The 3-stage process for making strategic decisions

Managers find it difficult to make strategic decisions and develop this management skill. Their day-to day work involves dealing with management issues that normally concern routine company activities requiring quick decisions. This can be classed as operational management, the everyday running of the business.

Managing strategic decisions is different. This activity relates to the future of the company and the setting of medium- and long-terms goals for the organisation. These decisions affect the entire company and normally involve a firm commitment to resources.

The challenge for managers is that they have to make these decisions with a limited amount of information and with few past experiences to draw upon. Strategic decisions involve a high level of uncertainty and can rarely be reversed.

In this type of strategic decision-making, they have no prior experience and often managers feel insecure and tend to seek outside help.

Strategic decisions involve a high level of uncertainty and can rarely be reversed

People have a vested interest in spreading the idea that strategic decisions are very complex and are best left to external consultants. But the truth is, in reality, no one knows the business better than the people within the organisation who will have to implement a strategy.

There is nothing wrong with enlisting the assistance of external experts; managers are increasingly using consultants to deal with management issues that do not involve operations. The problem arises when you abuse this crutch, because it merely delays the development of this strategic skill. 

Managers must accept ultimate responsibility for the strategies of their organisation and this task cannot be delegated to a subcontractor. They should choose the models that best suit their organisation and simply make their strategic decisions, learning from the process, in line with the organisation.

People have a vested interest in spreading the idea that strategic decisions are very complex and are best left to external consultants

“Where am I?” ”What should I do?” “How should I do it?” These questions form the basis of good strategic decisions. Businesspeople and managers must ask themselves these questions to be able to take responsibility and manage strategic decisions as an absolute priority.

To answer these questions, we propose the ‘circle of strategic decisions’ model, which is a three-stage process that involves analysing, decision-making and implementation.

The circle of strategic decisions is based on the premise that the strategic management or planning process should take into account the organisation’s purpose.

The mission, vision and values of an organisation lie at the heart of its strategies. They are the organisation’s raison d’être. They explain how it wants to do things and where it wants to go. It is stable and does not change with each decision. It is what remains, in other words, the foundation stones of the organisation itself.

The strategic management or planning process should take into account the organisation’s purpose

The 3-stage process for making strategic decisions

Once the mission, vision and values are embedded into each strategy, the following three-stage process can help guide executives to make better strategic decisions:

1. Analysis

An analysis is an attempt to understand where the organisation is, including the strategic position of the organisation in relation to its environment and its internal capabilities. 

Analysis aims to provide a better understanding of the internal and external environment. It requires a certain distance and perspective. It must be rigorous and supported by data, while also identifying opportunities and anticipating trends.

2. Decision

A strategy is a decision: without a decision there is no strategy. The purpose of this part of strategic management is to choose a strategy. It requires generating options, comparing them and deciding. 

The art of management lies in choosing a unique mixture of options that includes choosing a course to follow, and in so doing, setting a course for the future.

With strategic decision-making, the most sophisticated solution can often be the simplest one

3. Implementation

Decisions have to be implemented. Implementation is the last part of a strategy and is the part you can see and feel. It means ‘doing’ or ‘taking action’. The question is how to move from making a decision and turning it into reality. This has to do with people and resources, being able to effect change and make things happen.

A continuous learning cycle

People and organisations can learn. This circle can be seen as a learning wheel, a continuous process in which the organisation can learn and get better at strategic decision-making. It represents learning by doing and by deciding, correcting mistakes and providing new solutions. It involves learning in a double loop.

I have never seen anyone become a good strategist without practice. As in sport, this is a discipline that requires training and practice. You can learn to manage strategies through practice (by practicing management) in making decisions, putting them into practice and analysing the results. 

However, with strategic decision-making, the most sophisticated solution can often be the simplest one. Getting to the essence of a strategy does not have to be complicated. You simply have to know the way, the process to follow and have the necessary tools and models to accomplish your goals.

This article is based on knowledge insights by Marcel Planellas & Anna Muni published in the book Strategic Decisions: the 30 most useful models.