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This paper develops the concept of managerial discretion. Discretion, defined as individual empowerment to act, has received increased attention in the management literature, particularly in the policy area This research develops an instrument to measure discretion of individual managers. Vignettes are used to measure the willingness of managers to act in response to dilemmas that have organizational policy implications. The investigation of the reliability and validity of the developed measure, the Individual Discretion Questionnaire (IDQ), reveals that it identifies variability in managerial response and correlates significantly with two other established measures: locus of control and organizational ethical culture. The results suggest that this assessment tool may provide a means to identify how willing individual managers are to take preventive action in situations that present financial and sociopolitical risks to their organization.
"U.S. Grand Jury to Probe Sumitomo Traders' Moves in Copper Market: Renegade Trader Blamed for Loss of $1.8 billion" (Frank, McGee, & Friedland, 1996.
"Toxic trading: How Daiwa bond man in New York cost bank $1.1 billion in losses" (Sapsford, Sesit, & O'Brien, 1995). "Ousted PharMor President Found Guilty in $1 Billion Fraud: Sentenced to 20 Years" (Collins, 1995).
Events such as these illustrate the link between managerial discretion and organizational successes and failures. Often the outcome of discretionary behavior has important financial and sociopolitical ramifications; the exercise of managerial discretion can result in monumental losses for an organization or can avert potential organizational crises. Discretion is thus a powerful potential tool for managing organizational decision making. It is the aspect of the decision making process in which individuals make judgments concerning what choices are available to them. Organizations have much to learn regarding educating managers about the options that are available to them in a myriad of situations.
The two-edged sword that discretion offers organizations has long been recognized in management literature. While organizational rules and procedures have traditionally been used as a constraint on discretion, managers often make decisions that fall outside of clearly proscribed policy. It is in these latter instances that the individual personality and values of a manager become significant (Barnard, 1938; Simon, 1945). In these cases, managers who will exercise discretion in ways that benefit the organization are the most desirable. Ideally, organizations will provide managers with...