Attaining Sustainable Organizational Growth and Profitability
Strategic Management Decisions and Decision-Making
Strategic management is an ongoing process of activities/decisions through which management intentions (i.e., strategies) and ideas are formulated and realized through implementation. Strategic management process enables managers to plan and execute strategies that change the organization's behavior and capacity to adapt to or respond to changes in the external environment in which the company operates. Strategic management is concerned with managing the strategy-producing value chain of an organization. It involves the development and execution of strategies that define the corporate direction, how the company is going to grow and be profitable, etc.
Strategic management decisions link rhetoric (what people say), choices (what people decide and are willing to pay for), and actions (what people do) in shaping the nature and direction of an organization. Strategic decision-making is inextricably linked to strategic planning because it concerns the distribution of resources and the company's long-term direction. Strategic management decisions are strategic decisions made based on a company's mission, vision or its objectives. Strategic management decisions involve strategic thinking - the ability of the organization to plan - and strategic choice/decision-making.
Strategic thinking is more about making decisions directed towards achieving defined outcomes. Strategic thinking is the ability of the organization to plan, leadership - the ability to influence the desired outcomes through its people, and the ability to motive the people in the organization to outperform rivals. Strategic thinking is active and ongoing, and is a way of understanding the fundamental drivers of a business organization. Strategic thinking requires envisioning what you want to accomplish and formulating solutions to problems. Strategic thinking represents the "why" and the "what" of the work you want to accomplish in a particular context and the whole configuration of interconnected and continuous interacting components and systems. Strategic thinking connects the organization's current state and the "to be" future state in order to bridge the differences and close the gap to gain/maintain competitive advantage.
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 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 decisions require the decision maker to provide judgment based on insights into the problem situation and choices from alternatives. The effects of strategic decisions 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.
Some examples of strategic decisions include:
For these decisions, decision makers can actively influence outcomes of strategic choices (using their abilities to make things happen); and success means doing better than rivals. Success depends on the ability of managers to influence the desired outcomes through its people, and the need/expectation to outperform rivals. By definition, these decisions require executives (decision makers) possess the ability to influence outcomes by the way they lead and communicate, and through their ability to inspire and encourage people to perform better than the competition.
Characteristics of Strategic Decisions
Strategic decisions are different from administrative, tactical and operational 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. 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. Tactical decisions are decisions and plans that concern the more detailed implementation of the organization's business strategy.
Strategic decisions are characterized by a number of features including:
Strategic decision 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 more than just simply making a choice that leads to one outcome or another. Executives can influence outcomes by the way they lead and communicate, and through their ability to inspire and encourage workers. Success means doing better than rivals. 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. Strategic decision-making in concerned with how strategic decisions are made - formulated and implemented (Elbanna 2006). Strategic decision-making is the means by which management intentions are realized (formulated and implemented).
Understanding Strategic Decision-Making
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 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.