Managerial_Decision_Making

Visit the website www.motherjones.com/news/feature/1977/09/dowie.html and read the article concerning the Ford Pinto. How did the decision making process help to create the problems for the Ford Pinto' Do these decisions represent optimizing behavior or satisficing on the part of Ford' If you were Lee Iacocca, would you have decided differently' How' This is a very interesting and thought-provoking article. Let’s examine some of the issues that led Ford officials to making one of the most unfavorable business decisions in company’s history. The Impact of Decision Making Process: 1. Lee Iacocca became victim of overestimation of conjunctive-event bias. He overestimated the probability off VW’s market dominance in the small to compact car segment. Therefore, he forced everyone to make the Pinto project one of the top priorities and the project was rushed from the beginning until completion. This urgency led to making quick decisions that were not well thought out and many critical components of the project were completed without proper planning. 2. Ford officials exhibited representativeness heuristic when actively lobbying against the safety standards. They put a lot of effort in convincing the government that people or drivers were the biggest cause of fatal accidents. They had tough time accepting the fact that minor changes in vehicles could greatly reduce the possibility of fatal accidents, which explains their negligence towards addressing the mechanical issues related to Pinto’s fuel system. 3. Placing a value over human life was an inappropriate approach used by Ford. This strategy also contributed to damaging Ford’s overall reputation. By using this approach, Lee Iacocca and his followers exhibited a bias that emanates from confirmation heuristic – called anchoring. Do These Decisions Represent Optimizing Behavior or Satisficing' All decisions represent satisficing on the part of Ford. Generally, satisficing can lead to missing out on the optimal solution since the decisions are made only based on available information. Satisficing can also generate decisions that are based on personal opinions, biases, and perceptual errors. Moreover, satisficing can result in less satisfaction with the decisions since the decision maker is aware of missing out on some better alternatives. My Decision in Lee Iacocca’s Position I would most certainly make better decisions in Lee Iacocca’s position. Here are some of the ideas and suggestion that can produce effective decisions: 1. Obtain solid data to gain better understanding of consumers’ needs and expectations related to compact car market. This data should also help making the decision of when and what is needed for which market. I believe that Lee’s imposed his ideas on the rest of the team and rushed the entire project based on his single belief of how Ford immediately needed to step in the compact car market. 2. Understand the most critical components of the project and ensure that sufficient time and budget is allocated to complete these milestones of the project. In this case, the tooling was completed well in advance, which left no flexibility in terms of making last-minute changes such as restructuring the fuel system. 3. Evaluate the product that is being developed and understand how it compares to other competitor’s in terms of cost, quality, reliability, and safety. If their product is safer than ours then we need to do better to gain a competitive advantage. 4. Use safety as a corner stone of marketing strategy. Demonstrate and communicate how compact car safety is even more critical compared to full size vehicles. If adding additional $25 means that the car is slightly more expensive than the competition, then strategize to market safety features accordingly. Explain to the consumers how paying an additional $25 can improve the safety of their families. 5. Do not place dollar value on a human life. This negative strategy even impacts the organization’s culture because people lose their faith and trust in the organization. Source: Judgment in Managerial Decision Making – Max H. Bazerman & Don Moore Page: 29-40