Carborundum Case

In May 2001, with the next meeting of the Carborundum Policy and Planning Council only two weeks away, group vice president Tom Grenfield was preparing his position on the expansion of Ceramax production facilities. His assistant, Paul Thomas, working with an outside consultant, had conducted analyses of three alternative strategies and had come out in favor of a small expansion of Carborundum’s plant in Lockport, New York. His recommendation was based primarily on economic considerations, however, and Grenfield was weighing some of the more qualitative considerations to see if they might possibly overrule the economics. The economics, he suspected, might be open to question, since they were based on forecasts and assumptions that were, in some cases, little more than intuitive guesswork. He wondered how far some of these assumptions would have to be altered before the economic position shifted to favor another alternative.

Grenfield was also mulling over another aspect of the problem. Thomas had worked hard on this project and appeared to be emotionally committed both to the discounted cash flow approach he had taken and to the recommendation at which he had arrived. To give Thomas experience with some of the most senior executives in the company, Grenfield had asked him to deliver his report to the council. Grenfield knew that the executives like him might be more familiar with and heavily influenced by some of the qualitative aspects of the situation, and he wondered whether this was really the appropriate forum for Thomas’ presentation. Moreover, he suspected that