RACY CASES -37 What makes a good decision?


 

A V Vedpuriswar and V Pattabhi Ram

“What are the different types of decisions?” asked Service Sam, stunning the class.  Sam never asked inane direct questions.  But then he was the boss and the boss has the right to handle sessions the way he chooses!

Goggles offered a frill free answer.  “Decisions can be classified into strategic, tactical and operational, depending on the type of impact they make.  Strategic decisions are irreversible and have long term implications. These decisions must be made with the active involvement of the top management. Tactical decisions have medium-term implications. They convert strategy into action. Operational decisions have a short term impact and can be reversed with ease. Such decisions do not need the involvement of top management.  In fact top management should be freed of this burden, so that they can spend more time on strategic matters”.

“But, Sam, the ground realities are different” said Debbie, the baby faced, pony tailed, topper. “In Indian companies the involvement of senior management in decision making defies Goggles’ logic.  In one organization, in which my cousin worked, buying a management book costing Rs. 800 needed the approval of a senior manager. But a junior officer could place a Rs. 5 lakh order on a transporter to move cargo from the factory to the port”. The class smiled.

Flowers, with three years of work experience behind him said, “In the company where I worked, going on a tour which cost Rs. 30,000 was considered operational; but getting a nomination for a training program which cost Rs. 5,000 was viewed to be strategic”. Sam agreed, “There are no black and white rules while categorizing decisions”.

Sam then decided to take the discussion to the next level.  He quoted Peter F Drucker.  “The time and effort spent on a decision should be proportional to its importance.  Important decisions should consume more time compared to unimportant ones”.  Drucker might have been a management guru but the class felt that he was off the mark when it came to Indian companies.

Debbie chirped, “In most Indian organizations, the way decisions are taken has little to do with their importance. When taking decisions, the real concern of managers is how they will be perceived by their bosses.  Managers want to take decisions in such a way that they do not have to assume much risk”.

Flowers said, “When middle managers have to take decisions on matters which do not go through a serious vetting process, they are fast.  But when the decision has to be approved by the boss and a strong business case has to be prepared, they go slow. They are apprehensive whether they will be able to sell the decision to their bosses. They feel that any proposal which is rejected by the boss will diminish their career prospects”. Boka added, “Managers spend a lot of time doing things which make them happy and virtually no time on those which cause stress and discomfort. In the process, they turn decision making into a complete farce. Without actually taking decisions, they fool themselves into believing that they are doing so”.

“Unfortunately, all good decisions are inherently risky. And they involve a lot of effort and discomfort”, said Goggles.  “Illustrate” screamed the class.  “I hate personal examples, but I shall make an exception this time.”  It was Boka playing to the gallery.  “Years ago, when Chittaranjan Locomotive Works (CLW) was in its formative years, Telco (now called Tata Motors) was a major equipment supplier.  CLW always sent its engineers for inspection to the Telco factory before taking delivery of the equipment.  Once there was a crack in one of the equipments and the CLW engineer promptly rejected it.”

“When the Tata management expressed their concern to CLW, CLW decided to send my late grandfather, (then a Railway engineer on deputation to CLW) to inspect the machinery.  Grandpa quickly realized that rejecting the equipment was a safe decision that did not call for any effort or risk.  But effectively, it was no decision. The real decision was in telling Telco engineers how to rectify the defect so that both CLW and Telco would benefit. Such a decision involved risk. If something went wrong, grandpa would be held accountable.  But, if the decision proved right, he would not gain in any way, in a system where there were no incentives for high performers. But my grandfather decided to go ahead with what he felt was right. An expert in welding, he quickly specified the kind of welding to be done to repair the crack.  Working with the Telco engineers, grandpa ensured that the equipment was made fit for delivery.  Telco’s top management was so impressed with him that they promptly made him a job offer.  But the committed railway man that he was, my grandpa promptly refused the offer.  That, however, is beside the point”.

Sam nodded his head in appreciation.  “What Boka’s story indicates is that in most business situations, managers can take two decisions, one which is riskless and effortless and the other which is risky and effort intensive.  Dropping a new investment proposal is an easy decision but making the investment and taking the proposal forward is a tough one. Promoting a young, bright manager is a difficult decision but denying him promotion on the basis of seniority is an easy decision”.

Flowers remarked, “In well managed organizations, managers do what they think should be done without worrying about how they as individuals will be perceived. The top management tolerates failures as long as the reasons for the failure are beyond the control of the managers”.

Realizing that the gong was about to go, Sam decided to close out. “To encourage better decision making, top management must lead by personal example. They must walk the talk. They must encourage people to take decisions unmindful of possible failure”. He then asked, “You guys love cricket, don’t you?” “Yes”, screamed the class.  Sam said, “Who can ever forget Kapil Dev running across the field at Lord’s to take Viv Richards’ catch.  That catch, which looked impossible when Kapil started running, effectively won India the 1983 World Cup. A mediocre fielder would never have attempted it. And no one would have really faulted him!”

“To encourage managers to spend more time on the ‘right’ issues, experimentation must be encouraged.  Failures should be punished only if they have been made due to avoidable negligence or bad planning. Employees who stick their neck out, and walk the extra mile, must be rewarded handsomely”.  The gong went.

Advertisements

About Pattabhi Ram

A chartered accountant by profession, a writer by passion and a teacher by accidental choice.
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s