Effective Strategic Decision Making

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Slide 1 better business by design

Effective Strategic Decision Making

Kim Parker Melbourne

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Contents

• An Effective Decision Making Framework• Multiple facets of a business• What are others saying• Relevant Statistics• Drivers of Change• Factors Affecting Decisions• Understanding business touch points• What is the future of effective decision making• Value Proposition for establishing a decision making framework

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An Effective Decision Making Framework

• Decisions and how they are executed are the lifeline of an organisation.

• At some point in establishing a case to support a business initiative or business change a decision needs to be made either to proceed or to not proceed.

Decisions

Why

What

HowWho

When

• In building the case information will have been gathered and collective knowledge will have been applied to determine it adequacy.

• Risks will have been identified and presumably the cost of mitigation coupled with both their impact and the likelihood of their occurring will have been established.

• A decision can be reached by balancing the benefits of the initiative against the cost of implementation, the impact on the business if it is not and the importance of its contribution into the realisation of Business Goals and Strategy.

• Decision needs to be also made with an appreciation of other competing initiatives in the pipeline.

Decision making is not an activity that is universally done well

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What others are saying“Decision making is a powerful tool that can make or break a company. Some companies are known for their risk taking, others for playing it safe. As a CFO, I always find it challenging to strike the right balance between risk and opportunities, ambition and capabilities.” Patrick Dupuis: Chief Financial Officer (CFO) of PayPal

“The best decisions are those that are aligned with the strategic intent of the organisation and developments in the market and that support the organisation’s ability to perform ..

The company that wins today is the one that makes the best decisions and is able to act on them quickly”Lukas Michel : 'Managing Director of i3 Performance Solutions

“Half the decisions in organisations fail. Studies of 356 decisions in medium to large organisations in US and Canada reveal that these failure can be traced to managers who impose solution, limit the search for alternatives, and use power to implement their plan.

Managers who make the need for action clear at the outset, set objectives carry out unrestricted search for solution, are more apt to be successful.”Paul C. Nutt : Professor of Management Sciences and Public Policy and Management in the Fisher College of Business at Ohio State

University.

Good strategic decisions are made from adopting good processes

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Relevant Statistics

37% of executives say their companies are “very good or excellent at strategy execution

53% of implementers cannot state their company’s strategy in its entirety

95% of employees in most organisations do not understand their organisations strategy.

Source: Harvard Business Review

70% of typical organisations do not link their strategic priorities to their budget

Source: Mark Hughes; Journal of Change Management

If strategic intent is not well articulated how can decisions be effective

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Drivers of ChangeExternal

Better decisions are required in order to address:• Competitors from gaining market share through being more nimble.• Reputational damage though poor execution or being ‘too slow’• Customers demanding products and services.• Legislative changes forcing changes• Technical innovation opening opportunities

Internal

Decisions have resulted in outcomes that have not been beneficial to the organisation. • Stake/Stockholders require improved Returns on Investment• Key Performance Indicators need to be satisfied as well as time pressures. • Increased need to remove uncertainty and unresolved ambiguity.• Accountability to be assigned.• Conflict needs to be better managed.• Solution bias needs to be managed to ensure ongoing strategic alignment.• Fear of change to be overcome to ensure progress but not change for changes

sake.

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Factors affecting Decisions

• Uncertainty / unresolved ambiguity.• Time pressures• Statutory/Legislative Requirements• Conflict

• Delivery Capability• Organisational inertia• Defined Principles• Ethics

Driv

ers

ImpactVision &Strategy Capability

Process & Role

Function & Information

Service Delivery

Infrastructure

Cost dimensions

Financial

Resource

Customer

Operational

Bene

fits

Other factors

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Understanding business touch points

Decisions affect many aspects of the business. Each should be considered before committing to a course of action

Strategy

Objective

Goal

Measure

Capability

Function

Process• Role• Performance

Information• Data element• Data Store

TechnologyApplication• Application Function• Interface• SLA

Infrastructure• Infrastructure Component

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What is the future of effective decision making

Desired Outcome

Implemented framework providing:– An optimised decision making process– A supporting Knowledge Repository.– A Governance model ensuring compliance.

Consistently good and timely decisions.

Decision Maturity• Increases over time• Improved strategic alignment.• Effective option identification & analysis• Greater understanding of risk and

consequences.• Better investment management

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Value Proposition for establishing a decision making framework

An established Decision Making framework allows for:

• Informed and well articulated strategic decisions to be consistently made.

• Increased awareness of business impacts, risks and consequences of actions.

• Enhanced capacity to learn from mistakes.• Better targeted Investments and reduced waste. (time and

money).• Knowledgeable implementers of strategy.• More responsiveness to changing market conditions.• Enhanced competitiveness.

Good outcomes may result from ad-hoc decisions but there is no guarantee.

Adopting a decision framework can improve the likelihood of success