Unformatted text preview: xury” of “satisficing” and sub-optimal decisionmaking. Whereas in poorly performing organisations the lack of basic funds exerts
pressure on management during the making of crucial decisions, as a wrong decision
may drive the firm out of business. Consequently, since management has less scope
for error, they may have strong incentives to follow rational/comprehensive processes
(Bourgeois and Eisenhardt, 1988; Cyert and March, 1963). This suggests that managers of poorly performing firms may hire consultants, seek advice from various
sources and conduct extensive financial analyses (Papadakis, 1998). Such observations led Fredrickson (1985) to conclude that the investment decision-making
process of poor performers is more comprehensive than that of excellent performers.
The above arguments, if correct, would indicate that good organisational performance
is negatively related to comprehensiveness/rationality in the investment decisionmaking process (Papadakis, 1998).
Clearly, then, much of the research to date appears to have produced contradictory
results and no consensus seems to have yet emerged. Contrary to the arguments of
Fredrickson (1985) and others, it can be argued that good performance enables
companies to rationalise/modernise their internal structure and systems and thus be in
a position to apply more rational/comprehensive and formalised investment decisionmaking processes for two reasons. Firstly, as Dean and Sharfman (1996) have previously argued, effective decisions must be based on organisational goal. Rational
decisions usually require extensive data collection and analysis efforts and it is
difficult to do this unless the decision is closely aligned to the organisations’
objectives (Langley, 1989). Hitt and Tyler (1991, p329) described rational, formalised decision-making as a series of analytical processes in which a set of
objective criteria is used to evaluate strategic alternatives. This orientation toward
organisational goals makes it more likely that procedurally rational decisions will be
effective (Dean and Sharfman, 1996). Secondly, formalised, rational decisions are
also likely to involve relatively complete information and knowledge of constraints.
Executives who collect extensive information before making decisions will have more 34 accurate perceptions of environmental conditions, which has been shown to relate
positively to firm performance (Bourgeois, 1985).
A second stream of research deals with the impact of consensus on performance.
Despite the profound importance given to the performance-consensus relationship in
the normative literature (Papadakis, 1998), there is still much disagreement in the
empirical literature which indicates that more testing is required (Ekenberg, 2000;
Priem, 1990; Dess, 1987; Dess and Origer, 1987). Consensus is the agreement of all
parties to a group decision (Papadakis, 1998). Current thinking attributes tremendous
significance to the homogenisation of perceptions and to goal consensus, which is
assumed to be fundamental to good eco...
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This document was uploaded on 03/30/2014.
- Summer '14
- The Land