Attaining Sustainable Organizational Growth and Profitability
Strategic decisions are those decisions taken by top management that have an influence over years, decades and even beyond the lifetime of the project. Strategic decisions are different from administrative decisions and operational decisions. Administrative decisions are routine decisions which help or rather facilitate strategic decisions or operational decisions. Operational decisions are technical decisions which help execution of strategic decisions. Strategic decisions are novel (new) - there are no well understood or agreed upon procedures for making them, important (i.e., consequential) and non-routine; and their effects 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 its environment - customers, competitors, suppliers, etc. Strategic decision-making is the means by which management intentions are realized.
Strategic decisions are the decisions that are concerned with the whole environment in which the firm operates, the entire resources and the people who form the company, and the interface between the two. Strategic decision-making is concerned with strategic choices where business executives (decision makers) can influence outcomes and success means doing better than rivals. Some examples of strategic decisions include:
Strategic decision makers such as business executives, coaches in sports, or political candidates are not like shoppers or administrators making routine choices that lead to one outcome, or another. They can influence the outcomes by the way they lead and communicate, and through their ability to inspire and encourage others. Moreover, executives are in charge of organizations that compete vigorously with others; doing better than rivals is vital for success.
Characteristics of Strategic Decisions
Strategic decisions are characterized by a number of features including:
Strategic decisions require the decision maker to provide judgment based on insights into the problem situation and choices from alternatives.
Strategic decision-making in concerned with how strategic decisions are made and implemented (Elbanna 2006). 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). It entails managing for strategic success. Strategic decision-making involves strategic thinking - the ability of the organization to plan - and leadership - the ability to influence the desired outcomes through its people, and the ability to motive the people in the organization to outperform rivals.
The strategic decision-making process involves issue comprehension, concepts structuring, and concepts formulation into cause-effect relations model. 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 arbitrary and inductive in nature. It is important that managers understand that their choice of assumptions is arbitrary and influenced by their beliefs and mind-set (mental model), and might not accord with reality. So strategic decisions logically flowing from these assumptions if they turn out to be bad/erroneous assumptions, can lead to failure. Strategic decision-making activities that take place at different times, and may be organized into phases, such as::
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 decision-maker has to perceive and understand problems; once perceived, solution ideas must be formulated then choices have to be made about a particular solution which is then implemented. For example, customers’ utility for a product (goods or service), and managers’ opinions of the customers’ perceptions of quality for that product (goods or service), can be inversely related. These beliefs influence the choice of assumptions underlying the manager’s strategic decisions and determine how good/bad the decision is. Erroneous assumptions can lead to bad/poor strategic choice which in turn, can lead ultimately to strategic decision failing at implementation.
Factors Influencing Strategic Decisions and Choices
A number of factors can exert decisive influence on the success of strategy decisions and choices. These may include the following:
Strategic thinking is essentially the process of determining the direction an entity (business, team, or individual) will take to achieve its long-term goals and vision. Strategic thinking involves the intentional and rational thought process that focuses on the analysis of critical factors and variables that will influence the long-term success of a business, team, or individual plan to achieve some specified objectives and goals.
I am a computer scientist by education and training. My interests are in modeling complex business and social systems to foster better strategic and operations management processes in delivering value to customers while meeting the expectations of stakeholders.