Decision Making

Edited by
Devi Rajnikanth
IBS Case Development Centre
Icfai BooksTM
# 71, Nagarjuna Hills,
Punjagutta, Hyderabad – 500082
Andhra Pradesh, INDIA
Phone: 91 - 40 - 23435387/91, Fax: 91 - 40 - 23435386
e-mail: icfaibooks@icfai.org, ibscdc@icfai.org
Website: www.books.iupindia.org, www.ibscdc.org

© 2009 The Institute of Chartered Financial Analysts of India. All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted

in any form or by any means – electronic, mechanical, photocopying or otherwise –
without prior permission in writing from the Icfai University Press.

While every care has been taken to avoid errors and omissions, this publication is
being sold on the condition and understanding that the information given in the book
is merely for reference and must not be taken as having authority of or being binding in
any way on the authors, editors, publishers or sellers.

Icfai Books, IB and the IB logo are trademarks of the Icfai University Press. Any other
product or corporate names, that may be registered trademarks, are used in the book
only for the purpose of identification and explanation, without any intent to infringe.

Other than the publisher, no individual or organization is permitted to export this book
from India.

Case studies are intended to be used as a basis for class discussion rather than to
illustrate either effective or ineffective handling of a management situation.

Copies of individual case studies are available for purchase from www.ibscdc.org

ISBN: 978-81-314-1571-9

Editorial Team: Ivaturi Murali Krishna and Deepa Verma

Visualiser and Designer: P. Damodara Siva Prasad

The views and content of this book are solely of the author(s)/editor(s). The author(s)/editor(s) of the
book has/have taken all reasonable care to ensure that the contents of the book do not violate any
existing copyright or other intellectual property rights of any person in any manner whatsoever. In the
event the author(s)/editor(s) has/have been unable to track any source and if any copyright has been
inadvertently infringed, please notify the publisher in writing for corrective action.
 Contents

Managerial Decision Making and Long-term

Effectiveness
The Organisational Learning
1–12

Interview with Samuel E. Bodily

13–16

A Scientific Approach for Making Decisions

Don’t Leave it Up to Chance
17–22

The Eight Keys to Making Great Decisions

Conquer Crisis
23–28

Interview with David J. Snowden

29–32

Ethics, Biases and Strategic Decision Making

The Balancing Act
33–42

Interview with Bettina Büchel

43–46 The Conscious Manager

Zen for Decision Makers
47–56

The Anatomy of a Decision

The Customer Perspective
57–66

Interview with Colin Carnall

67–72
Diversification in Developed and Emerging
Countries
73–84 How to Facilitate the Executive Decision

Interview with George Wright

85–92
Interview with David Teece

93–98
Interview with Derek W. Bunn

99–103
 P R E L U D E
A Danish proverb says, “He who has a choice has trouble.” Every decision
ever taken is borne out of choices. Successes as well as failures are the
results of decisions. What then distinguishes success and failure? Good
decisions and bad decisions. “Nothing is more difficult, and therefore
more precious, than to be able to decide”, Napoleon said. After all,
decisions are the essence of management. They’re what managers
do – sitting around all day making (or avoiding) decisions. Managers are
judged on the outcomes and most of them have only the foggiest idea
how the workforce operates to meet their targets.
Many books, reports, articles, etc., have been written on decision-making.
Two that were really concise and insightful were Fortune’s 75th Anniversary
special (June 27th 2005) on how to make great decisions and HBR’s January
2006 issue on decision making.
In Fortune (June 27th 2005), Jim Collins made a lucid distinction between
bad decisions and wrong decisions. A wrong decision is picking Door
No.1 when the prize is actually behind Door No.2 It’s a disappointing
result, but the fault lies with the method. A bad decision is launching the
space shuttle Challenger when
Morton Thiokol’s engineers predict “Decisions are the essence
of management. They’re
a nearly 100% chance of catastrophe. what managers do – sitting
The decision, in this case, was by no around all day making (or
means feasible. The distinction is avoiding) decisions.”

important, because it separates ‘outcomes’, which you can’t control, from

‘process’, which you can. Wrong decisions are an inevitable part of life.
But bad decisions are unforced errors. They’re certainly avoidable and
there are proven techniques to avoid the most predictable pitfalls.
In the light of this distinction, how do you characterise the following two
events’ decisions? The first is to do with Nick Leeson. The accumulated
trading losses of over $1 billion by Barings Bank trader Nick Leeson led to
one of the most spectacular collapses in banking history. And the second is
to do with Jerome Kerviel, the Societe Generale’s former junior equity
derivatives trader. He is being investigated for forgery, breach of trust and
unauthorised use of a computer in connection with unhedged transactions
that allegedly left SocGen a victim of
“The impact of anyone’s
decisions is farreaching, a near ¤5 billion (£3.7 billion) rogue
managers’ decisions have trading fraud. In both the cases while
particular significance
two rogue traders were at the heart of
because they affect all the
people who report to them the disaster, it was actually the result
and the businesses they of a complex web of decisions –
manage. ”
personal, managerial and societal.
Every manager faces a myriad of decisions every day from the time he
wakes up in the morning until the time he goes to sleep at night. Some
of these decisions are fairly mundane, but others have a significant impact
on the future of his life, his organisation, and his career. Making the
right decisions is crucial. While the impact of anyone’s decisions is
farreaching, managers’ decisions have particular significance because they
affect all the people who report to them and the businesses they manage.
For this reason, making better decisions is a key concern of managers
and their organisations.