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larger companies, there is more of a need for formalisation for evaluating prospects
firstly to allow the relative ranking of opportunities and, secondly, because, as
Langley (1995 p64) noted:
“…the more strategic power is shared among people who cannot quite trust
each other, the more formal analysis may become important.”
The author stresses that this observation does not imply that formal analysis should
be perceived as purely political tool in such cases, but simply that it has a dual role
in decision-making in large organisations:
“When used for gathering information, [formal analysis] may help determine
and improve the substance of decisions directly, as most of the literature
indicates. But it can also help bind individuals’ decisions together to create
organisational decisions through communication, direction and control, and
symbolism. The second, political role should not be automatically despised.
On the contrary, when different organisation members do not necessarily have
the same goals or the same information sources, analysis helps to improve
decisions indirectly by ensuring that ideas are thoroughly debated and verified,
and that errors in proposals are detected before implementation.” (Langley,
Moreover, because of their size, such organisations are also more likely to have
individuals and departments using their own approaches.
involvement promotes consistency. More management To this end, some companies have also introduced a peer review system. It is well described by this respondent:
“The process we use for discussing risk is what we call peer review. This is a
shared learning exercise. We will take the people who work the prospect and
essentially self-audit. It’s not a process where management sits in judgement
because very often managers are generalists not spets, especially in the
UK. We get the people who work the prospect, and a group of their peers
from within the organisation. Recently we brought people from Australia and
Gulf of Mexico to consider some projects we were thinking of developing in
Angola. So, we actually spent a lot of money for that peer review process.
The people we brought in, we brought some technical experts for some
specific technologies and we brought some geoscientists who were working a
similar play in a different basin in the Gulf of Mexico – so they have a great
knowledge to bring to bear on the situation and subsequent decision-making.
Then we went through risking session.” (K) 148 Companies vary significantly in the extent to which their decision-makers rely on
the analysis in making their final decision. Whilst most companies require decision analysis to be undertaken for investments above their cost threshold, the
extent to which the final decision is influenced by the data, appears to be
contingent on the four interdependent relationships outlined above.
In companies where managers are convinced about decision analysis, the culture is
“numbers-driven”, the use of decision analysis is e...
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This document was uploaded on 03/30/2014.
- Summer '14
- The Land