Lecture 1: introduction – 9 April
What are strategic decisions?
The decision to move is a big decision, but what is the motive behind it?
It is important to know what the decision is about (label it), because certain people will feel
the need to be involved in the decision. Depending on how you label it, different people will
feel the need. To judge if a decision is good, you also need to look at the future.
Decisions
We make decisions all day:
- Some need additional information
- We ask advice for some decisions
- Some are made on the bases of pre-existing heuristics (shortcuts)
- We try to narrow down the number of alternatives
Organizations are also confronted with decision-situations. The key challenge to any decision
is the reduction of uncertainty.
Fundamental characteristics of strategic decisions
Four characteristics:
- Complexity: large number of aspects.
- Uncertainty: unknown number of alternatives/solutions
- Rationality: try to reach a goal
- Control: intentionality
Article 1 – Leiblein, Reuer & Zenger: what makes a decision strategic?
What are strategic decisions?
Strategic decisions are defined as decisions committing substantial resources, setting
precedents, and creating waves of lesser decisions; as ill-structured, non-routine and
complex; and as substantial, unusual and all-pervading.
Three perspectives:
I. Strategy as important decisions (made by important people)
II. Strategy as critical tensions: tradeoffs that need to be made
III. Strategy as decision interdependence along three dimensions:
o Inter-decisional: other decisions at the same time in the organization
(interdependent)
o Inter-actor: factor in aspects of other actors (competitors/other stakeholders)
o Inter-temporal: decisions in the future
Leiblein et al. (2018) position on these perspectives:
- III. > I.
- III. > II.
- I. equally bas as II., or worse?
III is more comprehensive, but that is not the goal.
See different things of decisions. Help us to think about
decisions and doing them.
,Article 2 – Jansen: intro text
Introduction of: integrative framework of strategic decisions
Generic annual strategic planning cycle: upper part is mostly concerned with strategy
formulation and the lower part with strategy implementation. Decisions are taken
throughout this annual cycle.
Adjust goals. You need to know where you are in the organization.
The intergrative framework for analysing SDs (simplified version)
The links between the parts
indicate the linear or cycling nature
of the relations between the parts.
Ways to read
- Easiest way is from left to
right (line 1, 7, 8, 2).
o Not all constituent
parts are
incorporated
black box = that part
of the research
model which is
known to causally affect other parts of the research model but is not explicitly
fleshed out in the research model (line 3). No aspects of the SDM process are
incorporated.
- Line 7: the formulation of a strategic decision, or actions that are in hindsight
translated back into a decision point somewhere in the past and captured as ‘the
strategic decision’. The direction of decision activity in the process can flow both
ways.
Dimensions such as political behavior, rationality, and intuition can individually affect
decision effectiveness.
Definition of strategic decision-making process
The SDM process is the process by which a strategic decision is made and implemented and
the factors which affect it, i.e. the process that leads to the choice of goals and means and
the way in which means are effectively deployed.
Thinking and doing.
,Key assumptions of SDM
Departure point of SDM thinking, research & theorizing:
Higher degree of rationality leads to higher performance, but this is not
sufficient.
So, why spend more time and resources on these decisions and processes?
Information is not always available.
Reasons for this lie in a myriad of factors, amongst which analytical and
organizational complexity. To deal with this:
- Professionals develop tools based on decision analysis and/or
evidence-based approaches.
- Researchers identify the factors that increase or decrease the quality of strategic
decisions from a multidisciplinary viewpoint.
Assumptions underlying the SDM process-effectiveness relationship:
- Variation in SDM processes different strategic choices variations in effectiveness
- Look forward: practitioners use the correct procedures and tools to prevent decision
failure and achieve decision success + look backward: researchers use the evidence
generated by research to understand decision failure and decision success brilliant
decision making!
Not always the same people involved at the decision.
Little certainty, but only reasoning compacity.
Key questions for the course
a. How can we understand variation and heterogeneity of the effects of context on SDM
processes?
b. How can we understand variation and heterogeneity of the effects of context and
SDM processes on outcomes?
Preliminary categorical answers to questions:
- Antecedents
- Process dynamics
- Constraining & enabling factors
More elaborately:
A. The way decision making processes unfold is subject to decision-situational factors:
not every situation is suited for an approach rooted in information gathering and
analysis in relation to goals.
B. In addition, the (collaborative) interactions between participants in the SDM process
and the dynamics of the process can unfold in different ways leading to different
decisions, and thus outcomes.
What is the integrative framework?
What is the integrative framework of SDs?
- Set of constituent parts with the links between them
, - The analytical scheme to study SDs
- Integration of (sets of) factors from a multi-theoretic perspective
Why do we need it?
An analytic review scheme is necessary for systematically discerning patterns from a widely
differing set of studies and evaluating the contributions of a given body of research and to
guide future research.
Framework
Context component
The context refers to those aspects that are not subject to the choice situation to
those decision-makers present at the moment of decision: i.e. those circumstances that
shape the decision process and that are given. The situation in which the decision is taken.
Four groups:
1. Environmental context external
2. Organizational context internal
3. Nature of the strategic decision characteristics of the decision (situation)
4. Top management characteristics characteristics of decision-makers on an
individual or collective basis and the dynamics between them.
Connects mostly to question A.
a. … subject to decision-situational factors…:
Context creates the ‘decision premise’ (problem to respond) and ‘strategic options’ (remedy)
The combination & analysis of environmental, organizational, top management and decision
characteristics provide us with the input for the formulation process.
starting point for the process-effectiveness link
Process component
The SDM process is the process by which a strategic decision is made (formulated) and
implemented and the factors which affect it, i.e. the process that leads to the choice of goals
and means and the way in which means are effectively deployed.
In our approach, the process consists of formulation and implementation.
- Execution = how teams are integrated in the work of the organization.
Outcomes component
Outcomes refer to the intended and unintended consequences of a strategic decision.
Decision level vs. organizational level vs. supra-organizational level outcomes.
- DLO = decision outcomes: the intended and unintended consequences of a decision
considered in terms of financial and/or nonfinancial outcomes isolated from other
influences, i.e. outcomes as a consequence of the SD that was taken.
- OLO = organizational outcomes: the intended and unintended consequences of a
decision considered in terms of financial and/or nonfinancial outcomes in the
aggregate of all influences on the organizational outcomes, i.e. outcomes as a
consequence of all relevant organizational activity influencing those outcomes,
including the SD.
- SLO = supra-organizational outcomes: repeat OLO, add environment and inter-
organizational (network) outcomes.
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