MODULE 5: STRATEGIC

DECISION-MAKING
GROUP 4
ENRIQUEZ, JOHN MARCO
GARUNG, ARIANNE JADE
LAXA, PATRICIA NICOLE
LOSITO, MA.JESSEL
 WHAT IS STRATEGIC DECISION-MAKING?
Strategic Decision-Making - Involves making long-term decisions,
usually three to five years, to achieve the company’s goals and
objectives. The decisions are intended to provide a competitive edge
by agreeing on how the company should operate and are based on
historical and market research data.
 WHY DECISION QUALITY AND DECISION
ANALYSIS ARE IMPORTANT?
Decision Quality (DQ) - Is a framework that enables you to choose
the best from among good options, adding the most value despite the
complexities and uncertainties the business faces.
Decision Analysis (DA) - Is a systematic approach to evaluating
alternatives using various quantitative tools. It allows you to compare
each alternative’s risks and opportunities and decide on a course of
action according to your uncertainty tolerance.
 SIX ELEMENTS TO ENSURE DECISION QUALITY
1) Appropriate Frame - A mistake in problem definition will most likely lead to a wrong choice. You must specify
the purpose of the decision, its scope, and how you want to approach it.
2) Creative & Doable Alternatives - When faced with a complex situation that calls for a decision, it’s so
tempting to latch on to a “copy-paste” mentality—use the same action taken to address a similar situation
experienced in the past. However, DQ challenges you to bring together the past, present, and future to come
up with creative options.
3) Relevant Information - To select from alternatives, you need to gather data and trends that are objective,
reliable, and reflective of uncertainties and ambiguities.
4) Clarity about Desired Outcomes - What would you like to happen because of your decision? It would be easy
if an alternative fits your desired outcome to a perfect T. However, most of the time, you need trade-offs.
5) Solid Reasoning and Sound Logic - High-level quality decisions are those you can rationalise based on what is
important to you and the information on hand. It requires you to break away from bias and comfort zones.
6) Commitment to Action - A decision that is not translated into action remains just an idea. You must engage
people with authority to decide and those who will carry out the decision in the entire process.
 In this digital age, two of the most powerful decision-making tools
are analytics and decision-automation for corporate environment.
o Analytics provides valuable business insights based on relevant, reliable, and timely
data. These insights, in turn, guide you in understanding why and how desired results are
achieved and predicting the probability of achieving planned results. With this awareness,
you become more efficient at making critical decisions, such as process automation.
Additionally, you tend to mitigate risks by getting an overview of market preferences,
trends, economic forecasts, etc.
o On the other hand, decision-automation uses artificial intelligence to maintain
consistency across decisions, which is absent in traditional decision-making. Regulated
industries, e.g., Banking, can benefit from rules-driven decision-automation, while others
use data-driven automation. This tool boosts productivity and reduces risks. Although both
tools drive efficiency, they leave out the human factor, which is more often the source of
significant risks.
 HIDDEN TRAPS & HOW TO AVOID THEM
1) Anchoring - You decide based on the first information you get; initial impressions, estimates or data. To avoid
this, you need to look at the situation on your own first. Look at it from various perspectives and choose before
you seek the opinion of other people to avoid being anchored by their ideas.
2) Confirming-Evidence - You fall into this trap when you source information that would validate your point of
view. Seek a person you trust to challenge your decision so you can view the situation from another perspective.
Get more information on other alternatives and compare them.
3) Framing. How you frame the problem can lead you to a wrong decision. Try reframing it in several ways,
aiming to use different reference points.
4) Status Quo. This trap refers to your bias towards actions that introduce little or no change. Stop focusing on the
cost of innovation or switching, eyes on the goal! Ask yourself, “if the status quo was not an option, which
alternative would I choose?”
5) Sunk-Cost. You justify past decisions even when conditions have changed significantly, thinking that deviating
from them is an admission of a poor decision. Seek the opinion of people not involved in past choices. Compare
the situation then and now.
 TOP 5 STRATEGIC DECISION-MAKING
1) Rational Model - The rational model is the most traditional and well-known decision-making model. It is
based on the assumption that decision-makers think rationally and will make decisions that maximize their
utility. The steps in the rational model are:
o Define the problem
o Identify objectives
o Generate alternatives
o Analyze alternatives
o Select the best alternative
o Implement the chosen alternative
 TOP 5 STRATEGIC DECISION-MAKING
2) Intuitive Model - The intuitive model is a simple decision-making method that relies on intuition or gut
feeling. It's best for straightforward situations and experienced individuals. However, it can be unreliable under
stress and lacks rational thought, making it less suitable for unsure individuals. Therefore, it's not the best
choice.
3) Recognition Primed Model - The recognition primed model (RPM) is a decision-making model developed
by Garth Saloner and David A. Rosenkrantz in the 1990s. It follows the recognition-primed decision (RPD)
theory, which suggests people make decisions by recognizing patterns and choosing the best course of action.
4) Bounded Rationality Model - Although a rational model is ideal, sometimes, there are one or multiple
constraints in a given business situation. There could be time constraints, limited information or resources,
making a perfect decision almost impossible. In such a scenario, it is best to go for a business solution which
offers the best possible outcome under the present circumstances. This is the core principle of the bounded
rationality model.
5) Creative Model - The creative model involves leaders making innovative decisions by thinking outside the
box, replacing conventional wisdom with novel ideas. This challenge can lead to revolutionary ideas and
transform the business landscape.
 WHAT IS DECISION-MAKING FRAMEWORK?
A decision-making framework is a tool or a technique a business or an individual uses
to make a decision. This framework or model outlines all key activities necessary for
making a decision. It also provides an overview of the process.

There are different types of frameworks, and each has a structure. This structure is
critical as it provides guidelines on how to evaluate a decision based on a company’s
values and goals. A framework aims to help teams consider such factors related to the
decision as:
• Context
• Consequences
• Best and worst outcomes
 TYPES OF DECISION-MAKING FRAMEWORKS

• Logic Tree Model

• Working Backward
• Regret-minimization Framework
• Decision Matrix
• Accepting Uncertainty
• Eisenhower Matrix
 TOP 5 STRATEGIC DECISION-MAKING
1) Logic Tree Model - The logic or decision tree is a critical thinking model. It is based on root-cause
analysis. The idea is to visualize the problem by decomposing it into small chunks. The model was first
described in the 1960s and used to track triggering events that may lead to failure. Today, the model is
used in decision-making.
Here’s how it works:
• Specify the problem;
• List all possible solutions (even if unrealistic);
• Consider each solution and list potential triggers;
• Create a tree BASED ON COLLECTED DATA.
 TOP 5 STRATEGIC DECISION-MAKING
2) Working Backward - This model should be perfect if a company uses such techniques as
brainstorming or blue-sky thinking. The idea is to create a clear structure a team will use
when brainstorming or blue-sky thinking. Creating a model requires identifying the final
goal. When the goal is set, work backward, stating all necessary steps to reach the goal.
3) Regret-minimization Framework - This model minimizes regrets by considering long-
term goals instead of short-term gains. The idea is to project oneself in the future at an old
age. Then the person has to visualize whether missing a specific opportunity has negative or
positive results.
4) Decision Matrix - Stuart pugh coined the model. It is based on a mathematical approach
to categorizing solutions with multiple characteristics (or dimensions).
 TOP 5 STRATEGIC DECISION-MAKING
Here’s how it works:
• List all options in a column.
• Choose comparison criteria and insert them in the first line of a table.
• Score each criterion. Consider 5, 10-point, or any suitable scoring system.
• Evaluate each criterion to prioritize each characteristic. Consider using the 1 to 10 system, where 1 is
terrible, and 10 stands for excellent.
• Multiply the score by its values.
• Add all numbers in each line to get the total score.
5) Accepting Uncertainty - Many decision-makers prefer to ignore uncertainty. However, it is recommended
to consider that the information may be incomplete, which could lead to a flawed decision. That’s why
decision-makers may accept uncertainty if there is no other option or the cost of avoiding this solution is too
high. This model is popular when it comes to environmental policy decisions.
 TOP 5 STRATEGIC DECISION-MAKING
6) Eisenhower Matrix - A US army captain, dwight D. Eisenhower, developed this model. He introduced it in
the 1950s as a framework that aims to help make better decisions. According to the eisenhower matrix, a
person has to break the decision-making process into four boxes: do, decide, delegate or delete.

Urgent Not urgent

DO (Urgent, Important)
 A complaining client. DDECIDE (Not urgent, important)
Important
 Hiring a barista.
 A pipe leak.

DDELEGATE (Urgent, not important)

DELETE (not urgent, not important)
Not Important  Create an interview questionnaire to
 Checking social media.
hire a barista.
 ADVANTAGES OF DEVELOPING A DECISION-
MAKING FRAMEWORK
o Saves time. Employees with guidelines that help them make everyday decisions don’t waste managers’ time.
Moreover, making simple decisions takes less time and positively influences the company.
o Takes off the burden from the management. A framework outlines the company’s values and its course.
The management makes decisions according to the framework that aligns with the company’s course. It
facilitates the process of finding the right decision, while the management is positive that it meets the
company’s goals.
o Defines roles and responsibilities. A team reaches consensus faster since everyone knows their roles.
Frameworks greatly reduce friction points regarding the ambiguity of who has to come up with a solution. A
framework defines every employee’s role in the decision-making process.
o Fills in the gaps to avoid lack of context. A typical framework has a step where the team collects relevant
data to develop an informed solution. Thus, it ensures the team closes information gaps.
o Consistent process. Companies expand, and teams grow. When new employees hop on board, they start
doing things their way if the business doesn’t have a framework. Having one set of rules makes it easier to
 ADVANTAGES OF DEVELOPING A DECISION-
MAKING FRAMEWORK
o List all potential outcomes of a situation. Predict any possible results of a decision. From this point, moving toward
the right choice should be easier.
o Set the period and delegate responsibility. Set the period for each decision. Consider if it should be a quick decision
or if it’s important to take time. Delegate responsibility to specific employees so that decision-making is more
efficient.
o Set guidelines for collecting information. Making the right decisions requires gathering any related information.
Create a set of rules for gathering and filtering data to get useful information.
o Risk management. It’s critical to list all the risks of making a bad decision. List every bad outcome and whether it’s
wise to take the risk in each case.
o Outline the company’s values. Everyone has values, but in the company’s decision-making process, the decision
should reflect the organization’s values. It’s a critical task, especially when you have a team of employees, since
everyone has to reach a consensus.
o Outline the pros and cons of each solution. Having a framework where each solution has a list of pros and cons
makes it easier for the management to estimate potential outcomes for the company.
RISK MANAGEMENT
AND ANALYSIS
 RISK MANAGEMENT AND ANALYSIS
Risk Analysis and Management Is an ongoing activity. To detect new risks and keep an eye on existing ones,
stakeholders must be consulted and communicated with on a constant basis.

Risk analysis and management identifies the areas of uncertainty and evaluates those uncertainties in order to
develop and manage ways to deal with such risks.
- Failing to identify and manage risks may affect the value of solutions negatively.

Risk Analysis and Management involves:

o Identifying;
o Analyzing; and
o Evaluating Risks
 RISK MANAGEMENT AND ANALYSIS

Risk Management: The process for locating, evaluating, and managing risks
to the assets and profits of a company.
o These risks stem from a variety of resources including financial uncertainties,
legal liabilities, technology issues, strategic management errors, accidents,
and natural disasters.

Risk Analysis: It is important for business analysts to know risk analysis

because it helps in enabling the effective implementation of change.
 HOW DO YOU EFFECTIVELY CONDUCT A RISK
ANALYSIS AND MANAGEMENT?
Step 1. Identify Your Organization’s Risk Tolerance
It is essential to have a clear understanding, definition and communication of the
organization’s and its stakeholder’s risk appetite, threshold, and tolerance.

An organization may be:

• Risk-averse - Seeks to reduce risk as much as possible and gravitates toward attaining
high-level of certainty on its projects.
• Risk-neutral - The benefits of the risk response must be equal to outweigh the costs.
• Risk-seeking - Accept low chances of success as long as the benefits of success are
considerably high.
 HOW DO YOU EFFECTIVELY CONDUCT A RISK
ANALYSIS AND MANAGEMENT?
Step 2. Complete A Risk Register To Assess The Risk
A risk register is a tool that is used to help for discussions among stakeholders
and key stakeholders regarding the organization’s key objectives and the
unplanned events that could interfere (or enhance) the organization’s ability to
achieve them.
A risk register is a list of an organization’s risks, along with their ratings (scores
or risk levels), responsible executives , areas affected and a summary of the
actions being taken in response to the risk.
 HOW DO YOU EFFECTIVELY CONDUCT A RISK
ANALYSIS AND MANAGEMENT?
Step 3. Identify A Response Strategy
For negative risks, there are 4 ways in which an organization may choose to respond:
o Transfer: the responsibility of bearing the risks are transferred to another entity, usually in
the form of insurance.
o Avoidance: the organization does all it can to ensure that the risk does not occur.
o Mitigation: the organization reduces the chances of the risk occurring and also identifies
alternatives for reducing the consequences.
o Acceptance: when there is no way to avoid, transfer or mitigate, the organization accepts
that there is nothing that can be done and makes no effort to deal with it.
 HOW DO YOU EFFECTIVELY CONDUCT A RISK
ANALYSIS AND MANAGEMENT?
For positive risks, there are also 4 different ways an organization can respond:
o Acceptance: the organization chooses to accept the opportunity once it lands.
o Exploit: the organization actively takes steps to ensure that the opportunity
materializes.
o Enhance: this is the exact opposite of mitigating. The organization takes
steps to increase the probability of an opportunity occurring and its associated
benefits, should it occur.
o Share: involves working with another entity to increase the probability of the
opportunity occurring and sharing the benefits.
 ETHICAL CONSIDERATIONS IN DECISION
MAKING
o Ethical considerations in business decision-making involve balancing profit with right and
wrong outcomes, moral principles, fair processes, and resolving dilemmas using
multicriteria analysis tools.
o The relationship between moral values and financial performance is a difficult aspect of
ethical issues in business decision-making.
o Businesses must make difficult decisions that require striking a balance between financial
objectives and ethical standards when faced with situations where profit-driven actions
may collide with ethical principles.

• Ethical decision-making is crucial in forming corporate branding and retaining

customers in today’s socially sensitive industry.
 ETHICAL CONSIDERATIONS IN DECISION
MAKING
Businesses that put morality and ethics:
o Can gain more customers
o Improve their brand image
o Increase their financial performance

Unethical activity can hurt a company’s reputation and result in lost sale.

The ethical problems in corporate management:

• Integrity, trust, justice, fairness, compliance, diversity, decision-making, and leadership ethics.

o These complicated problems call for a thorough comprehension and solution. Furthermore, effective
decision-making requires managerial ethics that prioritize qualitative values, particularly in small and
medium-sized businesses.
 ETHICAL CONSIDERATIONS IN DECISION
MAKING
Ethical considerations in decision-making involve weighing the potential
consequences of actions against moral principles and values. This entails
considering fairness, honesty, accountability, and the well-being of
stakeholders. It's about making choices that align with ethical standards and
respect the rights of all involved parties.

One example of ethical consideration in decision making is ensuring fairness

and impartiality, especially when making choices that impact multiple
stakeholders. This might involve weighing the interests of all parties involved
and striving to minimize harm while maximizing benefit.
 REFERENCES

o HTTPS://WWW.LINKEDIN.COM/PULSE/STRATEGIC-DECISION-MAKING-ITS-VARIOUS-FRAMEWORKS-CO
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AL%20AND%20MARKET%20RESEARCH%20DATA
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o HTTPS://WWW.JAROEDUCATION.COM/BLOG/TOP-5-DECISION-MAKING-MODELS-IN-STRATEGIC-
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o HTTPS://WWW.BOOKSTIME.COM/ARTICLES/DECISION-MAKING-FRAMEWORK
o HTTPS://BAKNOWLEDGESHARE.COM/RISK-MANAGEMENT-AND-ANALYSIS-FOR-BUSINESS-ANALYSIS/
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o BUSINESS ANALYSIS BOOK OF KNOWLEDGE
o STRATEGY ANALYSIS - A GUIDE TO THE BUSINESS ANALYSIS BODY OF KNOWLEDGE (BABOK GUIDE)
o STRATEGIC MANAGEMENT – THEORY AND CASES (GARETH R. JONES, CHARLES W.L. HILL)
o STRATEGIC MANAGEMENT – CONCEPTS AND CASES (FRED R. DAVID, FOREST R. DAVID)
THANK YOU!!!