Strategy Driven Organizational Performance and Change
Strategic decisions are the results of the strategic decision-making process; a strategic decision is the means by which management intentions are realized. Strategic decision-making is an ongoing cognitive process triggered by strategic "issues" and developments - events of strategic relevance, that must be resolved if the organization is to achieve its mission. An organization may believe that the strategic issue will be relatively easy to resolve or extremely difficult or even impossible to resolve (or somewhere in between). The degree of difficulty should not the focus, but rather the focus should be on the degree to which the issue is an obstacle to the organization achieving its mission.
Strategic Decision-Making Process
Strategic decision-making in concerned with how strategic decisions are made and implemented (Elbanna 2006). The strategic decision-making process can be categorized into two (2) broad types of decision-making processes: rational - bounded rationality - and political. The rational process is bounded by a decision maker's cognitive limits as well as scarce organizational resources. The rational process is based on bounded rationality which causes a decision maker to settle for a "good enough" solution (Simon, 1955).
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. These activities are organized into the following phases:
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 on logical and deductive reasoning, the issues comprehension that triggers it, involves choice of assumptions which is to some extent, is 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.
A major problem in strategic decision making is predicting the future of the organization in achieving its mission, and its environment and matching the characteristics of the organization to the environment. The mission defines the kinds of things the organization wants to achieve - the role the organization will play in the business environment as defined by its products (goods and services) the organization will provide and for whom.
Strategic decisions are the outputs of strategic decision-making process; they affect the overall positioning and direction of the organization. Strategic decisions may be classified as "unstructured"; these are decisions that require the decision maker to 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 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 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.
Quality of Strategic Decisions and Decision-Making
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,