Types of Strategic Decision Making Models

Introduction:

Life is manufactured after the decisions. Individuals, no matter their age, career, and any factor, make decisions on daily workout. Decisions may have small or big scopes with short-term or big term effects on individuals or group of people. No-one can refuse the role of decisions, either made by him/herself or another person, on his or her life.

Similar to humans, organizations are dealing with the decisions that are made in them every single day. Although all the managers at any level, and even sometimes employees, make decisions, the top decisions including tactical decisions are usually made by mature and top managers across organizations. Based on the type of decision and other factors, their lifetimes and their effects may vary. Tactical Decisions are amidst the main ones that are made in any company and usually have long lasting effects on the firms. The importance of proper decisions is undeniable, so that it is worth discovering its process and any factor regarding it. In this course paper, I try to review the existing literature on tactical decision making process.

Environmental factors and constraints form the main framework for managers, and the majority of the managerial decisions are undoubtedly influenced by interior and external environmental limitations and constraints. (4) The surroundings is usually changing and the dynamic condition of global brings doubt and risks in to the managerial decision process. On the other hand, anticipated to time, knowledge and other constraints and restrictions, managers make decisions with uncertain and incomplete information. Some professionals use intuition to take care of existing uncertainties and deal with organizational problems. Based on the Klain, 90% of managerial decisions are created intuitively (Klain, 2004).

Strategic Decision

For defining proper decisions, it is best to start with classification of decisions generally. Predicated on the Meriam-Webster dictionary decisions are "conclusions or resolutions reached after concern. " Based on this basic classification, each decision has 3 main steps: First, recognition of need or a dissatisfaction of current situation or; Second, moving towards satisfaction or filling up the recognized need; Third, a mindful dedication to put into practice the activities regarding reaching to the point of fulfillment (Arsham, 2010). (1)

Strategic decisions are the decisions that effect the long-term status of the business. In general the process of growing and getting ready to start options that lead to major organizational changes is called proper decision making process. (2) Strategic decisions usually bring long-term financial and non-financial commitments to the organizations and it's really usually difficult to invert the strategic decisions once they are applied in the organizations. (2) Therefore, managers for making the proper decisions, unlike common managerial decisions, use more time and effort and pay more attention (4). Proper management entails with unplanned, unstructured and complicated problems; thus strategic decisions are created under uncertainty (Rutherford-Silvers J. , 2008; Dragomir, C. , 2012; Stefanescu, R. , 2013).

The proper decisions usually play the bridge role between current and future expresses of the business (Papadakis & Barwise, 1998). In addition, the proper decisions play the amazing roles in organizational learning processes and professionals should deal with the evolving issues between practical and academic disciplines in the strategic decision making process (Papadakis & Barwise, 1998).

In strategic decisions, managers try to harmonize organization features and resources with the environmental opportunities and risks. (3) Quite simply, strategic decisions offer with environment and industry in which the organization manages; tangible and intangible resources which form the business; and the bond and romance between both of these groups at the same time (4).

Operational and administrative decisions will vary from tactical decisions. Administrative decisions are organization's tedious decisions that aid execution of the operational decisions. Operational decisions are made upon technical understanding of employees and help execution of the strategic decisions. (3) For instance, moving towards cost command strategy professionals may reduce the number of workers which can be an operational decision and it can be achieved by some administrative decisions. (3)

Strategic Decision Making Models

The best & most effective tactical decision model may vary based on the organization situation, manager's personality, plus some other factors. (4) For instance, if the outcome of the decision should be applied by group, its decision making process is completely different from the process of your choice which its productivity can be applied just by the decider. (4)

There are two main techniques in categorizing the strategic decision making models: 1) based on the number of steps 2) based on the framework and request. Both approaches involve some similarities plus they can be put together together in a few situations.

Models of decision-making based on the amount of steps:

Series of new efforts on procedure for proper decision making have been offered in previous decade (Jalal-Karim, A. , 2013; Verboncu, I. , 2011; Nobrega, C. G. et al. , 2009; Wildman, J. L. & Salas, E. , 2009; Nooraie, M. 2008; Quintus, J. R. & George, J. M. , 2005). Generally, the strategic decision making process starts by recognizing an issue or a chance. Although anyone in the business can find the challenge or opportunity, usually top managers recognize them and make an effort to accurately designate some alternatives to strike them. Corresponding to Cornescu, professionals may face some road blocks in accurately defining the problem that is the primary subject of proper decision: selective belief, just considering effects and not watching causes, defining issues based on alternatives and so on (Cornescu, V. et al, 2004).

Strategic decision making models contain the steps which guide the decider to attain better decisions in any situation. Inside the categorization of your choice making process based on the number of the steps, different writers and researchers described different amount of steps or levels: 7 step decision making process, 5 step decision making process, 4 level decision making process or impressive decision making process, 3 step decision making process and etc

Regardless of the decision making process, there is certainly one step which is the same in every of the models: defining the challenge or the subject of your choice to make. However, the main feature that discerns the decision making and problem dealing with relates to the human's bounded rationality. In problem dealing with process, pondering and the heuristics play the most important roles, and the specific solution is mainly captured by the end of the procedure. On the other hand, in your choice making process, the decider cannot completely analyzes the problem rationally and emotions cannot be excluded from the process.

Anyhow, oftentimes decision making and problems dealing with are replaceable conditions and functions. Furthermore, since one of the key stages of problem fixing process is choosing an alternative solution to solve the trouble, the problem handling can be recognized as one kind of decision making. And since oftentimes the decisions are made under time pressure, the procedure of decision making can be explained as one type of the problem resolving process. Based on the mentioned reasons, many people consider decisions as problems to be fixed and problems as decisions to be produced. (4)

7 Step Decision Making Process

In this model, the process of decision making has seven steps and the whole model is split into three main phases which are defining the situation, determining, and producing the activities (Number 1).

Lintherland recognized 7 steps in decision making process

1. Determining the problem

2. Identifying and limiting the factors

3. Development of potential solutions

4. Research of the alternatives

5. Selecting the alternative

6. Implementing the decision

7. Establishing a control and evaluation system (Lintherland, 2013)

This style of decision making process is used by almost all of the professionals in real world (Lintherland, 2013).

5 Step Decision Making Process

Doyle introduced the 5 step decision making process model (Number 2) (Doyle, 2012). This model also found in the real world and its stages are
  1. Identifying decision
  2. Options examination
  3. Gathering information
  4. Making decision
  5. Implementing decision

In this model, the first step plays a impressive role. The decider should write all factors and issues that may influence decision and form the decision in different ways till your choice precisely will fit the decider's need and wish. To be able to identify your choice accurately, the supervisor may use the answers to the questions like: What? When? Which? How? What if? and etc. (Doyle, J. , 2012).

In second step, "options examination", the decider should formulate the many cases and identify the outputs of the various options and situations. In this level, more info and assumptions around the subject of your choice are recognized. In order to shaping the platform more effectively and finding absent information, brainstorming with other employees is strongly suggested to managers. (4)

3 Step Decision Making Process

Chestnut created a 3 step decision making model, the stages of this model are: id of need or opportunity, building decision components and execution of decision (Physique 3).

Figure 3 - 3 step decision making model

According to Chestnut, in the id stage, managers get inside information and apply statistical and mathematical methods on gathered information and use the ouputs of the statistical methods to decide (Chestunt, D. , 2013).

Second level in this model is "building components" stage where the decider considers all possible mixtures of constraints and constrains into their models and assesses the consequence of each possible option. The final list includes all the possible decisions and the possibilities of these success rate.

The last stage in this model is implanting your choice. On this model, like the 5 step decision model, the support system in the organization performs an important role and it's really crucial to keep tabs on the outcomes constantly to change the activities within the organization.

3 Step Decision Making Process

Chestnut introduced a 3 step decision making model, the stages of the model are: id of need or opportunity, building decision components and execution of decision (Number 3).

Figure 3 - 3 step decision making model

According to Chestnut, in the identification stage, managers capture interior information and apply statistical and numerical methods on collected information and use the ouputs of the statistical methods to make a decision (Chestunt, D. , 2013).

Second stage in this model is "building components" level where the decider considers all possible mixtures of limits and constrains into their models and assesses the consequence of each possible option. The ultimate list includes all the possible decisions and the possibilities with their success rate.

The last level in this model is implanting your choice. With this model, like the 5 step decision model, the support system in the organization performs an important role and it's crucial to monitor the outcomes consistently to modify the actions within the organization.

Strategic Decision Models Predicated on the Context and Application

There is another categorization for strategic decision models. In this categorization, the models are separated predicated on their main feature, framework or software (5). A few of the most well-known are unveiled in this program paper
  1. Rational Model
  2. Bounded-Rationality or Behavioral Model
  3. Bargaining Model
  4. Participative Model
  5. Garbage Can Model

1. Rational Decision Making Model

This model, also called "the rational thorough" model, is based upon the famous economical approach in which the ultimate goal of any action or change is making the most of the efficiency of specific conditions by finding the right option. This model is usually split into 6 specific steps
  1. Defining goals
  2. Recognizing alternatives
  3. Examining the consequences of each alternative
  4. Making decision predicated on the precise criteria
  5. Monitoring implementation
  6. Modifying the initial decision based on the feedback

This model is generally used by professionals mostly due to its attractiveness and simpleness. This model offers a structured approach to treat concern or opportunity and help managers reach the decision. This model overlooks any doubt which is suitable for well-structured and simple problems in predictable business. Based on its feature, the key application of this model is at technological environment where goals are effectively identified and there can be an agreement on the conditions and dimension of goals. For example, NASA uses the rational model since anatomist factors, steps, and goals are relatively clear and less ambiguous. This model is difficult to use in the organizations which operate in powerful and politics environment. The problems and opportunities in the dynamic environment are complicated, which means unmanageable variety of possible options should be considered prior to making decisions in this process.

In addition, the existing complexity and doubt in the dynamic environments would also decrease the confidence of the decider in evaluating different alternatives.

2. Bounded-Rationality or Behavioral Model

Herbert Simon, Nobel Laureate, criticized the rational decision making way and introduced the concept of "bounded rationality" (5-4). Matching to this strategy
  • Humans cannot make fully rational decisions due to the fact they can process and consider a little amount of data at this time.
  • Expertise, information, and amount of time in each situation are limited; which means comprehensive evaluation is very difficult and almost impossible in most cases.
  • Humans can not consider and identify all possible limits and constraints of an issue, thus not all of the possible alternatives are examined in the logical decision making process.

In real life, considering the logical limitations the managers usually simplify the situation and restrict themselves to just several main options. Decision makers usually identify a few amounts of conditions and usually evaluate the options that contain worked for his or her organization or other similar companies before. Unlike the logical model, the behavioral model will not address just one best answer for a challenge. The advocates of the theory believe that managers based on the factors such as managers' characteristics, organization's situation, and other factors will get various solutions for their problems. Simon asserted that since everything is unavailable for a decider, the professionals who use the bounded-rationality model, unlike logical model, seek "satisfaction" for his or her problems rather than "maximization". (Simon) Quite simply, this model shows a decider the "sufficient" options to meet least selected standards at the decision making time. Within this model, the "criteria weighting" plays an important role to make ultimate decision.

3. Bargaining Model

The main application of the model is in the situations where two or more parties participating in the decision may have conflict of interest. The reps of the organizations should learn and know the concepts of negotiation. Mature managers select this process in the proper decisions which entail tradeoff between different organizations or between different people within the business. On this model, the managers or negotiators seek the common benefits or common interests to maximize the opportunity of achieving to the appropriate decision. The causing decision should be acceptable by all the engaged sides.

The bargaining model is highly found in politics mainly because in this context many active get-togethers are given from the same financial and non-financial resources and these resources are limited. However, some claim that using bargaining model in politics can lead to distribute power equally that consequently reduce the effect of electric power which is sometimes essential in the culture, company, and other neighborhoods. The bargaining model is useful for getting multiple views before making decision; and it can help professionals make the more lasting decision.

The bargaining model offers each party affecting in the decision a posture for reflecting their pursuits. Bargaining model pays off significant amounts of attention to the competition and their actions in decision making process. Among the disadvantageous of this model is its frustrating feature sometimes since parties try to resolve disagreements. But the interests of most parties are relatively considered in the discussions, the wishes of the very most powerful sides will be found than needs and wishes of the least powerful parties. Used, some professionals exclude some functions from bargaining model for getting agreements quicker and keeping time, but this process threatens the success of the resulted decision since some get-togethers might not support the actions pertaining to the choice. To sum it up, the larger pool of individuals in bargaining decision making model contributes to better yet additional time eating decisions.

4. Participative Decision Making Model

The bargaining decision making model is extended and created the participative decision making model. The participative decision making model tries to bring all folks who directly affected by your choice into decision making process. This model is known as the most democratic decision making process. However, the involvement of people along the way of decision making in this model plays just the "consultation" role and not "deciding" role. In other words, this model provides people the opportunities to bring ideas and information to the stand but they do not have real decision making ability. Any stakeholder group within the organization may have its agenda and passions to pursue; therefore in this model, the stakeholders should present their key concerns before decisions are made. It is worth mentioning that stakeholder categories are occasionally strong enough to impede the procedure of decision making if they are not contained in the procedure for decision making. Participative decision making model can be seen in NATO, United Nations, and other global systems.

The major disadvantages of participative decision making model are its expensiveness and slowness. Information in this decision making model become double-edged sword, as the information from different perspectives can clarify various areas of the issue, the large amount of unstructured information is somehow issues for professionals. For having successful participative decision model, individuals should make an effort to subordinate their own passions in search of common goals.

5. Garbage Can Model

According to Cohen, March, and Olsen, many decisions are made predicated on unorganized interactions of realtors and opportunities, chance, and the existing available individuals skills and other resources within the organization. (25) This model implies that organizations and professionals have strong, ill-defined, and inconsistent personal preferences, and organizations are operate on a basis of learning from your errors. Stakeholders partially understand the techniques in the organization, and the deciders act arbitrarily and impulsively. Based on the illustrated platform, Cohen et al. argued that professionals within the organizations think of several solutions when they have not faced problems yet. They keep these alternatives and utilize them when the issues occur within the business. They asserted that: "decisions are dumped in a holding can - the garbage can for future use. " (Refr)

Managers use garbage can model in highly ambiguous conditions which called organized anarchies. Cohen et al. argued that deciders are as more likely to identify their goals through actions because they are to discover them previous to decision. Furthermore, they argued that anticipated to existing organized anarchies within the organization some technologies found in the organizations are unclear. Moreover, they argued that managers have loose understanding of goals and means at the beginning. Cohen et al. dispute that organizational members learn through learning from your errors actions without understanding the causes. They also argued that in most cases your choice making individuals come and go in to the process constantly and their involvement vary because of their interest, energy, and time (Cohen et al. , 1972). Thus, it is rather difficult to identify who will actually take part in a conclusion (Cohen et al. , 1972). The garbage can model introduces four channels of randomness: 1) randomness in opportunities 2) solutions 3) participants 4) problems. Therefore, your choice making process is full of randomness and the resulted decision can be picked randomly. Summarily, Cohen and his fellow workers argued that decisions are not the outcome of rational analysis or coalition of capabilities but rather arbitrary events. On the other hand, some scholars dispute that garbage can model will not provide a theoretical framework and this is its main disadvantageous and can't be widely used in real world.

In addition to the mentioned decision making models, the experts introduced some other models that such as incremental and polis models.

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