The impacts of managerial decision making

by ExGen on November 7, 2007

Some decisions are made with great thought and planning while others are made off-the-cuff, with little information to help guide the course of action. Some decisions are monumental in scope, while others are comparatively minuscule. In each, the decision maker must make a judgment that will result in some final unknown, but hopefully foreseen, outcome. In the following passages we will examine two decisions, including the situation leading up to the decision, the decision itself, and the aftermath of making the decision. The first decision is from military history; the second from my personal corporate work experience. The intent of this article is show that the impact of one decision has the ability to make or break an entire operation. So let’s get on with it…

In late April, 1863, Major-General Joseph Hooker’s Army of the Potomac was directly across the Rappahannock River from General Robert E. Lee’s Army of Northern Virginia. General Hooker was desperately seeking a decisive victory against the Confederate army, and felt he was in position to strike a blow near Chancellorsville, Virginia. Hooker’s plan was to send a portion of his troops to attack Lee’s front. Before this strike would occur, General Hooker was to send the bulk of his army across the river to Chancellorsville. This larger fighting component would build a defensive position in the town and strike Lee’s flank during the ensuing battle. If the plan worked correctly, Lee would be focused on the pseudo strike to his front and leave his flank vulnerable. In reality, this did not occur since General Lee noticed the movement of Hooker’s troops across the river and sent his own men to meet the flanking movement at Chancellorsville. General Lee’s ensuing battle plan was to go down as one of the greatest command decisions in military history.

General Lee’s army was greatly outnumbered. In a situation such as this, the typical tactic is to retreat to a position that is easily defendable, and fight a defensive battle. Instead, Lee and Lieutenant-General Thomas “Stonewall” Jackson devised a plan to flank the Union army. Jackson was to take the bulk of the Confederate troops with him on a 12 mile forced march through the cover of thick woods and attack the Union position at its own exposed flank. The plan left Lee’s front spread extremely thin and vulnerable. If Jackson’s march and attack did not go as planned, Lee’s position would be easily overrun.

The plan did work, though. In one of the greatest military decisions ever, Jackson’s corps of men easily routed the Union position and caused a massive and unorganized retreat. The fighting continued into the darkness, as Jackson did not want to let up on the surprised Union troops. General Jackson himself rode out into the night to survey the situation for the next day’s battle and, in the confusion of the darkness, was accidentally mortally wounded by his own troops upon his return. The decision to divide the army, conduct a forced march, and attack the Union flank ended in a Confederate victory at the Battle of Chancellorsville, but also resulted in the loss of General Lee’s “right arm” – Stonewall Jackson.

From my work environment, the decision I would like to discuss is the choice of the manufacturing location for a new product we are developing. The product is widely used throughout the world, and our company is attempting to get into the market with our own version of this common item. Our development engineers designed the product to the specifications of our marketing department and presented their plans to our group management. The management team reviewed the designs and approved the product for further development and eventual release to market.

The next step in the development process was deciding upon a manufacturer of our new product. The management team assigned the product engineers the task of getting price quotes from various facilities worldwide. Among the quotes received were some from our own manufacturing facilities located here in the United States, one from our manufacturing facility in India, and one from a foreign OEM supplier in China. The engineering team presented their findings to management for review. After consideration of all items, our manufacturing facility in India was awarded the job. The hope was that low wages and highly experienced engineers in India would help propel this product to launch very quickly with minimal monetary expense.

Following over a year of design work, the product and initial manufacturing process was to be implemented and tested in approximately six months. The scheduled launch date for production was mid-April. This launch date would allow the manufacturer ample time to develop an inventory large enough to meet the initial product demand, and still be in a position to supply the trade enough product for the Christmas sales rush. The company looked forward to a high sales volume and, expecting a great return on investment, established a lofty yearly earnings forecast. Our company was to be sincerely disappointed.

The Indian manufacturing experiment failed to live up to expectations. Although the labor was indeed less expensive than here in the United States, the quality is far below our expected norm. Our engineering team spent unnecessary time correcting small issues that would not have been problems if the product was constructed here in the U.S. Problems such as plastic molding and packaging issues would have been easily corrected by a domestic supplier, but were difficult for our Indian team to fix. In addition, our engineers made six trips to India, at a cost of approximately $10,000 per person in airfare and lodging alone, to supervise the design and manufacturing work. Furthermore, the team in India supplied our engineers with misleading information concerning issues such as where they were in the schedule timeline, the location of supplies, and build-material composition.

Currently, the product is still not in production. The decision to use an Indian supplier has resulted in more problems than anticipated and cost more money that planned. A financial audit of the project has determined that, even with the low cost of foreign labor, we could have produced the product less expensively if we used our supplier located in the United States. Unfortunately, too much money and manpower has already been invested in the product to change the manufacturing location. Therefore, our company is essentially forced to live with a poor decision that was made based upon the hope of increased profit. The result is actually decreased profit and a missed earnings forecast which will likely lead to a decrease in stock price.

Through these two examples, I hope to have shown how the results of managerial decisions can impact the entire organization. The next time you are in a position to make decisions for your group, think about the future implications of your next move. Think about the great possibilities that lie ahead, but also think of the negative aspect. How can you, as one individual, hurt or help your company? Think about that, make your decision, and move forward confidently.

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