1. Decision Making
Edited by
Devi Rajnikanth
IBS Case Development Centre

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3. 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

4. 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

5. 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.