Strategic decision-making is both an art and a science.
When it encompasses strategic thinking and strategic action, it can lead to transformative results. Critical and strategic decision-making is needed at all levels of an organization and at many junctures. It often resides where there are a myriad of potentially competing and ambiguous factors.
What are strategic decisions?
A strategic decision is one that needs to be made because effective forward motion is halted or stalled. It may:
-involve a major change in a shifting environment
-affect multiple parts of the organization
-require significant changes in or to resources
-address the emergence of new threats or opportunities
While there are many types of strategic decision points, if leaders avoid reaching a decision, that will usually present some form of risk and often represents lost opportunities. Reaching a strategic decision is not a singular event. Particularly in these changing times, leaders must constantly make the tough decisions without delay and followed by action. Strategic decision-making is not an arcane science or so complicated as to be out of reach. However, it’s a skill that has not yet been well developed for many leaders.
Strategic decision-making is not a new concept. Although the term has gained traction in recent years, the ability to reach and execute strategic decisions has always been a game-changer. Whether the organization is small or large, new or established, for-profit or not-for-profit, successful strategic decision-making is often elusive. In the entrepreneurial world, decision-making is often bold and rapid. Looking at more established entities, larger companies have institutionalized the decision-making process. But in all these contexts, identifying and resolving strategic decision points is still not common. The 80/20 rule applies: 80% of decisions are more tactical and 80% of the resources are attached to these decisions. When an organization can flip the ratio to make 80% of the decisions reached and implemented truly strategic, the organizational impact is profound.
Barriers to strategic decision-making
Mostly, people making decisions follow three basic methodologies. Each of these presents barriers to strategic decision-making.
First, we have groupthink. Human beings are often creatures of habit and many are naturally conformist. Too often, the strategic decisions give way to the comfort of a familiar process. Comfort comes from following a process with colleagues regardless of the ultimate outcomes produced. Questioning and analytics are framed in the context of this process.
Next, there is individual heroism. Here, an individual will make decisions quickly, even though often their desire to make the decision and move ahead causes any questioning and analytics to be skewed towards the conclusion they have already reached.
Then, of course, there is the third option: avoidance or rethinking. Decisions are delayed, often with a disproportionate amount of justification or buy-in from multiple parts of the organization. The delays frequently reduce the relevance of the decision or of the opportunity at hand. Alternatively, decisions are reached and then challenged and redirected back to the starting point. Or decisions are reached without serious commitment to implementation.
Critical factors for strategic decision-making
Everything starts with the leadership commitment to execution! But even with that commitment, leaders must accept that achieving strategic decision-making excellence may not happen immediately. As with any new skill, theory must be combined with practice until aptitudes grow and the approach is embedded within the organization. However, organizations that master this skill demonstrate proactivity, internal alignment and harmonization, the nimbleness to capture opportunities and the flexibility to scale operational resources. These organizations are better prepared to respond to the market and even lead market segments.
Strategic decision-making requires blending the art of selecting and the science of supporting.
The three components of this process are:
-Identifying truly significant decision points and being willing to select (and reject).
A decision is strategic if:
-It solves a problem by addressing its root cause while avoiding getting distracted by its symptoms.
-It provides an opportunity gain, such as making moves in areas where market shifts could or should occur, finding new entry points or dealing with competitive pressures.
-It gets the organization moving after it has been stalled.
-Taking a disciplined approach to capture what “enough” is and avoid the “paralysis by analysis” trap. To do this, an organization must:
-Define and acquire data with high relevancy.
-Engage and empower individuals with direct involvement and knowledge.
-Create up to three credible scenarios.
-Taking a resolution to implement within a defined timeframe and live by the targets.
-Reviewing, assessing and concluding.
-Reaching agreement for resource commitments.
-Affirming milestones and assigning accountability.
Ultimately, the measures of success will lie in the organization’s durability.
We hope you enjoyed this guest post from Frances Post, Strategic Advisor at the OgdenPost Consulting Group llc, one of our valued member businesses.
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