STRATEGIC DECISION MAKING
“Strategy is a pattern in a stream of decisions.”
– Henry Mintzberg, Professor of Management, McGill University
What Is Strategic Decision Making?
Decisions are the forks in the road of strategy. You must take the time and care in making strategic decisions since they allocate the precious resources of time, money, and people to create value. In making strategic decisions, it is essential to understand the value at stake of going down one path versus another, along with the costs, synergies, and risks.
A decision is a final choice made from a set of options. A decision is only as strong as the set of options you choose from. While emotions often cloud judgment, strong decision-making uses the rational side of our brain, relying on evaluating options through an objective lens of criteria. The path of decisions forges an organization’s strategic course of action that ultimately decides the organization’s fate.
7 Strategic Decision Making Tools
Here are the strategic decision-making tools I find most helpful for leaders:
1. Rational Decision Making
We often make too many decisions based on emotion and too quickly with little thought. Rational decision-making is a pragmatic approach to making better strategic decisions based on intentionality, rationality, developing a better option set, objective decision criteria, and limiting biases.
2. Opportunity Cost
Opportunity cost is one of the most essential concepts in strategic decision-making in your role, business, and life. We often take the easy road in front of us when the road not seen is much better for us. We only have so much time, energy, and resources in life, so build the ability to discover and see the roads less traveled that are the real fruitful opportunities.
3. Cost-Benefit Analysis
Ultimately decisions come down to some sort of value equation. Cost-benefit analysis is one of those equations. What trips up most people is truly understanding the totality of hard and soft benefits and costs in a decision. Improving your ability to see the big picture and not leave out any significant costs and benefits will serve you well in your career.
4. Prioritization Matrix
The elegance and power of the prioritization matrix makes it an essential framework in your strategic decision-making toolkit. The prioritization matrix can be used daily for every small and large decision, especially for the relative value of potential options. Imagine if everyone in a company constantly prioritized high impact and low cost actions. The company would be unbelievable. Start with your own priorities.
5. Decision Matrices
Many decisions are multi-variable, with multiple dimensions to consider when evaluating options. In these situations, decision matrices are an essential tool. The key is properly defining the dimensions, importance weighting, and scoring criteria. Decision matrices are really useful with group decisions and debates.
6. Governance
Improving how leadership and other teams make strategic decisions is one of the fastest ways to improve organizational performance. Most teams need to improve their governance to make more objective, transparent, collaborative, and intentional strategic decisions. If you want to improve a team’s performance, trust, and alignment, work on improving its strategic decision governance.
7. Negotiation
Improving your ability to negotiate advantageous and mutually agreeable decisions among multiple parties is essential to the big forks in the road in your career, business, and life. Conceptualizing what a negotiation is, how it works, what the goals are, and what skills you can improve is a great way to start getting better at the life skill of negotiation.
Other related decision tools:
Which Decision Tool to Use When
- You have a long list of ideas or projects: start with the prioritization matrix to sort by impact and effort.
- You are comparing a few options across several criteria: use a decision matrix, especially when a group has to agree.
- The decision comes down to money: run a cost-benefit analysis and include the soft costs and benefits.
- You are about to say yes to something: check the opportunity cost and what else that time and money could do.
- The same kinds of decisions keep getting stuck: fix the team’s decision governance.
- Other parties have to agree: prepare with a negotiation strategy.
Whichever tool you use, follow the rational decision making basics: be clear on the decision, build a strong set of options, agree on the criteria, and watch for bias. These tools will become second nature the more you use them. Pick the topic you need now, or read them in order for the full overview.