Noorderhaven (1995) defines strategic decisions as those which concern “the goals of an organisation as well as the means to reach these goals”. These decisions are distinguished from the more routine day-day decisions of an organisation because they are often unprecedented and contribute to an organisation’s success: Strategic decisions require substantially more ‘effort’ than routine decisions.
The ‘rational model’ of strategic decision making, proposes this ‘effort’ constitutes “information gathering, assessment of alternatives, discussion and reflection” (OU, 2014, p. 56) as illustrated below:
The rational model is a formalised sequential process whereby organisational objectives are set and determines the need for a decision on how to achieve these objectives, commencing with defining the problem. Research into solutions is performed and alternative course of action are considered and, after evaluation, a choice is made. The model considers implementation and monitoring as part of the process – activity may revert back to a stage in order to reiterate through the process if, for example, the outcome is not desirable. The model’s formalised and generic process means that it can be used across organisations and industries to structure the decision making process and by making the process objective, it is detached from the nuances of specific organisations.
An example use of the model is where an organisation’s objective may be to sustain market share, which invokes the need for a decision on a course of action. The problem may be identified that a new entrant in the market is pricing substitute products more competitively and research is then performed e.g. Are the products of the same quality? Is the pricing long or short term? Is the competitor targeting the organisation’s customers? Alternative courses of action are then assessed and a choice could be to ensure that the marketing function clearly communicates that the organisation’s products are of high quality, last longer and therefore reduce the total cost of ownership for the customer over a given period. A marketing campaign is implemented and the sales are monitored to ensure it is successful.
This example is not atypical of scenarios many businesses might face and as a result, the familiar process can be observed and understood by stakeholders. Reports can be generated on the overall process and stakeholders can see a strategy in place.
The rational model attempts to address some of the flaws with the Classical approach of rational decision making – bounded rationality and satisficing. Rational thinking requires complete knowledge in order to make the most effective judgements but as Simon (1997), cited in OU (2014, p.58), suggests; the knowledge is often incomplete and decision makers must, to some degree, imagine consequences. Satisficing is where decision makers will often use the first alternative that merely provides a satisfactory solution to the problem, not necessarily the best solution nor consider an alternative that may re-define the problem and even further value.
The ‘rational model’, however, still does not fully account for human nature (flaws or motivations that vary) nor the complex relationships that make up an organisation – such as cultural bias. Perhaps organisational or national culture means that a mining firm, for example, finds a way around using labour regulations by making all miners self-employed and buying raw materials from them. Another mining firm may find this wholly unsatisfactory and feels that this conflicts with their corporate social responsibility. The rational model suggests that similar companies should converge on logical decisions but in the case of the mining firms, one may be owned by detached shareholders with little interest in the ethical considerations of their investments, whereas the other, owned privately and the owner is concerned about his or her own reputation.
The political model attempts to address, what can be regarded, as the somewhat unattainable idealistic expectations of the rational model by treating organisations as “social systems of individuals with an unequal distribution of power, different perceptions of the organisation and its desired future, and networks of relationships in which subtle – and not so subtle – forms of influence manifest themselves” – OU (2014, p.65).
OU (2014, p.66) suggests the political model approach involves “coalition building, influence, discussion and lobbying in order to bring people round to an existing preference”. Pettigrew (1973) argues this political behaviour is fundamentally due to individual or sub-units in an organisation that must compete for shared (limited) resources within an organisation.
An example of this competition for shared resources, is the author’s experience as ICT Manager for a commercial vehicle dealer group where managers of three distinct departments (vehicle sales, servicing and spare parts) are targeted on sales revenue alone. Their activities rely on the ICT infrastructure as a support function e.g. working hardware and technological innovations. The ICT budget is calculated centrally and not apportioned to each department so the departmental managers attempt to informally ‘curry favour’ with the ICT manager to ensure their own departmental issues are prioritised without necessarily considering the opportunity costs to other departments.
Although the political approach initially seems individualistic and that individual decision makers are not objectively nor directly concerned with the organisation’s success, it could be argued that the model is similar to the biological science’s model of natural selection. Here, a species evolves to outperform competition not through design but as an indirect consequence of the ‘selfish’ actions of individual members – the fitter the individual, the more likely it is to pass on its genes. If managers present biased and subjective cases to pursue goals for individual success, the indirect result would be organisational success.
Of course, this means that mistakes will happen and where the decisions made based on incorrectly presented information have a larger impact on an organisation strategy, the outcome could be detrimental. If a tool of the corporate politician is the censorship of information, it is important to appreciate that if unchecked, withholding information could be, or lead to, fraudulent activity.
The table below summarises the comparisons between the rational and political models of decision making:
Although both models seem to provide a means of understanding the strategic decision making process, they fundamentally contrast. The rational model appears prescriptive with an idealised process and methodology that decision makers should undertake. The political model is processual and considers that an organisation consists of competing individualistic goals and the context of that organisation (history, culture, hierarchy) determines the decision making processes. The political model does not offer guidance on how decision making ought to be made but merely seeks to understand how it is undertaken.
Strengths of one model (e.g. the objectivity of the rational model) seem to address the weaknesses of the other model (e.g. the individual subjectivity of the political model). It is more likely that both models exist in organisations where some degree of rational planning is undertaken but within that process, political activities either occur or are considered. For example, the author wanted to order some display equipment for each site at his organisation in order to promote a recent marketing campaign. There was no budget for the equipment but the parts manager bargained with the parent company that if they agreed to a parts order, the parent company would fund it. The political process enabled the outcomes of the rational strategic decisions to occur.
Gore, C., Murray, K. and Richardson, B. (1992) Strategic Decision Making, London, Cassell.
Noorderhaven, N. (1995) Strategic Decision Making, Wokingham, Addison-Wesley.
The Open University (2014) B301 Block 3: Strategic Choice, 2nd Edn, Milton Keynes, The Open University
Pettigrew, A. (1973) The Politics of Organizational Decision-Making, Abingdon, Tavistock Publications Ltd.