Chapter 7: Data and Decision-Making
Chilean Mine Disaster: Real-World Leadership in Crisis
The San José Mine Collapse: In 2010, the San José copper and gold mine in Chile collapsed, trapping 32 miners and their shift leader, Luis Urzúa, at a depth of () below the Earth's surface for 69 days.
Key Decision-Making and Leadership Actions:
Shift leader Luis Urzúa kept the trapped men organized and hopeful throughout the 69-day ordeal.
Urzúa organized the miners into work shifts, maintained structured activity, studied mine diagrams, formulated potential escape plans, and actively raised morale.
Reflecting on the initial collapse, Urzúa noted: "The most difficult moment was when the air cleared and we saw the rock… I had thought maybe it was going to be a day or two days, but not when I saw the rock…"
Upon rescue shaft completion, Urzúa was the 33rd and final man brought safely to the surface on the 70th day.
Reflecting on the rescue, Urzúa stated: "The job was hard… They were days of great pain and sorrow."
Chilean President Sebastian Pinera remarked: "He was a shift boss who made us proud."
Management Relevance: While few managers face extreme life-or-death crises, decision-making and problem-solving are fundamental to every managerial role, often requiring actions under tough, high-pressure conditions.
Information, Technology, and Management Competencies
Three Must-Have Competencies:
Technological Competency: The ability to understand new technologies and to use them to their best advantage.
Information Competency: The ability to locate, gather, organize, and display information effectively.
Analytical Competency: The ability to evaluate and analyze information to make actual decisions and solve real problems.
Distinguishing Data, Information & Intelligence:
Data: Raw facts and observations.
Information: Data made useful and meaningful for decision-making.
Intelligence: Analyzing and interpreting raw information to gain simple insights and patterns for better decision-making.
Five Criteria of Useful Information:
Timely: Available when needed; meets established deadlines for decision-making and action.
High Quality: Accurate and reliable; can be used with total confidence.
Complete: Sufficient for the task at hand; as current and up-to-date as possible.
Relevant: Appropriate for the task at hand; free from extraneous or irrelevant material.
Understandable: Clear and easily understood by the user; free from unnecessary detail.
Management Information Systems (MIS):
MIS use modern technology to collect, organize, and distribute data to fulfill organizational information needs.
Prominent executive C-suite roles include the Chief Information Officer (CIO), Chief Knowledge Officer (CKO), Chief Technology Officer (CTO), Chief Digital Officer (CDO), and Chief Data Officer.
Information Flows in Organizations:
Internal Information Flows:
Downward Flow: Transmits goals, instructions, and performance feedback.
Horizontal Flow: Facilitates cross-functional coordination and lateral problem-solving.
Upward Flow: Conveys performance reports, suggestions for operational improvement, policy concerns, and personnel disputes.
Intelligence Information: Gathered from the external environment and external stakeholders, including customers, competitors, government agencies, creditors, suppliers, shareholders, and community members.
Public Information: Disseminated to stakeholders and the external environment through advertising, public relations, social media, and financial reporting for image-building, product promotion, and damage control.
Data Mining, Big Data, Analytics, and Business Intelligence
Core Definitions:
Data Mining: The process of analyzing data to produce useful information for decision-makers.
Big Data: High-volume data sets collected in massive quantities that require sophisticated mathematical and computing techniques to mine.
Analytics (Business / Management Analytics): The systematic gathering, evaluation, and analysis of data to make informed decisions.
Organizational Applications:
UPS: Invests over annually in technology. A single big data initiative processes data points through an algorithm containing over of code to optimize driver delivery routes, saving an estimated per year in reduced driving distances.
United Nations: Purchases social data from Twitter (alongside platforms like Facebook and LinkedIn) to mine for real-time insights into global social unrest.
The Five "Vs" of Big Data:
Volume: Data exists in super-large quantities. Google searches alone exceed .
Variety: Data comes from diverse sources, including social media, weather services (e.g., Environment Canada), news outlets, manufacturing statistics, and government data.
Veracity: The believability and trustworthiness of the data. Data must be validated for accuracy and representativeness, guarding against biased or fake reviews on platforms like TripAdvisor, Amazon, or Glassdoor.
Velocity: Data must reflect real-time, dynamic events rather than static historical snapshots.
Value: Data collection and processing must pass a cost-benefit test, delivering actionable solutions to critical problems or capturing attractive opportunities.
Sloan Management Review Study ("The New Intelligent Enterprise"):
Surveyed on business intelligence and data usage.
of executives reported being "overwhelmed" by data and struggling to make it actionable.
Outperforming organizations were better at managing and acting on data compared to lower-performing competitors.
Top performers were more likely to prioritize further improvements in analytics.
Analytics are most heavily deployed in finance, strategy, operations, and sales/marketing.
Primary obstacles to analytics adoption: lack of understanding, competing management priorities, and skill deficits.
Fastest-growing techniques: data visualization, simulation/scenario development, and embedding analytics into routine business processes.
McKinsey & Co. Survey (2018): Found peak demand for analytics skills; organizations with top revenue and earnings growth directly attribute their success to creating a data-driven culture.
Business Intelligence & Data Visualization:
Business Intelligence: Tapping or mining information systems to extract highly relevant data for strategic decision-making.
Amazon Competitive Intelligence: Amazon maintains a dedicated competitive intelligence team that buys products from rival retailers to audit competitor product quality, delivery speed, and customer service.
Executive Dashboards: Real-time visual tools displaying graphs, charts, and scorecards of key performance indicators (KPIs).
Quote by Ceradyne CFO: "If numbers are the language of business, then dashboards are the way we drive the business forward… take the daily temperature of a business."
Problem Solving Approaches and Managerial Decision Styles
Managerial Information Processing Roles:
Managers act as information nerve centres executing Planning, Organizing, Leading, and Controlling.
Information Roles: Seeking, receiving, and transferring information among internal and external stakeholders.
Interpersonal Roles: Utilizing information for ceremonial duties, motivation, and networking.
Decisional Roles: Applying information to entrepreneurship, resource allocation, disturbance handling, and negotiation.
Defining Problem Solving and Decisions:
Problem Solving: The process of identifying a discrepancy between an actual state of affairs and a desired state, followed by taking corrective action.
Decision: A choice made among alternative possible courses of action.
Performance Threat: A situation where actual performance is below expectations or moving in an unfavorable direction (e.g., rising turnover, absenteeism, project delays, customer complaints).
Performance Opportunity: A situation offering the potential to exceed expectations if proper proactive measures are taken.
Managerial Approaches to Problem Solving:
Problem Avoiders: Ignore information pointing to performance threats or opportunities; passively avoid making decisions or taking action.
Problem Solvers: Reactive; resolve problems only after they occur, successfully addressing performance threats but missing major performance opportunities.
Problem Seekers: Proactive; constantly process information to identify and solve problems before they materialize, taking preemptive action.
Systematic vs. Intuitive Thinking:
Systematic Thinking: An approach that addresses problems using a rational, step-by-step, analytical, slow, and methodical process, breaking complex issues into logical components.
Intuitive Thinking: An approach that addresses problems in a flexible, spontaneous, and imaginative manner, evaluating issues holistically using hunches, experience, and broad context.
Airline Boarding Study: Astrophysicist Jason Steffen proved that boarding passengers alternating rows back-to-front and window-middle-aisle is faster than traditional methods. However, airline executives systematically resist altering established boarding protocols.
Jeff Bezos (Amazon): Emphasizes that top management cannot always rely on pure systematic data analysis; they must frequently trust the honed instincts and judgment of experienced executives.
Multi-Dimensional Thinking & Strategic Opportunism:
Multi-Dimensional Thinking: The capacity to view multiple, interrelated problems simultaneously across both short- and long-term time horizons.
Strategic Opportunism: The ability to stay strictly focused on long-term objectives while maintaining flexibility to resolve short-term problems and opportunities in a timely manner (coined by Daniel Isenberg).
Cognitive Styles (Carl Jung Framework):
Air Transat Flight 236 Incident: On August 24, 2001, Captain Robert Piché and First Officer Dirk de Jager experienced complete fuel loss over the Atlantic Ocean. Piché glided the jet engine-free for 18 minutes over a distance of to execute an emergency landing in the Azores, saving all 306 passengers and setting a world record for the longest unpowered commercial jet flight.
Four Cognitive Style Profiles:
Sensation Thinkers (STs): Impersonal, realistic, focused on hard facts, clear goals, high certainty, and structured control.
Intuitive Thinkers (ITs): Idealistic, comfortable with abstraction and unstructured situations, theoretical, logical, and focused on big-picture concepts while avoiding detail.
Intuitive Feelers (IFs): Focused on broad global issues, insightful, comfortable with intangibles, prioritizing flexibility and human relationships while avoiding details.
Sensation Feelers (SFs): Emphasize empirical facts and human relations, highly realistic, open communicators, sensitive to interpersonal feelings and values.
Problem-Solving Environments and Types of Decisions
Structured vs. Unstructured Problems:
Structured Problems: Straightforward, familiar, and routine problems with clear information requirements.
Handled via Programmed Decisions: Applying standardized solutions or pre-established rules derived from past experience (e.g., standard HR policies for vacation requests, promotions, or pay increases).
Unstructured Problems: Ambiguous, novel situations characterized by severe information deficiencies.
Handled via Nonprogrammed Decisions: Creating unique, tailored solutions specifically designed for complex, unprecedented situations.
Crisis Problems:
An unexpected, high-impact problem that can quickly precipitate disaster if not handled immediately and properly.
Common Error: Managers frequently isolate themselves during a crisis, restricting communication to a small closed group and shutting off vital information channels.
Toyota Recall Disaster: Toyota recalled over vehicles for safety defects. CEO Akio Toyoda and executive leadership were heavily criticized for a corporate culture that initially denied, minimized, and concealed quality flaws.
Six Rules for Crisis Management:
Figure out what is going on.
Remember that speed matters.
Remember that slow counts, too.
Respect the danger of the unfamiliar.
Value the skeptic.
Be ready to "fight fire with fire."
Three Decision Environments:
Certain Environment: Offers full, complete factual information regarding all possible alternative courses of action and their exact outcomes. Low risk of failure; decision-maker simply chooses the optimal alternative.
Risk Environment: Information and facts are incomplete; decision-makers must assign probabilities to estimate the likelihood of various potential outcomes.
Domino's Pizza Example: Former CEO J. Patrick Doyle took a calculated risk by launching a public advertising campaign admitting customer reviews called the old pizza crust "like cardboard" and "devoid of flavour" to successfully roll out a revamped recipe.
General Motors Example: Former Vice Chairman Bob Lutz avoided taking a calculated risk on early hybrid vehicles, opting not to request board approval for a program projected to lose money, which allowed Toyota (Prius) to capture early mover market dominance.
Uncertain Environment: Facts are so scarce that decision-makers are completely unable to calculate or assign probabilities to outcomes. Highest risk of failure; requires heavy reliance on intuition, judgment, and informed guessing.
The Six Steps in the Decision-Making Process
Overview of Steps:
Identify and define the problem.
Generate and evaluate alternative courses of action.
Choose a preferred course of action.
Implement the decision.
Evaluate results.
Check ethical reasoning across all steps.
Step 1: Identify and Define the Problem:
Clarify specific goals and gather preliminary data.
Three Common Errors:
Defining the problem too broadly or narrowly (e.g., defining a challenge as "building a better mousetrap" instead of "getting rid of mice").
Focusing on symptoms instead of root causes (e.g., treating a drop in performance as the problem rather than identifying a lack of worker IT training).
Selecting the wrong problem to tackle at a specific point in time.
The Ajax Case Study: Ajax Company announced the closure of its Murphysboro plant on December 31 due to global competition. All 172 employees (tenures ranging from 6 months to 18 years) faced termination with severance equal to 1 week's pay per year of service. The core problem for management: How to minimize the severe economic impact on workers, families, and the local community.
Step 2: Generate and Evaluate Alternative Courses of Action:
Identify key stakeholders and gather extensive information to map out clear alternatives and anticipated consequences.
Avoid abandoning the search for alternatives prematurely due to impatience or time pressure.
Role of Self-Confidence: Consultant Ram Charan defines self-confidence as "emotional fortitude" enabling leaders to listen to their own voice, speak their minds, act decisively, and overcome insecurity.
Hurricane Repair Example: Team leader Jeff McCracken led 100 workers to repair a destroyed lake railroad bridge needed for hurricane relief. After consulting his team, he confidently chose to salvage old submerged tracks rather than order new ones, completing the job 24/7 in under a week with zero injuries.
Accounting for Unintended Consequences: Unanticipated side effects of decisions. For example, higher provincial minimum wage laws led a Tim Horton's franchisee in Niagara Falls to track customer service timing to curb labor costs, while Statistics Canada noted elevated layoffs for workers over 55 between 2009 and 2012 as firms attempted to manage wage expenses.
Cost-Benefit Analysis: Comparing the monetary or operational costs of an alternative directly against its expected benefits.
Ajax Case Alternatives: (1) Close on schedule; (2) Delay closing to find a buyer; (3) Sell the plant to employees/local investors; (4) Close plant and transfer staff; (5) Close plant, offer transfers, and assist remaining workers in finding local employment.
Step 3: Choose a Preferred Course of Action:
Classical Decision Model: Assumes complete information, absolute certainty, and pure rationality. The manager makes an Optimizing Decision that delivers the single best solution to a clearly defined problem.
Behavioural Decision Model: Acknowledges human cognitive limitations and Bounded Rationality (incomplete information, time limits, limited alternatives). Formulated by Herbert Simon, managers make a Satisficing Decision by choosing the first satisfactory alternative that comes to attention.
Ajax Case Decision: Executives chose to close the plant, offer transfers to company facilities in another province, and run regional employment programs to rehire workers locally.
Step 4: Implement the Decision:
Requires concrete action and managerial mobilization of resources.
Lack-of-Participation Error: The failure to involve individuals whose support is critical to implementing the decision.
Ajax Case Implementation: Ajax ran two weeks of regional print advertising promoting an "Ajax skill bank" of qualified, dedicated former employees.
Step 5: Evaluate Results:
Comparing actual performance outcomes against pre-established quantitative goals and benchmarks.
Ajax Case Evaluation: The industrial relations manager reported being "very pleased with the results" after two weeks of ads, though comprehensive evaluation requires tracking long-term worker re-employment and community economic stability.
Step 6: At All Steps—Check Ethical Reasoning:
Mount Everest Case Study: In 2006, 34-year-old climber David Sharp sat dying of oxygen deprivation in a snow cave below the summit. Approximately 40 climbers passed him without stopping their ascent. Sir Edmund Hillary criticized the climbers, stating: "Human life is far more important than just getting to the top of a mountain."
Cavanagh's Four Ethics Criteria:
Utility: Does the decision satisfy all stakeholders?
Rights: Does the decision respect the rights and duties of everyone involved?
Justice: Is the decision consistent with the principles of justice?
Caring: Is the decision consistent with responsibilities to care for others?
Three Ethical Spotlight Questions:
"How would I feel if my family found out about this decision?"
"How would I feel if this decision were published in the local newspaper or posted on the Internet?"
"What would the person I know who has the strongest character and best ethical judgement do in this situation?"
Rationalization Warnings: Guard against statements like "It's just part of the job," "We're fighting fire with fire," "Everyone is doing it," "I've got it coming," "It's legal," or "I'm doing it just for you."
Decision-Making Pitfalls, Heuristics, and Cognitive Traps
System 1 vs. System 2 Thinking (Daniel Kahneman):
System 1 Thinking: Automatic, effortless, fast, associative, and reliant on simplifying heuristics.
System 2 Thinking: Conscious, slow, deliberate, analytical, and evaluative.
Common Decision Heuristics and Biases:
Framing Error: Evaluating and resolving a problem purely within the context in which it is presented (positive vs. negative).
Medical Example: Presenting a procedure as having a survival rate generates approval, whereas presenting it as having a mortality rate generates refusal.
Business Example: A market share framed negatively asks "What are we doing wrong?", whereas framed positively asks "How can we do things better?"
Corporate Example: Yahoo! CEO Marissa Mayer framed telecommuting negatively as a drag on collaboration and innovation when banning remote work.
Availability Bias: Assessing a current situation using information that is readily available from short-term memory (e.g., refusing to invest in a new product line simply because of a recent vivid memory of a product launch failure).
Representativeness Bias: Assessing the likelihood of an event based on its similarity to a stereotyped set of past occurrences (e.g., hiring a candidate solely because they attended the same university as a previous successful employee).
Anchoring and Adjustment Bias: Decisions heavily influenced by arbitrary baseline starting points (e.g., determining an employee's annual raise by applying a small percentage increase to their prior salary rather than evaluating market rate).
Confirmation Error: Seeking out only data that confirms a decision already made while ignoring or discounting contradicting information.
Escalating Commitment (Sunk-Cost Fallacy): Continuing or increasing investment of resources in a failing course of action due to personal ego and momentum.
Tips to Avoid Escalating Commitment:
Set firm, advance limits on commitment and stick to them.
Make independent decisions without blindly following others.
Carefully assess why a course of action is being continued.
Explicitly account for ongoing financial and resource costs.
Workplace Applications: Performance Reviews and Organizational Feedback
Flaws in Traditional Performance Reviews:
Research shows of workers are surprised by their formal ratings, are disappointed, and nearly show a direct decline in job engagement following annual performance reviews.
Problems with Forced Categorization ("A", "B", "C" Grading):
Microsoft Example: Director of Global Performance Programs Lisa Dodge noted that stacked ranking caused severe morale issues: "We hired all-their-lives A students, and they couldn't believe that they were getting a C."
Modern Shift Toward Continuous Coaching:
Firms like Cigna and Microsoft eliminated forced numerical rankings in favor of frequent, direct performance chats focused on ongoing employee development.
Creativity, Innovation, and Integrative Thinking
Defining Types of Creativity:
Elevator Example: Elevator riders in a high-rise complained of slow speeds. Engineers recommended a high-cost mechanical upgrade. A creative consultant advised installing floor-to-ceiling mirrors by the elevator doors, successfully eliminating complaints by distracting waiting passengers.
Big-C Creativity: Breakthrough innovations by exceptional individuals (e.g., Steve Jobs creating the iPad/iPhone; Mark Zuckerberg creating Facebook).
Little-C Creativity: Everyday problem solving and novel adaptations by average individuals in routine contexts.
Faizan Ahmed Case Study: As a City of Mississauga employee and U of T MSc in Sustainability Management student, Ahmed created the "Green Leaders" organic waste management program, developed a trail-monitoring Cycling Ambassador program, and secured community garden grants.
Design Thinking (David Kelley - IDEO):
Experiencing: Defining problems through direct field observation and research.
Ideation: Visualizing and collaborative brainstorming of potential solutions.
Prototyping: Building, testing, and modifying physical models or frameworks iteratively.
Personal and Situational Creativity Drivers:
Personal Creativity Drivers: Task Expertise, Task Motivation, and Personal Creativity Skills (associative capability, questioning, observing, networking, experimenting; utilizing convergent, lateral, and divergent thinking).
Situational Creativity Drivers: Team Creativity Skills, Management Support, and Organizational Culture.
Fisher-Price ("The Cave"): Mattel established a dedicated, relaxed brainstorming space called "The Cave" featuring beanbag chairs and soft lighting, optimized for small teams of 15 to 20 people.
RCA LCD Discovery Failure: In 1964, George H. Heilmeier discovered the liquid-crystal display (LCD) at RCA Labs. RCA management shelved the discovery due to heavy investments in traditional color TV tubes. Foreign competitors later dominated the LCD industry; Heilmeier was awarded the Kyoto Prize.
Integrative Thinking:
A methodology created to reconcile the tension between two opposing ideas to craft creative solutions superior to simple compromise.
Based on Metacognition (understanding mental model limits), Empathy (illuminating gaps in thinking), and Creativity.
Four Stages of Integrative Thinking:
Articulate the Models: Define two extreme, opposing solutions to create a clear two-sided dilemma.
Examine the Models: Deeply analyze how each model functions, identifying underlying assumptions, similarities, and differences.
Explore the Possibilities: Synthesize the strongest elements of both models into a novel hybrid model.
Assess the Prototype Solutions: Test prototype ideas with stakeholders using storyboards, sketches, or physical models before final implementation.
Practical Application Exercises, Self-Assessments, and Case Studies
Self-Assessment 7: Cognitive Style:
Based on Carl Jung's psychological framework.
Measures preferences across Information Gathering (Sensing vs. Intuition) and Information Evaluation (Thinking vs. Feeling).
Class Exercise: Lost at Sea:
Scenario: A raft stranded south-southwest of land following a boat fire.
Items to rank (1 to 15): Sextant, Shaving mirror, water, Mosquito netting, 1 survival meal, Maps of Pacific Ocean, Floatable seat cushion, oil-gas mix, Small transistor radio, Shark repellent, black plastic, 20-proof rum, nylon rope, 24 chocolate bars, Fishing kit.
Critical Incident: Asking for a Raise:
Negotiation insight: Asking for a precise salary figure (e.g., ) is significantly more effective than a rounded target (e.g., ), as it demonstrates thorough market research and factual preparation.
Team Activity: Crisis Management Realities:
Requires evaluating three business crises using a balance-sheet approach, scoring management responses from 1 (low) to 5 (high), and compiling a list of "Done Rights" and "Done Wrongs."
Case Study 7.1: Amazon.com | One E-Store to Rule Them All.