Cont:

Decision Making Processes /Model

1. Define the Problem

2. Identify the Decision Criteria
3. Allocate weights to the Criteria
4. Develop alternatives
5. Evaluate the Alternatives
6. Select the Best Alternative

No competitive advantage or success is ever permanent, the winners are those who keep moving, but creating a series of
shifting advantages is challenging. It requires effective strategic decision making at several levels: at the unit level to
improvise
business strategy; at the multi-business level to create collective strategy and cross business synergies; and at the corporate
level to articulate major inflection points in strategic direction.
Strategy is really akin to strategic decision making, especially in rapidly changing markets. The ability to make fast, widely
supported, and high-quality strategic decisions on a frequent basis is the cornerstone of effective strategy.
Many business leaders in governance roles in larger organizations make the mistake of considering their role as one of
‘making’ strategic decisions and making business strategy rather than ‘taking’ strategic decisions and delivering strategic
direction. In doing so, by taking the responsibility for making the strategic decision and business strategy they lose the right
to sit in judgement or act as arbitrator when things go wrong. The strategy and strategic decision become their ruler, rather
than
them ruling the strategy. Inevitably it makes it more difficult to force a change in
strategic direction when needed. Business leaders need to look more closely at how their organization can make and
propose decisions without moving the responsibility for the decision to the business leaders. The more important the
decision, perversely the more important it is for a business leader to take a decision ratification role rather than decision
maker/owner role.
But if you take the decision-making role away from business leaders, they need to be assured that the right decisions are
being made. This puts the onus onto business leaders to put in place methodologies, processes, systems and tools to ensure
decision making is carried out to the highest standards, that the right people and stakeholders are consulted and that
decisions are robust, transparent and fully documented.
When talking about strategic decisions, we are talking about those decisions, which have considerable impact looking
forward and considerable costs if you get wrong. What you also find in this environment of globalization, convergence and
increasing competition is that most organizations can no longer compete in the marketplace as stand-alone entities. Most
organizations have, or will have, a web of strategic partners that they work with to deliver the end-to-end service to their
customers; these partners may be located anywhere globally. An increasing number of strategic partners means an
increasing number of stakeholders that need to be considered and/or involved in the strategic decision-making process.
Thus, we have a situation where the existing strategic decisions and processes an organization may have used in making
decisions, is changing and changing fast. Increasingly, the environmental context of strategic decision making is also rapidly
changing and is volatile.

The Complexities Inherent in Strategic Decision Making

The strategic decision making process must deal with 4 Four Barriers: Complexity (the intricacy of key decision factors),
Ambiguity (vagueness about the current situation and potential outcomes), Volatility (rate of environmental change) and
Uncertainty
(unpredictability of change). These are not independent concepts; while each may describe certain aspects of a decision
task, each feeds the other.

Complexity: Multiplicity of Decision Factors

• System complexity impacts hugely on the capacity of leaders as strategic decision makers to formulate and execute
effective strategies. Cause and effect relationships are difficult to see, much less assess, when there are many causes, and
when many divergent effects exist.
• Determination of cause-and-effect relationships is made more difficult by uncertainty about the time lag of effects in
complex systems. In addition, there may be many linked cause and effect chains.

Ambiguity: Lack of Clarity About the Meaning of an Event

• Ambiguity exists when a given situation can be interpreted in more than one way. System complexity contributes
ambiguous meaning, as does, uncertainty about the full range of factors operating in a situation. Ambiguity may also exist
because the intentions of significant actors in the strategic situation may either not be known or may be misinterpreted.
• Organizations must expect to encounter ambiguity as they transition to more complex situations in their organizations.
Strategic leaders must also do a great deal of consensus building as a normal part of their leadership roles. The consensus

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decision making process is designed to uncover information not previously held, perspectives not previously understood,
and knowledge not previously applied to the solution generating task.
• The challenge to strategic leadership is recognizing that the decision maker cannot have a ‘stand-alone’ perspective, and
that effective strategic decisions must flow from a managed process that produces a perspective through consensus that is
broader than any single person probably possesses.

Volatility: Rate of Change

• The relevance of volatility to strategic leadership and decision making stems from the competitive nature of the world.
Environmental change often determines where the point is reached when a change in strategy should be initiated.
• Without leadership that guides reformulation of vision, strategic policies and objectives, organizations are placed at
competitive disadvantage.
• Uncertainty exists about the present situation and future outcomes.
• Strategic leadership is complicated not only by the rate of change in the global environment, but by uncertainty about
what the effects of even known changes are likely to be. This uncertainty results from both the complexity of systems and
subsystems at the strategic level and from incomplete knowledge about the current situation.
• Uncertainty also arises because significant competitive advantage is often gained through surprise (Guerrilla strategies),
where competitors seek to conceal their strategic directions, particularly their means for achieving their directions from
their competitors.

Factors Preventing Rational Decision Making

• Unclear means and ends means it is virtually impossible to generate an exhaustive list of alternatives and select the best
one, especially for infrequent (nonprogrammed) decisions.
• The recognition that alternatives offered to a decision maker are bounded by social, legal, moral and organizational
restrictions (bounded discretion).
• Situations are complex, many factors intervene the result of a decision; a noisy environment makes the task predicting
outcomes difficult.
Turnbull (2002) argued that recent corporate scandals and financial crises are symptoms of deficient corporate governance
based on outdated top-down command and control hierarchies that are unable to cope with complexity. Firms cannot
regulate themselves and are vulnerable to corruption. He advocated for a new breed of ecological organization based on
nature’s ability to manage complexity by distributing decision making among members of non-hierarchical organizations
(analogous to ant colonies) and evolving sustainable levels of complexity that exceed the cognitive capacity of any
controlling individual or group.

Differences Between Corporations with Long History and Track Record and Entrepreneurial Firms
Executives in large organizations frequently bemoan the fact that they cannot react as quickly as small companies in the
face of change and consequently lose out to their more dynamic competitors. Is it a necessary truth that an organization
when it
grows larger loses its dynamism or is the loss of dynamism a result of the decisions that are made over time and the
reactions of the organization to them?
Let’s look at the characteristics of the successful, smaller, entrepreneurial business. First, they typically have an ‘engaged’
executive management team. The executive management team is small, meets daily, and has specific subject matter
expertise, not only within the context of their profession, but also within their market.
They are able to make immediate decisions, often on an individual’s own initiative because of the degree of engagement
with the grass roots of their own organization.
Typically, in these contexts there are at most four layers to the organization: Director,
Manager, Supervisor, and Employee with the Supervisor role often being taken by the Manager. These organizations not
only know their own organizational members on a first name basis but frequently, the vast majority of the rest of the
organization. To consult with any individual in the organization is as easy as walking a few steps down the corridor.
Corporate politics is kept to a minimum as there is little overlap between
Directorates, and most roles are occupied by a single person.
The large organization by contrast typically has an executive management team that limits its engagement to senior and
middle management. The executive management team is much larger and may be multi-tiered. Meetings between senior
executives are at less frequent intervals. The senior executives, while having expertise related to their profession may not
have specific subject matter expertise within their industry and market. Their decision making capability is limited to
routine matters and any decision making relating to the company as a whole or impacting departments outside their
responsibility have to be referred upwards for discussion and ratification. Typically, in these organizations, there can be in

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excess of four layers of management, let alone supervisory and operational roles. Adding to this complexity is that roles
may be replicated across multiple sites and the existence of similar roles in multiple sites may only be recognized by the
coordinating manager. To consult with members of such an organization is a nightmare. Just arranging a meeting involving
people from several sites can be a logistical impossibility or a series of individual consultations, which naturally leads to
time delays and cost. Corporate politics is rife and overlapping responsibilities result in regular turf wars and border
disputes.

" So how can you rejuvenate your tired organization if all the traditional mechanisms for dealing with problems are making
it even more tired and in need of rejuvenation?
First, stop thinking that the problem is ‘making decisions. The root cause is not decision making, but rather ‘the decision-
making processes. Get that right and many of the problems will go away.

The decision making process is much more than the choice between options. It involves consultation, collaboration,
consensus building, and engagement across all parts of the organization impacted by the decision and ultimately the
implementation of the decision.

Rational Decision-Making Process

A high-quality decision comes with a warrant: a guarantee. Not a guarantee of a certain outcome – remember this is the
real world we’re talking about, and there are certain things that just aren’t knowable until after they happen, but a
warranty that
the process you used to arrive at a choice was a good one. This level of confidence implies a process: a set of steps and rules
that provide an assurance of thoroughness and rigor. This means breaking decisions down into component parts and doing
one thing at a time. Unless you’re unlike most people, it is your nature to do what you know how to do and to avoid what
you don’t. That’s why you want a rational decision process: To defeat the natural behaviors and tendencies that can lead to
low quality decisions.

Decision Making Models and Theory

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What is Decision Making in Management
- Judgement of the process by which one can choose between a number of alternative courses of action for the
purpose of achieving goals.

TYPES OF DECISION MAKING

1. Programmed&Non-Programme Decision
- Habit, Rules
2. Major & Minor Decision
3. Routine & Strategic Decision
4. Organizational & Personal Decision
5. Individual & Group Decision
6. Policy & Operational Decision
7. Long - Term, Departmental & Non-Economic Decision

Seven Deadly Sins of Decision Making

1. Availability Heuristics. People usually assess the probability of an event by the ease with which occurrences of the
event come to mind. However, availability is affected by factors other than frequency and probability. We have a
tendency to give preference to recent information, vivid images that evoke emotions and specific acts and
behaviors that we personally observe and relate to. All these cause biases in decision making.
2. Representativeness. Unrecognized tendency of decision makers to judge the likelihood of an event’s occurrence
based on its similarity to previous events leads to representative bias, i.e. outsourcing can save at least 20 % from
our current costs. If managers challenged these assumptions and long held beliefs, they may come to a more
realistic conclusion – i.e. around a third of deals result in an overall loss....
3. Anchoring and Adjustment. Anchoring is a widely prevalent trap in decision making. It is so common that
sometimes it is hard to think that the decision may be biased. The mind gets anchored on initial assumptions so
much that any decision made subsequently revolves around what was presented initially, i.e. we need to save a
bucket load, therefore outsourcing has to be the answer.... To ensure that the decision making process is not
guided by such anchors, executives must view the issue from multiple perspectives, involving people with different
thinking styles and creating an environment for dissent and debate.
4. Loss Aversion. Loss aversion is a human tendency to prefer avoiding losses than acquiring gains. Loss aversion leads
to status quo bias in decision making where people prefer maintaining the status quo to avoid losses, i.e. we’ve
been doing this for years, so it must be a core competence and surely it shouldn’t be outsourced....
5. Mental Accounting. Mental accounting is a set of cognitive operations used by individuals to organize, evaluate and
keep track of financial affairs. Existing outsourcing programs may have less stringent controls compared to current
outsourcing deals, whereas, there may well be more to gain from scrutinizing existing programs, i.e. managers
should set a clear set of criteria for evaluating performance on an ongoing basis, with continuous improvement
being fundamental to long term outsourcing programs....
6. Hindsight Bias. Hindsight bias is a tendency to see things more predictable and obvious when they have occurred,
whereas in fact the event could not have been reasonably predicted before the onset of event. It is easier to
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 reconstruct why something worked or did not work after the event has happened. Managers can assume the future
as more predictable in developing strategies rather than maybe the case. As a result, they may face challenges
executing those strategies or may not achieve projected results when external environment changes. In this era of
high uncertainty in the external environment, there is an even greater need to be aware of hindsight bias. The use
of scenario modelling and organizational flexibility become paramount....
7. Over Confidence. Being confident is considered as a great asset, nevertheless unfortunately we systematically
overestimate our decision making abilities with what objective circumstances would warrant. If the skill required is
great and the task is complex, we tend to get even more confident of our abilities and judgments (if you have tried
to dissuade a drunk driver, you will no doubt have heard them vehemently state that they are a safer driver
because they are more cautious of getting caught...). Related to overconfidence is a bias of over-optimism. We tend
to be over optimistic in predicting what we desire will happen. When we have more information, we feel more
confident (i.e. illusion of knowledge). Similarly, if we spend more time on analyzing the situation and longer the run
of prior successful outcomes, we feel we have more control over the outcome (i.e. illusion of control – just ask a
gambler on a roulette table). The tendency to see the future through the lenses of over confidence and over-
optimism can create unrealistic forecasts which are not met, i.e. estimation of synergies in an outsourcing
partnership, that never materialize post deal...

Collaborative Decision Making

Decision making at the strategic level hinges on the ability of decision making teams to forge consensus for action. No team
can succeed unless it is strong enough to sustain decisions through bureaucratic politics, interest group resistance and
implementation hurdles. Consensus acts as the ‘power plant’ to sustain strategic decisions through to implementation.
Leaders need to engage in a delicate balancing act with regard to nurturing confidence, dissent, and commitment within
their organizations.
Fostering constructive dissent is important. Insufficient debate among team members can diminish the extent to which
plans and proposals undergo critical evaluation. Flawed ideas remain unchallenged, and creative alternatives are not
generated.

A strategic team’s goal is to make decisions that best reflect the thinking of its members, thus ‘forging’ consensus.
However, one can easily confuse what consensus is and isn’t:

• Consensus is both process and outcome. Consensus is a process in which everyone has their say. Divergent views are fully
addressed and resolved by the group. A satisfactory level of convergent individual opinion emerges in the search for general
agreement;
• Consensus is agreement, but not necessarily complete agreement. It is an outcome which is ‘close enough’ to be
acceptable. All or most team members can support it, and few or no members totally oppose it. Usually, when a team
achieves general agreement, no one is completely satisfied, but everyone accepts or ‘lives with’ the group’s prevailing view;
• Consensus is not authoritarian, perfect or conformist;
• Consensus is not the team leader imposing decisions and team members complying. Hierarchical decisions do not reflect
the thinking of the group. Hierarchical decisions usually do not implement the alternative that all members agree is best
and that everyone can support;
• Consensus is not a perfect team agreement representing first priorities of all team members. Everyone will not be totally
happy with the consensus;
• Consensus is not a unanimous decision, which essentially gives each team member veto power;
• Consensus is not majority vote. This is faulty consensus, since it only reflects what the majority is happy with. The
minority is forced to comply with a decision it doesn’t want, which is not what consensus is about;
• Consensus is not ‘groupthink’, the desire of cohesive teams to conform and make close-minded decisions, disregarding
critical examination, divergent opinions, or debate; and
• Consensus is not bland, watered-down proposals having no substance, and entailing no risks.

Decision Risk Assessment

Strategic decision making should be fundamentally different from traditional business strategy, because organizations don’t
just communicate, but involve the organizational stakeholders in the strategic decision-making process. If a business leader
needs to communicate the strategy to the organization and to the people that will ultimately deliver the strategy, then they
have failed and the risks of not achieving the strategy are very high.

There are three sources of uncertainty inherent in decision making:

• Known unknowns: areas of uncertainty that are recognized and integrated into the decision-making process. This requires
gap analysis and visual analytics to assess and understand those risks;

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• Unknown unknowns: risks (uncertainties) that are relevant to the decision but that are not identified in the analysis –
these are effectively ‘off our radar’ factors. To counter these, organizations need access to best practice decision and risk
templates; and
• Analytical bias: own biases, perceptions, emotions and the effects of information overload. To identify and rationalize
these and understand biases you need to utilize analytical decision support systems.

Decision Optimization
It is common for organizations to consider a range of options for a decision, but then quickly hone on into one of the
options. Although this may seem the logical thing to do, what it does do is limit the opportunities for optimizing a decision
through some form of hybrid option. If two options were chosen that were better than the others but different from one
another, then the decision makers should consider the extent to which a hybrid option could achieve an even better result.

Organizational Alignment Processes

Organizational alignment is perhaps the most elusive component of a successful organizational environment. It is both a
process and an outcome. Building and ensuring organizational alignment requires focused action and should be an ongoing
activity.
Organizational alignment is the congruence, the intentional congruence, between goals, functions and activities. It relates
to the degree to which the components of an organization are arranged to optimally support the intent, objectives, and
goals of the organization. Organizational alignment addresses the alignment of the strategic objectives, the organization,
organizational roles, policies and processes, management structures, accountabilities, and metrics.
An aligned organization is more tactically and strategically efficient, contributing to lower costs from errors, missteps, and
competing priorities. Customers and suppliers can sense that an organization is well aligned through their interactions with
the organization.

Alignment Processes
Alignment starts with a clear understanding of what the purpose of the organization is, what the bounds of acceptability are
for the organization, how these relate to the wider environment and how these are translated into specific strategic
objectives.

These strategic objectives need strategies to turn desire into action, whilst internal structures, systems and resources shape
the degree of alignment.
In order to achieve an aligned organization you need:

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1. Clear definition of the organizational purpose and the values and behaviors that will guide actions on the journey to
achievement of these organizational goals
2. An aligned culture – it is not good enough for people to know what the organizational purpose is, but fully buy into it
3. Clearly articulated strategic objectives that the organization is striving to achieve
4. An articulation of the strategies that will be utilized to achieve these objectives.
These must be developed through engagement with people across the organization and all employees must be clear on the
what, why, when and how of strategy
5. A clear understanding of how strategies will be translated and cascaded into action across the organization (vertically and
horizontally). These must define the local actions and contributions required from each area of the organization
6. A mechanism to ensure that all activity and action within the organization is
supporting the achievement of strategic objectives. An inventory of key business processes and projects may be required to
determine whether they link to and support the elements of the agreed strategies.

Implementing Changes to the Organization to Achieve Alignment

Any change within an organization is difficult. People resist change, for it brings with it the unknown. It brings with it the
potential to create more work, the need for more skills training, the need for more flexibility; all things that tend to mean
the
individual will need to exert more effort with potentially no change to their remuneration structure.
Every organization operates with a ‘closed system’ where a change in the way of doing things in one part of the
organization has an impact on other parts of the organization. If the system isn’t primed for change, the part of the
organization that is attempting to change will face huge pressures to change back to the old way of
doing things.
There are two methods by which change can be implemented: the big bang approach where major change initiatives are
formally initiated and bulldozed through the organization, or incremental change.

Alignment Between Strategic Intent and Reality

Organizational alignment requires compatibility between the strategic and cultural paths and consistency within them.
Values should be compatible with goals and day to day behavior should be consistent with the stated values.
Statements of mission, vision, values, strategies etc. are meaningless if they are not translated into action. Organizational
alignment occurs when strategic goals and cultural values are mutually supportive and when key components of an
organization are linked and compatible with each other. Organizational alignment links vision, mission, strategy, culture,
people, leadership and systems to best accomplish the needs of the organization and its stakeholders.
Leadership plays a major role in creating alignment between strategic intent and operational reality. When that alignment
is strong, values are congruent and people share the purpose and values of the organization. They work collectively to make
the vision a reality. This level of congruence translates into increased individual and organizational effectiveness.
Alignment is more than horizontal alignment where managers across different divisions and departments are aware of the
actions of others. It also includes vertical alignment: ensuring that senior management are aware of what is happening at
ground level.
Developing a well aligned organization depends on two critical factors: First, the systems and structures must support the
strategic vision; and second, the members of the organization must understand the top strategic objectives and how these
translate into their own personal goals

Personnel Alignment
Alignment should also include the incentive systems such that employee efforts are aligned to the achievement of goals.
Historically performance management activity has been conducted as a series of discrete processes undertaken throughout
the year.
Leaders often express frustration at the disconnectedness between the ability of their teams and the results they deliver.
Having a team that is truly aligned on the top priorities ensures that the valuable resources of the organization are being
directed at the right opportunities. A motivated organization working towards a common goal will be able to perform at its
peak potential.
Achieving and sustaining organizational alignment is hence easier said than done. At the core of the initial and ongoing
success of this effort must be:
• A passionate, deep, and abiding commitment throughout the ‘C’ suite to define, achieve, and sustain organizational
alignment throughout the organization as a part of the organization’s business strategies.

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• Providing infrastructure support: systems like training, leadership development, succession planning, rewards,
recruitment and retention, performance measurement, recognition and career development must all intentionally support
and reinforce the strategic intent of the organization.
• Creating intentional congruence: alignment dictates that business processes and functions are congruent with
organizational direction and values.
• Linking performance measurement to strategic goals: measurement enables the organization to consistently
communicate its strategy in operational terms that everyone can understand. Using well planned performance
measurement
methodologies enable HR to begin teaching new expectations throughout the organization. When the entire performance
management methodology is revised to reflect the critical success factors that underpin strategic intent, everyone begins to
take notice and revise their modus operandi. Performance management enables people to understand how and why their
actions create results, both positive and negative for the achievement of the organization’s objectives. Once
that awareness is heightened, leaders and managers can begin leveraging each employee’s efforts.
• Ensuring any significant change management activity is integrated with strategic objectives, strategies and tactics to
assure continued alignment throughout the change process.

The goal of the alignment process is to create transparency around the actual performance against targets, provide insight
to identify and understand deviations early and define and execute the right actions to improve performance. The process
culminates with a realistic forecast of the expected business outcomes given the performance to date, the target set in
strategy and the program of performance improvement actions.
The key benefits of having this alignment process with appropriate support tools include:
• Business engagement at all levels, with a focus on activities and actions linked to achieving strategic objectives
• Standardization and simplification through reduction in the sheer number of low values adding activities
• Outputs become action orientated with clear accountability
• A centralized alignment process delivers clear lines of accountability and ownership for the achievement of each
department’s, functions and individuals’ contribution
• Individual performance management activity gets aligned to business performance management activity
• Workforce can become incentivized to execute against activities aligned to delivering desired strategic outcomes
• You achieve an integrated set of planning processes with clear handover points that improve alignment between strategic
plans, business plans and budgets
• You can get timely reports and analysis on achievement to date based on metrics
that matter
• A well managed alignment process would integrate employee training to business performance and embed this within the
individual performance management process.
Oversight and Insight Processes
Oversight is often equated with ‘supervision’ and usually equated with what the board does. It is usually confined to
financial oversight and more recently, risk oversight.

The Role of Information Management

Information is a corporate asset and as such is a potential source of competitive advantage. In order to derive this, an
organization must first be able to harness consistent and accurate data from across the enterprise and then consolidate it
for
the purpose of timely decision making. Increasingly this requires the creation of a central repository of data, and a series of
additional applications managing the flows and messaging of data between systems. Having a central and consistent source
of data means there is one version of the truth across an organization, the information is made available to enable effective
cross functional collaboration across operational and geographical boundaries. What all this means is increased
productivity,
reducing time spent searching for and creating information.