STRATEGIC

DECISION MAKING
 CONTENT
 What is strategic decision making?
 Types of decision making
 Process of strategic decision making
 Approaches to Strategic Decision Making
WHAT IS STRATEGIC DECISION
MAKING?

“Decision making is the selection

based on some criteria from two or
more possible alternatives.”
-George.R.Terry
TYPES OF DECISION MAKING

1.Programmed decision
A decision that is fairly structured or
Recurs with some frequency (or
both) 2.Non programmed decision
A decision that is relatively
unstructured and occurs much
less often than a programmed
decision
PROCESS OF STRATEGIC
DECISION MAKING
Define the Problem

Gather Information

Develop and Evaluate Options

Choose the Best Action

Implement and Monitor the Decision

 1. DEFINE THE PROBLEM
Consider these questions:
 What is the problem? Can it be solved? Is this
the real problem or a symptom of a larger
one?
 Does it need immediate attention or can it
wait? Is it likely to go away by itself? Can I
risk ignoring it?
 What is my objective? What’s to be
accomplished by the decision?
 2. GATHER INFORMATION
Seek information on how and why the problem
occurred:
 Stakeholders: Talk to individuals or groups
affected by the problem
 Facts and data: research, benchmarking
studies, interviews with credible sources,
observed events
 Constraints: Lack of funding, resources,
cultural barriers
 Ask: What am I not seeing? What have I
missed?
 3. DEVELOP AND EVALUATE
OPTIONS 
Generate a wide range of options:
 Choose options that show promise, need more
information, can be combined or eliminated, or
will be challenged.
 Weigh advantages/disadvantages of each.
Consider cost to the business, potential loss of
morale/teamwork, time to implement the
change, whether it meets standards, and how
practical the solution is.
 Predict the consequences of each option.
(“If/Then” or “What if?”)
 Ask: What is the worst solution?
 4. CHOOSE THE BEST ACTION
Select the option that best meets the decision
objective:
 Consider factual data, your intuition, and
your emotional intelligence when deciding a
course of action.
 Accept that the solution may be less than
perfect.
 Consider the middle ground. Compromising
on competing solutions may yield the best
decision.
 5. IMPLEMENT AND MONITOR
THE DECISION
Develop a plan to implement and monitor
progress on the decision:
 Step-by-step process or actions for solving
the problem
 Communications strategy for notifying
stakeholders
 Resource identification/allocation
 Timeline for implementation
 Measurements/benchmarks to gauge progress
APPROACHES TO STRATEGIC DECISION MAKING

The following are the most common

approaches:
1. Rational-analytical approach,
2. Intuitive-emotional approach,
3. Political-behavioural approach, and
4. Administrative approach
1. RATIONAL-ANALYTICAL APPROACH

Rational-analytical approach assumes that the decision

maker is a ‘unique actor who behaves intelligently and
rationally’. He is fully aware of all available feasible
alternatives and considers all the alternatives as well as
the consequences and chooses the alternative that secures
the maximum gain.
This approach follows the process as:
(a) Decision makers have complete information about the
decision situation and possible alternatives.
(b) They can effectively eliminate uncertainty to achieve a
decision condition of certainty.
(c) They evaluate all aspects of the decision situation
logically and rationally.
2. INTUITIVE-EMOTIONAL APPROACH:

Intuitive- emotional approach is opposed to rational decision-

making. Managers sometimes decide to do something
because it feels “right”.
Proponents of this approach point out that, in many cases,
judgment may lead to “better” decisions than
“optimizing” techniques. In fact, the timing of when to
implement a decision based on the analysis may require an
intuitive feel for what the data are telling you.
In many cases, judgment might be preferable to relying on
the analysis. Of course, all managers but most especially
inexperienced, should be careful not to rely too heavily on
intuition.
3. POLITICAL-BEHAVIOURAL APPROACH:

This approach suggests that real decision makers must

consider a variety of pressures from other people who are
affected by their decisions. An organization interacts with
different stakeholders in interdependent exchange
relationships. A stakeholder is any group or individual who
can affect or is affected by the achievement of an
organization’s purpose.
Unions exchange labour for decent wages and job security.
Customers exchange money for products and services.
Owners exchange capital for expressed returns on
investment. Suppliers exchange inputs for money and on-
going business. Governments exchange protection and
economic security for taxes.
4. ADMINISTRATIVE APPROACH:
Herbert A Simon was one of the first person to recognize that
decisions are not always made with rationality and logic.
His administrative model holds that managers- (i) have
incomplete and imperfect information, (ii) are constrained
by bounded rationality, and (iii) tried to satisfice when
making decision.
THANK YOU