Does CEO optimism affect strategic process?

Critical Synopsis for Strategic Management for Sustainability

Done By Nadika Dharmawardena Student ID S00094123 (Word Count 306)

Does CEO optimism affect strategic process?

By- James R. Langabeer II and Jami DelliFraine
Langabeer II & Delifraine (2011)explorespossible affects CEO optimism could have on the strategic process and how it affects the approach used for decision making .I.e. incrementalism associated with heuristics versus much conservative comprehensive rational approach.They state that optimist often brings about an array of benefits ranging from creative problem solving to tendency to be proactive and eagerness to face challenges. They claim that Optimism theorist rely on the self-regulation theory which suggest that behaviours such as decision making are based on perceived discrepancies on ones current state and a possible future state. With regard to the strategic process optimistic executives could view their decision making capabilities as superior, along with perceiving the environmental conditions favourably. As a result many optimists opt to facilitate the less rational and more incremental approach. Choo (2008) propose that the unconscious reliance on habitual heuristics can help explain the existence of many blind spots that makes one overlook or fail to process information of upmost importance. This as a result will lead to many blunders made by corporate executives. Ross &Staw (1993) indicates that methods based on heuristics can at times work against an organisation. For example- Where a rational approach would indicate the necessity to withdraw to avoid further losses many decide to persist utilising resources which makes no difference to justify actions and protect past decisions. In conclusion, Forgas (2001) suggests that one should keep in mind that neither optimistic nor negative affects should be considered beneficial or detrimental for the strategic process. Rather they lead to different decisions, more creative and innovative where optimism is concerned and a much more conservative approach in case of negative ones. Furthermore the strategic processes used will factor in other additional criteria such as the organisation size and the nature of the environment (Langabeer II &Delifraine, 2011).

References
Carpenter, M., & Sanders, G. (2009) Strategic Management: Concepts and Cases (2nd Edition), Pearson Prentice Hall. Choo, C.W. (2008).Organisational disasters: why they happen and how they may be prevented. Management Decision. 46(1), 32-45 Forgas, J.P. 2001. Feeling and thinking: summary and integration. In Feeling and Thinking: The Role ofAffect in Social Cognition, Forgas JP ed., Cambridge University Press: Cambridge, UK

Langabeer II, J.R. & Delifraine, J. (2011), Does CEO optimism affect strategic process?.Management Research Review. 34(8), 857-868. Ross, J. & Staw, B.M. (1993), Organizational escalation and exit: lessons from the Shoreham Nuclear Power Plant. Academy of Management Journal.36 (4), 701-32.