Asking the Right Questions - the Manager as a Critical Thinker

AMBA 610

Week 2: The Manager as a Critical Thinker

Submitted: October 25, 2011

Introduction

Asking the Right Questions, in and of itself was a phenomenal read. I gained an incredible amount of insight with regards to critical thinking, but I also learned a lot about myself. While reading the text, I frequently had light bulb moments where I would reflect on my decision making process in personal relationships, but also business relationships. This book assisted me in identifying a new way in which I process information and how I make decisions. Asking the Right Questions, gives you the tools and skills to carefully approach questions and the ability to skillfully think through tasks. Critical thinking as defined by Browne and Keeley consists of an awareness of a set of interrelated critical questions, the ability to ask and answer critical questions at appropriate times and the desire to actively use the critical questions.

This assignment, which focused on the PDQ Memorandum (Mark Headlee, personal communication, October 1, 2011), was an interesting discussion to use for the critical thinking process. Initially, when I thought about critical thinking as a task, my mind immediately focused on a problem and a solution. It most often times in my experience has been a lengthy discussion which resulted in numerous steps in the process. The model used by Browne and Keeley, is a different approach than what I was familiar with, however, it was quite unique when applying it to the PDQ CEO compensation evaluation.

The PDQ scenario was very unique, because there was some background information provided which helped to frame the case of the writer. Without knowing the background information and why the task was being assigned, it would have been difficult to ascertain why the memo was written and also why the critical thinking exercise was even necessary. Throughout the remainder of this paper, I will use the critical thinking model outlined in Asking the Right Questions to describe the PDQ Manufacturing CEP compensation evaluation.

Issues and Conclusions

After reading the PDQ memo, it was quite clear very quickly what the issue with the memo was. The Human Resources (HR) Department were charged with the task of reviewing the current CEO's compensation plan. The issues that were evident to me were, whether the compensation level for Raymond James was appropriate for the position with relation to the current industry standards. The second issue, identified by HR was the fact, that for six years 'the company experienced only 3% overall growth while the CEO salary increased by 48%' (Mark Headlee, personal communication, October 1, 2011). Thirdly, the HR Department identified the respect of union workers had been lost due to the flyer being circulated that taunted an unflattering Raymond James as CEO. According to the HR representative, 'once the respect of other employees had been lost it would be too difficult for the regain faith in the CEO.' (Mark Headlee, personal communication, October 1, 2011). While doing due diligence and examining the national standards for similar CEO's, the HR Department discovered that the average salary for other CEO's was $391,659 which was over $100,000 over the national average in that time frame. The HR Department identified several other issues also which were the global financial crisis which had a devastating impact on the executive pay across the country, and the CEO's personal wealth. The article from the Wharton professors provided a reasonable explanation for using personal wealth as a consideration when allocating a CEO salary.

Conclusions

The conclusion for the PDQ memo was very easy to ascertain. The HR Department concluded based on the information received from external groups as well as the current financial climate that the CEO salary was excessive, and not appropriate with regards to the current industry standards for a company of similar size. The HR Department also concluded that 'the base salary for the CEO was in fact $200K to $300K above the national average.' (Mark Headlee, personal communication, October 1, 2011). The HR Department advised the Board of Directors, to 'engage in a nationwide search to replace Raymond James in hopes of finding someone that will reinvent PDQ as well as exemplify more effective leadership.' (Mark Headlee, personal communication, October 1, 2011).

Reasons

There were a number of reasons that prompted the Board of Directors to instruct the executive compensation HR Department to evaluate of the CEO compensation. The Board of Directors requested research using a benchmark study of peer competitor firms in addition to a review of best practices for the industry. Raymond James salary grew modestly under the terms of his contract for the first four years. When considered in relation to the company's performance and the national economic climate, which resulted in a recession in 2007, the HR Department concluded that Mr. James salary was significantly misaligned.

Other reasons that were discovered as a result of the HR Department research were the PDQ growth stalling from 2006 and the raises that Mr. James received during the seasons of slow growth. According to the author, from 2003 to 2009, PDQ grew only 3% while, Mr. James salary increased 48%. (Mark Headlee, personal communication, October 1, 2011). The story in the newspaper titled "Highest Paid Valley Executives" and the flyer circulating to 'Overthrow the Tyrant King James' were significant reasons for the argument that Mr. James' salary was exorbitant.

The HR Department also argued that a member of the management team would not ordinarily discuss this type of issue, but since the facts were requested, they were compelled to disseminate all of the information. The Economic Research Institute noted that the average salary was significantly less that was Mr. James was awarded, in fact, his salary was over 100K over the national average. According to the author, 'due to the global current financial crisis, the media total compensation of similar executives declined 7.5% from 2007 to 2008. A survey of executive practices, as outlined in the memo, indicated that in 2009, 64% of companies either froze or trimmed their CEO salaries and 20% were expected to freeze salaries in 2010.' (Mark Headlee, personal communication, October 1, 2011).

Ambiguous

The HR Department used a number of ambiguous terms and phrases throughout the memo. First, they