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Introduction

 

            Organisational disasters are often viewed in two general ways. One perspective is that the organisational disaster resulted from the implementation of decisions with rational underpinnings but interventions in the implementation process resulted to problems[1]. This perspective assumes that there is no innate problem in the organisation or the decision-making process so that the decision made have sound bases. Nevertheless, certain factors such as unanticipated situations or elements resulted to various problems in implementation. The other perspective is that the organisational disaster emanated from the application of decisions that are innately flawed because of problems in the organisation itself[2]. As such, this perspective assumes that the decision itself is problematic because the decision-making process is also complicated and faulty because of issues surrounding the organisational structure and knowledge management.

            The applicable perspective depends upon organisational context with some situations resulting to organisational disasters because of problems in organisational processes but there could also be disasters brought about by highly unanticipated intervening factors such as economic downturns that do not necessarily or greatly influenced organisational disasters. Since organisational disasters carry the characteristic of having dire consequences, the existence of organisational problems expressed in the decision-making process and decisions is likely to find explanation in the first instance. Regardless of the applicable perspective, it becomes clear that decision-making constitutes both a cause and consequence of organisational disasters.

Decision-Making as the Cause of Organisational Disasters

            Theorising on the cause or causes of organisational disasters resulted to the proposition of a number of explanations for these catastrophes. Turner (1976)[3] explained that organisational disasters are brought about by faulty premises, ineffective or lack of communications, and irrational optimism. Gephart (1984)[4] provided that organisational disasters could be attributed to the intervention of political factors that influence cognition and perceptions. Perrow (1984)[5] explained organisational disasters as occurring because of the complexity of organisational processes resulting to the inability of leaders to predict the occurrence of disasters and anticipate the imminence of disasters. By developing a crisis model, Pauchant and Mitroff (1992)[6] explained that organisational disasters occur because of faulty management within the different levels of organisational operations such as firm structure, business strategy, organisational culture, and individual management. Inability to manage effectively or all of these levels would result to organisational disaster of a degree depending upon the context of the business firm. Wieck (1993)[7] agreed to this explanation of organisational disasters but focused more on the individual-based sense making, specifically the lack of meaning as well as the development of different meanings, as the root cause of disasters encountered by organisations. Differentiated meaning hinders the making of sound decision. Finally, Vaughan (1996)[8] discussed organisational disasters as occurring because of the social structure of the organisation so that the policies and rules of the organisation, when unable to match the needs of the business firm lead to flaws not only when these are violated but also even when these are followed. Although these explanations may point to different causes of organisational disasters, there seems to be a common factor for all of these causes, which is flawed decision-making.

            Faulty premises, failure or lack of communications, and irrational optimism all find expression in decision-making. As such, faulty premises are result to unfounded decisions that would likely lead to disasters depending upon the extent of the implication of the decision made. Communication problems also result to flawed decisions, with insufficient knowledge as bases[9]. Irrational optimism caused by limited or inaccurate information and understanding of the situations faced by the organisation results to decisions that could lead to more difficulties than benefits to the organisation. Political factors such as differing interests could also adversely affect decision-making when only one or a single political interest influences the decision made with the results unable to justify the decision. Complexities of the organisation such as inconsistencies in the policies and the activities of the organisation also translate to decision-making based on inconsistent policies and lack of effective assessment measures that prevents organisations from determining the imminent and possible consequences of the decisions made. Social structures relate to the flow of information to and from decision-makers so that a faulty social linkage results to decisions based on insufficient information[10]. Individual cognition covering the organisation-related factors is eventually expressed through decision-making. Individual beliefs and attitudes integrated with the policies and rules of the organisation constitute the underlying reasons for decisions. As such, there could be many underlying factors explaining the causes of organisational disasters. However, all of these reasons find expression in the decision-making process. As such, these factors constitute explanations for the manner that flawed decision-making leads to organisational disasters.

National Aeronautics and Space Administration (NASA)

            NASA is a government organisation charged with the development of the country's space program. As such, the organisation handles various programs focusing on space research with implications to the technological innovations as well as the security of the country. Challenger, a space shuttle, was finished in 1983 to become the second operational space shuttle of NASA. It successfully launched in the same year and was able to survive nine missions. During its planned tenth mission, the space shuttle disintegrated in 1986 leading to the death of all the crew. The cause of the disaster was a sealing failure of a part of the solid rocket booster resulting to the spread of flare that reached the fuel tank. This incident brought to the fore organisational and decision-making problems of NASA.

            Schwartz (1989)[11] collated the different perspectives covering the cause of this organisational disaster and determined that these views revolved around the recognition of organisational decay in NASA expressed through flawed decision-making. These covers the decision to authorise the tenth mission and make repairs on the space shuttle instead of building another shuttle as the Challenger has reached its life expectancy and repairs may no longer be sufficient. The organisational problems of NASA were classified into four categories. First is problem in the hardware of the space shuttle based on the reports of the Rogers Commission indicating that problems in the space shuttle not only involved the solid rocket booster but also the steering control, brakes and other key parts. Whether or not NASA knew of all these hardware flaws was subject to different views but it is apparent that decision-makers with limited or complete knowledge of these flaws together with the repairs made decided to push through with the tenth mission. Second problem is the diminished administrative control expressed through wastage and misappropriation of its funds over a long period resulting to the lack of funds for priority projects. As such, this could have influenced the decision to make repairs on the Challenger instead of building a new space shuttle. Again, the decision-making process was flawed because of administrative control problems. Third problem is the loss of the organisations technical control over its space shuttle program. At the onset, contractors were expected to have sufficient knowledge of the implications of their contribution to the space program. However, after a few years and due to changes in contracting policies, the monitoring of contractors lessened resulting to the decline in the technical control of NASA over the technical issues such as the assessment of the capabilities of the Challenger and the implications of repairs relative to the building of a new shuttle. Fourth problem is the decline in NASA's control over its own operations. This difficulty resulted to the diminished control over the complex processes involved in the Challenger's tenth mission that is brought about by faulty decisions and resulting to problematic decisions.

            The case of the tenth Challenger mission exemplified the manner that organisational disaster was attributed to faulty decision-making within the context of organisational problems. As such, faulty decision-making process derived from a decaying organisation caused the disaster in the supposed tenth mission of the Challenger space shuttle.

Merck & Company Incorporated

            The company is a pharmaceutical firm developing medicines for various emerging medical conditions or existing medical conditions without known cures. The company engages in information dissemination and provision of access to medicines to far-flung communities in different countries. The company was established in 1891 and it has expanded its pharmaceutical operations and market reach since then. However, in 2004, the firm announced a withdrawal of the drug Vioxx from the market. This drug was introduced in 1999 as medicine for arthritis. A medical journal reported in 2000 that Vioxx users are likely to experience heart attack at four times the rate of those taking in an alternative drug. However, the company continued distribution of the drug until 2004. It was only after an external panel of experts monitoring clinical trials for the new medicinal use of the drug Vioxx reported that patients experienced higher risks to experience strokes more than the control group. This was considered as an organizational disaster because of the huge health implications of the reason for the drug withdrawal to long-term users.[12]  

            Choo (2005)[13] explained that the reason for this organizational disaster is the failure of the company to assess fully the journal report citing the side effects of the drug Vioxx in the decision whether to continue with the marketing of the drug amidst the risks reported in the medical journal. The failure of the company to recognize warning signs and threats of impending disasters in the decision-making process that caused the occurrence of the disaster. A problem in the knowledge management culture of the company led to insufficient information on the merits of the report in the medical journal from the company experts that further resulted to the decision to continue drug distribution. Again, it was decision within a flawed decision-making process that caused Merck's organisational disaster.

Enron Corporation

            The company is an energy firm engaged in various business areas including the distribution of electricity as well as natural gas. Due to the scale of its operation, Enron needed to find sources of funds so that it electronically traded contracts and products. To ensure a positive credit rating and encourage investors to take interest in the company, Enron engaged in various practices such as monetizing and prepays. It also sold assets, to different unconsolidated parties, which were removed from the firm's financial statements but whose investment contributions were included in the financial planning of the company. Although, this was not standard procedure, the board allowed it because the move was perceived to be consistent with the business goals of the company. Eventually, Enron sold almost half of its assets to unconsolidated parties leading to the removal of these assets from its financial statements. This widespread selling and the risky arrangement resulted to the bankruptcy of Enron in 2001, which the company is still trying to recover from up to now.[14]

            Choo (2005)[15] explained that this disaster was due to faulty decision-making. Even if the board knew the risks of the practice, they still made the decision to sell half of the company's assets through unorthodox means and justifying the decision with the necessity to meet its financial needs. Enron was not able to fully comprehend the risks involved in this practice and take control of the extent of asset sales. The company decidedly exposed itself to such great risks that it was not able to control.

Conclusion

 

            Decisions and the decision-making process constitute key elements in organisations because it is decisions derived from efficient decision-making processes that direct and drive organisations. As such, failures in decision-making lead to dire implications for organisations with varying extents from minor issues to organisational disasters. This is exemplified in the case of NASA as a government organisation and Merck and Enron as private organisations. NASA experienced the Challenger disaster because of its flawed decision to authorise a space exploration mission using a repaired space shuttle. Merck and Enron experienced disasters by making decisions without due information and consideration of all possible alternatives. It appears that decision-making causes organisational disasters within the context of problematic organisations so that greater organisational flaws increases the probability of decisions made within this context to led to disasters.

 



[1] Schwartz, Howard., 1989. "Organizational disaster and organizational decay: the case of the National Aeronautics and Space Administration." Industrial Crisis Quarterly, vol. 3, pp. 319-334, p. 319.

[2] See Above, p. 320.

[3] Wicks, David., 2001. "Institutionalized Mindsets of Invulnerability: Differentiated Institutional Fields and the Antecedents of Organizational Crisis." Organizational Studies, vol. 22, no. 4, pp. 659-692, p. 660.

[4] Wicks 2001, p. 660

[5] See Above

[6] See Above

[7] See Above

[8] Wicks 2001, p. 660

[9] Doyle, Christine., 2003. Work and Organizational Psychology: An Introduction with Attitude. East Sussex: Psychology Press Limited, p. 177.

[10] Doyle 2003, p. 177

 

[11] Schwartz, Howard., 1989. "Organizational disaster and organizational decay: the case of the National Aeronautics and Space Administration." Industrial Crisis Quarterly, vol. 3, pp. 319-334, p. 323.

 

[12] Karha, J., & Topol, E.J. (2004). "The Sad Story of Vioxx, and What We Should Learn From It." Cleveland Clinic Journal of Medicine, vol. 71, no. 12, pp. 934-939.

[13] Choo, Chun Wei., 2005. "Information Failures and Organizational Disasters." MIT Sloan Management Review, vol. 46, no. 3, pp. 7-10, p. p. 8.

 

[14] Choo 2005, p. 8

[15] See Above


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