The Effective Decision

The Effective Decision

The Effective Decision - The Function of the Chief Executive

At 60, John Neyland, the company president, decided he would retire before the mandatory retirement age of 65. He did not reveal his decision to anyone until he reached 62, and at this time he confided to his best friend and the most powerful board member that he would retire imminently. Mr. Neyland proposed that Bill Strong, Vice President, Administration, a very able and experienced executive, succeed him as president. Mr. Neyland's friend vehemently opposed Bill Strong's candidacy, and forcefully argued that Margaret Wetherall, vice president of manufacturing, was the best qualified to be the new president.

This case presents a situation where the decision-making process has completely failed. The selection of the president is one of the most important decisions a board of directors makes. Not only does a president have an enormous impact on the fortunes of a company, but the very process by which the executive is picked influences the way employees, investors, and other constituencies view the company and its leadership. One of the board's most critical roles is to ensure the presence of an effective management development program for the whole enterprise. While the CEO (in most firms, the president is also the CEO), is the person managing the program, the board needs to play an active oversight role to ensure that the program is in place and is working effectively. Considering that Mr. Neyland was approaching the mandatory retirement age, and that a significant difference in opinion between Mr. Neyland and the most powerful board member as to who should be the new president, it is clear that the board (the president is almost always a board member) was extremely derelict in its duties. The decision-making process was greatly undermined, with huge ramifications for the organization.

In the Japanese way of decision-making, the single most important element in solving such problems is defining the question. Because the Japanese system is very time consuming and involves many participants from various functions within the organization, the Japanese system is suited to big decisions. A change is president is one of the most crucial events in the life of a company, and it is an event in which the board of directors plays a central role. Because the ne...

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...ns by consensus, and they have developed a systematic decision-making process. The critical first step in the Japanese decision-making system is to define the problem and then proceed through well-defined stages to arrive at an effective decision. For example, the Japanese flush out various opinions without any discussion of the answer. The Japanese focus on exploring and debating the merits of alternatives, rather than on the optimal solution. The process includes all parties that are affected by the decision. When a consensus is reached, the decision can be easily implemented because people implementing the decision were intimately involved in the decision-making process.

The disagreement between Mr. Neyland and the board member regarding who should succeed Mr. Neyland has sabotaged the effective decision-making process. It is highly unlikely that the next president will be the "best" candidate, and politics will compromise the integrity of the decision process. Naturally, there are enormous implications for the economic health of the organization. American and European managers often make poor decisions, and the consequences can be devastating for their organizations.