Case study - Unwise decisions and unanticipated consequences

In this case study, the authors examine the unwise business decisions of a once highly profitable ordnance manufacturer in tight of psychological rese arch about how people make decisions and process information. Their analysi s provides insight into what could easily happen to many executives manufac turing jobs, the firm had little involvement with the middle-class suburban community that gradually surrounded its facilities. It deliberately chose to remain as inconspicuous as possible, an arguably valid approach given th e dangers of designing and producing explosives. Managers did not question the policy of ignoring the community and were totally unprepared when contr oversy arose. By the 1970s, nearby homeowners began to complain to the firm and to govern ment agencies about air quality and noise pollution. Finally,: disgruntled employees - lacking any formal grievance procedure and fearing for their ow n health - reported the firm's alleged misuse of recycled waste-water and i ts illegal transportation and dumping of toxic: waste. Eventually an intera gency task force and the county sheriff's department searched extensively t hroughout the company's facilities. The firm violated the law by illegally storing barrels of hazardous waste material. To contain the damage caused by,the investigation's disruption of business and by negative publicity, the firm took several actions, including hiring outside consultants. Some actions were:successful; most were not. Although the firm eventually incurred heavy expenditures in-corrective measures and fines, officials also held three managers personally liable even though the y had inherited the problems from their predecessors. In a 1996 SMR article, Messick and Bazerman identified three types of inter related theories that executives apply when making decisions - theories abo ut the world,- theories about other people, and theories about ourselves. U sing these concepts' as a theoretical framework to analyze six decisions ma de by firm managers, Magasin and Gehlen conclude that most negative outcome s illustrated in this case study were avoidable. Noting that particular psy chological tendencies are generally associated with weakness in thinking an d poor decision making,they offer fourteen ti ps far actively managing comp anies that adeptly sidestep "the moral minefields" of today's business worl d.