Why Decisions Fail: Avoiding the Blunders and Traps That Lead to Debacles

By: Paul Nutt
Views: 1379
Ratings: (0)
Based on the his analysis of 400 strategic decisions made by top managers in areas such as products and services, pricing and markets, personnel policy, technology acquisition, and strategic reorganization, Nutt estimates that two-thirds of all decisions are based on failure-prone or questionable tactics. He uses the fifteen monumental decision-making disasters to illustrate the potential consequences of these common tactical errors and traps and then details successful alternative decision-making approaches.
Why Decisions Fail translates decades of award-winning research into practical terms that managers can use to improve their own decision-making practices.

List price: $22.95

Your Price: $17.21

You Save: 25%

 

17 Slices

Format Buy Remix

Contents

PDF

 

The Decision Debacles

PDF

 

Chapter 1: Blunders that Launch a Decision Debacle

PDF

Blunders That Launch a Decision Debacle

C H A P T E R

T

O N E

he overpriced and rarely visited Millennium Dome in London and Firestone’s botched tire recall spotlight decision debacles.

The dome opened January 1, 2000, ushering in the new millennium with promises of a futuristic, flashy, high-tech experience for people willing to ante up the price of admission. Controversy soon quelled the hype. Championed by the previous conservative government, Labor Prime Minister

Blair embraced the dome as he took office, calling it “a triumph of confidence over cynicism, boldness over blandness.” Others saw it differently, and the dome became a national embarrassment within weeks of its opening. Tories and Laborites pointed fingers and argued over whom to blame.

Critics were downright hostile, calling it, among other things, vain, vapid, patronizing, and, with its twenty-five pound admission fee, grossly overpriced. The dome’s sixteen zones offered a blend of theme exhibits, interactive technology, and live shows that, according to the critics, failed to work together and lacked the promised “wow” factor. Worst of all, no one came. Twelve million visitors were forecasted, but fewer than 4.5 million, many with cut-price tickets, paid to get in. The Labor government put 785 million pounds into the project and had to infuse it with an additional 175 million pounds to keep it afloat. Heads rolled. Blair and the dome’s other champions, including the former head of British Air and major bank and local television executives, took hits on their reputations. The dome closed a year to the day from its opening, awash in red ink, with still another overhyped celebration, this time to mark the actual date of the new millen-

 

Chapter 2: Traps that Catch Decision Makers

PDF

Traps That Catch

Decision Makers

C H A P T E R

T W O

D

ebacles follow a chain of events that unfold as blunders create traps and traps bring about failure. The blunders of using poor decision-making practices, rushing to judgment, or misusing available resources, discussed in the previous chapter, point unsuspecting managers toward seven traps that can ensnare them (Table 2.1). Traps are set when decision makers fail to reconcile claims, overlook people’s interests and commitments, leave directions vague, limit their search for remedies, misuse evaluations, ignore ethical questions, or fail to reflect on decisions to learn what works and what does not. When caught in any of these traps, managers are apt to make a bad call that can become a debacle. In this chapter, we will examine the seven traps to see how each arises and its impact, offering a preview of how to navigate around the traps. EuroDisney, Ford, BeechNut, Nestle, and the DIA decisions provide illustrations.

The Traps

1. Failure to Reconcile Claims

 

Chapter 3: Decision-Making Processes Prone to Success and Failure

PDF

Decision-Making Processes Prone to Success and Failure

C

H A P T E R

3

T

o carry out a decision-making process, one engages in a series of activities to collect information that reveals possibilities.

Process spells out the order or staging of these activities. In this chapter, two of many possible processes are considered. One illustrates a frequently used process that leads to failure. The other demonstrates best practice.

First, the stages will be described to show what is done in each. Then ways to sequence these stages are presented, illustrating best and worst process practices using the debacles described in Chapter 1.

Decision-Making Stages

An extensive literature review was conducted to discover what thoughtful writers find to be required stages and the best ordering of stages for decision making. This led me to prescriptions made by people who have studied the best way to do research, design, social change, and problem solving. Also, studies by Schon (1987) and others, which document how expert architects, urban planners, social and behavioral scientists, engineers, system theorists, and the like go about their work, elaborate on these recommendations and suggest others. Five decision-making stages emerged from a comparison of these prescriptions and findings: collect information to understand the claims calling for action, establish a direction that indicates the desired result, mount a systematic search for ideas,

 

Chapter 4: Traps in Failing to Lead the Effort with Agreed-Upon Claims

PDF

Traps in Failing to Lead the Effort with Agreed-Upon Claims

C

H A P T E R

4

C

laims identify the “arena of action”—what the decision is about. When a claim makes sense to key people, it mobilizes support and points the decision-making effort in a useful direction. When it does not, the decision heads off in an unproductive direction and the support needed to sustain it may not develop. Here we consider the dual themes of taking charge by uncovering concerns and considerations to fashion claims and the consequences of failing to do so. A failure to fashion a claim that captures the concerns and considerations of stakeholders sets the first trap. Let’s begin by demonstrating how a decision-making effort can be thwarted when a claim fails to capture concerns and considerations and coaxes stakeholders to give lip service to the effort or to oppose it.

The Call to Action

Decision making begins when a stakeholder notes a trend or event with sufficient importance to prompt a “consideration” or create a “concern.”

 

Chapter 5: The Traps in Unmanaged Social and Political Forces

PDF

The Traps in Unmanaged Social and Political Forces

C

H A P T E R

5

S

uccessful implementation calls for the understanding and careful management of people’s “interests.” If these interests can be uncovered and understood, the social and political forces that the interests stir up are usually manageable. In each of the debacles, implementation follows evaluation. When implementation is delayed until evaluation is complete, the social and political forces stirred up by the decision have been at work for some time. This chapter considers traps set when decision makers fail to head off the social and political forces by delaying implementation. We will look at ways to head off these forces with an appropriate implementation tactic.

Forces That Block Decisions

Interests arise in perceptions about one’s turf and the needs for achievement, self-esteem, recognition, security, social relationships, valued practices, and the like. People become aroused when such interests are put in jeopardy. The reasons for opposing a decision are not widely shared, so they are lost on the decision maker. An employee with a health problem, for example, may not share his or her reasons for opposing a decision that alters early retirement rules. Opposition takes shape in subtle ways through delay, token compliance, and attempts at negotiation to hold up a decision

 

Chapter 6: Traps in Misleading Directions

PDF

Traps in Misleading

Directions

C

I

H A P T E R

6

n Chinese gardens sitting areas are placed across from open-air windows to direct a visitor’s view toward vistas the architect believes merit attention. The windows provide a frame that directs one’s view toward what the designer believes to be the best views of collections of flora and sculpture and away from the less desirable views.

Decision makers also frame things to indicate what is wanted, the results a decision seeks to provide. Like the window in the Chinese garden, the frame provides a direction that points toward certain kinds of remedies, and away from others. The savvy decision maker opens the window and stands at different locations so more can be seen. The classic Japanese garden with its raked stones and strategically placed rocks provides an illustration. No matter where you sit, the entire picture that the garden conveys cannot be taken in. The garden is designed to force visitors to change their position to take in the entire view. This change in stance is called reframing. The broader field of view that results allows more cues to be seen, which opens people to other possibilities.

 

Chapter 7: Traps in Limited Search and No Innovation

PDF

Traps in Limited Search and

No Innovation

C

H A P T E R

7

“K

eep your options open” is sage advice. When making a big ticket expenditure such as buying a car or a house, we identify several options before settling on one. Yet many decision makers making weighty decisions drastically limit their search. Others embrace an idea found in a claim, as in the telescope and arena decisions, and avoid search altogether. Both the idea in a claim or the pet idea of a zealot drive out search. The traps of limiting search are considered in this chapter along with best-practice search approaches. The role of innovation and ways to interject new ideas into the mix of options is also discussed.

Opportunistic behavior drives out search in nearly 40 percent of the decisions explored. This behavior stems from the pull of a quick fix and the push of a pet idea. The quick fix and the motivations behind adopting an idea found in a claim were described in Chapter 6. Here we consider zealots, decision makers, or key players in the organization’s orbit who advance their pet ideas. AmeriFlora, profiled in Tables 7.1 and 7.2, illustrates how this decision pushed aside search and became a debacle.

 

Chapter 8: The Traps in Misusing Evaluation

PDF

The Traps in Misusing

Evaluation

C

P

H A P T E R

8

romoting a preferred course of action with a defensive evaluation and disregarding its risk invites a debacle. Decision makers who set out to support a preferred idea get drawn into a defensive evaluation. Because the products of a defensive evaluation are shallow and predictable, clever wordsmiths must work their magic to justify the data to be collected. Vast sums are spent to find evidence that validates what a decision maker wants to do or must support. Little, if anything, is spent on claim investigation, implementation, direction setting, or searching for new ideas. A direction that specifies expected results cuts the ground from under a defensive evaluation by making its self-serving intent evident, so decision makers in the debacles were careful to evaluate a preferred course of action without them.

Defensive evaluations that lack a clear direction produce argumentative and misleading conclusions. Without a direction, different people see different things to be measured. Ford officials focused on the cost of a recall, indicating that this was all that mattered. Critics contended that more should have been spent on measuring the consequences of not fixing the defective gas tank. Shell officials had staffers evaluate the cost of disposal, assuming that their disposal cost was the primary concern. Shell’s critics contended that costs to society had been overlooked. An agreed-upon direction would have broadened the scope of these evaluations and made them work for, instead of against, the company.

 

Chapter 9: Ethical Traps

PDF

Ethical Traps

C

A

H A P T E R

9

person’s ethical stance is rooted in his or her standards of fairness and justice. What one believes to be fair and just is imposed on a decision and how the decision is made. Decision makers apply standards of fairness and justice to what they see, which may or may not capture what actually takes place. Both the appearance and the reality of an ethical lapse can spell trouble. A decision seen to be threatening to an organization’s image or to its traditions of fair play provokes strong reactions. Concerned individuals may be moved to use any means at their disposal to prevent the erosion of image or a departure from fair play. A lack of vocal opposition can be misleading. People file perceived ethical lapses on a personal scorecard, providing an ongoing read of management’s moral compass.

The decision debacles illustrate ethical lapses, their consequences, and how they can trap decision makers. To dodge an ethical trap, you need both awareness and a means to cope. Awareness can be gained by uncovering the motives behind ethically questionable positions. To evade this kind of ethical trap, you must counter the often implicit incentives that encourage people to hold these positions. Situations in which people have opposing ethical positions pose a second kind of trap. To navigate around this trap, you must look for the values behind the opposing views. Once these core values are understood, you can seek actions and practices that recognize them and can alter your course of action and your decision approach to remove objections and affirm core values.

 

Chapter 10: Learning Traps

PDF

Learning Traps

C

D

H A P T E R

10

ecisions produce outcomes with consequences. Learning requires an assessment of these consequences and the actions taken to realize them. Fire departments learn by reviewing how major fires were handled, examining how firefighters and equipment were dispatched and used on the scene and looking for practices that should be modified.

Everyone involved is assembled to determine how the fire could have been fought differently to reduce property losses, injuries, and any loss of life.

Surgeons, cardiologists, and other diagnosticians gather regularly to review cases, examining the progress of heart surgery patients, comparing notes about predicted prognoses, procedures used, and outcomes, questioning methods, and sharing experiences. Such reviews are mandatory for inservice training in all U.S. hospitals. The partners of consulting firms debrief consultants upon their return from an engagement, asking probing questions to learn what was done, what worked, and to offer advice. The partners look for ways to use the knowledge gained to serve new clients, to do the same thing at the same price for less cost, and to isolate best practices.

 

Chapter 11: The Lessons: Avoiding the Blunders and Traps

PDF

The Lessons: Avoiding the

Blunders and Traps

C

H A P T E R

11

D

ecision debacles follow from being caught by one or more of the seven traps set by making one of the three blunders. This book offers a path that avoids the blunders and sidesteps the traps. When you are able to do this, your chance of success increases by 50 percent. In this chapter, the lessons learned from successful decisions are summed up, providing a road map that points toward, but does not guarantee, a successful outcome. The chapter is organized around the moves you can make to avoid the blunders: stay issue-centered, use resources wisely, and adhere to best practices through each stage of the decision-making effort.

Stay Issue-Centered

In the debacles, decision makers made premature commitments by grabbing onto the first idea that popped up. These hot ideas that promised a quick fix were, at best, misguided, and at worst, wrongheaded. Recall

Smithburg’s disastrous beverage acquisition, the telescope partnership,

Wolf’s flower show, Nationwide’s try for a tax subsidy, Pena’s new airport, the delayed product recalls, and the Paris location for EuroDisney.

 

Appendix 1: The Decision-Making Research Project

PDF

Appendix 1

The Decision-Making Research Project

M

y decision-making research project collected four hundred decisions made by senior managers in medium to large organizations across the United States, Canada, and Europe. The decisions are typical of what those managers in contemporary organizations face every day. Table A lists the types of decisions studied along with some illustrative examples. The decisions were taken from three kinds of organizations: public organizations made up of government agencies funded by tax dollars; private organizations with for-profit firms that offer products and services paid for by consumers; and third sector organizations including private not-for-profit organizations, such as the bulk of U.S. hospitals, charities, symphony orchestras, and professional societies. The results do not vary much between the different types of decisions and organizations.

My primary indicator of success is whether a decision is put to use.

Changes in conventional wisdom, awareness, enlightenment, or attempts to legitimize did not count as a success. A management information system (MIS) is called a failure if the organization continues to use the old system, and a merger is a success if it is completed. Each decision was followed for two years to determine changes in use that can occur with time. During this two-year period, some decisions unraveled, being used only in part or not at all. With this information, decisions are classified in the study as successful or not according to their initial use (a trial was attempted), long-term use (decisions sustained for two years), and their degree of sustained use (decisions still in full use after two years). Indicators of each decision’s value and the time required to carry it out (duration) were also obtained.

 

Appendix 2: Estimating Risk

PDF

A P P E N D I X 2 : E S T I M AT I N G R I S K

They are (in millions):

Net Revenue Loss

$5.7

Cost of Service Restoration

$3.4

Analysis of Blackout

$0.5

Increase in Non-collectable Accounts

$1.0

_________________________________________

Total

$10.6

Computations

Risk in the shed load decision is determined with the cost incurred by Con

Ed. First, one assigns an unknown P to the chance of a blackout. This can range from 0 (never) to 100 (certain). The likelihood estimates must sum to

1.0 so the outcome will cover all possibilities. This makes the chance of no blackout 1 − P. These values are assigned to the data.

Shed

Wait

Blackout

P

−$512,000

−$10,600,000

No Blackout

1−P

−$512,000

−0

The value of each option is determined by weighting the outcomes by their chance of occurring and summing the results.

Shed = −$512,000 (P) + −$512,000 (1 − P)

=

Wait = −$10,600,000 (P) + 0 (1 − P)

−$10,600,000 (P)

=

−$512,000

This reduces to

Shed = −$512,000

Wait = −$10,600,000 (P)

To plot the two outcomes, assign the extreme values of the chance of a blackout, never and certain, to each:

 

Appendix 3: Citations for the Debacles

PDF

Appendix 3

Citations for the Debacles

AmeriFlora

AmeriFlora, Business Plan and Financial Statements, 1990.

AmeriFlora, Board of Trustees and Executive Committee (minutes from select meetings).

AmeriFlora, Community Relations Program, 1990.

Broron, M. Columbus Quincentennial Exposition. 1971.

Columbus “Eastsider,” July 28, 1992.

Columbus Monthly, April 1990; April 1991; December 1992.

Columbus Dispatch, May 14, 1989; April 30, 1990.

The Other Paper. July 8, 1986.

Barings Bank

Brilliant, David. “The Tone at the Top.” The Banker, 145(837), November 1, 1995,

26–27.

Chernoff, Joel. “Barings Legacy: Tighter Controls.” Pensions and Investments, 23(15),

March 6, 1995, 1–3.

Fay, Stephen. “The Collapse of Barings.” Management Accounting, 74(10), November

1, 1996, 14.

Guan, Lim Kian. “Barings Bankruptcy and Financial Derivatives.” Asia Pacific Journal of Management, 13(1), April 1, 1996, 117–119.

Inspectors of Barings Futures. Singapore PTE LTD.

Investment Banking. “Out of Control.” The Banker, 145(834), August 1, 1995, 15–16.

 

References and Selected Readings

PDF

References and Selected Readings

Abernathy, W., and Utterback, J. (1982). “Patterns of Industrial Innovations.” In M. Tushman and W. Moore (Eds.), Readings in Management Innovations. Boston: Pitman.

Ackoff, R. (1981). Creating the Corporate Future. New York: Wiley.

Adizes, I. (1988). Corporate Life Cycles: How and Why Corporations Grow and Die and What to Do about It. Englewood Cliffs, NJ: Prentice-Hall.

Agar, W. (1986). The Logic of Intuitive Decision-Making. New York: Quorum.

Albert, S. (1984). “A Delete Design for Successful Transitions.” In J. Kimberly and R.

Quinn (Eds.), Managing Organizational Transitions. New York: Dow Jones-Irwin.

Alexander, L. (1986). “Successfully Implementing Strategic Decisions.” In B. MayonWhite (Ed.), Planning and Managing Change. London: Harper and Row.

Allison, G. T. (1969). “Conceptual Models and the Cuban Missile Crisis.” American

Political Science Review, 63, 689–718.

Alter, C., and Hage, C. (1993). Organizations Working Together. Newbury Park, CA:

Sage.

Amabile, T. (1996). Creativity in Context: Update to Social Psychology of Creativity.

 

Details

Print Book
E-Books
Slices

Format name
PDF (DRM)
Encrypted
true
Sku
9781605091495
Isbn
9781605091495
File size
0 Bytes
Printing
Disabled
Copying
Disabled
Read aloud
No
Format name
PDF
Encrypted
No
Printing
Allowed
Copying
Allowed
Read aloud
Allowed
Sku
In metadata
Isbn
In metadata
File size
In metadata