Strategic Decision Making

Strategy With Purpose

A clear and effective strategy can provide many benefits to understanding your business. 

Success and weakness

Focusing on strategy highlights areas of success and weakness within the business.  The information can be used to identify where is making money and why, providing value insight to assist with growing cash flow, building profits and increasing shareholder value.

Concentrating resources

Strategy is a good indicator as to where resources should be concentrated.  It allows managers to understand the needs, patterns and requirements of their customers – enabling them to develop products and services in line with its customers ever shifting preferences. In addition, it provides crucial information about their competitors.  

Customer loyalty

Developing and implementing a strategy can strengthen a business as it makes sure resources are dedicated to the most important customers. This is positive way to retain their loyalty and get them to buy even more of the products and services.

Markets

Product extensions, i.e. new products based on existing ones, changes to product mix/complimentary merchandise or services, prices adjustment or cost cutting and product/market abandonment are all areas that can be highlighted by strategy.

Better Thinking Tools

PMI: Plus / Minus / Interesting

Edward DeBono introduced the PMI tool to help teams move beyond “for and against” debates particularly where one side of the discussion is more strongly supported. PMI stands for Plus, Minus and Interesting. By allowing for “Interesting” elements in addition to Plus and Minus items a more rounded discussion is possible.

+  -  i

Plus, Minus and Interesting points are collected by the group. If the outcome is not clear then points can be awarded to items listed to help clarify course of act ion to take.

SWOT

Identify the Strengths, Weaknesses, Opportunity and Threats in a situation. 

Worth noting the left column comprises positives and the right column comprises negatives. How can the negatives be addressed by enhancing the positives?

PESTLE

PEST or PESTLE focuses on external factors that may affect the business.

Choosing Between Options

Decision Tree

Starting at the left side of a sheet of paper, note the problem to be resolved.  

Next create branches possible options – add the name of the option to each line

Review each line and record the following as required: 

If the outcome of the branch is another decision then draw a square and add lines for the subsequent decision(s). If the outcome is uncertain draw a circle and from it add lines for its potential outcomes. Lastly if the outcome is a result do not add a shape at all as this branch will not progress any further. 

Comparing the two paths:  

Save returns the original amount 100% of the time.

Invest could return £150 80% of the time or £50 20% of the time:

80%* £150 = £120

20% * £50 = £10

Total of both Invest outcomes is £130

Comparing Invest at £130 with Save at £100 it looks like invest will be the best option taking into account the very high likelihood of a positive return.

Stakeholder Commitment

Vroom -Yetton-Jago Decision Model

When involving people in a decision –the level of their involvement is often left to chance or personal interest. Vroom & Yetton, and later Vroom & Jago developed a model for determining the optimum level of involvement of a group in making a decision. Ranging from no involvement at all to full participation. To help determine the level of group involvement required they formulated the following questions:  

Quality Requirement (QR): How important is the technical quality of the decision?

Commitment Requirement (CR): How important is subordinate commitment to the decision?

Leader's Information (LI): Do you (the leader) have sufficient information to make a high-quality decision on your own?

Problem Structure (ST): Is the problem well-structured (e.g., defined, clear, organized, lend itself to solution, time limited, etc.)?

Commitment Probability (CP): If you were to make the decision by yourself, is it reasonably certain that your subordinates would be committed to the decision?

Goal Congruence (GC): Do subordinates share the organizational goals to be attained in solving the problem?

Subordinate conflict (CO): Is conflict among subordinates over preferred solutions likely?