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DEVELOPING
DECISION MAKERS
By Charles H. Kepner and
Benjamin B. Tregoe
In this article we are going to deseribe a new
and different approach to developing decisionmaking abilities. Tbis approach has been practiced and refined in a wide variety of companies.
If you could sit in on one of the training sessions, you would not at first notice exeeutives
and managers doing anytbing very different from
wbat they usually do on the job. Tbey would
be sitting in tbe same offices and at the same
desks where they usually sit. They would be
getting information over tbe telephone, in the
mail, and in conference. They would be discussing problems with many of the same men
they ordinarily talk with. And, as always, they
would be making decisions.
But after a wbile you would notice that there
are differences. For example, while the particular
problem under consideration would be like tbe
problems managers have every day, it would not
actually have come up in company operations,
having been created for tbe special purpose of
an exereise in decision making. Moreover, after
reaching a decision on it, the managers would
go into special session with a course leader (who
would have been monitoring tbeir conversations)
to review wbat they did and analyze how they
could have done it better. Later on, they would
go on to tackle another problem in very mucb
the same way.
Since this approach is sueh a new one in concept, we shall first examine the need for it.
WTiat is the object of training? What kinds of
experiences make for real learning? Why do not
other methods fill the need, even though they
may help a great deal? After looking at questions like these, we shall then turn to the principles and mechanics of the new approach as it
is being practiced today in a number of firms.
Pressing Need
Wben an executive makes a decision, he commits his organization in some degree to a course
of action. If the decision is a poor one, his eompany will suffer accordingly. All of his art in
working with people to implement his poor decision will only extend and perpetuate the effects of his inadequacy as a manager. Nothing
that he can do will change the situation much
until the decisions themselves are improved.
Can an executive develop his abilities to make
effective management decisions except through
the process of making good ones and bad ones
over a long period of time? Many managers are
empbatic in saying that they doubt it. And they
ean point to good evidence to back them up.
Short cuts and easy ways to executive excellence
in decision making have been notably unsuccessful. Experience still appears to be tbe best teacber of tbis most basic management skill.
Yet companies are expanding, and tbere is a
greater demand for experienced managers tban
ever before. Opportunities are going begging for
want of good management personnel. Where
are such men to come from? On-the-job experience is too slow to meet the demand. And opportunity simply eannot wait for managers to
learn decision making through slow osmosis and
gradual growth.
One of the most crying needs in business today is for some way tbat will allow learning time
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Common Shortcomings
We can now see why it is that eertain approaches to management training have not been
too satisfactory and wbat needs to be added to
improve their effectiveness. A striking fact is
that most of them have little in common with an
on-the-job learning experience of the kind that
is most valuable to managers. Indeed, most approaches seem to be in search of a substitute for
experience rather than a way of capitalizing on
it. Let us examine some of the best-known
methods:
C Lecture, general discussion, and audio-visual
approaches These methods deal solely with abstract principles and ideas, any application of which
is up to the manager. This can be a source of frustration to him, since application is never as easy as
it sounded back in the conference hall. The problem is like learning to ride a bieycle from a description of the process. Description carries only so
far and then there is no substitute for getting
on the bicycle and riding. The same can be said
of decision making.
The concepts of decision making, such as getting
all the facts and defining the problem, can be eolorfully displayed on a Hannel board. But what the
manager needs to know is how to translate them
into action. What procedures will help him, for
instance, in gathering and evaluating the pertinent
data? He must know the roadblocks that stand in
his way and how to get around them. Above all he
must be clear as to what data he has and what
he needs if he is to have all the relevant information. And even when these concepts are applied
on the job, there is no assurance the manager will
get the feedback necessary for effective learning.
tl Case method Good case studies, conducted
by experienced leaders, provide something more
Decision Makers
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tangible for the manager. Here the emphasis is
both on ideas and on how they can be applied in
real situations. The manager gains vicarious experience in seeing how ideas have worked out and
might work for someone else. The more active his
imagination and the more expert the discussion
leader in making him feel involved in the case,
the more gain can be expected.
Learning to make decisions from a case study is
like learning to ride a bicycle by watching others
fall off or avoid falling off. Glaring errors can be
duly noted and avoided when the time comes to
put theory into action; helpful ideas ean be analyzed. But the application of new knowledge is
still left up to the manager to arrange as best he
can. And, once again, the best of case studies
cannot assure the manager of the feedback he needs
once the application is made.
e Workshops and role playing These techniques of decision-making training are almost completely limited to showing how interpersonal relationships and feelings enter into the process. This
is of real value, but it eannot show the manager
how to use information to reach the best possible
decision. The feedback is extremely one-sided and
speeific.
Bole playing appeals to many as a participative
approach; the manager is doing something during
the training session. This does not necessarily
mean that he is learning anything, however. There
is often more concern with the technique itself,
e.g., the dramatic niceties of role playing, than
with the learning purpose for which the technique
is employed.
The result, it seems to us, is that the manager
has a rousing, partieipative time but often is not
sure what he was supposed to get from it. Ideas in
preparation for the experience are seldom elearly
formulated. Full participation is looked upon as
the end to be achieved, as if partieipation were a
guarantee of effective learning. Feedbaek is usually overlooked or is of the my-opinion-against-; ours
type, of questionable value to the manager who
hopes to eome away from the session with something positive and concrete whieh he can apply
in his daily work.
( Coaehing and job rotation These approaches to management development make good use of
experience as a teacher. The manager can be
placed in positions in the company where he will
get experience in making various kinds of decisions.
His coach can help make feedback available to him
from which to assess the adequacy of his actions.
Though these approaches are about as effective as
any that are widely used at the present time, they
have definite limitations as devices for the improvement of decision-making skills:
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Other games Simulation does not automatically mean that a computer will be used. There
are a number of noncomputer games very similar
in format to the computer games but which can be
played on a board or with paper and pencil. Typically a few umpires armed with a table of random
numbers calculate the success of the moves of each
team in place of the computer. Because these
games are simply imitations of those employing
computers, the same .shortcomings apply.^
Computer games Business gaming has recently become popular as a method of teaching decision making. These games require participants
to make decisions about the allocation of funds in
a simulated company. Several competing teams
decide how they will spend their money among a
limited number of activities, such as marketing,
research and development, and plant expansion.
The computer has built into its program a formula
for the relative merits of the various categories of
expenditure. The nearer the men on one team
come to guessing the computer's philosophy of expenditure, the better their chances of winning the
largest share of the market.
Managers who have participated in a game report tbat they learn something about the interrelationships that exist between the variables they
manipulate. They also report that they can see
the compounding effects over time of the decisions
they make. This is one of the real advantages of
the computer game. It enables participants to play
through the effects of a number of years of business in a matter of hours. The more nearly tbe
formula in the machine represents the true state
of affairs in the participants' own business, tbe
more valuable this learning will be to them when
they return to their day-to-day jobs.
But managers do not learn hou^ to make better
decisions from the computer game. They receive
no feedback as to how they went about the task of
decision making and therefore are in no position
to improve their techniques against the next set of
decisions which they must make. The feedback
received is a simplified version of what would normally be available to the participants in day-to-day
activities except that the computer can compress
time and turn out these data rapidly. In fact, it may
well be a misnomer to call these computer exercises "decision-making games" just because decisions
must be made in playing them.
"Hello, production. This is the general manager. Say, what's the story on those rejects on
line I ?"
"We've had an increase in rejects but not enough
to account for tbe customer complaints which sales
has been on my back about."
"Customer complaints! What complaints? You
mean some of tbe rejects have gotten past quality
control out into tbe field?"
"Sales just called in a panic. He said he just got
word that some of the product is defective in the
California area and sales have fallen off as a result.
Complaints are that the thing is buckling and sagging, and dealers want replacements. It could be
Decision Makers
tied in with the reject problem, but we've got that
licked now. Definitely."
"We'll play hell making replacements out of inventory. I got a report from the warehouse. Some
inventory levels are critically low as a result of the
rejects from your production changeover. You better call purchasing and shipping and see how you
can get those inventories up. I'm going to get hold
of sales and get the whole story. On second
thought, maybe the four of us had better get together in my office and nail this thing down so
we can see what has to be done about it."
This is not play-acting, and it is not a game.
The men are working in a real business setting,
on a problem that is just like a real one, and with
information in the same form in which it comes
in real life. The participants must use every bit
of skill and understanding they have to make
the best decisions they can. Each of them is
working under an impelling sense of urgency
which will not let up until the matter has been
settled one way or another.
What is more, they must use the channels of
communication normally open to them interoffice telephone and face-to-face meetings. They
need not guess at a hidden theory of business
but rather must use the information provided
them about a concrete situation concerning specific products and events. Their task is to use
this information as efficiently as possible to analyze the situation and recognize the problems
facing them, to determine what is wrong, and
to resolve the difficulty.
Feedback Sessions
After the crisis is over and they have made
their decisions and set the necessary courses of
action into being, they can examine their perfonnance in a critique session in a way that is
never possible on the job. They can analyze
their decisions and the information and assumptions that went into them in light of all of the
information that was available. This feedback
can be provided by the course leader, who has
monitored their conversations and who knows
all of the information that is available to the
four of them.
The feedback critique session is the heart of
this method for providing controlled experience.
The management situation with which they
have dealt is essentially what might be called a
"closed" system of information about the company and the crisis which has arisen. What has
gone into the situation is known, and also what
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has come out of it as decisions made and courses of action selected is a matter of record.
It is therefore possible to lay bare what was
done by the managers to arrive at these decisions
and actions. The information used and how it
was used stand in sharp contrast to the total
information available and complete knowledge
of the situation. The decisions made were either
based on an adequate assessment of the situation
and a complete use of the information, or they
were not. Questions like these are discussed in
the critique session:
What were the assumptions that were made
about the situation?
What information was not used and why not?
How efficiently was the available information
communicated ?
How did the general manager go about coordinating the efforts of his people, and what were
the effects of his actions?
What might he have done?
Were procedures for handling the crisis adequately set out, or did things just happen?
Were the consequences of the decisions made
properly considered?
In other words, the experience is systematically turned inside out to provide the managers
with complete feedback on their performance.
Assignments Rotated
In the next session these four men will be
facing other management problems, perhaps an
organizational problem, or one of inventory control, or one involving the choice of a new product line. A top staff function may be represented on the team next time. Each man will
be responsible for operating a different functional area of the business in the next session,
and another one of the four will take over as general manager. By rotating through various functional positions in the company during a series
of controlled experience sessions, each man has
an opportunity to look at typical management
problems and decisions from a number of different points of view which complement his normal
on-the-job responsibilities.
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more detail now. What kind of problem situation is most effective? What preparations should
be made by the executives who participate? How
are the feedhack sessions best conducted? To be
as specific as possible, we shall turn at this point
to the program that we have been helping a
number of companies to carry out. Because it
has been tested in such a wide variety of situations, it offers the best opportunity to see tbe
new approach "in action."
Organizational Setup
Two years ago we created the "Apex Company" as a vehicle for the controlled experience
approach to developing decision-making skills.
It is a company of about 400 people. It bas two
divisions, commercial and military products. It
is small enougb to be readily grasped by tbe
managers assigned to it, yet large enough to embody the kinds of business problems faced by
mucb bigger organizations. Its products are
easily visualized. Its plan of organization is
relatively clear-cut and provides botb line and
staff functions.
Our purpose is not to present an organization in complete detail. It is not our aim to
indoctrinate managers in tbe particular metbods and philosophies of the Apex Company as
a model business. Unlike the computer game,
it is not the business itself Avbich is of interest
hut the way in which managers use the information provided them in making their decisions.
Almost any business, conducted according to
almost any set of policies, would serve as tbe
necessary setting within which to solve problems.
Four managers work in the Apex Company at
one time and manage either the commercial
products division or the military products division in the various sessions. Each of the four is
assigned to a different functional position in the
division and is responsible for tbe operation of
that area. Some of the positions to which the
men are assigned are division manager, production manager, sales manager, distrihution manager (a function including purchasing, shipping, and inventory control), finance, and industrial relations. They include both line and
staff. The four positions to be filled in each session are not the same; however, there is always
a general manager.
How Managers Prepare
Each session consists of two groups of four
men. Each group is confronted with the same
information and is working on the same situation hut independently of each other. Each
man receives a chapter of study materials to absorb on his own time before taking part in each
problem session. These materials provide him
with a set of concepts and techniques which he
will use in the experience. Each man also receives in advance background information on
the company, the division which he will be operating, and tbe department he will manage.
The managers are given a short briefing just
prior to the heginning of the problem. Tbe concepts tbat apply to this case are stressed, and
ground rules are gone over in detail. The managers go into the session knowing what they are
expected to learn from it and what they will be
required to do. They are as fully set and prepared to gain from the experience as possible.
The managers then receive the exereise material, which sets out what has happened in Apex
over the last few days. There are memos from
within their own departments, from other departments, or from outside the company. There
are policy directives, requests for information,
financial statements, production and sales records, and other information which would realistically come their way on the job. For example:
The sales manager might have the latest sales
forecasts, a report on last week's finished product
inventory from distrihution, a "wire" from one of
his district managers in the Reid, cost estimates on
a new product line for pricing purposes, and other
relevant information.
The production manager may know nothing
about sales forecasts but would have the latest
quality control reports, manufacturing cost breakdowns, and overtime records.
Of course, some of the information of divisionwide interest would be routed to all the managers. Such data would describe the immediate situation eonfronting each man and pose the
problems to be solved.
Eacb man takes tbis material to bis own or
to an assigned office. He reads through the information, organizes it, takes notes, or does whatever he normally would do in a similar real-life
situation. The men cannot expect to find a slip
of paper neatly labeled, "This is a problem,
solve here." Problems do not appear this way in
real life or in the Apex Company. Most problems appear first as seemingly unrelated bits of
information which take on meaning as these
pieces are put together. And this is the Avay
Decision Makers
they appear to the four members of the Apex
management team.
Going Into Action
As the managers go through the materials,
they begin to see their part in the crisis facing
Apex. They become aware of the actions called
for by them in dealing with the crisis situation.
When they have assimilated the information,
they reaeb for the interoffice telephone and begin tbe task of managing Apex.
They talk over the phone with the other department managers, ask for or give information,
set procedures, coordinate aetivities, give orders,
make decisions, and do anything else they feel
is appropriate to the situation. They may decide
to eall a conference if they wish and use it as
they normally would in the course of day-to-day
operations. Tbey draw on wbatever skill and
understanding of management tbey can muster.
Moreover, because they have only one and a
half hours, they work under a real time pressure and sense of urgency. This means that each
step in dealing with the information must he
carefully approaehed and well thought out.
They must coordinate their actions and communicate efl^ectively. If they have a conference,
they must use it well or valuable time is lost. As
in every crisis situation, they must get tbe most
out of the information they have available within a limited amount of time if they are going to
make the best decisions. (They cannot have access to more information tban is initially provided.) This is never an easy task. It takes tbe
urgency of a crisis to put the spotlight on decision-making deficiencies.
The controlled experience situations are put
together so tbat the cause of tbe major problems
confronting Apex can be determined // the information is used effectively. As in real life, if
the decision is based on an inadequate analysis
of the problem and its cause, the deeision will
be effective only through chance. If it is based
on a good analysis, management has done all
that can be asked of it (even though in actuality
chance may later upset the decision).
This is not to say that there is only one possible decision that is adequate. The situation is
too complex for that. Given a satisfactory determination of the cause of the problem, there
are any number of courses of action available to
the group depending on such factors as longand short-range considerations, or their estimate
of potential consequences. They must use their
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Harvard Business
Review
Conclusion
To put the new approach in perspective, now
that its content is clear, let us compare it with
some of the other training concepts that have
proved themselves:
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"Edward is the perfect executive. He's got the imagination and forthrightness of Alfred, the objectivity and steady pace of Benjamin, the
realism and the dispassionate ability to face the facts of Cbarles, the responsibility and the sensitivity of David."
From "Sequel to Wickersbam Mills," see page 160, tbis issue.