Capturing judgments to clarify production strategy and policy
Authors: Ebert Ronald J. , Rude Dale E. , Cecil Earl A. 
Published: October 2002

Recent years have brought a reawakening of the importance of shaping the operations function to support the broader strategy of each organization. Doing so, however, can be a complex, controversial, and highly subjective matter. Determining production's relationships to marketing, engineering, and finance requires executive‐level judgments on the relative emphases among these policy areas. Other judgments about internal capabilities, external factors, and production policies are also involved. Assessing these relationships is a subjective process that is often subtle and usually hidden. For managers, these judgmental areas are sources of disagreement, confusion, and controversy in policy determination.

Within this context, the authors applied a judgment‐capturing process, called ProPol (Production Policy), to reveal and clarify managers' judgmental processes. The procedure uses correlational methods to identify where and how managers diverge from a common policy focus. The application settings were two executive development programs—one in manufacturing and the other in the public utility industry. Grouped into teams, the executives competed in week‐long computer simulation games. ProPol was introduced to assist in clarifying their production policies and strategies.

In the manufacturing setting, five general policy areas—marketing effort, cost efficiency of production, R&D effort, product pricing, and service flexibility—were identified as salient variables prior to the simulation. We sought to reveal managers' subjective views on the appropriate balance among these variables. The variables were scaled and embedded within questionnaires to present alternative strategy and policy postures within the context of the simulated organizations. From analyzing the resulting judgments, ProPol served the following purposes: (1) to reveal to each manager his own decision structure; (2) to permit intermanager comparisons of decision structures among team members; (3) to provide explicit bases for focused discussions on overall strategy agreement/disagreement within teams; and (4) to serve as the basis for determining a consensus strategy by each team. The managers' judgment processes were compared in terms of judgmental consistency, complexity, and espoused versus in‐useimportances of the policy variables. Consistency, the amount of uniformity in the manager's decision structure, varied widely among team members and across teams. While some executives held firm, consistent views of policy‐outcome relationships, others applied their structure inconsistently or shifted from one relationship structure to another in making their judgments. Judgmental complexity also varied widely within and across teams. The judgmental structures for most managers were simple linear relationships. Several, however, used more complex quadratic and interactive structures in relating the policy areas to overall effectiveness. Even when individuals were identically complex, however, they differed as to which policy variables were significant. Furthermore, although every manager espoused that all five variables were important, they were not all significantly used. The discovery of these discrepancies had a surprise affect: managers became aware of their personal inconsistencies and were stimulated toward understanding why they occurred. The group judgments, in contrast to the individuals, were more consistent and the espoused versus empirically‐derived importances were more in agreement. This occurred from group interactions following individual feedback. The feedback clarified specific areas of policy agreement, provided a productive way for resolving basic policy differences, and facilitated the groups in clarifying their strategic directions.

In the utility environment, executives participated in a decision‐making simulation of a consumer‐owned electric utility. As before, five key policy variables for this industry were chosen. Some of the five policy variables are indirectly related to operations (e.g., rate setting and employee relations), while others are more specifically related to operations (e.g., cost efficiency, dependability, and flexibility). Analyses of the judgments revealed characteristics similar to those in the manufacturing environment. Overall, however, utility executives displayed somewhat more complex judgment structures than did manufacturing executives. As a result, there seemed to be more common ground for intrateam policy agreement. For eight of the nine teams, the group consistency exceeded the average of their members' individual consistencies. Otherwise the various teams displayed diverse functional forms for their strategy and policy judgments, and they were relatively consistent in doing so.

These results indicate that ProPol can help managers clarify specific directions for the production function. By doing so, a more focused production thrust, one that is clearly and explicitly articulated, will enhance any organization's competitive strategy and provide clear guidance for subsequent decisions.