MGT 362 Week 5 Evidence-Based Analytics and Decision-Making Case Study

1. Here is one structured methodology for scenario planning, for your organization or for one with which you are familiar:

"Brainstorm” the range of environmental factors that have the potential to impact on the performance of your organization. In the spirit of brainstorming, accept all suggestions at this point, and suspend judgment as to the significance of any suggested factor.

Ask individuals to identify which factors from this list they believe to be the “key drivers” of the organization’s performance over a specified period—say, five years.

Aggregating these individual responses, identify the five most commonly cited key drivers; these could be, for example, exchange rates, new technologies, entry by new competitors, mergers, competition for key staff, costs or shortages of raw materials.

Using these critical drivers as the core elements, construct three future scenarios for the organization: the most likely, an optimistic scenario, and a pessimistic one. The “most likely” scenario is built on the basis of the “best guess” as to what will happen to each of the five key drivers over the specified time frame. Note that “best guess” does not imply a casual approach; best guess can be based on sophisticated market intelligence and forecasting. The “optimistic” and “pessimistic” scenarios focus attention on how the organization might respond to each of those outcomes. The construction of the scenarios requires skill, and it is not uncommon for organizations to employ external consultants who are experienced in scenario development. Scenarios need to be compelling and plausible narratives, even if they are unlikely to happen. This is necessary if they are to form the basis of discussion concerning the organization’s response to those three possible futures.

Finally, outline the different organizational change agendas that will be required to deal with each of those three possible futures
 

2. Changed Diagnostics

Six-box model: Simplify the complexity, focus on key problems - Be reminded of the systemic implications of actions in one area 7-S model: Recognize interconnectedness - Pay attention to the “soft” factors as well as structure and strategy

7 Star model: Recognize interconnectedness and “knock on” effects - Align your strategy, structure, people, processes, and rewards

Four-frame model: See the organization through different lenses at the same time - Generate deeper understanding to develop creative solutions

Gap analysis: Develop a change agenda that addresses future conditions - Generate understanding and consensus around the agenda

PESTLE framework: Understand the impact of multiple environmental pressures - Exploit future opportunities and deal with risks and threats

Scenario planning: Encourage creative thinking and acceptance of uncertainty - Prioritize, plan, and implement future-oriented changes

Elements of strategy: Identify changes necessary to pursue a given strategy - Develop an integrated package of self-reinforcing changes

Strategic inventory: Clarify and validate strategic assumptions - Decide what changes are necessary to drive strategy

Cultural web: Map and understand the components of the organization culture - Challenge the taken for granted and identify barriers to change

Receptive context: Determine how receptive the organization is to change - Decide action to increase receptiveness if necessary

Absorptive capacity: Assess the organization’s ability to assimilate and apply new ideas - Increase absorptive capacity with appropriate actions

Innovative organization: Assess if the organization stifles or stimulates innovation - Develop or strengthen innovative organization characteristics

Force-field analysis: Assess the driving and restraining forces for a given change - Manage the balance of forces to encourage the change -

Readiness for change analysis: Assess organizational and individual readiness for a given change - Identify the “groundwork” needed before the change goes ahead

Individual readiness: Assess individual readiness for a given change - Take appropriate steps to increase individual readiness

Stakeholder analysis: Identify how those affected could influence the change process - Manage stakeholders given their power and their interest

Built-to-change model: Ensure that change happens more quickly and smoothly - Design an organization in which continuous change is routine

3. Change Metrics Post Chapter 11

When Gordon Bethune became chief executive of Continental Airlines in 1994, it had been losing money for most of the previous decade, had a debt-to-equity ratio of 50 to 1, and had served some time in Chapter 11 of the federal bankruptcy code. During this period, Continental had emphasized competing on the basis of cheaper fares than its major competitors. However, although it achieved the lowest cost per available seat mile (of the major airlines), it also had the lowest revenue per available seat mile and a loss overall.

Bethune reflects on this situation: firmly believe that what you measure is what you get. This is an example of a company that said that it couldn’t compete with the big boys366unless it was able to have cheaper fares. That set the culture and mind-set. So, we had a culture that said, “Cost is everything.” That’s the Holy Grail. We even had pilots turning down the air-conditioning and slowing down airplanes to save the cost of fuel. They made passengers hot, mad and late. That’s a dysfunctional measure, a measure some accountant dreamed up who does not understand our business.

Bethune responded by investigating what factors most influenced passengers’ level of satisfaction with airlines. This revealed that on-time performance was the most significant factor. Unfortunately, at the time of Bethune’s arrival, Continental ranked 10th of the 10 largest U.S. carriers on this criterion. Nonetheless, Bethune changed the core metric used inside Continental to on-time performance:

We use that measure for two reasons. One because it is the single most vital sign of a functioning airline, and two, it’s ranked by our Government and we can’t screw the metrics.

To reinforce the centrality of this factor, a new system of rewards was established in which bonuses were paid to all staff each month that Continental was ranked in the top 5 of the 10 largest U.S. carriers for on-time performance. The cost of the bonus payments was more than covered by the reduction in the amount—that had risen to $6 million per month—that Continental had been paying to put passengers on other airlines, put them up in hotels, bus them across town, and so forth.

The next month, March 1995, we wound up in first place. We had never been in first place in 60 years. I mean, Continental, the worst company in America for the last 20 years, is the first place in “on time” which is a metric everyone kind of understands.

By 1996 (and again in 1997), Continental had won the J. D. Power & Associates award for customer satisfaction as the best airline for flights of 500 miles or more and was in the top three in terms of fewest customer complaints and lost baggage. From 1995 to 1998, Continental’s market capitalization rose from $230 million to $3 billion.

Source: Copyright © 1998 by Joel Kurtzman. Used with permission of the author.

4. Federal Express 

Federal Express (FedEx) introduced a new aircraft routing system with the intention of increasing the productivity of its pilots. More powerful computers and developments in scheduling algorithms made this seem feasible, the estimated savings in the hundreds of millions of dollars made it attractive, and the pilots had a record of supporting measures intended to improve competitive efficiencies.

However, things didn’t work out as planned. The new system produced flight plans that required pilots to cross the time zones of two hemispheres, undertake back-to-back trans-Pacific and trans-Atlantic flights, and spend hours travelling by land to change aircraft. Efforts by FedEx to improve the working of the new system failed to produce any improvement, but the company persisted with the new system. In response, the pilots’ union, despite having a reputation for compliance with management requirements, threatened a work stoppage if the system was not abandoned. Then, having taken this stance, their demands extended to a substantial wage increase, fewer flying hours, and improved retirement benefits.

Faced with the prospect of a strike by the pilots—which would have been the first pilot strike in the company’s history—FedEx management relented, and the new scheduling system was abandoned (from Pascale et al., 2000).

5. Sustainable Organizations

Jeffrey Pfeffer (2010) argues that to build sustainable organizations, we need to treat human sustainability as seriously as we do Environmental and ecological concerns. Organization policies and management practices influence the human and social environment and affect employee well-being in various ways: provision of health insurance, effects of layoffs, working hours and work-life balance, job design, and stress, income inequalities, organization culture, and emotional climate:

Companies that do not provide health insurance, lay people off, pay inadequate wages, and have work arrangements that stress and overwork their employees also impose externalities that others pay for even as they save on their own costs. (p. 42)

However, “green management,” which is concerned with environmental awareness, energy efficiency and carbon emissions have not been matched by a parallel focus on employee welfare, “even though that might be an interesting and informative indicator of what companies are doing about the sustainability of their people.” (p. 36). Actions affecting the physical environment are more visible:

You can see the icebergs melting, polar bears stranded, forests cut down, and mountaintops reshaped by mining, and experience firsthand the dirty air and water that can come from company economic activities that impose externalities. Reduced life expectancy and poorer physical and mental health status are more hidden from view. Even the occasional and well-publicized act of employee or ex-employee violence has multiple causes and is often seen as aberrant behavior outside of the control and responsibility of the employer. (p. 41)

Pfeffer proposes a research agenda to explore the implications of “human sustainability” policies on both employee welfare and organizational effectiveness. What steps is your organization taking to address human and social sustainability? What further action would be desirable, and why?

The old adage “nothing is constant but change” implies that organizations are always in a state of flux and business leaders cannot necessarily keep pace with the rate of change. Thus, which of the following statements do you consider the most accurate.

Multiple Choice

• This observation indicates that business leaders’ ability to make effective decisions is limited by an uncertain future.
• The use of evidence-based analytical tools is necessary to assess current situations and improve the quality of strategic decision making.
• Considering the accelerated rate of change in today’s business climate, a permanent title of change manager should be adopted in organizations to scan the environment.
• None of the above.

Refer to Highlight “Change Metrics”. Which of the following statements best describes why the business leaders altered their approach to the organizational crisis.

Multiple Choice

• Upon assessment of the competitive environment using evidence-based analytics, Continental’s leaders recognized that the organization’s emphasis was misplaced, and changed its strategic objectives.
• The bankruptcy court appointed independent overseers to force change.
• Continental leadership was attempting to raise stock prices in anticipation of a buyout.
• Union leadership was ready to call for a national walkout during the Chapter 11 hearings.

Upon review of the effectiveness of a strategic business decision using evidence-based analytics, business leaders may reverse course. Refer to Highlight, “Unanticipated Consequences at FedEx”. What factor(s) led to reversal of the new scheduling system?

Multiple Choice

• Restrictions on international air space were not accounted for in the decision making.
• The cost of upgrading the technology infrastructure was cost prohibitive.
• The new system contained assumptions that did not consider critical factors such as changes in time zones, travel time across hemispheres, and pilot flying hours.
• There was an inadequate number of aircraft to accommodate the new schedule.

Sustainability of change is associated with:

Check All That Apply

• New working practicesNew working practices
• Reductions in time to marketReductions in time to market
• Adapting to circumstances to gain increasing benefits for organizational initiatives

Redesigning roles, staff selection, and redesign of reward systems is linked to

Multiple Choice

• Changing societal requisites and regulatory policies
• Attracting employees
• “human sustainability” policies to address human and social sustainability
• None of the above

“Walking the Talk” is a(n)

Multiple Choice

• Euphemism
• Theoretical term for employee / manager communication
• Phrase that refers to a leader who encourages volunteer acts of initiatives, celebrates “smaller wins” and “ions” in progress
• Outdated term for leadership in today’s cyber world

When using evidence-based analytics in decision making, measurement is an essential tool in gauging progress. However, the leader needs to assess data based on the following consideration(s).

Check All That Apply

• To what extent is the measurement an accurate representation of the success of the change initiative?To what extent is the measurement an accurate representation of the success of the change initiative?
• What is the relationship between the time of the measurement being reported and the timeframe over which the benefits of the change is expected to be delivered?What is the relationship between the time of the measurement being reported and the timeframe over which the benefits of the change is expected to be delivered?
• What are the components of the measurement being monitored e.g. internal and/or external environmental factors and to what extent are they relevant to the organizational change?

Analytical tools and decision-making framework models are essential in the business leader toolbox to move an organization forward in refreshing the vision and associated strategies to achieve that vision. In order to sustain the change initiative, what are some actions necessary to prevent initiative decay?

Check All That Apply

• Ensure changes are sustainable, and are handed over to the operational environment of the organization.Ensure changes are sustainable, and are handed over to the operational environment of the organization.
• Develop capacity and capability for continuous improvement.Develop capacity and capability for continuous improvement.
•  

In times of change, strong leadership is essential and cannot be overstated. While the use of metrics may reinforce presentation of a persuasive argument for change to stakeholders, leaders need to project certain qualities and values, which include, but not limited to the following.

Check All That Apply

• Leaders should be “role models” of the desired changes, focusing on organizational culture and developing a climate for continuous improvement.Leaders should be “role models” of the desired changes, focusing on organizational culture and developing a climate for continuous improvement.
• Leaders must possess the qualities of integrity and credibility in order to communicate change and enlist the support for change among employees effectively.Leaders must possess the qualities of integrity and credibility in order to communicate change and enlist the support for change among employees effectively.
• Leaders should empower change teams to take risks, communicate decision making authority clearly, and remove barriers to their progress accordingly.

As noted earlier, today’s business leaders are equipped with a “toolbox” to improve strategic decision-making involving change. However, not all initiatives should be sustained, which was referenced in the FedEx case. In distinguishing between “blameworthy” and “praiseworthy” change initiatives, what guidelines are relevant in determining the difference?

Check All That Apply

• "Blameworthy” failures include deliberate or inadvertent deviations from the prescribed practice."Blameworthy” failures include deliberate or inadvertent deviations from the prescribed practice.
• Experimental approaches designed to improve performance are considered “praiseworthy”, because managers can learn from the failure.Experimental approaches designed to improve performance are considered “praiseworthy”, because managers can learn from the failure.
• There are no failures that are considered acceptable, and differences don’t matter.

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