Attaining Sustainable Organizational Growth and Profitability
Strategic decisions are the decisions 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. They 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 customers, competitors, etc. Strategic decision-making is the means by which management intentions are realized. It entails managing for strategic success.
Strategic decisions belong to the category of strategic management decisions in which decision-makers can actively influence the expected outcomes, and success means doing better than your rivals. Strategic decisions require the decision maker to provide judgment based on insights into the problem situation and choices from alternatives. 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.
Examples of strategic decisions
In business, examples may include decisions to:
In sports, a coach shapes the performance of athletes, melding them into effective team that can outperform the opponent.
And in politics, a candidate must inspire donors, build an organization, attract and motivate campaign workers, and ultimately persuade voters (shape outcomes). A winning political campaign depends on smart assessment of rivals, as well as the ability to mobilize supporters, often in the face of long odds.
Strategic decision-making in concerned with how strategic decisions are made and implemented (Elbanna 2006). Strategic decision-making involves activities that may be organized into the following phases:
The strategic decision-making process 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 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 these assumptions if they turn out to be bad/erroneous assumptions, can lead to failure.
Strategic decision making involves strategic thinking - the ability of the organization to plan - and the ability to influence the desired outcomes through its people, and the need/expectation to outperform rivals. Strategic thinking is 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. 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.
Why Strategic Decision-Making is Hard
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).
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. This 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.
Factors Influencing Strategic Decision Quality
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 which can influence 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. For example, customers’ utility for a product/service, and managers’ opinions of the customers’ perceptions of quality for that product/service, can be inversely related. These beliefs influence the choice of assumptions underlying the manager’s strategic decisions and determine decision success/failure.
Improving Quality of Strategic Decisions
Strategic decision makers - such as executives, entrepreneurs and leaders - are not like shoppers picking a product or investors choosing a stock, simply making a choice that leads to one outcome or another over which they have no influence. As executive leaders or entrepreneurs they can influence the outcomes, and their choices are successful only if they are better than the competition's or rival's.
Executive leadership and entrepreneurs can improve the quality of their strategic decisions if before making any decision, they make an assessment of the type of decision for the situation at hand. Executives are free to influence the outcomes as they see fit. They can use decision models focusing on the information needs of senior managers to aid their decision-making practices. An ESS can help senior executives monitor organizational performance, track activities of competitors, spot problems, identify opportunities and forecast trends.
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.