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Chapter 9 Ma na geria l Decision Ma king

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Stimulating rigorous debate can be done in several ways. One way is by ensuring that the group is diverse in terms of age and gender, functional area of expertise, hierarchical level, and experience with the business. Some groups assign a devil’s advocate, who has the role of challenging the assumptions and assertions made by the group.75 The devil’s advocate may force the group to rethink its approach to the problem and avoid reaching premature conclusions. Jeffrey McKeever, CEO of MicroAge, often plays the devil’s advocate, changing his position in the middle of a debate to ensure that other executives don’t just go along with his opinions.76 Still another way to encourage constructive conflict is to use a technique called point-counterpoint, which breaks a decision-making group into two subgroups and assigns them different, often competing, responsibilities.77 The groups then develop and exchange proposals and discuss and debate the various options until they arrive at a common set of understandings and recommendations.

AVOID G ROUPTHINK

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In a fast-paced environment, good managers encourage risk taking and learning from mistakes, but they also aren’t hesitant to pull the plug on something that isn’t working. Research has found that managers and organizations often continue to invest time and money in a solution even when there is strong evidence that it is not appropriate. This tendency is referred to as escalating commitment. Managers might block or distort negative information because they don’t want to be responsible for a bad decision, or they might simply refuse to accept that their solution is wrong.81 A study in Europe verified that even highly successful managers often miss or ignore warning signals because they become committed to a decision and believe that if they persevere, it will pay off.82 As companies face increasing competition, complexity, and change, it is important that managers don’t get so attached to their own ideas that they’re unwilling to recognize when to move on. According

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It is important for managers to remember that a certain amount of disagreement and conflict is much healthier than blind agreement. Pressures for conformity exist in almost any group, and particularly when people in a group like one another, they tend to avoid anything that might create disharmony. Groupthink refers to the tendency of people in groups to suppress contrary opinions. When people slip into groupthink, the desire for harmony outweighs concerns over decision quality. Group members emphasize maintaining unity rather than realistically challenging problems and alternatives. People censor their personal opinions and are reluctant to criticize the opinions of others.78 Author and scholar Jerry Harvey coined the related term Abilene paradox to illustrate the hidden pressures for conformity that can exist in groups.79 Harvey tells the story of how members of his extended family sat sweltering on the porch in 104-degree heat in a small town about 50 miles from Abilene, Texas. When someone suggested driving to a café in Abilene, everyone went along with the idea, even though the car was not air conditioned. Everyone was miserable and returned home exhausted and irritable. Later, each person admitted that they hadn’t wanted to make the trip and thought it was a ridiculous idea. They only went because they thought the others wanted to go. Because groupthink is such a natural and pervasive challenge to group decision making, some experts recommend using an expert decision coach to provide hands-on help and feedback so that people can learn and practice new behaviors rather than revert to the default behavior of suppressing opinions that are contrary to the group.80

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“The most dangerous thing is to be successful. You then think every decision is the right one.”

to Stanford University professor Robert Sutton, the key to successful creative decision making is to “fail early, fail often, and pull the plug early.”83

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To improve decision making, managers need to reflect and learn from every decision they make. When people review the results of their decisions, they learn valuable lessons for how to do things better in the future. A technique that many companies —WONG WAI M ING, CFO OF LENOVO have adopted from the U.S. army to encourage examination of the evidence and continuous learning is the after-action review , a disciplined procedure whereby managers invest time in reviewing the results of decisions on a regular basis and learn from them.84 After implementation of any significant decision, managers meet to evaluate what worked, what didn’t, and how to do things better. Many problems are solved by trial and error. For example, postmortem reviews of decisions regarding attacks from roadside bombs in Iraq led soldiers to suggest the implementation of an overall counterinsurgency strategy rather than relying so much on technology.85 Numerous business organizations have adopted some form of after-action review. A similar technique emphasized by Lenovo founder Liu Chuanzhi is called fu pan, which means “replaying the chessboard.” The idea is to review every move to improve the next one. Lenovo managers are trained to apply fu pan to everything from a small quick review of a workday incident to a full, in-depth review of a major decision.86 When managers get prompt feedback on decisions through after-action reviews, it gives them the chance to incorporate new information and greater understanding into their thinking and decision making.

Remember This group, and whereas managers can’t always see their own biases, they can build in mechanisms to prevent bias from influencing major decisions at the organizational level.

into subgroups and assigns them to express competing points of view regarding the decision is called point-counterpoint.

to spontaneously suggest a broad range of alternatives for making a decision.

groupsto suppress contrary opinions in a desire for harmony.

interactive group over a computer network, rather than meeting face to face.

time and money in a decision despite evidence that it is failing.

ment to examining potential biases, seeking and examining evidence with rigor, and making informed and intelligent decisions based on the best available facts and evidence.

review is a disciplined procedure whereby managers review the results of decisions to evaluate what worked, what didn’t, and how to do things better.

challenging the assumptions and assertions made by the group to prevent premature consensus.

which means “replaying the chessboard,” reviewing every move to improve the next one.

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Ch9 Discussion Questions 5. What opportunities and potential problems are posed by the formation of more than one coalition within an organization, each one advocating a different direction or alternative? What steps can you take as a manager to make sure that dueling coalitions result in constructive discussion rather than dissension? 6. Can you think of a bad decision from your own school or work experience, or from recent business or political news stories, that was made in an effort to correct or justify a past decision? As a new manager, how might you resist the urge to choose a decision alternative based on the idea that it might correct or validate a previous decision? 7. Experts advise that most catastrophes in organizations result from a series of small problems or mistakes. As a new, entry-level manager, how might you apply this understanding to help your organization avoid making major mistakes? 8. List some possible advantages and disadvantages to using computer technology for managerial decision making. 9. Can intuition and evidence-based decision making coexist as valid approaches within an organization? How might managers combine their intuition with a rational, data-driven, evidence-based approach? 10. What do you think is your dominant decision style? Is your style compatible with group techniques such as brainstorming and engaging in rigorous debate? Discuss.

Ch9 Apply Your Skills: Experiential Exercise What’s Your Personal Decision Style? 87 Read each of the following questions and circle the answer that best describes you. Think about how you typically actin a work or school situation and mark the answer thatfirst comes to mind. There are no right or wrong answers. 1. In performing my job or class work, I look for a. Practical results b. The best solution c. Creative approaches or ideas d. Good working conditions 2. I enjoy jobs that a. Are technical and well defined b. Have a lot of variety c. Allow me to be independent and creative d. Involve working closely with others 3. The people I most enjoy working with are a. Energetic and ambitious b. Capable and organized c. Open to new ideas d. Agreeable and trusting

4. When I have a problem, I usually a. Rely on what has worked in the past b. Apply careful analysis c. Consider a variety of creative approaches d. Seek consensus with others 5. I am especially good at a. Remembering dates and facts b. Solving complex problems c. Seeing many possible solutions d. Getting along with others 6. When I don’t have much time, I a. Make decisions and act quickly b. Follow established plans or priorities c. Take my time and refuse to be pressured d. Ask others for guidance and support 7. In social situations, I generally a. Talk to others b. Think about what’s being discussed c. Observe d. Listen to the conversation

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1. Aaron Alexis, the former Navy reservist who went on a shooting rampage in September 2013 and killed 12 people at the Washington Navy Yard in Washington D.C., had a history of mental instability, but he was carrying a valid security clearance. How would you suggest managers make decisions for issuing or revoking security clearances to prevent this kind of catastrophe? 2. Managers at Gap Inc., a once-popular retail chain, are reported to have made a series of decisions that hurt the company: They expanded so rapidly that the chain lost touch with customers; they tried to copy the successful approach of rivals rather than charting their own course; they cut quality to reduce costs; they shifted from one fashion approach to another as each one failed to appeal to customers, and so on. What techniques would you recommend Gap managers use to improve the quality of their decisions? 3. Explain the difference between risk and ambiguity. How might decision making differ for a risky versus an ambiguous situation? 4. Analyze three decisions you made over the past six months. Which of these were programmed and which were nonprogrammed? Which model—the classical, administrative, or political—best describes the approach you took to making each decision?

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Ch9 Apply Your Skills: Ethical Dilemma “I’ve just been upset about Brenda leaving, and I let it get out of hand this weekend.” Moses told Carpenter that if he would get to New York and complete the project, all would be forgiven. Now, however, he wondered whether he should really just let things slide. Moses talked to Carpenter’s team leader about the situation and was told that the leader was aware of his recent problems but thought everything would smooth itself over. “Consultants with his knowledge, level of skill, and willingness to travel are hard to find. He’s well liked among all the customers; he’ll get his act together.” However, when Moses discussed the problem with Carolyn Walter, vice president of operations, she argued that Carpenter should be dismissed. “You’re under no obligation to keep him just because you said you would,” she pointed out. “This was a major screw-up, and it’s perfectly legal to fire someone for absenteeism. Your calls to customers should make it clear to you that this situation was not a one-time thing. Get rid of him now before things get worse. If you think eating half that $250,000 fee hurts now, just think what could happen if this behavior continues.” What Would You Do? 1. Give Carpenter a month’s notice and terminate him. He’s known as a good consultant, so he probably won’t have any trouble finding a new job, and you’ll avoid any further problems associated with his emotional difficulties and his possible alcohol problem. 2. Let it slide. Missing the New York appointment is Carpenter’s first big mistake. He says he is getting things under control, and you believe that he should be given a chance to get himself back on track. 3. Let Carpenter know that you care about what he’s going through, but insist that he take a short paid leave and get counseling to deal with his emotional difficulties and evaluate the seriousness of his problems with alcohol. If the alcohol abuse continues, require him to attend a treatment program or find another job.

Ch9 Apply Your Skills: Case for Critical Analysis The Office Krista Acklen was the “golden girl” of metropolitan government in a large Midwestern city. The top graduate of a local high school, she studied in France and interned at Vogue in Paris before returning to the States to get an MBA, and she landed a position with a top New York PR firm. She knew everyone, and chatting with or “doing lunch” with the rich and famous was a normal day for Acklen.

The only child of a single mom, Acklen dropped it all and willingly returned to her Midwestern hometown when her mother’s health declined suddenly. She had barely settled in and established home care for her mother when the mayor’s office contacted her with a job proposal. Would Acklen consider a position developing and directing a public arts program for the city? She enthusiastically accepted the job. With her winning connections, drive, and abilities,

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The No-Show Consultant89 Jeffrey Moses was facing one of the toughest decisions of his short career as a manager with International Consulting. Andrew Carpenter, one of his best consultants, was clearly in trouble, and his problems were affecting his work. International Consulting designs, installs, and implements complex back-office software systems for companies all over the world. About half the consultants work out of the main office, while the rest, including Carpenter, work primarily from home. This Monday morning, Moses had gotten an irate call from a major New York client saying that Carpenter never showed up at the company’s headquarters, where the client had been expecting his new computer system to go live for the first time. In calling around to other customers on the East Coast trying to locate the missing consultant, Moses heard other stories. Carpenter had also missed a few other appointments—all on Monday mornings—but no one had felt the need to report it because he had called to reschedule. In addition, he practically came to blows with an employee who challenged him about the capabilities of the new system, and he inexplicably walked out of one customer’s office in the middle of the day, without a word to anyone. Another client reported that the last time he saw Carpenter, he appeared to have a serious hangover. Most of the clients liked Carpenter, but they were concerned that his behavior was increasingly erratic. One client suggested that she would prefer to work with someone else. As for the major New York customer, he preferred that Andrew finish the project rather than a new consultant, but he also demanded that International eat half the $250,000 consultant’s fee. After Moses finally located Carpenter by calling his next-door neighbor, Carpenter confessed that he’d had a “lost weekend” and been too drunk to get on the plane. He then told Moses that his wife had left and taken their two-year-old son with her. He admitted that he had been drinking a little more than usual lately, but insisted that he was getting himself under control and promised no more problems. “I’m really not an alcoholic or anything,” he said.

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Ch9 Answers to Questions in “Manager’s Shoptalk” attached to the previous decision, even one as hopeless as this inadequate drone. 4. The median estimate from students is 2,250. When thenumbers are given in reverse order starting with 1 3 2, etc., the median estimate is 512. The correct answer is 40,320. The order in which information is presented makes a difference to a person’s solution, andacting quickly produces an answer that is far from correct. 5. When judging people, early information has more impact than later information, called the primacy effect. Reversing the word sequence so that intelligent and industrious come first creates a more favorable impression. Respondents rate Robert more or less emotional depending on the order of the descriptive words. Were you guilty of rating Robert as more emotional because of being influenced by initial impressions? 6. Although the options are numerically equivalent, most people choose alternatives B and C. People hate losing more than they enjoy winning, and hence about 80 percent choose a sure small gain (B), and 70 percent will take more risk in the hope of avoiding a loss (C). Taking emotions out of the process typically leads to better decisions.

Ch9 Endnotes 1. See Stephen J. Sauer, “Why Bossy Is Better for Rookie Managers,” Harvard Business Review (May 2012): 30; and Kenneth R. Brousseau et al., “ The Seasoned Executive’s Decision-Making Style,” Harvard Business Review (February 2006): 110–121, for a discussion of how decision-making behavior evolves as managers progress in their careers. 2. Monica Davey and Mary Williams Walsh, “Billions in Debt, Detroit Tumbles into Insolvency,” The New York Times, July 18, 2013, http://www.nytimes .com/2013/07/19/us/detroit-files-for-bankruptcy. html?pagewanted=all (accessed September 19, 2013); Nathan Bomey and John Gallagher, “How Detroit Went Broke: The Answers May Surprise You—and Don’t Blame Coleman Young,” Detroit Free Press, September 18, 2013, http://www.freep.com/interactive /article/20130915/NEWS01/130801004/DetroitBankruptcy-history-1950-debt-pension-revenue (accessed September 19, 2013); Monica Davey and Mary Williams Walsh, “For Detroit, a Crisis Born of Bad Decisions and Crossed Fingers,” The New York Times, March 12, 2013, A1. 3. Danielle Sacks, “Blown Away,” Fast Company (February 2011): 58–65, 104.

4. Colum Murphy, James T. Areddy, and James R. Hagerty, “Deal Gone Wrong Adds to Caterpillar’s Troubles in China,” The Wall Street Journal, January 21, 2013, http://online.wsj.com/article/SB10001424127 887323301104578255740261180404.html (accessed August 29, 2013). 5. Herbert A. Simon, The New Science of Management Decision (Englewood Cliffs, NJ: Prentice Hall, 1977), p. 47. 6. Paul J. H. Schoemaker and J. Edward Russo, “A Pyramid of Decision Approaches,” California Management Review (Fall 1993): 9–31. 7. Adam Lashinsky, “Boeing Bets Big on the 707,” segment of “The Greatest Business Decisions of All Time” book excerpt, Fortune (October 8, 2012): 178–184. 8. Jon Birger, “How This Man Took Priceline from Dot-Bomb to Highflier,” Fortune (September 24, 2012): 128–134. 9. Samuel Eilon, “Structuring Unstructured Decisions,” Omega 13 (1985): 369–377; and Max H. Bazerman, Judgment in Managerial Decision Making (New York: Wiley, 1986). 10. James G. March and Zur Shapira, “Managerial Perspectives on Risk and Risk Taking,” Management Science 33 (1987): 1404–1418; and Inga Skromme Baird and

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1. The answer is unbelievably huge: roughly 800,000,000,000,000 times the distance between the Earth and the Sun. Yourmind was likely anchored in the thinness of a sheet of paper, thereby leading you to dramatically underestimate the effect of doubling the thickness 100 times. Initial mental anchoring to a low or...