strategic decision making paper summary
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B E R N A R D O A M E Z C U A
STRATEGIC DECISION MAKING
PAPER
Cites
Google Scholar 688
Scopus Not found
Literature Review, Special Issue
AUTHORS
• Eisenhardt Katleen M. • Professor; Stanford
Warren Ascherman Professorship in the School Engineering
• Her research focus is on strategy and organization in uncertain, high-velocity markets with emphasis on complexity and power theories
• Had received numerous awards
• kme@stanford.edu
• Zbaracki, Mark J. • Associate Professor in
General Management at the Richard Ivey School of Business. (Western Ontario)
• His research addresses how organizations implement management practices, including Total Quality Management, supply chain management, and strategic pricing initiatives.
• mzbaracki@ivey.uwo.ca
JOURNAL
• SMJ is devoted to the improvement and further development of theory and practice of strategic management and it is designed to appeal to both practicing managers and academics.
• The journal also publishes communications in the form of research notes or comments from readers on published papers or current issues. (Forum)
Scopus SNIP 2010: 5.60
ABSTRACT
The article reviews the strategic decision making (SDM)
literature by focusing on the dominant paradigms:
Rationality and bounded rationality
Politics and power
Garbage can
They review the theory and key empirical support, and
identify emerging debates within each paradigm.
Finally they propose a research agenda that
emphasizes a more realistic view of strategic decision
making.
WHAT IS SD?
• Strategic Decision is one which is “important” in
terms of the (Mintzberg, Raisinghani and Theoret,
1976: 246):
• Actions taken
• Resources committed, or
• Precedents set
• Infrequent decisions made by the top leaders of an
organization that critically affect its health and
survival
RATIONALITY AND BOUNDED RATIONALITY (BR)
Rational action also called
Synoptic or Comprehensive Model of Decision
1. Actors enter decision situations with known
objectives
2. These objectives determines the value of the
possible consequences of the action
3. Actors gather appropriate information and
develop a set of alternative actions
4. Select the optimal alternative
RATIONALITY AND BOUNDED RATIONALITY (BR)
Model Evolution
Hobbes
Consistent, value maximizing calculation
Simon
Bounded rationality
Later variations
Accept rational model but allow repetition and variety
Recent approach
Rationality Bounded Rationality
(Optimize) (Satisfice)
RATIONALITY AND BOUNDED RATIONALITY (BR)
Cognitive limitations • Theory and case studies demonstrated
• Goals can be inconsistent across people and time
• Search behavior is often local
• Standard operating procedures guide much of organizational behavior
Cyert and March, 1963:
• In a review of six top-level planning decisions, found 2 types of search process
• Personnel-induced: strong executives with definite objectives in mind
• Opportunity-induced: search occurs when unexpected opportunities arise.
Carter, 1971
• How standard operating procedures applies to strategic decision in Government?
• “Actions arising from a org. yesterday best predict the actions today” Allison, 1971
• Goals and alternatives by objection model (at ExCom):
• Consider simultaneously few alternatives courses of action, then participants raise objections to a current alternative (discovery of goals and choices trough social process)
Anderson, 1983
RATIONALITY AND BOUNDED RATIONALITY (BR)
Rearrangement and repetition In the classic rational model of choice the identification, development
and selection phases of decision making occur sequentially
Mintzberg et al., 1976, studied 25 decision
processes and generated a model where
these 3 phases have no sequential
relationship.
Identification: decision
recognition and diagnosis routines
Selection: Evaluation-choice and authorization
routines
Development:
Search and design routines
Phases and their
routines come in any
order and repeat (shift,
branch, cycle and
recycle)
RATIONALITY AND BOUNDED RATIONALITY (BR)
Rearrangement and repetition Nutt (1984), studying health-related organizations, found that the
pieces of the rational model are valid, but that they not necessarily
follow a simple, casual sequence. He found 5 types of decision
process, which vary primarily in their approach to search:
Off-the-shelf: Uses aggressive search to find the best available
technique.
Appraisal: Manager use the scientific method to evaluate the
effectiveness of ideas with unknown value.
Hickson, Butler, Cray, Mallory and Wilson (1986) studying 150 firms
found that decision process vary upon decision characteristics
(complexity and political):
With simple matters: smooth and constricted decision process
With complex and contentious matters: More complicated
process with delays and recycling
Rationality Bounded Rationality
RATIONALITY AND BOUNDED RATIONALITY (BR)
¿Where is the optimal point?
Mintzberg and
Waters (1982):
Organizations size affects the
rationality of SDM
Dean and Sharfman (1992):
Threatening environments, high uncertainty and
external control decrease
rationality
Cosier, Janis, Nutt,
Schweiger, Sandberg,
Rechner, Cosier and
Schwenk: Moves with
increasing conflict
Most prevalent
argument: MORE
COMPLEX OR
TURBULENT
ENVIRONMENTS
REQUIRES LESS
RATIONALITY (e.g.
Fredrickson and
Mitchell, 1984)
Schweiger, Sandberg and
Ragan (1986): Tested that
Dialectical inquiry and
devil´s advocacy
produced better
recommendations that
consensus groups
Janis (1982) uncovered
the “groupthink” an
excessive tendency for
concurrence.
RATIONALITY AND BOUNDED RATIONALITY (BR)
An alternative view
Authors don´t agree completely with R-BR continuum. They argue
that rationality is multidimensional, and strategic decision makers are
rational in some ways but not others.
Suggest “heuristics” decision making tactics are effective in fast-
paced, uncertain settings.
There are many variations of bounded rationality
POLITICS AND POWER
Politics inside the organization?
How conflict is resolved? Preferences and choices of the most
powerful people are followed
Decision makers attempt to change the power structure trough
coalition, cooptation, strategic use of information and the use of
outside experts.
Legislative process (1950’s): Decision makers have different goals,
they come together trough coalitions and the most powerful triumph.
Organizations are coalitions of people with competing interests.
May share some goals but also have conflicts.
POLITICS AND POWER
What is politics?
According to Quinn (1980) politics emphasize TIMING
and OPPORTUNISM.
This allows executives to build a power base for their
ideas, accelerating, delaying or being flexible as the
need to change arises.
Authors refers by politics, “those observable, but often covert, actions
by which people enhance their power to influence a decision”
POLITICS AND POWER
An alternative view
Traditional view is that politics are “fluid” and is essential to organizations
for creating effective change and adaptation.
A contradictory view is emerging:
Politics are trigged by power imbalances
Frustrated executives turn to politics in autocratic situations.
Politics are static, as decision makers rely on the same allies and the
same politics time after time.
Politics is ineffective. Many people dislike it.
Authors conclude that politics create animosity, wastes times, disrupts
information channels and leads to poor performance.
GARBAGE CAN (GC)
What is?
The GC model describes decision making in highly ambiguous settings
(organized anarchies)
Ambiguity surfaces in 3 principal ways:
1. Problematic preferences: among decision makers
2. Unclear technology: people have a loose understanding of means and
ends.
3. Fluid participation: involvement of participants depends upon their
energy, interest and other demands on their time.
The GC model calls attention to the importance of chance
GARBAGE CAN (GC)
GB model streams
Decision making
Participants-people
Solutions-answer
Problems-concerns
Choice-opportunities-
occasions
Decisions depends
strongly on timing and luck
Decisions are fuzzy and
are not the result of
analysis
Individuals are not sure
about what they want
and change their mind
often
(Random confluence)
GARBAGE CAN (GC)
Amplifying the GC model
Several case studies and empirical results show:
As deadlines are imposed decision making process tend to
become less like a GC because
Force the ejection of extraneous and focus on the remaining issues
The number of participants decreased, but the remaining
participants are more knowledgeable and participation more
frequent
Longer time perspective improves the fit with the GC model. Short
time perspective is better captured by rational and political models
of choice
GARBAGE CAN (GC)
An alternative view Although problematic preferences have empirical support, there are
common themes throughout the choice process
Participation is not always so random, but rather is a consequence of
institutional roles, politics and the phase of the decision process. That is
participation is somewhat predictable.
Also, according to Magjuka (1988) the GC model is supported at the
individual level, but overall patterns of participation were clearly
predictable from psychological and demographic variables. The
patterns are purposive, rational and predictable
The BC model must be accurate since small variations in circumstances
could change the outcome of choices
Streams of problems, people, choice opportunities and solutions are
linked by the issue at hand. They are not independent
GC model is more robust as time frames become longer, deadlines are
removed, and institutional forces are diminished
NEW RESEARCH AGENDA
Most scholars believe that people are boundedly
rational, that decision making is essentially political,
and that chance matters
New agenda seek that empirical findings could transcend traditional
perspectives to new, more realistic views.
Future research areas:
Cognition
Normative implications
Conflict
NEW RESEARCH AGENDA
GC model ignores the cognitive capability of decision makers
At the other extreme political model assumes that people are
cognitive superheroes
Both models are unrealistic. Authors propose to achieve a more realistic
view of cognition studying heuristics of strategic choice. Which, how,
why and when they are most appropriate.
Also suggest to incorporate Insight, an instance of apprehending the
true nature of a thing, especially trough intuitive understanding.
A third suggestion is to study Intuition, which is related to continuous
engagement in the details of business. It refers to incremental
adaptations based on deep, intimate knowledge of the situation.
Cognition
NEW RESEARCH AGENDA
Is required to do more normative studies:
To find how effective strategic decision making vary with the size
of the firm, degree of government regulation, pace of technical
change, different cultures
In profit-seeking firms
To deep in the meaning of “successful outcome”
Rational: Best quality
Political: Getting their own way in battles
Garbage Can: No relation with success
To examine decision outcomes at different levels of organizations
Is decision quality and speed simultaneously achievable?
Normative implications
Garbage Can
• Ignores Conflict
Rational
• A mean to improve problem solving
• No real insight on how is resolved
Political
• Glorifies conflict
NEW RESEARCH AGENDA
Conflict
To improve realism of conflict, explore:
Benefits Vs. Costs
To answer questions like: Some sources of conflict are more beneficial
than others? Is there an optimal level of conflict? How relates to
emotion (anger, frustration, animosity) and decision speed?
Incorporate new approaches like resolving conflict trough
cooperative decisions, building trust, maintaining equity and evoking
humor
Combine with negotiation literature
PROS AND CONS
PROS
• Defined posture
• Use of tables, specifying author(s), method, sample, description and conclusion
• Good structure: By model and then by dates
• Summary on every model and final conclusion
• Refers to author´s original work
• Future agenda
CONS
• Overloaded tables,
including authors who
barely are mentioned
• Publishing date
• Lack of studies on
profit-seeking firms
THANKS
HEURISTICS
• http://www.merriam-
webster.com/dictionary/heuristic
• Involving or serving as an aid to learning, discovery,
or problem-solving by experimental and
especially trial-and-error methods
• also : of or relating to exploratory problem-solving
techniques that utilize self-educating techniques (as
the evaluation of feedback) to improve
performance
Examples of this method include using a "rule of thumb", an
educated guess, an intuitive judgment, or common sense.
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