BUSINESS DECISIONS

How to make a decision

Imagine going to your doctor because you

are not feeling well. Before you had a chance to describe your symptoms, the doctor writes out a prescription and says Take two of these medicines three times a day and call me next week But I haven't told you whats wrong with me, you say . How can this medicine help me? Why wouldn't it , it worked effectively for my last two patients. Says the doctor.

Would you accept such medicine?

No competent doctor would ever practice

medicine like this, nor would any sensible patient accept such a prescription. Yet professors and consultants routinely prescribe such advice, and managers routinely accept such therapy in the naive belief that if a particular course of action helped other companies to succeed, it will also click with them.

The case of Lucent Technologies

Lucent Technologies is a company providing

Telecommunications equipment. In the late 1990s their management reorganized their 3 operating divisions into 11 separate business units. The idea was that each business unit would be running independently. Senior executives claimed that this approach would take the company to the next level of growth and profitability by pushing decision making down the hierarchy and closer to the market place, thereby enabling faster response to customer needs and innovations.

Decentralization & Autonomy

The belief of Lucent Technology

management was very much in fashion and according to the latest trends i.e. decentralization and autonomy. There were many businesses around them which were split into small autonomous units and close to their markets. Surely what was good for them would be good for Lucent as well.

It simply didn't worked

Unfortunately for Lucent, the whole episode

turned out to be a fallacy. It simply didn't worked. The reorganization seemed to make Lucent slower and less flexible in responding to customer needs. Rather than saving costs, it added a whole new layer of costs. How could this happen? How could a formula that helped other companies become leaner, faster and more responsive along with saving costs have caused the opposite at Lucent?

Why it didnt worked?

It happened because the management team of

Lucent and those who advised them acted like the patient and the doctor in the opening of our chapter. The remedy they used forming small , product focused , close to the customer business units to make their company more innovative and flexible actually does work when business units are selling modular, self contained products. What they failed to realize was the fact that they were not selling plug and play products. They were selling complicated system solutions whose components have to be knit together expertly to ensure that they worked correctly and reliably.

Theory wasnt appropriate

Such systems (where component parts are to

be knit together to make them functional as a unit) are best designed, sold and serviced by employees who are not hindered from coordinating with each other by being separated into unconnected units. Lucents management used a theory that was not appropriate to their circumstances and the result was disaster.

The importance of failures

It is critical for the researchers to identify circumstances in which

companies did exactly what was prescribed and yet they failed. Unfortunately many management researchers are so focused on how companies succeed that they dont study failure. The obsession with studying successful companies and their best practices is a major reason why fads in management come and go with such alarming regularity. This is the reason that much early stage management thinking doesnt evolve to the next stage. Managers try out advice because it sounds good and than discard it when the recommended actions do not yield the expected results. Their conclusion most often is, it doesnt work. Instead of this they should ask why doesnt it work", which is a magical key. But for reasons unknown management researchers and writers are afraid to turn that KEY. As a consequence many research work has fallen into disuse because the researchers carelessly and egoistically claimed that it would work in every instance.

Core in decision making

What the researchers should seek to learn is that when it would work , and when it would not , and why. In a doctor patient relationship , doctors usually can analyze and diagnose what is wrong with a specific patient and prescribe an appropriate theory. By contrast the relationship between managers and those who research and write about management is a distant one. For practical purposes research must be conducted and written in a way that make it possible for the readers to diagnose their situation themselves. When managers ask questions like , Does this apply to my industry? Or Does it apply to service businesses as well as product businesses? They really are probing to understand the circumstances under which a theory does or does not work. The moral of this lesson is that in business, as in medicine, no single prescription cures all ills. A manager must understand the circumstances that he is facing. A highly centralized decision making structure with its fair share of bureaucracy can be effective in a specific business environment and there may be a totally reversed approach that is required in another situation. What managers must understand while making business decisions is THE NEED OF THE HOUR.