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Decision Making and Business Performance

Eric J. Bolland and Carlos J. Lopes

This breakthrough study examines how business decisions explain successful and unsuccessful performance. Real world and academic research is evaluated, including interviews and cases studies, to create a model of how decisions and performance are connected for businesses of all sizes. Recommendations are made to optimize decision making and projections about the future of decision making and performance are provided.
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Index

Eric J. Bolland and Carlos J. Lopes

17 decision success factors 767, 1323, 135
classification of decisions and 10513
first round findings 84101
logit model 11324, 132
ordered logit model 12531, 132
Pearson correlation coefficients 135, 137
Adams, R. 56
advisory committees 16970
agents’ freedom to make decisions 80
Agle, B.R. 97
Airbus A 380 188
Ali, R. 93
Almeida, H. 56
Amazon 94, 95, 96, 97
Ampex 5
Anderson, T. 59
Apple 2, 94, 97, 99, 146
Arthur Andersen 75
artificial intelligence 1901
assumptions of the process model 801
automobile industry 2, 39, 94
Bain & Company 1767
Barnard, C. 37
Baum, J.R. 57, 96
Bausch, A. 934
behavioral decision making 4
Benson, G. 57
Bezos, J. 97
Bhagat, S. 578
biases 434
champion bias 34
judgmental bias 501
Black, B. 578
blind sip taste tests 103, 104
board of directors 578, 60, 77, 111, 133, 169, 171
correlations 1358
exploratory factor analysis 141, 1478,
first round findings 92, 97, 98
ordered logit model 125, 126, 127, 130, 131, 132, 149, 1512, 153
simple logit model 116,
Boeing 2
border trade 199200
bounded rationality 38
brand loyalty 93
Brinkmann, J. 934
Brown, L. 589
Brynjolfsson, E. 64
Bughin, J. 96
Burling, I. 157
business analytics 1868
business level 10, 11
business units 5960
resource sharing see resource sharing
CAGE framework 200
calibration of instruments 17, 18
capital power 184
Caporn, N. 96
Carnegie Model 40
case studies 858, 98, 99, 101
summary information 8892
Cattell’s scree method 138, 139
Caylor, M. 589
centralization 198, 199202
CEO attributes 55, 77, 112, 127
correlations 1358
first round findings 92, 97, 98
simple logit model 116, 123
CEO autonomy 77, 11213, 133, 146
correlations 1358
ordered logit model 127, 13031, 132
simple logit model 116
CEO effect 54
CEO pay 545, 77, 11112, 127
correlations 1358
simple logit model 116
CEO tenure 53, 140
logit model 142, 143, 146, 153
ordered logit model 149, 150, 153
CEOs 6, 33, 36, 42, 43, 516, 678, 171
high performance companies 546
perspectives on performance 514
Chamberlain, A. 62
champion bias 34
chief executive officers see CEOs
choices 4, 223, 81
Christensen, H.K. 58
cobras 5
Coca-Cola 93, 96, 1034, 105
Collins, J. 51
commitment to ethics 601, 76, 1067, 127
correlations 1358
first round findings 92, 93, 98
simple logit model 116, 11718
common grammar 19
communication 186, 193
compensation, CEOs’ see CEO pay
competition 55, 64, 77, 10910, 127
correlations 1358
first round findings 92, 96, 98, 99
simple logit model 116
competitive analysis 18891
computer-based decision making 3940, 19091, 2002
concealed decisions 75, 1612
conclusions 21, 15567
learning orientation 1606
model revision 166
reconciling short-term and long-term performance measures 157
strategic orientation 15960
unexpected findings and 1579
consciousness 191
consulting agencies 159
consumer empowerment 1856
continuous decision making 1878
continuous process-based production 204
continuum of decisions 1634
Cook, T. 97
cooperation between small firms 170
corporate culture 62
of sound decision making 17780
corporate governance 589, 77, 111, 171
correlations 1358
exploratory factor analysis 140, 141, 144, 1478, 149, 152, 153
first round findings 938
ordered logit model 127, 149, 1512, 153
simple logit model 116
corporate histories 856
corporate level decisions 11, 29
cost–benefit analysis 174, 175
cost-cutting strategies 119
cost–effectiveness analysis 174, 175
Countrywide 122
Crook, T.R. 95
Crossfield, S. 191
cruise ships 1878, 204
culture 1989
corporate decision making 62, 17780
current performance measurement 203
customer relationship management (CRM) 40
customers
empowerment 1856
focus on 100
profiles of 1867
views 165
Dalton, D. 58
data-driven decisions 64, 77, 110, 133
correlations 135-8
first round findings 92, 96, 98
ordered logit model 127, 129, 130, 132
simple logit model 116, 121, 132
de Wet, J. 60
decentralization 192, 194, 198, 199202
deception 34, 75
decision advisers 178
decision condition for human actions 38
decision makers 6
decision making
avoiding and delaying 5
Carnegie Model 40
challenges to rational decision making 356
changes in 1958
competitive analysis and 18891
continuous process 1878
data sources 823, 848
defining 34
evolution of corporate decision making 3640
evolutionary and historic roots of 89
future of 186202, 2034
levels 1011, 2930
literature on 345
merged with performance measurement 2034
and planning 16, 26, 36, 41
practical advice 30
in practice 414
problems with 1315
process 67, 334
risk taking and 56
steps of 1516, 235
decision making culture 17780
decision making tools 1727
financial analysis tools 1734, 175
limitations 1747
decision speed 57, 77, 110, 113, 127
correlations 1358
first round findings 92, 96, 98
simple logit model 116, 1212
decision support 190
decision trees 1734, 175
decisional roles 256
decisions 910, 20, 2245
see 17 decision success factors
considerations in modeling 749
levels of 1011
link with performance 3, 13
manager roles in 256
medium and large firms 323
number of 27
small firms 312
strategic plans and 16, 26
types of 2830, 1623
Dell Computers 97, 122, 186
demand 185
Deming, H.E. 161, 179
Dess, G. 50
digital photography 1045
discussion 81
dispute resolutions 166
distortions of reality 34
distribution 170
disturbance handler role 25
diversification 58, 623, 119
diversity, workforce 1845, 193
Dun and Bradstreet reports 49
Eastman Kodak 1045
Eccles, R. 1819
economic factors 789
economic man 38
Einstein, A. 73
emotions 166, 191
employee quality 100
employee satisfaction 52, 62, 76, 108, 133
correlations 1358
first round findings 92, 95, 98, 99100
ordered logit model 127, 129, 132
simple logit model 116
Enron 75, 161, 167
entrepreneurial decision role 25
environmental factors 57
Epstein, L. 62
ethical reputation 141, 145, 148
ordered logit model 149, 152, 153
ethics 601
commitment to see commitment to ethics
evaluation and feedback 24
evolution of corporate decision making 3640
existential structural emergencies 82
expert systems 190
exploratory factor analysis 13853
Exxon 2
Facebook 121, 1867
factory system 37
fair value accounting 49
Farley, J.U. 96
Ferreira, D. 56
financial analysis tools 1734, 175
financial measures 1819
financial reports 12, 4950, 856, 157
Finegold, D. 57
firm’s prior performance see prior performance
first round findings 20, 84102
17 factors 87, 92100
data sources 848
single most important factor 878, 100
summary information on interviews and cases 8892
fishbone diagram 17, 18
Fisher, J. 5960
flatter organizations 194
Floyd, S. 567
food services 1856
Ford, H. 2
Ford Motor Company 43, 11718, 119
Frick, W. 534
Friedman, T. 199
functional areas 176
functional level 11
future, the 21, 182205
business analytics 1868
centralization and decentralization 198, 199202
changes in decision making 1958
changes in work 1924
competitive analysis and decision making 18891
culture and decisions 1989
past trends and 1836
performance measurement 2024
Garbuio, M. 412
Gartner Inc. 186
General Motors 94, 198
generally accepted accounting practices (GAAPs) 14, 49
generational change 193
Ghemawat, P. 199200
Gillette 93
Gladwell, M. 35
globalism 195200
goals of decision making 41
Gootman, E. 77
governance see corporate governance
government regulation 79
Govindarajan, V. 5960
Great Depression 117
group decision making 89
Halberstam, D. 39
halo effect 501
Halper, F. 18990
Hambrick, D.C. 989
Hammond, S. 61
Harrington, M. 183
Harter, J.K. 95
Hawthorne experiments 17
Hayes, T.L. 95
Heekyung, K. 64
Heisenberg effect 17
hierarchical organizations 194
high performance companies 546
Hill, C. 61
Hitt, L. 64
Hoenig, S. 96
Hofer, C. 11, 178
homeworking 192, 194
Horowitz, B. 52
Hubble Space Telescope 17
human needs 8
human resource management (HRM) 612, 76, 108, 109, 127
correlations 1358
first round findings 92, 95, 98, 99100
simple logit model 116, 120
hunch playing 81, 1712
Huselid, M. 612
Iacocca, L. 43
IBM 2, 158
impact of prior performance see prior performance
implementation 14, 24, 81
incrementalism 39
indecisiveness 15
individual blame 17980
individual learning 160
individual-level decision making 1011
individualization 186
information sources 823, 848
informational roles 25
innovation 61, 76, 107, 127, 156
correlations 1368
first round findings 92, 934, 98, 99
simple logit model 116, 118
intensity of activity 43
international businesses 195200
International Financial Reporting Standards 49
Internet 40, 182, 195
interpersonal roles 25
interview guide 87
interviews 858, 98, 99100, 101, 1646
summary information 8892
intuition 28, 30
investor community 10, 157
Janis, I. 172
job tenure 193
Jobs, S. 2, 94, 97, 99, 146
joint impacts 131, 132, 133
exploratory factor analysis 13853
Pearson correlation coefficients 1358
judgmental bias 501
Kahneman, D. 356
Kaiser criterion 138
Kang, J. 60
key findings 20, 10334
classification of decisions and the 17 factors 10513
logit model 11324, 132
ordered logit model 12531, 132
kings’ charters 8
Knight, P. 118
Kodak 1045
Kozlowski, D. 75
labor effectiveness 139, 140, 166
logit model 142, 1456, 153
ordered logit model 14850, 153
Larcker, D. 55
larger/large and medium-sized firms 323, 812, 16061, 1623, 1645, 169, 17072
Lay, K. 75
lean manufacturing 95
learning orientation 16066
legal system 8
levels of decision making 1011, 2930
Liang, T.P. 95
Likert scale 1245
interviews and case studies results 8991
ordered logit model 12531, 132
principal components ordered logit model 14853
Limbach, P. 53
Lindblom, C. 389
Liu, C.C. 95
logit model
ordered 12531, 132, 14853
principal components 1428, 153
simple subjective 11324, 132
Long Term Capital Management (LTCM) 96
long-term effects of decisions 8991
Lovallo, D. 334, 412, 434
luck 36, 55, 68
Mackey, J. 52
Madoff, B. 93, 118, 161, 1667
Maher, M. 59
management 37, 38
manager development 156
managers’ roles in decisions 256
middle management see middle management
management-by-walking-around 18
management techniques 62, 76, 1089, 127
correlations 1358
first round findings 92, 95, 98
simple logit model 116, 120
Mankins, M. 16, 26, 27
Mann, L. 172
March, J. 180
marginal effect 11424
Margolis, J.D. 93
market share 14
market standing 1556
market structure 58
marketing 100
marketing/R&D 14041
logit model 143, 1467, 153
ordered logit model 149, 150, 151, 153
mass customization 186
Mayo, E. 17
measurability of performance 80
medium-sized firms see larger/large and medium-sized firms
Merton, R. 96
Meyer, E. 60
MF Global 97
Microsoft 2
middle management 567, 77, 113, 127
correlations 1358
first round findings 92, 98, 99, 100
simple logit model 116, 1234
Miesing, P. 60
Mintzberg, H. 256
misaligned risk aversion profiles 34
misaligned time horizon 34
model data sources 823, 848
modeling 20, 7283
aims 734
assumptions 801
initial model of decisions and performance 757
logit model see logit model
performance and decision considerations 749
process for 74
process model 7982
revised model 166
sources of information 823
value of a model 723
modes of foreign market entry 1978
Montgomery, C. 58
Motorola 1212
Mulcahy, A. 52
multinational corporations (MNCs) 196
Musgrave, S. 17
Myspace 121
Nair, A. 95
natural factors 789
negotiator role 25, 26
New Coke 93, 96, 1034, 105
newly formed businesses 312
Nickell, S. 64
Nike 118
Nokia 99, 120
non-programmed decisions 289, 3940
in medium and large companies 323
in small companies 312
number of business decisions 27
NUMMI plant 94
Obama, B. 22, 23
objective performance measures 50
observation 18
odds ratios 11524
operational level 29
operations management 141
logit model 144, 147, 153
ordered logit model 149, 15051, 153
options, choice from 4
ordered logit model 12531, 132
principal components 14853
organizational learning 16066
organizational structure 623, 194
Orlitzky, M. 93
over-diversification 119
Panama Canal 82
pay, CEO see CEO pay
payback 173, 175
Payne, G. 57
Pearce, J. 60
Pearson correlation coefficients 92, 1358
Pepsi 103, 104
Pepsi Challenge 103, 104
performance 12, 10, 20, 4671
characteristics of 467
characteristics of high performance companies 546
considerations in modeling 749
data sources 858
factors affecting 5663
link with decisions 3, 13
literature review 638
perspectives on 1820, 514
standards for 478
performance measurement 1819
expectations of 478
future of 2024
informal 18, 1556
issues 4951
large number of measures 63
merged with decision making 2034
problems in 1315, 1618
reconciling short-term and long-term measures 157
tradition and 63
Perot, R. 2
PEST framework 78, 200
PESTN framework 789, 166, 200
Peters, T. 51
Peterson, S.J. 97
physical resources 156
Piketty, T. 184
planning 16, 26, 36, 41
political-legal factors 789
popular management techniques see management techniques
Porter’s Five Forces Model 64
power
of CEOs over boards 56
players 245
precise performance measurement 18
predictive analytics 18990
principal components 13841
logit model 1428, 153
ordered logit model 14853
prior performance 76, 106, 127
correlations 1358
first round findings 923, 98
simple logit model 11517
prioritization 1789
process model 7982
Procter and Gamble 53
programmed decisions 28, 39
propensity score 11524
public responsibility 156
quarterly reports 12
Quigley, T.J. 989
R&D see marketing/R&D
Radio Shack 80
ratio tools 173, 175
rational decisision making 24, 38
challenges to 356
recognition of need for decision 24
recommendations 21, 16881
culture of sound decision making 17780
for decision making tools 1727
usefulness of 16872
Reed, J. 202
regulation 79
related business firms 623
related-constrained firms 623
related-linked firms 62
reliability 17, 18
remote working 192, 194
Renjen, P. 52
reputation 61
ethical see ethical reputation
research conclusions see conclusions
research methods 8492
data sources 823, 848
summary information on interviews and case studies 8892
resource allocator role 25
resource sharing 5960, 76, 1078, 133
correlations 1358
first round findings 92, 945, 98
ordered logit model 127, 128, 132
simple logit model 116, 132
return on decision investment 173
revenue recognition 49
revenues 85, 91, 155, 1645
revised model 166
risk aversion profiles, misaligned 34
risk taking 56
Robinson, R. 50
root causes 17
Rosenbusch, N. 934
Rosenzweig, P. 2930, 5051
Rumelt, R. 58, 623
Rynes, S.L. 93
Sarbanes–Oxley Law 14
SAS Institute 95
satisficing 38
Schendel, D. 11
Schmid, M. 53
Schmidt, F.L. 93, 95
Scholes, M. 96
Scholz, M. 53
Schwabel, D. 193
scree plot 139
Sears Roebuck and Co. 94
Senge, P. 1778
sequence 80
services 193
Shafagotva, A. 63
shared applications 39
Sherman, D. 4950
Shkreli, M. 97, 99, 101
Sibony, O. 334, 434
Simon, H. 34, 15, 378
simple subjective logit model 11324, 132
single most important factor 878, 100
Six Sigma 95
Sloan, A. 198
Slocum, J. 61
Small Business Administration 30
small electronics manufacturing 2
small firms 312, 812, 16061, 162, 165, 16870
Snell, S. 61
social media 185
social tradition 8
socialization 423
socio-cultural factors 789
Sorensen, L. 55
sound decision making culture 17780
sounding boards 16970
specific management techniques see management techniques
speed of decisions see decision speed
standardization of performance 17, 18
standards for performance 478
Steele, R. 16, 26, 27
steps of decision making 1516, 235
strategic decisions 12, 7, 1113, 8081, 158, 179
link with performance 3
number of 27
problems in 334
problems with performance measurement and 1315
timing 7
see also decision making; decisions
strategic orientation 15960
strategic planning 16, 26
Straw, B. 62
subjective performance measurement 50
Subramony, M. 95
sunflower management 34
system 1 and system 2 decisions 356
systematic approach 1712
systems analysis 37
tactical decisions 1113, 29, 179
Tagan, B. 55
take-it-or-leave-it choice 22
Target 96
taste tests 103, 104
Taylor, D. 53
Taylor, R. 4
team effectiveness 57, 76, 107, 133
correlations 1358
first round findings 92, 94, 98
ordered logit model 1268, 132
simple logit model 116, 132
teamworking 11, 1923
technological factors 789
technology 191, 195
temporary work 192
tenure
CEO see CEO tenure
job 193
third-party consultants 192
thought experiments 73
time 1, 1789
for implementation 81
time horizon, misaligned 34
timing 158, 179
Tosi, H.L. 97
total quality management 39
total quality measurement 17, 18
Toyota 2, 94, 95, 96
tracking decisions 176
CEOs’ performance records 171
tradition 8, 63
training in decision making 178
Trump, D. 23
Turing Pharmaceuticals 97
Tyco 75
types of decisions 2830, 1623
uncertainty 1516, 80
underlying performance factors 201, 13554
principal components 13941
principal components logit model 1428
principal components ordered logit model 14853
unexpected findings and conclusions 1579
unionization 1834
unofficial earnings 49
validity 14
Van Looy, A. 63
VanNess, R. 60
Verschoor, C. 6061
Viguerie, P. 412
Volkswagen 97
Wally, S. 57, 96
Walsh, J.P. 93
Walt Disney 99
Waterman, R. 51
wealth concentration and distribution 184, 1967
Welch, J. 52
Western Union 2
Williams, J. 188
Wooldridge, B. 567
work, changes in 1924
workforce composition 1845, 193
World Wide Web 40, 182
Yakowicz, W. 55
You, J.J. 95
Young, S. 4950
Zahra, S. 60