• ISBN13: 9781578515578
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The Harvard Business Review Paperback Series is designed to bring today’s managers and professionals the fundamental information they need to stay competitive in a fast-moving world. From the preeminent thinkers whose work has defined an entire field to the rising stars who will redefine the way we think about business, here are the leading minds and landmark ideas that have established the Harvard Business Review as required reading for ambitious businesspeople in organizations around the globe. Harvard Business Review on Decision Making will help people at all levels understand the fundamental theories and practices of effective decision making so that they can make better decisions in their personal and professional lives.

Harvard Business Review on Decision Making

“It’s just another tool. It is not the great cure for management inefficiency… MBO works if you know the objectives, 90% of the time you don’t.”
Peter Drucker

Management by Objectives (MBO) is an elaborate, systematic, ongoing program that helps employees to understand their objectives at organizational and personal level.

MBO principles:

1. Cascading of organizational goals and objectives
2. Specific objectives for each employee
3. Shared decision-making process
4. A predefined time framework
5. Performance evaluation and feedback

Advantages of MBO:

1. Motivation -employees’ involvement in the goal setting process increases job satisfaction and commitment
2. Better communication – the evaluation sessions and feedback are supposed to do that
3. Clarity of goals – SMART
   • Specific
   • Measurable
   • Achievable
   • Realistic
   • Time-related

From my experience with MBO, I can tell you that it did not work for me. Mostly because nowadays the manager that set the objectives often already works in a different company when time for the employee’s evaluation comes.

Job design is in itself a convention. Starting with the Scientific Management of Frederick W. Taylor, the work of the employees (managers not included) was simplified to the smallest unit possible, mainly repetitive tasks.

The concern for motivation in the work environment has change the purpose of job design. Job satisfaction, performance, customer satisfaction, and quality of working life are the goals that must be accomplished through job design and the associated techniques: job enlargement, job enrichment, job rotation.

Job scope is defined as a combination of the number of different activities performed by an employee and the level of control that an employee has upon how to perform those activities.

A manager has a high scope job because he performs a large number of activities (see Management – art of controlling processes and outcomes) and has a broader or narrower decision-making power.

There are companies that have smart people in charge of implementing the business strategy. They look also at the long-term goals of company. It is the same with human resources specialists that understand what organizational development is about.

Individual performance is important, but a company is not formed from one individual. A company is a team and its strategic needs can be supported by group-oriented pay plans.

Profit sharing is one of the most used incentive systems. Money-wise it might not make a difference in a big company because the impact on profit from one individual is small. But in a small company it matters and in time, when most small companies will become partnerships, and the notion of employee will be history, this will represents the only form of compensation.

Employee Stock Ownership Plans (ESOPs) and Employee Stock Purchase Plans (ESPPs)
An ESOP allows employees to own stock in the company without having to purchase shares. An ESPP allows employees to use after-tax wages to purchase stock in their companies, usually at a discounted price.
Implementation of such incentive plans is not easy. There are taxes implications, private companies are required by law to purchase ESOP share from the employee that leaves the company, and so on.
But as motivational factor, ownership remains in the top of the list. For start-ups, especially in this period of economical crisis, it can also be used as partial replacement for money that constitutes the salary.

Gainsharing incentive schemes have usually as goals: improved productivity, quality performance, customer service, cost reductions, etc. It differs from profit sharing by the fact that is not related to the company’s performance.
The employees participate in the decision-making process and the gains obtained when reaching the goals are shared between the company and the employees. Gainsharing requires a team oriented management style and can lead improvements in performance as well as increased commitment to organizational goals.
Some of the most known schemes are: the Scanlon Plan, the Rucker plan, and Improshare.

Globalization is a buzz word. Isolationism is another. In any case there are some cross-cultural values that can be applied to nations which where defined by Geert Hofstede. These values influence the organizational behavior and can be applied to the work environment of a company as well.

Individualism versus collectivism - refers to the degree that people favor their individual against group values.

Power distance – the extent to which people accept the inequality in the distribution of power in a society. The low power distance environment allows participation in the decision making process and most important direct access to your superior. In a high power distance environment is normal to manifest positive emotions to your superiors and negative emotions to your subordinates and everybody accepts this as normal. The last one  is definitely not my favorite.

Uncertainty avoidance – deals degree to which people tolerate or feel threatened ambiguity and uncertainty. Strong uncertainty avoidance means that change is dangerous. Weak uncertainty avoidance environments do not see hard work as virtue. As an individual choice, the truth should be somewhere in between these two.

Masculinity vs. Feminity – the distribution of roles between genders can determine the orientation of a society in the direction of assertiveness and materialism or to focus on human interaction and concern for others.

Long versus short-term orientation – Long-term orientation focuses on the future, on perseverance and persistence. Short-term orientation focuses on the past and present, on respect for tradition and fulfilling social obligations