subject: How to Make Effective Strategic Decisions [print this page] How to Make Effective Strategic Decisions
What differentiates successful organisations from the failing ones is the ability of the former to separate the wheat from the chaff. Most of the decisions that managers make are based on information. With so much information out there these days, not all of it is critical for improved business performance.
To avoid making decisions that are always doomed for failure, decision makers have to do the following:
- Determine whether a decision is necessary: There are necessary and unnecessary decisions. The former are crucial for the ongoing success of the organisation and require close monitoring, and in some instances, some adjustments. The later, only waste time, money and other resources. Before making any decision, look at the opportunity cost of each decision you're about to make and weigh the risk.
- Classify the problem: This involves establishing whether the events are common within the your organisation and throughout your industry, are unique to your organisation but uncommon throughout the industry or they are unique and first appearance problems. Classifying the problem will help you identify which approach to use to formulate the solutions. Generic problems require a generic approach, one which is based on standard rules and principles. Unique problems require a different approach to the norm.
- Define the problem: This involves asking questions like, "What is this all about, what is key about this situation and what is pertinent?" Defining the problem will help you get to the root of the problem and find the right diagnosis. For example, using the analogy of a doctor and the patient, when the patient is ill and visits the doctor, before prescribing any medication, the doctor carefully examines all the available facts and medical history of that patient.
Based on his findings, he then prescribes medication. If the patient shows slight changes or no improvements at all, the doctor will prescribe a stronger or different dosage. Just imagine if the patient was suffering from a headache and the doctor administers some diarrhoea medication. This will not work at all.
As a manager, you are the doctor and your organisation is your patient. Before you try to solve any situation, gather and analyse all the facts you can find to avoid misdiagonising your patient.
- Decide on what is right: This stage involves making compromises. Not every individual within the organisation is going to like and benefit from the new decisions. For example, let us imagine you have decided to invest in a piece of machinery that will boost productivity and quality, at the same time reduce the number and cost of manual labour hours. It is possible that some people are going to lose their jobs. Therefore, this group is more likely to oppose the decision. As a manager, are you going to give in or not? Giving in, will be an indication of wrong compromise, as this does not provide the solution to the problem's definition.
- Get others to buy the decision: At the start of the decision making process, long before the final decision is made, you should solicit the opinions and recommendations of those who are going to be affected by the decision. Their input is very invaluable and will later help you keep the ship on course.
- Build action into the decision: A decision will only become effective once implemented. There is a difference between planning and implementation. So many organisations continue to hope for the best but never put their plans into action. At this stage, someone capable should be assigned the responsibility and given a deadline to carry out the action.
- Test the decision against actual results: Feedback is very necessary for continuous learning. By comparing the expected results against the actual results, it allows you to identify new and problem areas and take corrective action. Drivers of variances can quickly be identified before they escalate into huge problems.
Remember, effective decisions mobilize the vision, energies and resources of your organisation thereby helping you achieve your desired outcomes.
This article was written by Peter Chisambara both a blogger and business accountant.
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