Convenience

110
Part 2:
Planning
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teams—the kind of teams that make so many organizational decisions today. Under
these circumstances, the greater the gap between highest- and lowest-paid executives,
the weaker the firm’s financial performance. Why? According to Pfeffer and Sutton,
wide disparities in pay often weaken both trust among team members and the social
connectivity that contributes to strong team-based decision making.
Or consider another increasingly prevalent policy for evaluating and rewarding talent.
Pioneered at General Electric by the legendary Jack Welch, the practice of “forced ranking”
divides employees into three groups based on performance—the top 20 percent, middle
70 percent, and bottom 10 percent—and terminates those at the bottom. Pfeffer and Sutton
found that, according to many HR managers, forced ranking impaired morale and collabo-
ration and ultimately reduced productivity. They also concluded that automatically firing
the bottom 10 percent resulted too often in the unnecessary disruption of otherwise effective
teamwork. That’s how they found out that 73 percent of the errors committed by commer-
cial airline pilots occur on the first day that reconfigured crews work together.
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BEHAVIORAL ASPECTS OF DECISION MAKING
If all decision situations were approached as logically as described in the previous section,
more decisions might prove to be successful. Yet decisions are often made with little con-
sideration for logic and rationality. Some experts have estimated that U.S. companies use
rational decision-making techniques less than 20 percent of the time.
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And, even when
organizations try to be logical, they sometimes fail. For example, when Starbucks opened
its first coffee shop in New York, it relied on scientific marketing research, taste tests, and
rational deliberation in making a decision to emphasize drip over espresso coffee. How-
ever, that decision still proved wrong, as New Yorkers strongly preferred the same
espresso-style coffees that were Starbucks mainstays in the West. Hence, the firm had to
hastily reconfigure its stores to better meet customer preferences.
On the other hand, sometimes when a decision is made with little regard for logic, it
can still turn out to be correct.
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An important ingredient in how these forces work is the
behavioral aspect of decision making. The administrative model better reflects these sub-
jective considerations. Other behavioral aspects include political forces, intuition and
escalation of commitment, risk propensity, and ethics.