http://stream.publicbroadcasting.net/production/mp3/wamc/local-wamc-991245.mp3
Albany, NY – In today's Academic Minute, Dr. Rangaraj Ramanujam of Vanderbilt University uses fourth down plays to explain why and when businesses choose to go for it.
Ranga Ramanujam is an associate professor of management in Vanderbilt University's Owen Graduate School of Management. He is a leading researcher and consultant on the organizational causes and consequences of operational failures in high-risk work settings. Ramanujam's current research is focused on organizational success in the healthcare industry, where he has served as a consultant to a number of large corporations. He holds a Ph.D. from Carnegie Mellon University.
Dr. Rangaraj Ramanujam - Fourth Downs and Business Decisions
We all know that fourth-down plays in football games can make for drama. They are also great occasions for observing organizational decision making. This was the premise that got David Lehman at National University of Singapore, other colleagues, and I interested in the question when are NFL teams more likely to go for it on a fourth-down?
To answer this, we analyzed over 22,000 fourth-down plays from regular season NFL games. Our basic findings: teams rarely go for it. In fact, they went for it in just under 12% of the plays. They were more likely to go for it when they were trailing. Trailing teams were much more likely to go for it later rather than earlier in the game.
As observations about football, none of this is surprising. But as statements about decisions in business organizations, they are quite revealing. The finding that teams chose to punt the ball 88% of the time is significant because as several studies of NFL teams have indicated, purely from a risk-benefit viewpoint, teams should be going for it much more frequently. That they don't supports an important idea in organizational sociology that decisions in organizations are often rule-based actions.
In other words, people make choices not by calculating costs and benefits but by choosing appropriate rules to follow. So, for football teams, the rule seems to be that if it is a fourth-down, punt. This also means that the willingness to go for it is essentially the willingness to deviate from a rule or experiment with non-routine actions. Applied to business organizations that pursue the goal of meeting or beating analysts' expectations at the end of each quarter, our findings suggest that such organizations may be more willing to try something different when they are underperforming and when they are close to an important deadline such as the end of the quarter.