54 Understanding Rational Decision Making
as they read two documents produced by top management teams to elicit oversight decisions: a
strategic plan from General Motors and the Management’s Discussion and Analysis section of Control
Data Corporation’s annual report. Each expert was asked to put himself into the role of a board
member of those fi rms and to make an oversight decision based on the information the plan or
report provided. The comments refl ect the decision criteria for making oversight decisions and
illustrate how important it is that they be addressed fully. All of the comments each expert made
are numbered in the order they were made. Comments that did not directly refl ect the experts’
decision criteria, such as comprehension-related comments and complaints about superfl uous
information, are not included here.
Both expert audience members found the information they required about each organization’spast fi nancial performance, but both noted that the reasons for that performance were lacking. The
expert reading the strategic plan was glad to see an action plan was included, but complained that
the strategy for positioning the fi rm vis-à-vis its competitors and the risks, usually included in a
contingency plan, were not clearly spelled out. The expert reading the annual report complained
that fi nancial objectives for the future were not included, that the report lacked a competitive
strategy for positioning the fi rm, and that the action plan was too vague. Neither of the expert
audience members found that enough of his decision criteria were adequately addressed and, as a
consequence, each withheld his approval.
On the following pages are slides that a team of MBA students presented to their board ofdirectors—a group of fi ve experienced top managers. The student team played the role of top
management in a simulated watch manufacturing fi rm. The students’ fi rm was in competition with
four other simulated watch fi rms run by other teams of MBA students. Notice how the student
team’s slides address each of the board’s decision criteria for oversight decisions: the fi rm’s past
performance, the reasons for that performance, the fi rm’s fi nancial objectives, as well as the fi nan-
cial objectives, competitive strategy, action plans, and contingency plans for the fi rm’s premium
“Omicron” watch (note: the slides pertaining to the fi rm’s less expensive “Iota” watch have been
omitted. Those slides follow the same outline as the slides for the “Omicron” watch). The charts
in the team’s slides provide many benchmarks as well. Unsurprisingly, the team’s board rated their
presentation as well above average.
Expert Comments on a Strategic Plan From
General MotorsExpert Comments on an
Annual Report From Control DataContingency
plans
- Based on the document itself,
I would not feel comfortable granting
authority requested. - The document does a poor job of
focusing the reader’s attention on the
important issues, priorities, and the major
risks involved in this strategy. And those
kinds of questions would be the ones
I would focus on in a discussion and
presentation. - The ability to present information
in a well-organized way, either in the
written form or the verbal form, in
a short amount of time, say fi fteen
minutes (which would not be unusual
at the corporate level for something
like this) is suffi cient to either make
or break a strategic plan. I’ve seen
it happen, and make or break the
individuals involved.
[This expert did not indicate
whether he noted the report’s lack of
contingency plans.]TABLE 2.3 (Continued)