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Decision making in organizations

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Management

Abstract

[The study of decision making] is complicated by the difficulties of assessing to what extent... rational devices actually are used in making decisions, particularly by higher-ups... The CEO of Covenant Corporation [pseudonym for a company in the US which is a large conglomerate], for instance, sold the sporting goods business from one of his operating companies to the president of that company and some associates in a leveraged buyout. The sale surprised many people since at the time the business was the only profitable operation in that particular operating company and there were strong expectations for its long-term growth. Most likely, according to some managers, the corporation was just not big enough to hold two egos as large and bruising as those of the president and the CEO. However, the official reason was that sporting goods, being a consumer business, did not fit the ‘strategic profile’ of the corporation as a whole. Similarly, Covenant’s CEO sold large tracts of land with valuable minerals at dumbfoundingly low prices. The CEO and his aides said that Covenant simply did not have the experience to mine these minerals efficiently, a self-evident fact from the low profit rate of the business. In all likelihood, according to a manager close to the situation, the CEO, a man with a financial bent and a ready eye for the quick paper deal, felt so uncomfortable with the exigencies of mining these minerals that he ignored the fact that the prices the corporation was getting for the minerals had been negotiated 40 years earlier. Such impulsiveness and indeed, one might say from a certain perspective, irrationality, is of course always justified in rational and reasonable terms.

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© 1999 L. Fulop and S. Linstead

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Fulop, L., Linstead, S., Clarke, R.J. (1999). Decision making in organizations. In: Management. Palgrave, London. https://doi.org/10.1007/978-1-349-15064-9_9

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