Business Decision Making with Harrison's Six-Step Process

Decision making can be a complicated process, especially in a business setting. Countless figures, projections, ideas, and views can complicate matters, even before a choice is made. And successfully implementing a decision can be just as much a challenge. As a result, many individuals find using a structured process for decision making takes away much of the chaos and uncertainty. One such structure that business owners, managers, and others in charge of implementing change might find useful is E. Frank Harrison's six-step process of decision making.

Overview of Harrison's Six-Step Process

Let us begin with an overview of E. Frank Harrison's six steps of decision making. Each step depends upon the completion of the rest of the steps and is driven by information gleaned from the other steps. Consequently, if managers truly want to make a competent decision for their organization, they must ensure they put ample time and effort into every single one of these steps, finishing each step, as well as the entire process itself (Beatty, 2002).

The foremost step in this process is to set objectives. Managers must ensure these objectives are clear and specific to prevent misunderstandings. Also, these objectives have to be measurable so the manager can keep track of the company's progress, as well as practical since there is no sense in setting objectives that are vertically impossible. Next, the manager searches for alternatives, seeking different solutions that might meet the objectives. Once some alternatives are identified, he/she can move on to compare and evaluate these options (Beatty, 2002; CTU Online, 2007). This third step allows the manager to then complete the next step: to apply "the act of choice" (CTU Online, 2007, Questions & Answers, Question #2). Basically, this means the manager uses the option evaluations to choose the better alternative. Next, in step five of this process, the manager then executes this option. Finally, the process is completed when the manager uses follow-up and control to make certain the company is making adequate progress and the objectives and/or chosen option do not need revision (Beatty, 2002; CTU Online, 2007).

Now that we have discussed Harrison's six steps of decision making, let us analyze how his model can be applied in real life. In a 2000 article that appeared in the journal Management Decision, Harrison and Monique A. Pelletier gave examples of how three American business leaders' decisions followed Harrison's process with varying degrees of success.

Example 1--Phillip Morris

The first of these real-life firms was Phillip Morris (PM), which had exceptional success using Harrison's model to direct a decision that significantly reshaped this company. In 1984, PM made the majority of its profits (92%) from tobacco products. Although this firm was thriving as America's leading cigarette manufacturer, PM managers were concerned about how risks, especially health problems now linked to cigarettes, might affect the company's future. Consequently, PM decided change was necessary (Harrison & Pelletier, 2000).

First, PM set out to create objectives that were clear, measurable, and practical. Ultimately, it chose to set a 10-year objective of lessening how much it relied on cigarettes to make a profit, as well as, simultaneously guarding itself from the growing risk caused by anti-smoking laws and lawsuits. Next, PM set out to search for its alternatives. Throughout this entire step, the company kept in mind that they had very little data or certainty about the outcome of their objective. Furthermore, PM was very concerned about the time and money it would take to make this change, while realizing there might be countless options out there. Thus, the firm tried to focus only on a handful of promising alternatives. After evaluating these alternatives, it narrowed them down to two options: general consumer goods and consumer packaged goods since these two alternatives best fit the nature of PM (Harrison & Pelletier, 2000).

Next, PM had to choose between these two options. After analyzing the two, it selected consumer packaged foods (Harrison & Pelletier, 2000). The company's rationale was food processing requires similar technology and managerial knowledge, but "is a low profile, low margin industry," offsetting the "high profile, high margin" nature of their current industry (Harrison & Pelletier, 2000, Phillip Morris's managerial decision-making process). Once PM settled on this option, the company wasted no time implementing it. Over the next several years, it spent nearly $23 billion to purchase a number of key firms in this industry (i.e., Kraft Foods). As a result, by the ten-year mark, less than 70% of PM's profits were from tobacco products. Although its objective was reached, PM continued to strive to reduce its dependence on cigarettes. As a result, it has continued to soften its image through increasing profits from processed foods. In the end, each time PM reassesses this choice, it is clear that this option still works for the corporation. Despite less and less dependence on tobacco products, PM continues to present itself as one of the most promising businesses in the United States and continues to lead many of the top American corporations in profits (Harrison & Pelletier, 2000).

Example 2--General Motors

General Motors (GM) was the second company analyzed by Harrison and Pelletier. This company, though, was not nearly as successful applying Harrison's decision-making model. GM was the perfect example of success in corporate America for nearly 40 years. In spite of this, this corporation's growth and profits began to suffer during the 1970s. It was clear by 1978 that serious changes had to be considered to jumpstart the company's success and thus restore GM to its original position in corporate America. As a result, the company's top managers set out to reinvent GM (Harrison & Pelletier, 2000).

Unfortunately, the lofty vision of GM's top managers seemed to distract them from the actual decision-making process. In a hasty attempt to save GM as a corporate leader, the managers ignored most of the important facets of managerial decision making, which are described in Harrison's model. To begin, GM failed to create an objective that was truly clear and attainable. The top managers decided they needed to reinvent GM to protect its position in corporate America, all without doing an assessment to see why growth and profits were waning and to measure how external factors might affect their efforts. To complicate matters, the managers did not put any limitations on the amount of money GM could utilize for this purpose. Next, the corporation continued to ignore proper decision making by taking little time and effort to search for the best alternatives to achieve its objective. Instead of asking others for suggestions, the top managers went with a single option that they automatically assumed would accomplish their objective (Harrison & Pelletier, 2000).

Consequently, GM chose the one and only idea the managers had presumed would fix the company's problems when the issues first became evident. Ultimately, the top managers fooled themselves into believing that they could successfully use $40 billion to reinvent the corporation just because they and the company had achieved success in the past. Little did they know that their past techniques would not work because of the new variables that affected GM. Because of their assumptions, the top managers implemented a complex plan that failed miserably in the end. For example, the corporation made a number of huge expenses, including creating and then manufacturing a new brand of car-Saturn-for between $7 and 8 billion, in addition to using incalculable billions over 14 years to improve its facilities and structure. Since GM completely failed to research its change before its implementation, the company never fixed the real issue that was causing its growth and profits to dwindle: its disorganized, inefficient management structure. Finally, what reinforced GM's decision-making failure was virtually no follow-up or control once the managers' choice was executed. As each of GM's departments wasted billions on an unfocused plan to "reinvent" the corporation, its efficiency and profits continued to gradually diminish. Ultimately, it become apparent to many people that GM did very little good, despite the vast amounts of money it spent to reinvent itself (Harrison & Pelletier, 2000).

Example 3--Walt Disney

Finally, let us take a brief look at Harrison and Pelletier's last example: the Walt Disney Company, which also had some difficulties implementing proper decision making with its 1995 purchase of Capital Cities/ABC. Disney has long had the reputation of being of cornerstone of American society and thus, has experienced much success over the years. However, in the 1990s, the company began having serious issues with its top management team, largely because of its CEO Michael Eisner. Disney's gain of Capital Cities/ABC was well thought out. However, the achievement of this change still has not been that successful. Consequently, we should seek to find where and why this acquisition was not nearly as profitable as originally anticipated (Harrison & Pelletier, 2000).

First, Disney had no problem setting a solid, achievable objective. The company desired to continue expanding as a leader in entertainment by acquiring its own television network to distribute its products (Harrison & Pelletier, 2000). Fundamentally, Disney wanted to use the benefits and profits from this expansion to help achieve and then sustain its "targeted 20 percent return on shareholders' equity" (Harrison & Pelletier, 2000, Walt Disney's managerial decision-making process). Moreover, this company did a fine job searching for alternatives, using concrete information to rule out those major television networks that were not available or did not fit what executives were looking for. And when the Walt Disney Company saw that Capital Cities/ABC might be the logical network to acquire, it did not stop there. Rather, it evaluated also the different ways it could gain the resources of this television network-alliance, merger, or direct purchase-to weigh the benefits of each options against their cost to find the better choice (Harrison & Pelletier, 2000).

After thoroughly evaluating the benefits vs. the costs of each way to acquire Capital Cities/ABC, Disney realized it would benefit most from complete ownership, despite the $19 billion price tag (Harrison & Pelletier, 2000). With this purchase "Disney jumped from a $12 billion entertainment company to a $19 billion vertically integrated entertainment company leading the industry in both content and distribution" (Harrison & Pelletier, 2000, Walt Disney's managerial decision-making process). As a result, this company has direct control over all three important aspects of bringing entertainment products to countless individuals: (1) how it is manufactured, (2) how it is distributed, and (3) how long it can be aired on the network. Thus, Disney should have gained countless benefits from this acquisition (Harrison & Pelletier, 2000).

Yet, Disney appears to be having some difficulty properly completing step 5 of Harrison's model: to implement the company's choice. Nearly four years after its acquisition of Capital Cities/ABC, not much more progress past the purchase of the network was made. Rather than carefully planning ways to successfully integrate the network into Disney, the company chose to allow both parts to continue operating as if they are still separate entities (except that CEO Eisner now oversees major decision for the network too). In their article, Harrison and Pelletier are clueless as to why Disney has chosen such a costly and inefficient method of running the two parts, suggesting that this company did not continue the decision making process once it decided to purchase Capital Cities/ABC. Consequently, because Disney failed to fully implement and then properly assess its choice, it has not reached its vast potential since this acquisition in 1995 (Harrison & Pelletier, 2000).

References:

Beatty, W. (2002). Chapter 9 - E-business decision support. Retrieved August 5, 2008, from University of West Florida, ISM3011 - E-Business System Fundamentals: http://www.uwf.edu/wbeatty/ism3011/chap9/chap9.html

CTU Online. (2007). Phase 4 course materials. Retrieved July 8, 2008, from Colorado Technical University Online, Virtual Campus, MGM260-0803A-10: Fundamentals of Management: https://campus.ctuonline.edu

Harrison, E. F, & Pelletier, M. A. (2000a). Essence of decision making. Management Decision, 38(7), 462-469. Retrieved August 8, 2008, from Colorado Technical University Online Library, Articles & Books, ABI Inform Global: https://ctuonline.edu

Harrison, E. F, & Pelletier, M. A. (2000b). Levels of strategic decision success. Management Decision, 38(2), 107-117. Retrieved August 8, 2008, from Colorado Technical University Online Library, Articles & Books, ABI Inform Global: https://ctuonline.edu