88 Understanding Rational Decision Making
Borrowing Decisions: Responses to Offers of Loans
Audiences, such as consumers and CFOs who are open to borrowing money in order to pay
for expenditures, make borrowing decisions. Homeowners make borrowing decisions when they
decide whether to take out a second mortgage on their home; students make borrowing deci-
sions when they decide whether to apply for a student loan; upper management makes borrowing
decisions when they accept or reject lower-management’s recommendation to borrow funds for a
costly new project.
Consumers, CFOs, and others make borrowing decisions for a number of reasons: to increasethe value of their household or fi rm, to reestablish liquidity, to defer payment, or to manage their
debt load. Banks and other lending agencies seek borrowing decisions from potential borrowers in
order to earn interest on their capital. Documents and presentations lenders produce in order to
elicit borrowing decisions from potential borrowers include credit card offers , bond issuance proposals,
line of credit proposals, as well as assessments of optimal capital structure and cost of capital.
I recently instituted monthly meetings with the development engineers, product
segment manager, and representatives from marketing to discuss, prioritize and
assign target development dates to new marketing or customer requirements.
During this meeting, it is my responsibility – as chair of the board – to keep
the meeting moving forward and keep the team focused. In addition, I am
increasingly involved in conference calls between sales account managers and
consultants, to help provide assistance while the two parties work through the
terms of a major contract.
I would like to request a salary adjustment which would reflect the extra
responsibility of these kinds of activities. I think a salary of $85,000 per
year would fairly reflect the work and responsibility carried by my position.
[2. I would look into it, but based this document I would not grant the request. There’s not
enough evidence.
- This does show that we have a manager that is unhappy in the position. He believes that
he has taken on more responsibility, and therefore should get paid more. That may be
true, if he’s contributing more to the bottom line. - What’s wrong with this is he doesn’t make a strong case. I would like to see how his
responsibilities have increased, what exactly he is doing, how the sales volume’s
increased. - Quite possibly we may just need to hire additional management for the division. Or
maybe this individual would not be happy working in the product division over the next
year or two and is looking for more opportunity. But you can only elicit that from a face-to-
face meeting. - There may be some inefficiency going on that I’d want to discuss.
- The only thing this document would do would get me to talk to this person. But
otherwise, the memo does not document enough what the contributions to the bottom line
are, or how much more time is spent, how only he with his experience can do these kinds
of jobs, etc. - Perhaps our company needs a more formal process for promotion and salary increase.
Usually what you would have would be a set of objectives that would be agreed upon at
the first of the year. So that at the end of the year, I could look at your objectives and agree
that you had met them.]