Decision Making

Decision Making INTRODUCTION The purpose of this paper is to analyze the decision -making process that was involved in appointment of company president, in the company where I personally worked. Mr.Zutshi, the company president faced a very critical decision making situation while appointing new successor for the company, after his retirement. A Chief executive officer’s decision has considerable impact on the performance of the organization. Decision-making is one of the most important recurring responsibilities facing managers in organizations. A high-quality decision helps an organization accomplish its strategic goals and also meets the needs of the organization’s employees, executives, stockholders, consumers, or suppliers. In his book called Decision Making, Paul Moody (1983) defines decision as an action that must be taken when there is no more time for gathering facts.

The Problem is how to decide when to stop gathering facts. The solution varies with each problem we attempt to solve, for gathering facts costs time and money. RELEVANT RESEACH Peter E. Druker (1967), lists five elements of decision process in his book, The effective Executive:1) Clear realization that the problem is generic and can be solved only through a decision that establishes a rule, 2) Definition of the specifications of the solution, or the boundary conditions, 3) Derivation of a solution that is right, that is, one that fully satisfies the specifications before attention is given to the concessions needed to make the decision acceptable, 4) The building into the decision of the action to carry it out, 5) The feedback that tests the validity and effectiveness of the decision against the actual course of events. Druker goes on to explain that a decision is a judgment and, as such, is rarely a choice between right and wrong.

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At best it is a choice between almost right and almost wrong. Paul Moody (1983), has written in his book, Decision Making, that, if a company has a long-standing policy of acting in a certain situation in a particular way, then it is easy to make a decision that is consistent with past history. However, if an organization is very volatile and a historical pattern has not been established –or if the nature of the decision is such that actions are highly dependent on the factors known to only higher-level personnel in the organization–then the decision assumes major importance. He further adds that, where the human impact of a decision is great, its importance is great. This is particularly true when the decision involves many people.

Paul C. Nutt (1989), states in his book, Making Tough Decisions, that, the best that a decision maker can do is follow steps thats increase the prospects of understanding foreseeable risks and prepare for possible outcomes. Most decisions have uncertainty, ambiguity, and conflict. Uncertainty and ambiguity arises when key elements in a decision cannot be characterized. Conflict can stem from ambiguity, or it can result from the disagreements among key parties with stakes in the decision (Freeman, 1983).

In the book called Decision making at the Top, Gordon Donaldson & Jay W. Lorsch (1983) state that, strategic decisions are not the product of simple economic logic alone. Because these decisions often depend on forecasts of the future events, they involve considerable uncertainty and ambiguity. Corporate leaders’ desire to assure the survival of their company provides the driving force for their initiatives and strategic choices. James G. March (1994) has written in his book, A Primer on Decision making, that, Organizational decision making is a combination of talk and action.

The making of concrete decisions in an organization is an exercise of practical, contextual judgment. Decision making normally presumes commitment, the willingness of decision-makers both to devote time and energy to deciding and to accept responsibility for the uncertain consequences of their actions. ANALYSIS: Case: At 60, Mr. H L Zutshi, the company president, decided he would retire before the mandatory retirement age of 65. He did not reveal his decision to anyone until he reached 62, and at this time he confided to his best friend and the most powerful board member that he would retire imminently.

Mr. Zutshi proposed that Mr.S K Kherr, Vice President, Administration, a very able and experienced executive, succeed him as president. Mr. Zutshi’s friend vehemently opposed Kherr’s candidacy, and forcefully argued that S N Mathur, vice president of manufacturing, was the best qualified to be the new president. This case presents a situation where the decision-making process has completely failed. Analysis: The selection of the president is one of the most important decisions a board of directors makes. Not only does a president have an enormous impact on the fortunes of a company, but the very process by which the executive is picked influences the way employees, investors, and other constituencies view the company and its leadership.

In short this decision will effect the whole organization. Considering that Mr. Zutshi was approaching the mandatory retirement age, and that a significant difference in opinion between Mr. Zutshi and the most powerful board member as to who should be the new president, it is clear that the board (the president is almost always a board member) was extremely derelict in its duties. The decision-making process was greatly undermined, with huge ramifications for the organization. In the Indian way of decision-making, the single most important element in solving such problems is defining the question.

Because the Indian system is very time consuming and involves many participants (higher level managers) from various functions within the organization, the Indian system is suited to big decisions. A change is president is one of the most crucial events in the life of a company, and it is an event in which the board of directors plays a central decision – making role. Because the new president must be chosen soon, it was already too late to make an effective decision. The decision process will inevitably be marred by politics and compromises, resulting in a weaker organization and lower morale. A successful succession process requires that the board members first define the question: Always view the problem from different perspectives.

Each board member should have an independent point of view. Board members should be open-minded. Every board member should seek information and opinions from a variety of people to widen his/her frame of reference. Board members need to be active pl …


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