Sustainable Organization Growth and Profitability through Strategy Driven Organizational Change
Copyright Enterprise Design Labs 2005 - 2018
Strategic Decisions and Decision-Making
A strategic decisions is the product of the strategic decision-making process, and is the means by which management intentions are realized.
Strategic decision-making is an ongoing cognitive process triggered by "issues" and developments (events of strategic relevance). Strategic decision-making determines the objectives, resources, and policies of an organization. A major problem at this level of decision making is predicting the future of the organization and its environment and matching the characteristics of the organization to the environment. One characteristic of a strategic decision making that differentiate it from other types of decision making is the particular setting or context. The context for strategic decision making is comprised of the following elements:
Decision-making process involves several activities that take place at different times. The decision-maker has to perceive and understand problems; once perceived solutions/ideas must be formulated then choices have to be made about a particular solution/idea which is then implemented. Strategic decision-making is typically more complex, novel (new) and open-ended (Mintzberg, Raisinghani and Theoret, 1976), and is characterized by independent elements that by definition cannot be formulated, let alone solved, independently of one another.' (Mitroff and Emshoff, 1979:1).
Strategic decision-making involves "issue" comprehension, concepts structuring, and concepts formulation into cause-effect relations. While the cause-effect relations are based logical and deductive reasoning, the issues comprehension that triggers it, involves choice of assumptions which is to some extent arbitrary and inductive in nature. It is important that managers understand that their choice of assumptions is arbitrary and influenced by their beliefs, and might not accord with reality; so strategic decisions logically flowing from bad/erroneous assumptions can lead to failure. Strategic decisions always represent risk because they deal with the future and changes in behavior of organizations and institutions which cannot be predicted with any degree of certainty.
Strategic decisions are the outputs of strategic decision-making process; they affect the overall positioning and direction of the organization. Strategic decisions are "unstructured" in that the decision maker must provide judgment, evaluation and insights into the problem definition. They are novel (new), important and non-routine; there is no well understood or agreed upon procedure for making them; and are difficult or expensive to reverse because they substantially alter (and irrevocably so) in the short run the relationships between the decision makers' organization and customers, competitors, etc. They can be characterized by the strategic issues, events, and factors that trigger them. Some examples of these riggers include: decrease in sales growth, new product entry by competitor, a request for action event from executive management, or simply regular planning cycle. Examples of strategic decisions categorized by decision areas include:
Strategic decisions affect and change the direction of the whole business/organization, and are long-term in their impact. Strategic decisions are more complex than operational control decisions; (e.g., which jobs to schedule into production, etc.), or management control decisions (e.g., where to hold a company's picnic, etc.), or customer choice decisions (e.g., selecting a particular brand of tooth paste, etc.). They are different from operational and management control decisions which are "structured/semi-structured in that they are repetitive, routine, and involve a definite procedure for handling, so that they don't have to be treated each time as if they were new.
Strategic Decision Quality
The quality of a strategic decision is defined in terms of the gap between expected outcomes and the actual outcomes achieved. The outcomes of strategic decisions are usually contingent on their effects on the behavior of other actors affected by the actions deriving from the decisions and the cause-effect relationships between decisions, actions, effects, and decision outcomes. The nature of strategic decisions make it possible for decision makers e.g., managers within an organization, to have widely varying and incorrect beliefs about environmental factors such as market facts. For example, customers’ utility for a product/service, and managers’ perceptions of the customers’ perceptions of quality for that product/service to be inversely related. These beliefs influence the choice of assumptions underlying the manager’s strategic decisions and determine decision success/failure.
Factors Influencing Decision Quality
Some of the factors that influence the quality of strategic decisions and decision-making process include:
The viability of managers' strategic decisions depends in large part on managers' knowledge about the current situation, and probable reactions of their company, competitors, customers, and broader public. The quality of strategic decisions can be improved through use of Executive Support Systems (ESS) focusing on the information needs of senior managers to aid their decision-making. Executives are free to shape the problems as they see fit, using the system as an extension of their thinking process. ESS can help senior executives monitor organizational performance, track activities of competitors, spot problems, identify opportunities and forecast trends.
I am a computer scientist interested in modeling complex business systems, and strategic management processes to drive analysis and evaluation of strategic decision making and decisions. Specifically, I am interested in the use of modeling to improve organization managers shared understanding of strategy and its influence of organizational behavior and change. And how this understanding informs management's decisions and actions in effectively managing strategy formulation, implementation and execution,