Keys to Improving Strategic Decision-Making
- Strategy is a series of choices and trade-offs. Written strategy provides guardrails that help leaders focus on the right opportunities and avoid reactive decision-making.
- Decision rights drive organizational effectiveness. Inventory key decisions, clarify ownership and accountability, and regularly review outcomes to improve decision quality and execution.
- Differentiate between reversible and irreversible decisions. Delegate “revolving-door” decisions that can be changed later, and reserve leadership attention for high-impact “one-way door” decisions that are difficult to reverse.
- Strategic leaders embrace calculated risk. Avoiding difficult decisions often leads to stalled strategy, while thoughtful risk-taking creates opportunities for growth and competitive advantage. It also help to make better strategy decisions overall.
How important is decision making? In the late 1990s, Larry Page and Sergey Brin decided to try and sell their fledgling company. They reportedly approached companies such as Excite, Yahoo, and several others with an asking price just north of $1 million. Fortunately for them, a sale was never consummated, and they continued to run the start-up then known as Google, which now has a market value of more than four trillion dollars.
In retrospect, it would have arguably been one of the worst decisions in business history, costing hundreds of billions of dollars and altering the career and financial trajectory of thousands of people. If business luminaries such as Page and Brin are susceptible to faulty decision making, then how do the rest of us navigate such treacherous terrain?
Trade-offs Shape Strategy Decisions
The good news is that by implementing frameworks and processes to establish decision rights, you can put your team in much stronger strategic and financial positions. The foundation of strategy is comprised of choices, which result in trade-offs—choosing to do X, and not Y. One of the reasons it’s crucial to have strategies in written form is that they provide a filter for what you should and shouldn’t do. Leaders without clear strategies can be seen bouncing from one opportunity or fire drill to the next, because they don’t have any guardrails in place. Strategy provides those guardrails on choices such as what offerings to provide, which customers to target, and the optimal configuration of resources.
5 Questions for Strategic Decision Making
Consider your organization and the following questions:
1. Have we inventoried the most common decisions we face on a regular basis?
2. Is there a process in place to effectively and efficiently make these decisions?
3. Are people clear on their roles in the decision-making process?
4. Have decision rights for each decision been established with authority and ownership?
5. Are decision assessments and debriefs conducted following decisions to review outcomes and learnings?
In my work over the past two decades facilitating strategic thinking sessions for senior leadership teams, it’s become evident how powerful and transformative it can be for executives to gain clear sight lines into the decisions they make. As an organization grows, so too do the number of decisions. If these decisions are not inventoried and accounted for, they become like a tree that has never been pruned—poking out, intertwined and choking off resources from the area’s most in need.
7 Steps to Improve Strategic Decision Making
Here are the steps I lead executive teams through to inventory decisions:
1. Create a list of the common decisions the team faces.
2. Identify at which level each decision is currently made.
3. List the decision maker.
4. Rate the importance of the decision as low, medium or high.
5. Determine whether to keep or change the current decision rights.
6. Propose a modification for any changes in the decision rights.
7. Assign people related to the decision a role according to the phase they should be involved in.
2 Main Types of Decisions
An important consideration in the decision rights process is whether individual decisions have the quality of a revolving door or one-way door. Decisions of a revolving-door nature are ones that can be readily entered into again and reversed if need be. One-way door decisions are those that cannot be re-entered and therefore, require more expertise. Decisions of the revolving-door nature are ripe for delegation to free up time for leaders to focus more energy on the one-way door decisions. Consider your business: what are the one-way door decisions your team is currently is involved in? Have you inventoried these decisions and put the proper expertise, authority and accountability in place?
Once the senior team has completed the exercise, it’s helpful to cascade the process to the next levels of leadership so that efficiencies are gained throughout the organization. Look to consolidate decisions and in some cases eliminate them altogether if they can be rolled up elsewhere or replaced with a checklist. The decision rights process can be especially valuable to leaders assuming a new role, as it brings their new team together to work through who’s deciding what and establishes accountability.
The act of decision making is woven into the fabric of strategy. When you see a business struggling and lacking strategic direction, it’s often because leadership is afraid and reluctant to make real decisions. Real decisions require real trade-offs and some leaders don’t have the mental toughness to assume risk. But, as Meta CEO Mark Zuckerberg said, “In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”