Strategic decision making is one of the paradigms used in organizations to formally and systematically structure their strategies and visions. The process is known for its rigid steps as well as the advantages they bring to most organizations, big and small. However, the same advantage of blue-print certainty does not work well on all kinds of organizations. Organizations that function in highly dynamic environments are likely to look into alternative ways of strategic decision making because of the weaknesses that formal strategic planning embody.
Formal strategic planning applies logic and structure in the development of new strategies. It has ways of helping the company deal with complex problems with the use of specified and proven steps which any manager can follow and use in maneuvering through his job. It also helps people look into the macro and long term views of the company and their roles in it. Some of its stages like the competitive analysis and environmental analysis take into consideration the company’s 3 to 30 year perspective. Formal strategic planning likewise helps in the coordination of the different functions inside an organization, and thus encourages team work and productivity.
However, formal planning also has its limitations, which do not work well in dynamic settings. Rigidity makes formal strategic planning inflexible for both managers and their subordinates, limiting individual initiative and resourcefulness. There is also a tendency for formal strategic planning to stunt individual development for the benefit of the company. The process that it entails involves biases and prejudices in favor of profit or company bottom line. The formality of strategic planning makes it time consuming because one has to collect various information, and run it through the process of analysis and interpretation. Such data invariably can change any day, which makes results uncertain and unreliable. Most of the data involved in the process is based on estimates and forecasts. Since what is most certain about the future is change data can be deemed ineffective by then. It is likewise expensive and provides a false sense of security.
Organizations exist today in dynamic and uncertain environments, where time and resources are limited. The real challenge of modern times is coping with these varied dynamics and the change that comes with it. Thoughtful analyses from formal approaches of decision making are not enough. In fact, these plans are even rarely used for all organizational decisions. Insightful uncertainty enlarges the significance of decision-making at the right time, taking into consideration the unique individuals that are present and available, and the circumstances that are happening at real time.
Some of the alternative decision making strategies used by organizations today include; learning by doing method where managers use techniques such as scenario planning and stage-gating to make decisions under uncertain circumstances; workshop-based techniques where executives can foster new attitudes and skills, especially in coping with the ambiguity that is intrinsic in today’s environment; and performance measurement where managers are held liable for their actions individually but as leaders that contribute significantly to the organization’s success.
For organizations to thrive, they need to adapt to uncertainty and establish new ways to create structure for their organization.
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