PERFORMANCE AND PROFITABILITY EVALUATION
In 2012, Benjamin took over his father's network of 15 forklift dealerships. Benjamin has just received his MBA, and he was eager to show his dad that he knew how to manage the business. Benjamin began with a weekend "strategy retreat" where he brought the various department heads together at a resort. Benjamin thought the meeting went well, and they emerged with a coherent long-range strategic plan to guide the company through the next five years. However, when Benjamin returned to work the following Monday, he discovered that he had a more immediate problem. The rental division, headed by a former salesman, needed a cash infusion to keep operating. This was puzzling to Benjamin because the accounting statements indicated the division was generating profit even though it was clear that the division was running out of cash. After a few hours of going over the books, Benjamin discovered that the rental division was selling its forklifts after five years and then buying new forklifts. Purchasing the new machines was eating up cash, but it did give the company a significant advantage over their rivals: their rental fleet was much newer (three years) than their rival's (seven years).
Questions:
1. What is the problem and how would you fix it?
2. Who is making the bad decision?
3. Does the decision maker have enough information to make a good decision?
4. Does the decision maker have the incentive to make a good decision?