Strategic DecisionMaking

Farah Naz Naqvi

Introduction
to
Strategic Decision Making
(SDM)

Farah Naz Naqvi

Strategy Plus Decision Making (SDM)

Strategy
the art and science of understanding, creating and
choosing options.
Large-scale, future-oriented master plan for
interacting with competitive
environment(competitive advantage) to achieve
objectives
Decision Making
means the power to choose.
Making a choice from two or more alternatives.

Choosing from option

Farah Naz Naqvi

SDM

Sources of Organizational Decisions

Problem
A situation in which existing organizational
performance is less than desirable.
discrepancy or disparity between an existing and
desired state of affairs.

Opportunity
A situation that has the potential to provide additional
beneficial outcomes.
Farah Naz Naqvi

Hierarchy/Level of Strategy
Corporate Level:
Overall Direction of Company and Management
of Its Businesses
by Board of Directors, CEO and Administration
Business Level:
Competitive or cooperative business strategies.
Business and corporate managers
(SBU-Strategic
business Unit).
Functional Level:
Maximize resource productivity
i.e. product, geographic and functional

Farah Naz Naqvi

Classification of Decision-Making
Organisational theory

classifies decision-making into

fundamentally three different types:

1.

Strategic decision-making is concerned with long-term goals &

policies for resource allocation/management to meet defined
objectives generally made by top level managers.
( More Unstructured)
1. Management or Tactical decision-making is concerned
implement the strategy with the acquisition & efficient utilization
of resources to achieve defined goals made by middle level
managers. (Semi Structured)
2. Operational decision-making is concerned with the day-to-day
running of the business effective & efficient use of resources for
execution of specific tasks ,generally made by lower level managers.
(More structured)
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What is strategic decision making???

Chandler (1962)
Ansoff (1965)
Ackoff (1970)
Andrews (1971)
four studies are among the first to formally
propose the distinction between:

The process of strategic decision

The content of strategic decision.
Farah Naz Naqvi

Definitions of Strategic Decision Making

The content of strategic decision:
Content studies on strategic decision-making focus on the subject of
the strategic decision itself and on the relationship between specific
decisions and performance outcomes.

The process of strategic decision:

the strategic decision-making as a process focuses on the actions that
lead to and support strategy.

Definition of strategic decision making :

is the process of choosing and implementing actions that will affect
an organization's future abilities to achieve its goals.
Farah Naz Naqvi

Characteristics of Strategic Decision Making

1. Rare: Strategic decisions are unusual &complex
and dont have to follow a precedent.
2. Consequential & long-term: Strategic decisions
require substantial resources and demand
commitment for extended period.
3. Directive: Strategic decisions set precedents for
lesser decisions and future actions throughout an
organization.
4. Major Resource Implication: source of specific
decisions and performance outcomes.
Farah Naz Naqvi

Steps in Strategic Decision Making Process

Strategy Formulation(six steps)
1.
2.
3.
4.
5.
6.

Evaluate Current Performance : Results and Mission

Review Corporate Governance: BOD, top management.
Scan and Assess External Environment.
Scan and Assess Internal Environment.
Analyze strategic (SWOT) factors.
Generate, evaluate, and select the best alternative strategy

7.

Strategy Implementation: Implement selected

strategies via programs, budgets, and procedures

8. Evaluation and Control: through feedback systems,

and the control of activities to ensure their minimum deviation from
plans.
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MINTZBERGS Modes & Approaches to

Strategic Decision Making
1. Entrepreneurial Mode:

powerful individual
Focus on opportunities (proactive)
dominant goal is growth

2. Adaptive Mode:

reactive solutions to existing problems

move a corporation forward

3. Planning Mode:
systematic gathering of appropriate information for analysis
for both proactive for new opportunities and reactive
solution of existing problems.

4. Logical Incrementalism:

top management has clear idea of the corporations mission and

objectives.
development of strategies
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Strategic decisions at different level of hierarchy

Top Level

Middle Level

Lower Level

Corporate level

Business level

Functional level

Tactical/Managerial

Operational

Strategic
More Unstructured

Semi Structured

Farah Naz Naqvi

More structured

12

Features of Strategic Decisions making

Corporate -level decisions:
More risk, cost, and profit potential
More flexibility
Longer time horizons

Business -level decisions:

Bridge decisions at corporate and functional levels
Are less costly, risky, and potentially profitable than corporatelevel decisions
Are more costly, risky, and potentially profitable than
functional-level decisions

Functional- level decisions

Implement overall strategy
Involve action-oriented operational issues
Are relatively short range and low risk
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How decisions are made?

Core STRATEGIC DECISION MAKING PARADIGMS

Allen and Coates( 2009 ) gave detail models of decision

making useful for strategists in conceptualizing decisions.

Rational Model( Hobbes)

A particular class of procedures for making choices
based on cognitive assumptions:

rational-comprehensive model, borrows from economic

theory
picking the best alternative based on specific criteria
optimal choice;
Consistent and value maximing choices with specified
constraints
optimal procdures and outcomes (intelligence);
statistical decision analysis.
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How decisions are made?

Core STRATEGIC DECISION MAKING PARADIGMS
Bounded-Rationality Model (March &Simon)
Humans have limitations of both:

Knowledge and computational capcity:

For discovering alternatives;
Computing their consequences under certainty or uncertainty;
And making comparisons among them.
Satisfice (first alternative encountered ) good enough
Garbage Can Model(March,Cohen,and Olsen)
The decisions are made based on chance and unsystematic way.
Model based on theory of organizational anarchy( inconsistent
and ill-defined preferences in organization)
operate on the basis of hit & trial method and impulsively.
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How decisions are made?

Core STRATEGIC DECISION MAKING PARADIGMS

Polis or Political Model (Deborah Stone)

1.

State goals ambiguously and keep some secret.

2. Be prepared to shift and redefine goals as the political situation dictates.

3. Keep undesirable alternatives off the agenda by not mentioning them.
4. preferred alternative appear to be the only feasible one.
5. Focus on one part of the causal chain and ignore politically difficult ones.
7. Selectively project consequences that make decision look the best.
8. Choose the action that hurts powerful constituents the least, but portray
decision as creating the maximum social good.
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Article on

Strategic Decision Making

Eisenhardt KM, Zbaracki MJ.

Abstract
Primary purpose the article reviews the strategic decision
making (SDM) literature by focusing on the dominant
paradigms:
Rationality and bounded rationality
Politics and power
Garbage can
Secondary purpose to propose a research agenda that
emphasizes a more realistic view of strategic decision making.
The study review the theory and key empirical support, and
identify emerging debates within each paradigm.
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WHAT IS SDM?
Mintzberg, Raisinghani and Theoret, 1976:
Strategic Decision is one which is important in
terms of the:
Actions taken
Resources committed, or
Precedents set
Infrequent decisions made by the top leaders of
an organization that critically affect its health
and survival.
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RATIONALITY AND BOUNDED RATIONALITY

cognitive assumption
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 action
4. Select the optimal alternative
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RATIONALITY AND BOUNDED RATIONALITY

Model Evolution:
Hobbes

Simon

Later
variations

Consistent, value maximizing with specific constrains

Bounded rationality --satisfice
Accept rational model but allow repetition and variety

Recent Approach:
Rationality (Optimize)

Bounded Rationality (Satisfice)

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RATIONALITY AND BOUNDED RATIONALITY

Cognitive Limitations:
Cyert and
March, 1963

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

Carter, 1971

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.

Allison, 1971
Anderson,
1983

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RATIONALITY AND BOUNDED RATIONALITY

classic rational model

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

Identification
25 decision recognition and processes
and generated a model where diagnosis
routines these 3 phases have no sequential
relationship.
Phases and their routines come in
any order and repeat.
Development

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Selection
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RATIONALITY AND BOUNDED RATIONALITY

Rearrangement and repetition

found that the pieces of the rational model
are valid, but they not necessarily follow a simple,
casual sequence. He found 5 types of decision process.
Uses aggressive search to find the best
available technique.
Manager use the scientific method to evaluate
the effectiveness of ideas with unknown value.

studying 150 firms found that decision process vary

upon decision characteristics (complexity and
political):
With
: smooth and constricted decision
process
With
: More
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Naqvi
complicated process with
delays
and recycling

23

RATIONALITY AND BOUNDED RATIONALITY

Rationality

Mintzberg and Waters

(1982): Organizations
size affects the
rationality of SDM
Most prevalent
argument: MORE
COMPLEX OR
TURBULENT
ENVIRENMENTS
REQUIRES LESS
RATIONALITY

Bounded Rationality

Dean and Sharfman (1992):

Threating environments, high
uncertainty and external
control decrease rationality

Cosier, Janis, Nutt, Schweiger,

Sandberg, Rechner, Schwenk:
Moves with increasing conflict

Schweiger, Sandberg and Ragan (1986):

Tested that dialectical inquiry and devils
advocacy produced better
recommendations that consensus groups
Farah Naz Naqvi

Janis (1982): uncovers

the group think an
excessive tendency for
concurrence
24

Rationality and Bounded Rationality

Rationality and Bounded Rationality no longer
vary controversially and empirical research
supports :
1. Cognitive limits to rational model. i.e.
satisfice instead of optimizing.
2. Different paths of identification, development
and selection.
3. Complexity of problem and conflict among
decision maker.
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RATIONALITY (R)AND BOUNDED RATIONALITY (BR)

An alternative view
Authors dont 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

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POLITICS AND POWER---social assumption

Legislative process (1950s): Decision makers have different goals,
they come together trough coalitions and the preferences of the
most powerful triumph..

Organizations are coalitions of people with

competing interests. May share some goals but also
have conflicts.
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
the use of outside experts
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POLITICS AND POWER

Authors refers by politics, those observable, but
often covert, actions by which people enhance
their power to influence a decision.
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.
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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:

hostility,
wastes times,
disrupts information channels
leads to poor performance
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GARBAGE CAN (Cohen &March)

The GC model describes decision making in highly
ambiguous settings (organized anarchies)

Ambiguity surfaces in three 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.
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GARBAGE CAN (GC)

Amplification 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
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GARBAGE CAN (GC)

An alternative view
Aaccording 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
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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 go beyond

traditional perspectives to new, more realistic views.
Future research areas:
Cognition
Normative implications
Conflict

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NEW RESEARCH AGENDA

Cognition
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.
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.
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NEW RESEARCH AGENDA

Normative implications
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,
and 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?
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NEW RESEARCH AGENDA

Conflicts:
Garbage Can

Ignores
conflict

Rational

A mean to improve
problem solving
No real insight on
how is resolved

Political
Glorifies 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?
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NEW RESEARCH AGENDA--Conflict

Incorporate new approaches like resolving conflict
trough:
cooperative decisions,
building trust,
maintaining equity and evoking humor
Combine with negotiation literature

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INERTIA AND CREEPING RATIONALITY

IN STRATEGIC DECISION PROCESSES
By
Saqib Rehman

Understanding INERTIA
In physics, researchers define inertia as the resistance an
object has to change its state of motion. The state of
motion of an object is its velocityspeed with direction.
Thus, inertia is a tendency of an object to resist change in its
velocity.
Huff et al. (1992) see inertia in the context of strategic
management as tendency to remain with the status quo
and the resistance to strategic renewal outside the frame of
strategy.
Hodgkinson and Wright (2002) understand inertia as
habitual reliance on a (previously successful) organizational
recipe or success formula.
Gresov, Haveman, and Oliva, (1993) define inertia as
tendency not to move or act.

Understanding
CREEPING RATIONALITY
As time passes in firms that are not experiencing
turmoil, executives are increasingly socialized, the
top management team remains intact, and the
firm grows. Therefore, it appears that these
conditions, which are natural by-products of an
organization's continued evolution, contribute to
what we call creeping rationality.
The potential importance of creeping rationality
stems from the fact that the character of a firm's
strategic decision process is ultimately reflected
in the firm's actions (Miller, 1987).

VARIABLES OF THE STUDY

Comprehensiveness
Strategic Process Inertia
Sources of Changes in Comprehensiveness
Change in Organizational Size
Executive-team members' intra-firm tenure
Level of executive-team continuity

Comprehensiveness (a measure of rationality)

"the extent to which an organization attempts to
be exhaustive or inclusive in making and
integrating strategic decisions
How comprehensive organizations are, in making
individual strategic decisions and how
comprehensive they are in integrating those
decisions into an overall strategy.
Comprehensive process involves such activities as
searching widely for information, conducting
extensive analyses, and using a formal planning
process, it is expensive.

Comprehensiveness
Synoptic processes, which are based on a
rational model, are appropriate for firms in stable
environments. Since comprehensiveness is a
major feature of synoptic models, this view
implies that a comprehensive decision process
will result in superior performance in a stable
environment. In contrast, a noncomprehensive
process, with its speed and flexibility, would be
expected to have a similar effect in an unstable
environment.

Hypothesis 1
There will be a positive relationship between
comprehensiveness and performance in a
stable environment and a negative
relationship between them in an unstable
environment.

Strategic Process Inertia

There is no need to change a firm's strategic decisionmaking process if it is appropriate for the firm's
environment, if the firm is performing well, and if the
environment does not change.
The existence of a widely described feature of strategic
decision making, which has been variously referred to
as inertia, momentum, or simply habit, argues against
all but relatively modest and incremental
organizational change.
Starbuck argued that such decision making is
nonadaptive because "behaviors get programmed
through spontaneous habits, professional norms,
education, training, precedents, traditions, and rituals
as well as through formalized procedures" (1983: 93).

Hypothesis 2
A firm's comprehensiveness at a given point in
time will be highly and positively related to its
comprehensiveness several years later, and
will exhibit only modest change.

Sources of Changes in
Comprehensiveness
The literature suggested that changes in three
such variablesorganizational size, executiveteam (intra-firm) tenure, and executive-team
membership (i.e., the level of continuity)are
likely
to
produce
changes
in
comprehensiveness.

Change in Organizational Size

As organizations grow, they tend to create
increasingly differentiated and specialized
subunits like planning staffs, as well as
sophisticated information systems and formal
controls (Tushman & Romanelli, 1985).
Mintzherg (1978) suggested that the presence
of such features encourages increasingly
rational decision making.

Hypothesis 3
There will be a positive relationship between
change in organizational size and change in
comprehensiveness.

Executive-team members' intra-firm

tenure
Shared understanding of their firm's typical
decision process can, in turn, lead executive-team
members to rely on established decision-making
policies and procedures (Staw et al., 1981),
particularly those that have been successful
(Cyert & March, 1963). Tushman and Romanelli
argued that the longer executive team members
have heen in their firm, the more likely it is that
"habit becomes a substitute for thought" (1985:
193) in strategic decision making.

Hypothesis 4
There will be a negative relationship between
change in executive-team members' intra-firm
tenure and change in comprehensiveness.

Level of executive-team continuity

For example, as group continuity increases,
communication patterns get routinized
(Wagner et al., 1984), environmental
perceptions become idiosyncratic (Meyer,
1978), and group members grow less
responsive to information that challenges an
existing decision process or its outcomes
(Janis, 1972; Katz, 1982; Tushman &
Romanelli, 1985)

Hypothesis 5
There will be a negative relationship between
level of executive-team continuity and change
in comprehensiveness.

METHODS
Several executives in each firm read a decision
scenario that described a firm in their industry
faced with a major problem. They then
responded to a series of questionnaire items
designed to describe the process their firm
would use if it faced the scenario situation;
questions were designed to measure the
comprehensiveness construct.

 Responses within firms were aggregated and

used correlational analyses to test the
relationship
between
the
level
of
comprehensiveness found in the present study
and that measured four or six years earlier.
The correlational analyses also provided a general
test of the hypothesized relationships between
changes in organizational size and executive team
tenure, level of team continuity, and change in
comprehensiveness; a more rigorous test was
conducted using multiple regression.

 Correlational analyses used to test the relationship

between comprehensiveness and performance during
the suhsequent four or six years. Finally, potential
differences in comprehensiveness across industries
were explored with multivariate analysis of variance.
Interviews were conducted with the CEO of each firm,
who was presented with a list of major decisions, such
as whether to add a product line or build a new plant,
and asked to identify the managers normally involved
in making such decisions. Thus, CEOs provided their
personal views of who comprised the top management
team at their firm.

 Following the scenario were 43 Likert-type questions, 24

single response and 19 multi item, designed to assess the
comprehensiveness of the firms' strategic decision
processes. The questions were divided into four distinctly
headed sections that were used to describe how
comprehensive a firm was in (1) diagnosing the problem,
(2) generating alternatives, (3) evaluating alternatives, and
(4) integrating the decision into any overall strategy that
might exist. Seven questions were common to each step of
this theoretical decision process; 4 questions were unique
to the situation diagnosis, alternative generation, and
alternative evaluation steps, respectively; and 3 appeared
only in the decision integration step.

Conclusions
Present study validates statistically the largely
untested arguments of authors who have
suggested that strategic decision processes tend
to resist all but modest change (Miller & Friesen,
1980a; Mintzberg, 1978; Quinn, 1980; Starbuck,
1983; Tushman & Romanelli, 1985; YasaiArdekani, 1986).
The second major conclusion was that changes in
selected characteristics of organizations and
executive teams were significantly related to
changes in comprehensiveness

Conclusions
The present study provides evidence that
organizational size has important implications for
strategic decision processes. Consistent with
Mintzbergs (1973) observation that firms evolve to a
planning mode as they grow, experience here indicates
that an increasingly comprehensive decision process
indeed accompanies an increase in size. In firms that
got smaller, comprehensiveness declined.
The present study suggests that the effects of tenure
and group composition on decision processes are
substantially different at the strategic level

Conclusions
Results indicate that increases in executive-team
tenure, which tend to be accompanied by high levels of
team continuity, and increases in organizational size,
are associated with increased comprehensiveness.
Creeping rationality is likely caused by increasing
expectations of rationality (DiMaggio & Powell, 1983;
Hannan & Freeman, 1984; March & Sevon, 1984;
Steinbruner, 1974). Results do not suggest that
creeping rationality is a universal phenomenon. All the
firms studied did not exhibit it.

Conclusions
The evidence reported here suggests that the
comprehensiveness
of
strategic
decision
processes exhibits considerable inertia, with only
modest, but important, change occurring.
Moreover, it appears that changes in certain
characteristics of executive teams and
organizations are critical to producing changes in
comprehensiveness. Even modest changes in
comprehensiveness may, in turn, be reflected in
changes in performance. And firms in different
environments may use very different processes in
making the same decision.

DECISION MAKING WITHIN AND

BETWEEN ORGANIZATIONS:
RATIONALITY, POLITICS, AND
ALLIANCE PERFORMANCE

BY
Saqib Rehman

Purpose
The purpose of this study is to explore
alliance-related strategic decision-making
processes at both the firm and alliance levels.

Alliance Performance
Alliance performance is a composite of the
achievement of a harmonious relationship,
the fulfillment of objectives, the successful
acquisition of new capabilities, and the
attainment of an enhanced competitive
position (Kale et al., 2001, 2002).

Procedural Rationality
The extent to which decision makers engage in a
comprehensive collection of the relevant
information, analyze all that information, and
attempt to select the best of all generated
decision alternatives in the presence of
incomplete information and bounded rationality
(Dean & Sharfman, 1996; Ford & Gioia, 2000). It
exists at
Firm Level
Alliance Level

Hypothesis 1
Procedural rationality at the alliance level will
be positively related to alliance performance.

Hypothesis 2
The positive relationship between procedural
rationality at the alliance level and alliance
performance will be stronger when there is a
higher degree of procedural rationality at the
firm level.

Politics
Intentional attempts to enhance or protect
the self-interest of individuals or groups
(Hickson, Wilson, Cray, Mallory & Butler,
1986). It exists at
Firm Level
Alliance Level

Hypothesis 3
Politics at the alliance level will be negatively
related to alliance performance.

Hypothesis 4
The negative relationship between politics at
the alliance level and alliance performance will
be stronger when there is a higher degree of
politics at the firm level.

Method
These hypotheses were tested using a subset of questionnaire
items from a more exten-sive survey of companies that initiated
strategic alliances between 1995 and 2002, as reported in the
Securities Data Companys (SDC) Platinum Database. This database
is widely considered a comprehensive and reliable source on
interfirm collaborations (Anand & Khanna, 2000; Schil-ling, 2009),
as it tracks a variety of publicly available sources, i.e., SEC filings,
trade publica-tions, and other news sources. Sample includes
computers (SIC Codes 357 and 737), tele-communications (366),
pharmaceuticals and chemicals (283, 284, 286, 289), and related
services (874) industries. These industries were previously
identified as high-technology industries (Ha-gedoorn, 1993; Kale et
al., 2002) and are characterized by a high degree of uncertainty,
competi-tiveness, entry costs, and rapidly changing technologies
(Evans, 1991).

MAKING FAST STRATEGIC

DECISIONS IN HIGH-VELOCITY
ENVIRONMENTS
KATHLEEN M. EISENHARDT
Stanford University

Presented by:
RIZWANA HUSSAIN

Strategic Decision Making

It is the process of choosing and implementing
actions that will affect an organization's future
abilities to achieve its goals
The long term direction and scope of an
organization to achieve competitive advantage
through the configuration of resources within a
changing environment for the fulfilment of
stakeholders aspirations and expectations.

High Velocity Environment

It refers to rapid and discontinuous change in
multiple dimensions of the environment, such as
demand, competitors, technology, and regulation.

Bourgeois and Eisenhardt (1988)

Comparison
Fast Decision Makers

Slow Decision Makers

They use more information They use less information

They develop more
They develop fewer
alternatives to meet the
alternatives
pace
They doesnt use such
They use two-tiered process
strategy

Previous Studies
Fast Strategic Decisions make effective work
Performance
Politics seemed to slow down the decision
making

How are fast strategic decisions

made?
How does decision speed link to
performance?

Methodology
Top Management team
CEO interviews
Top Manager interviews

Strategic Decision
Strategic positioning
High stakes
Representatives

Firm Performance
Questionnaires

Secondary sources

High Velocity Micro-Computer industry

Substantial Technological changes
Introduction of the UNIX Operating system
64 K RAM
RISC Computer architecture

Substantial Competitive Change

Entry of IBM
Decline of Texas Instruments
Double-digit demand growth

Description of Micro-Computer
firms
Firms

No. of Employees

N0. of informants

Zap

500

Forefront

90

Promise

185

Triumph

150

Omicron

192

Neutron

200

Alpha

50

Presidential

462

RESULTS
Proposition 1:
The greater the use of real-time information, the
greater the speed of the strategic decision process.
fast strategic decision making is associated with extensive use of
real-time information.
Executives making fast decisions routinely paid close attention to
quantitative indicators such as daily and weekly tracking of
bookings, scrap, inventory, cash flow, engineering milestones, and
competitors' moves. They preferred these operational indicators to
more refined accounting data such as profit.

RESULTS
Proposition 2:
The greater the number of alternatives considered
simultaneously, the greater the speed of the strategic
decision process.
Simultaneous alternatives were options that executives considered
during at least partially overlapping time periods.
The decision makers maintained multiple options, including sale of
the firm's proprietary technology, liquidation, a new strategic
direction, and tactical changes in the existing strategy, during the
decision-making process.

RESULTS
Proposition 3:
The greater the use of experienced
counselors, the greater the speed of the
strategic decision process.
An experienced counselor can help a team deal with the ambiguity
of high-stakes decision making in fast-paced environments.

RESULTS
Proposition 4:
The greater the use of active conflict
resolution, the greater the speed of the
strategic decision process.
First, a team attempts to reach consensus by involving everyone. If
agreement occurs, the choice is made. However, if consensus is not
forth- coming, the CEO and, often, the relevant VP make the choice,
guided by input from the entire team.

RESULTS
Proposition 5:
The greater the integration among
decisions, the greater the speed of the
strategic decision process.
Decisions were examined in relation to their integration with past
and current strategic decisions and tactical plans like budgets and
engineering schedules.
Decision integration helps executives to analyze the viability of an
alternative more quickly. Second, it helps them to cope with the
ambiguity of high-stakes decision making.

RESULTS
Proposition 6:
The greater the speed of the strategic
decision process, the greater the
performance in high-velocity
environments.
One reason may be learning. Executives learn by making decisions,
but if they make few decisions, as slow decision makers do, they
learn very little.
A second reason is that, in fast-paced environments, opportunities
move quickly, and once a firm is behind, it is difficult to catch up.

Conclusion
The current article and the overall research program address the process of
strategic decision making, especially in fast-paced, technology-driven
environments. The microcomputer industry is admittedly an extreme
situation, a setting that places an extraordinary premium on fast, highquality decision making. If the idea presented here is empirical to all other
organizations they can cope the hurdles and they can compete the pace of
fast moving environments.

Group approaches for improving strategic decision

making: a comparative analysis of dialectical
inquiry, devil's advocacy, and consensus
By
Iram Lateef

Introduction
Usually groups of managers with a variety of
information and different perspectives address
strategic problems (Brodwin & Bourgeois, 1984).
Discussion and other interaction among top
executives are frequent means of sharing and
evaluating information and ensuring inferences,
assumptions, and recommendations (Glueck,
1980; Mintzberg, Raisingbani, & Theoret, 1976;
Springer & Hofer, 1978; Stagner, 1969).

Two Group Approaches

Researchers have paid the most attention to
two approaches that rely on the use of
constructive group conflict, dialectical inquiry
and devil's advocacy.
Dialectical inquiry uses debates between
diametric sets of recommendations and
assumptions, whereas devil's advocacy relies
on critiques of single sets of recommendations
and assumptions.
In the case of dialectical inquiry, studies
presented plans and counterplans; for devil's
advocacy, plans and critiques.

Two Group Approaches

Both dialectical inquiry and devil's advocacy
recommend the use of constructive conflict in
group decision making.
Mason (1969) suggested that dialectical inquiry
should lead to higher quality solutions than
devil's advocacy because the latter focuses only
on what is wrong with assumptions and
recommendations rather than on finding or
identifying suitable alternatives.
Devil's advocacy is less effective than dialectical
inquiry in developing alternative sets of
assumptions and recommendations.

CONSENSUS APPROACH
All members of consensus decision making groups are
encouraged to state their assumptions and
recommendations and then freely discuss them until
they reach final decisions (Hall, 1971).
The consensus approach advocates free expression in
groups, it provides no formal procedure for testing and
evaluating these expressions.
Consensus approach provided an excellent opportunity
to compare the effects of formal structured intragroup
conflict techniques with a less structured technique.

HYPOTHESIS 1
There will be differences in performance
between groups using different
approaches to group decision making.
a: Dialectical inquiry groups will perform
better than both devil's advocacy
and consensus groups.
b: Devil's advocacy groups will perform
better than consensus groups.

HYPOTHESIS 2
Among groups using different approaches to group
decision making, there will be differences in
members satisfaction with groups and in their
desires to continue to work with the same groups on
subsequent tasks.

a: Members of consensus groups will have

greater satisfaction and desire to continue
working with the groups on subsequent tasks
than will members of dialectical inquiry or
devil's advocacy groups.
b: Members of devil's advocacy groups will have
greater satisfaction and desire to continue
working with the groups on subsequent tasks
than will members of dialectical inquiry groups

HYPOTHESIS 3
There will be differences in levels of critical
evaluation of assumptions and recommendations
among members of groups using different
approaches to group decision making.
a: Dialectical inquiry groups will produce more
critical evaluation of assumptions and
recommendations among group members than
either devil's advocacy or consensus groups
b: Devil's advocacy groups will produce more
critical evaluation of assumptions and
recommendations among group members than
consensus groups

METHODS
Participants were 120 M.B.A, students at the
University of Houston.
Mean age was 29 years (s.d. = 5.2).
Mean number of years of full-time work experience
was 6.4 (s.d. = 4.9).
Mean number of years of managerial experience
was 2.3 (s.d. = 3.9).
45.8 percent had never been managers.
34.2 percent had been lower-level managers.
15.8 percent had been middle-level managers.
3.3 percent had been top-level managers.
72 were men and 47 were women

PROCEDURES
Three sections of a semester long M.B.A. course in
corporate strategy and policy.
This course was chosen because the decisions
required in it were similar to those for which the
three approaches to decision making were designed.
The procedures used in the three sections were
identical.
They were instructed to read the case, analyze it,
prepare written recommendations and lists of their
assumptions, and to be prepared to discuss the case
in depth at the next class meeting.

PROCEDURES
Subjects were part-time night students; lectures
had not previously discussed any of the
experimental conditions, and subjects got the
case only two days before the experimental
session.
At the experimental sessionthe next class
subjects learned that they would now be working
on the same case in four-person groups.

TASK
The study used the Leitch Quality Drug Company case
(Glueck, 1980).
This case presents subjects with a number of real
strategic problems and allows analysis in a reasonable
amount of time.
The case presents a situation that confronted an actual
but disguised company and the four partners who
owned it.
Individuals and groups were instructed to analyze the
company's situation and address recommendations.

Experimental Manipulations
Dialectical inquiry manipulation
Devil's advocacy manipulation
Consensus manipulation

GROUP PERFORMANCE
Judges ratings of the groups' final recommendations and
supporting assumptions were used to assess performance.
They rated the validity of each assumption on a 5-point scale
ranging from 1.
The two judges also independently rated the overall quality of each
group's recommendations on a 5-point scale.

GROUP PERFORMANCE
Group members perceptions:
A 12-item questionnaire was administered to each
group member immediately after a group's work was
completed.
The questionnaire asked the extent to which
respondents agreed with statements describing
perceptions of and reactions to the decision making
experience.
Tape recordings:
Each group's work session was tape recorded for use
as a manipulation check.

RESULTS
Results show that dilectical inquiry and devilss
advocacy lead to higher quality recommendations
and assumptions than consensus.Dilectical
inquiry also more effective than devils advocacy
with respect to the quality of assumptions.

DISCUSSION
This study, the first controlled laboratory experiment to assess the
comparative effectiveness of dialectical inquiry, devil's advocacy,
and consensus in a group context, suggests that programmed
conflict is useful in improving the quality of strategic decisions.
Although dialectical inquiry was more effective than devil's
advocacy with respect to the quality of the assumptions, there
were no differences with respect to the quality of the
recommendations.
The taped manipulation checks may indicate that group members
need to be trained in using the approaches or need to gain
experience with them before they can successfully implement
them.

DISCUSSION
The results of this study partially support the idea that both
dialectical inquiry and devil's advocacy lead to significantly
greater critical evaluation of personal assumptions on the part
of group members than consensus.
Concerning satisfaction with groups and desire to work with
them in the future, the findings suggest that consensus may
be more functional than either dialectical inquiry or devil's
advocacy for preserving harmony within a group.
This was also evident in the greater degree of acceptance of
decisions in the consensus groups than in the dialectical
inquiry and devil's advocacy groups.

For Listening and Your Patience

THANK YOU VERY MUCH