.

A good example of a common decision-making process for strategic decisions requiring broader input and support is the Amazon memo-based approach which has a number of key aspects for decisions that are strategic and benefit from a broader review. This content is lifted directly from the following excellent in-depth review of the 6-page Amazon memo and decision-making process:  https://writingcooperative.com/the-anatomy-of-an-amazon-6-pager-fc79f31a41c9

• Introduction — This needs to set up precisely what the material is going to cover and to inherently state the general direction of where the document plans on going.
• Goals — List right up front what the metrics for success are so we can use them as a lens to see the remaining document through.
• Tenets — This is a very Amazon thing where every action has some clearly defined north star. There are a lot of ways to word these. Generally, they are inspirational pillars that the rest of the plan sits on top of (go with me on this one).
• State of the business — This section is another important one. You need to inform the reader of the current state of the business. There needs to be a lot of detail here, which sets up the points to compare against in the next section.
• Lessons learned — Amazon is big on data. This section will outline the current state of the business and its influence over creating the goals you need to achieve. It should be a detailed enough snapshot to give the reader all of the data they need to understand the positive and negative activities in the prior period.
• Strategic priorities — This is the meat of the document and lays out the plan, how to execute it, and should match up to achieving the goals stated at the top of the document.

Amazon is of course not an exemplary organization in many ways. One way that they are historically unique, however, is their ability to scale innovation at an unprecedented scale. While there are many factors that have enabled this innovation, one of them is their approach to balancing individual and small team autonomy with the collective review of more strategic decisions through approaches such as the 6-page narrative.

Conclusion:

When reviewing a proposal we expect:

• The proposal to be strategic in nature
• To include relevant context 
• To address timing 
• To address key risk factors
• To be based on a common approach to decision making
• To explain how it will help the organization achieve strategic objectives 

Only with that information available can I feel confident that my input will assist in rational, strategic, and value-aligned decision-making.