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Currently viewing the tag: "Strategic Decision Making"
Most people believe that the value and impact of the C-level leadership originates from the number of meetings conducted, having the ability to plan for long term, and make key strategic decisions collectively. However, in reality, the C-level seldom works in unanimity to make collective decisions. They often have animosities with each other and lack collaboration and mutual trust.
The real impact and success of the top team emanates from the informal and social networks of its members, their resolve to capitalize on those connections for strategic decision making, and their competency to perform well in subgroups created to solve pressing concerns.
Effective C-level leadership is conscious of the value of their informal / social networks and their ability to deal with serious issues. They organize themselves in a way to work as the nucleus of the organization, which gives them the leverage to promptly act on adversities or opportunities.
Leadership’s Social Network Analysis
C-level’s informal social network enables an organization to draw combined capabilities—in-house as well as the extended network. Top leadership needs to evaluate the strengths of their social network by mapping their informal associations. This can be done by conducting surveys, analyzing meetings, phone calls, and emails.
The social network analysis reveals that 90% actionable information comes from this informal leadership network rather than through internal reports and datasets. These linkages aren’t distributed evenly; some members may be highly networked commanding a major chunk of two-way interactions across the organization whereas others may have a smaller network and lesser influence accordingly. The analysis also suggests that poor leadership connections lead to failed decisions—whereas enriched networks cause advancement in Innovation and Organizational Efficiency.
To design—or redesign—an effective Leadership Operating Model, organizations need to incorporate 3 key principles in their operations:
- Leverage Focused Subgroups
- Improve Networking Effectiveness
- Manage Conflicts at the Constituent Level
These 3 principles aren’t simple to implement. It warrants evolving the very nature of how the senior leadership team functions and design a more poised and assimilated Operating Model.
Let’s discuss these principles in detail.
Leverage Focused Subgroups
Senior leadership’s performance cannot be judged solely by its ability to revamp the enterprise’s organogram. Effective top leadership demands from the team a capability to form peer-to-peer, top-down, and bottom-up relationships; and work in discrete yet linked groups, each of which is focused on solving a unique problem or tapping an opportunity.
Depending upon the circumstances, leaders should adopt any of these modes when dealing with networks. Focused subgroups work best in 3 discrete modes:
- Discussion Groups – These groups focus on information flow, comparing notes, and updating each other on progress. The mode does not cater strategic decisions or active leadership.
- Single Leader Units – In this mode, every executive of the group has clear responsibilities and is accountable to one boss who has the authority over the others to enable speed and efficiency.
- Real Teams – This subgroup includes executives possessing similar capabilities, who are committed under an accommodating leader to achieve shared objectives.
Networking Effectiveness
It is culturally acceptable at many organizations to utilize time on trivial matters—e.g. unnecessary e-mailing, lengthy approval cycles, long-drawn-out meetings, or to schedule events. These matters cannot be eliminated altogether however, meticulously planned informal networking between the top team enhances efficiency of leaders to a great extent.
Each member of the C-level should connect the right people together, lead and support subgroups, and maintain associations. Gaps in informal communication between leaders damage the implementation of organizational strategic plans. Interaction between top executives is often limited to participation in senior level meetings for information sharing purposes only, lacking collaboration to pursue shared objectives. To make matters worse, they spend too little a time with their direct reports, employees, or customers. This detachment creates widespread unease and skepticism.
Interested in learning more about the 3 key principles necessary to design a Leadership Operating Model? You can download an editable PowerPoint on 3 principles key to design a Leadership Operating Model here on the Flevy documents marketplace.
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Do people always follow a rational linear process to come to a decision? Studies have suggested that a combination of Decision Making Models are used by people to reach quality decisions.
Strategic Decision Making is a complex process with a lot riding on those decisions. Eliminating risk from Decision Making is unthinkable but radically enhancing chances of success is a realistic goal.
In making Strategic Decisions, executives tend to rely only on those Decision Support Tools they know best. The usage of non-optimal Decision Support Tools is, in part, due to lack of knowledge about which tools work best in a particular scenario and, in part, due to lack of information regarding what tools are available out there.
Having access to a variety of Decision Support Tools increases the likelihood of making a successful decision provided the decision maker has knowledge of which tool to employ or a combination thereof in various scenarios.
The following 5 Decision Support Tools or their combination is applicable in a variety of Decision Making scenarios:
- Conventional Capital-Budgeting Tools
- Quantitative Multiple Scenario Tools
- Qualitative Scenario Analysis
- Case-based Decision Analysis
- Information Aggregation Tools
In some cases, just one tool is needed while in others an assortment of tools makes for the best combination.
Let us delve a little deeper into some of these tools.
Conventional Capital Budgeting Tools
Projected Incremental Cash Flows are used from likely investments to ascertain whether a project merits being funded through the firm’s Capitalization Structure. Included in it are Discounted Cash Flow, Expected Rate of Return, and Net Present Value models.
Quantitative Multiple Scenario Tools
Decisions are analyzed by completely specifying possible outcomes and their probabilities. Mathematical, Statistical, and Simulation methods are employed to distinguish the Risk and Return properties of prospective choices. The tools include:
> Monte Carlo Methods
> Decision Analysis
> Real Options
Qualitative Scenario Analysis
These techniques are beneficial to decision makers who encounter excessive levels of uncertainty about outcomes because the techniques do not assume a conclusive and entirely specified set of possible outcomes.
Real-life business Decision Making often comprises of judgments that are based on incomplete and uncertain information. This can be mitigated by using appropriate Decision Support Tools. However, which tools are appropriate will depend on the answer to the following critical questions:
- Do I know what it will take to succeed?
- Can I predict the range of possible outcomes?
The Causal Model question—combination of Critical Success Factors (CSFs) and economic conditions leading to success—needs settling before we can proceed to answer the 2nd question regarding Outcome Prediction.
Managers need to ask the following in order to clarify the state of the Causal Model hence the answer to the question:
- Do I comprehend what combination of Critical Success Factors will decide if my decision leads to a successful outcome?
- Do I recognize what metrics need to be met to guarantee success?
- Do I have an accurate understanding of how to attain success?
The other question to answer is: Can I predict the range of possible outcomes?
Managers should ask the following in scenarios predicting various outcomes and probabilities:
- Can I outline the range of outcomes that may result as a consequence of my decision, both as a whole and for each Critical Success Factor?
- Can I measure the probability of each outcome?
Even where the CSFs and Model for Success are understood, it sometimes becomes difficult to predict range of outcomes and their probabilities due to uncertain conditions.
Interested in learning more about Decision Support Tools? You can download an editable PowerPoint on Decision Support Tools here on the Flevy documents marketplace.
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Do You Find Value in This Framework?
You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:
“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”
– Bill Branson, Founder at Strategic Business Architects
“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”
– David Coloma, Consulting Area Manager at Cynertia Consulting
“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”
– Roderick Cameron, Founding Partner at SGFE Ltd
Human judgment can be unreliable as these are all susceptible to errors. In Strategy Development, organizations make a lot of strategic 
decisions. These strategic decisions share a common feature: they are evaluative judgments.
In making these tough calls, a large amount of complex information must be weighed down and evaluated. While some management decisions are made without weighing quite so much information, yet strategic decisions involve the distillation of complexity into a single path forward.
With the unreliability in judgment, particularly in decision making, there is a need for a practical, broadly applicable approach to reducing errors. This approach is called the Mediating Assessments Protocol (MAP).
Why Human Judgment Can Be Unreliable
Human judgment can be unreliable as evaluations are susceptible to errors. These errors stem from known cognitive biases. There can be a tendency to give more weight to information that comes to mind easily because it is recent or striking than other more important facts. We have the tendency to notice, believe, and recall information selectively which confirms our preexisting hypotheses and beliefs.
Making decisions can also be affected by the Mental Model we have formed. This is an impression of a complex situation that is often less nuanced and more coherent than the reality it represents. When decision making is influenced by biases, there will be errors in decision making.
The 3 Core Elements of MAP
MAP or Mediating Assessments Protocol is a structured approach to Strategic Decision Making. It consists of 3 core elements.
- Advanced Assessment Definition. The first core element requires the identification of mediating assessments. Mediating assessments are key attributes critical to the evaluation.
- Independent Assessments. The second core element is grounded on the evidence available. It uses fact-based independently made assessments.
- Final Evaluation. The third core element is undertaken when the mediating assessments are complete. The final decision is discussed only when all key attributes have been scored and a complete profile of assessments is available. However, the final evaluation may not be undertaken if a deal breaker fact has been uncovered.
Understanding the Importance of MAP
Any organization is a decision factory. Many decisions made can shape the future of organizations. At the same time, many decisions have caused organizations to fail. Decisions, unlike physical products, cannot be quality checked. However, it can be improved by working on processes by which they are made.
Mediating Assessments Protocol (MAP) is an approach that can bring quality assurance to complex decisions. One of its strategic application is in structuring one-off decisions.
Structuring one-off strategic decisions is a type of strategic decision that makes use of explicit assessment as a basis for the decision. It requires leaders to make separate, explicit assessments of each aspect.
The use of MAP in structuring one-off decisions can limit the risk that a compelling narrative will sway board discussions and affect quality decisions. When there is a rigor of formal structure in strategic decision making, it has the benefit of sequencing the process resulting in more quality decisions.
The use of MAP requires very trivial extra effort yet it can bring a lot of benefits. Board discussions are more organized and focus than the usual process, but is not necessarily longer or more contentious. Important facts are less likely to be overlooked and thoughtful, self-critical consideration of trade-offs is more likely to occur.
Most importantly, the use of the MAP can lead to producing strategic outcomes when used in structuring recurring decisions.
Interested in gaining more understanding of Strategic Decision Making? You can learn more and download an editable PowerPoint about Strategic Decision Making here on the Flevy documents marketplace.
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