Strategical Decision Making Assignment-Btechnd
Decision making is the process through which an individual moves while selecting the best alternatives among various available alternatives to achieve predefined goals (Stokman,, Assen, Knoop and Oosten, 2000). In an organisations manager has to take many decisions on day to day basis, some of which might be routine or simple with less impact area while others may be complex with long term and overall impact on the working of the organisations. (Calthrop, n.d.) Several researches have been done to understand the process and methods of making effective decisions but no one suggests a perfect method with a win-win outcome. The problem is that all types of decisions , whether simple or complex, are called with the same name ‘decision’ and same methods to apply in the researches. Therefore to apply implement correct decision making method it’s very important to categorise which type of decision is being taken by a person. Routine decisions are usually simple, non-competing and have short term impact on the company. Strategic decisions however are different from other kind of decisions as their scale is broad, they are resource intensive requiring high commitment level and have long term effect on the company (Hamel, 2014). These types of decisions taken by the project management generally lay the standards upon which other decisio ns are taken in the company and provides direction for future actions. Strategic decision making process starts with analysis of organisational strength and weaknesses and then external analysis to search out the opportunities and threats. It encounters some barriers like volatility in the business environment, uncertainty of change, complexity of decisions factors and ambiguity about present situation and possible results (Vasilescu, n.d. )
In the article “What makes strategic decisions different” published in Harvard Business Review, Phil Rosenzweig differentiated routine decision making with the strategic decision making and proposed a framework to understand the type of problem we are encountering which require decision to be taken. Decisions may differ on the basis of people taking them as an individual or as a leader of an organisation and on the basis of their complexity but the best way to categorise them is on the basis of our influence on the terms of outcome and decisions and the way me measure the success. These can be called as two dimensions of decisions-performance and control. Performance is checked on the basis of whether we are trying to get results better than other or not competing with anyone that is success is needed at absolute or relative terms. Other dimension control measures whether we can shape the alternatives available to us and the outcomes achieved after selecting the option. These two dimensions when taken along two axes form four types of decisions in the four quadrant of the matrix.
Categorization of the decisions
First field decisions: The first field decisions are based on the routine judgement and choices in which people have low control on the choices and outcomes and the performance is not relative as the person takes decision without competing with others. For example when a person invest in a company he can only choose from the alternatives available but after selecting the option he cannot alter the performance of the shares he purchased and there is a desire to get better returns but the person is not competing with anyone. That means performance is absolute with low control on outcomes. Under this kind of situation managers main task should be the elimination of biases occurring in business decisions and move towards a rational alternative.
Second field decisions: In the second field individual have high control and the performance is absolute. Here optimism plays an important role as the performance can be modified with an optimistic approach and positive attitude.
Third field decisions: In the third field of the matrix individual have low control but his performance is relative as the performance is measured in relation with others/ competitors. Moves of rivals are always checked and then counteractions are taken. It seems like the author is recommending decision makers to learn the knowhow of game theory before taking decisions in such situations.
Fourth field decisions/the Strategic Decisions: The fourth field is the area where strategic decisions are made. Individual has high control and success is measured in relation to others that is performance is relative. This field is called “Managing for Strategic Success” and is the soul of strategic management. Acquisition of a company and Launch of a new product can be the example of this type of decisions.
Recommendation to managers for taking strategic decisions
After identifying the type of decision to be taken it is important that versatility must be developed to alter the approaches according to the decisions to be taken. When it comes to take strategic decisions, only avoiding the common errors is not sufficient for the executives, they are required to develop analytical skills and ability to shape the possible outcomes of the decisions by leading and inspiring other people and at the same time should be ready to take audacious decisions as demanded by the situation. Since the strategic decisions have high level of competitiveness and gain of one is the loss of other therefore executives are needed to judge and predict the moves of competitors so that right actions can be taken at right time (Roberto, 2002). Decisions taken by managers in organisations affect the overall performance of the organisations as well as people working for it. It is not possible to completely eliminate risk of failure from the decisions which are strategic in nature but the chances of success can be improved by clearly understanding the control and performance over the decision and equipping managers with decision support tools as well as training to understand which decision tool will work most effectively for a decision.
Another important thing is that decision maker should try to attain a correct balance between timeliness and decisiveness as if decisions are not taken at right time they result in failure and loss (Nash, 2010). It is being correctly said that missed opportunities are the most damaging decisions therefore a manager should always keep an eye on the upcoming opportunities and take right decision at right time otherwise no matters how best the decision was, but if not taken timely will leave unfavourable consequences.
Managers are pragmatic by nature and always believe in collecting facts and relying on them before taking any decision but in the competitive scenario it become quite dangerous to wait for all facts to come (Courtney, Lovallo and Clarke, 2014).
Prerequisites of taking an effective decision
- Decision maker should first identify clearly what outcomes and objectives are to be achieved.
- Maximum Information gathering to asses all the available options for maximum gain.
- On the basis of decision maker’s ability, interest and values, elaboration of several likely alternatives should be done.
- Cost and benefit analysis of each option and listing their possible pros and cons along with what is considered to be less important, important or very important.
- Decision making should learn from his past experience and ask for the opinions of others who have encountered similar type of situation.
Critical Analysis & major limitations of the approach
Although the suggested methods by the author are quite useful in categorising decisions as routine or strategic but one of the limitations is that their application is limited in the area of strategic decisions only which are quite critical. (Skalski, 2014) It also has been admitted by the author that in this area limited amount of researches have been done and more exploration of the topic is required in near future.
The competition strategy suggested in the article states that an organisation can have no control over the actions of its competitors but it is not true in all cases as we can see in the healthcare sector this statement cannot be applied because here it can easily be anticipated what a competitor can or cannot do. The basic competitive strategy should follow the following two steps:
- First of all find out your internal strength to decide the best practice based on what superior you can do in comparison to your competitors and always try to innovate these practices. (Eisenhardt, 1999)
- It’s better to be bold and courageous while taking decisions as people or company cannot be a leader among followers or in market without having the willingness and dare to challenge the status quo to introduce new things and shaping the market with new rules. (Warner, 2014)
The author also argued that the word ‘decision making’ itself is quite misleading as it is applied to all types of matter whether it be routine matter having less impact on others or a do or die situation for an organisation. This is quite genuine and a limitation of English language. The 2 X 2 matrix of decision categorisation suggested by author cannot be considered very effective and having a long lasting effect as done by some other matrices like the BCG growth share matrix (Mawhinney, 2013). The suggested matrix with two dimensions of ‘control’ and ‘performance’ is relevant to some extent but cannot be considered as easy to relate to as some other framework of strategic management and decision making.Order Now