Assuming that there is an unlevered firm and a levered firm. The basic information is given by the following table. Table1: Information of the firms Unlevered firm Levered….
Identify, define and apply two types of perception or decision-making errors (2 marks each) to discuss how they may be playing a role in any of the problems evident in the case (4 marks total).
Mike was the consummate genius. After finishing his university entrance exams at the age of 16, he topped nearly every Engineering unit at university. With an IQ of 151 and a mean score of 91.5% across all university units, Mike was deemed to be destined for greatness by his lecturers. Several of his university mentors counselled him to pursue a career in academia with one professor noting, “Mike seems to have it all. He’s a gifted, tough minded and hard working student who’d do well in university or any setting he may choose.”
Many firms saw his obvious talent as an engineer and Mike was promptly snapped up by local engineering firm Endeavour Pty Ltd. Endeavour was a classic family business with its founder Ron Richardson and sons Jason and Steve occupying three of the top five management positions. Engineers themselves, they had recently set Endeavour on a new course in the hope of promoting high growth. While Endeavour had a long history of successful local civil construction projects, it was now branching into new engineering markets locally and overseas. This was all part of an aggressive offensive strategy put in place to address the growing competitive pressures in traditional home markets from foreign competitors operating in partnership with traditional local rivals.
To accomplish this, the firm launched a worldwide search for engineering talent which saw their full time workforce more than double in just a few years. It was during this period of unprecedented growth that Mike came to the firm along with several other star university graduates. Regarded as the firm’s future, these “stars” were quickly thrown into some of the most challenging projects ever tackled by Endeavour; projects that were often firsts for the firm. While there were mistakes and successes, during this early period Mike distinguished himself as a very talented engineer and quickly became the “go to” man for many technical problems.
Deemed the consummate subject matter expert by colleagues, Mike became central to fixing many problems and attained the distinction of being the youngest senior engineer in the firm’s history. One fellow senior engineer with twelve years at the firm summed up Mike with these words: “He’s incredibly bright and a great problem solver in the technical sense. However, it remains to be seen if he can cut it in a senior role as he’s quick to lose his temper and few seem to enjoy working with him.” Around two years after Mike joined the firm it became very clear that some of the old guard within management ranks were struggling with the sheer number, magnitude and uniqueness of projects. As senior engineers are often assigned large projects, Ron felt it was finally time for Mike to sink his teeth into a new challenge: leading his own project team. Ron said at the time “Mike’s time has come. While I’ve not worked with him it is clear he’s made a remarkable contribution and I’m sure that by heading his own project team many will learn a lot from him. I like the lad as he reminds me of me. Some reckon he’s a bit too abrupt with people but, this is a tough and hectic business and I see the value in being direct. Having him heading up his own project group also means others can learn from him.”
How strange it was for Ron then to be looking at a damning report some eighteen months later about Mike’s first project; now in danger thanks to cost overruns to the tune of $150 million. Several dismissals had occurred in previous months as a result of Mike’s insistence that problems were the result of incompetent staff that the firm had inherited during the years of aggressive expansion and recruitment. One of his notable statements in the midst of this chaos was, “I can’t believe how weak some of these people are. If I can’t address problems about work with them then what’s the point of me being here? All I’m trying to do is my job and I find it annoying that some find it necessary to blame their shortcomings on me.” Ron was concerned that in exit interviews all the staff that were dismissed consistently attributed blame for project problems to Mike. As a result Ron decided to get an impartial opinion by having one of their new business analysts look at the problem.
1.Identify, define and apply two types of perception or decision-making errors (2 marks each) to discuss how they may be playing a role in any of the problems evident in the case (4 marks total).
(200 word maximum – 100 words each)