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Strategic Decision-Making: Process Perspectives

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DOI: 10.1111/j.1468-2370.2006.00118.x

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 ACCEPTED VERSION

This is the accepted version of the following paper: Elbanna, S. (2006), "Strategic
decision making: Process perspectives", International Journal of Management Reviews,
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STRATEGIC DECISION MAKING: PROCESS PERSPECTIVES1

Said Elbanna
Faculty of Commerce, Cairo University

1
I would like to thank John Child for his general encouragement and constructive comments on earlier
drafts of this article. Thanks also to the two anonymous reviewers and the editor for their insightful
comments.
 STRATEGIC DECISION MAKING: PROCESS PERSPECTIVES

ABSTRACT

This article reviews the strategic decision-making process literature with respect to the

synoptic formalism/political incrementalism debate. Procedural rationality is chosen as

a representative of the synoptic formalism perspective; and both intuitive synthesis and

political behaviour are employed as representatives of the political-incrementalism

perspective. In this article, the author discusses the theoretical underpinnings of these

three process dimensions, as well as the key research efforts gathered together under each

perspective. In conducting this review, a number of areas have been identified which

could profitably be examined further, together with a number of implications for

managers will be highlighted and discussed.

Key words:

Incrementalism; intuition; political behaviour; rationality; strategic decision-making;

synoptic formalism.

2
 INTRODUCTION

Dean & Sharfman (1996, pp. 379-380) describe strategic decisions as: ‘committing

substantial resources, setting precedents, and creating waves of lesser decisions

(Mintzberg et al., 1976); as ill-structured, nonroutine, and complex (Schwenk, 1988); and

as substantial, unusual, and all pervading (Hickson et al., 1986)’. Some of the

characteristics of strategic decisions are as follows. Strategic decisions are the

responsibility of top management. They reflect the interaction between an organisation

and its environment and show how an organisation manages this relationship (Ginsberg,

1988). They may be formal or informal and can be both intended and emergent

(Pennings, 1985). They are embedded in both the inner context (e.g. psychological,

structural, cultural, and political factors) and the outer context of the organisation (e.g.

competitive factors) (Pettigrew, 1992). They deal with concerns which are essential to

the livelihood and survival of the organisation and usually involve a large proportion of

the organisation’s resources; and they typically address issues which are unusual for the

organisation rather than issues which lend themselves to routine decision-making (Stahl

& Grigsby, 1992). They are difficult to define or to assess in terms of performance; they

are associated with different trade-offs and risk; they are interrelated to other decisions in

the organisation and set precedents for subsequent ones; they are political and carry high

levels of uncertainty; they rarely have one best solution and once this is made, they are

difficult to reverse (Wilson, 2003).

It should be noted that a decision which is considered strategic in one industry may be

less or not strategic at all in another (Hickson et al., 1986). For example, a decision to

introduce a new product (e.g. a car) in the automotive industry can be a strategic one;

3
while the decision to introduce a new product (e.g. a children’s toy) in a factory which

produces hundreds of new toys every year may not be a strategic one.

The study of strategic decision-making has long been of interest to both scholars and

executives (Ireland & Miller, 2004). Research into strategic decision making has often

been divided into two categories ‘content research’ and ‘process research’. Content

research deals with issues of strategy content such as portfolio management,

diversification, mergers; and the alignment of firm strategies with environmental

characteristics. Process research, however, deals with the process by which a strategic

decision is made and implemented and the factors which affect it. For example, it

concentrates on the way in which managers influence the firm’s strategic position through

the strategic decision making process (SDMP) which they use.

Although the body of research over the last two decades indicates the domination of

the research agenda by content issues, while process issues have received less attention,

there is at present renewed interest in process research (Rajagopalan et al., 1997). This

interest is still maintained. It should be borne in mind that these two categories are

complementary, not alternatives, and that content research can significantly influence the

direction of process research and vice versa (Mintzberg & Waters, 1985). For the

purposes of this article, we focus on the second approach, namely, process research.

While strategy process research covers a broad range of issues, this review focuses on

the SDMP, an area of process research which deals with the question of how strategic

decisions are made. Therefore, SD implementation is beyond the scope of the present

review.

4
 This article is organised as follows. First, we discuss research on two specific

perspectives which differentiate the SDMP. These are the synoptic formalism and the

political incrementalism perspectives. Based on a careful examination of the theoretical

and empirical literature on these two perspectives, procedural rationality is chosen as a

representative of the synoptic formalism perspective; and both intuitive synthesis and

political behaviour are employed as representatives of the political-incrementalism

perspective. Second, the author discusses the theoretical underpinnings of these three

process dimensions as well as the key research efforts gathered together under each

perspective. Third, this article suggests a number of areas which could profitably be

examined further. These areas address implications for theory building, methodology and

managers.

SYNOPTIC AND INCREMENTAL PERSPECTIVES

Two basic types of models pervade the literature on the SDMP, i.e., the synoptic

formalism model and the political incrementalism model (Goll & Rasheed, 1997;

Johnson, 1988). Synoptic formalism is considered an extension of the traditional rational

model; and analysis is its basic feature. In contrast to the synoptic formalism are

incrementalism (Lindblom, 1959), logical incrementalism (Quinn, 1980) or political

incrementalism as Mueller (1998) call it; this, clarifies the way in which organisations

actually make strategic decisions.

These three terms, i.e. incrementalism, logical incrementalism and political

incrementalism, are not identical. For example, Fredrickson & Mitchell’s (1984)

discussion of incremental processes does not address the political aspects of decision-

making processes; while Eisenhardt & Zbaracki (1992) conclude that the political

perspective provides a compelling description of the way in which managers actually

5
make decisions. Quinn’s ‘logical incrementalism’ differs from Lindblom’s

incrementalism or ‘muddling through’ in that it combines elements of rational planning

with elements of incrementalism (Papadakis & Barwise, 1997). Although there are some

differences between these three terms, they are often offered as the antithesis to synoptic

formalism or as simply a more accurate characterisation of the way that organisations in

reality make strategic decisions.

Researchers have discussed many dimensions of the SDMP in the bulky intellectual

literature of strategic decision-making. The rationality of decision-making processes has

received a central place in the strategic decision-making theory and practice (Papadakis

& Barwise, 1997). Political behaviour among decision-makers has long been recognised

as an aspect of decision-making (e.g. Child & Tsai, 2005; Wilson, 2003) and has received

a great deal of attention from researchers (Schwenk, 1995). Although there is little

empirical research on intuition in strategic decision literature, making decisions by

intuition is increasingly viewed as a viable approach in the SDMP (Miller & Ireland,

2005; Sadler-Smith & Shefy, 2004). Eisenhardt & Zbaracki (1992) point out that

studying intuition is one way to create a more realistic view of the SDMP. Butler (2002)

concludes that more recent research has emphasised how executives make decisions using

intuitive and political processes in addition to rational procedures.

Given the above, in addition to the fact that reconciling synoptic and incremental

perspectives is a desirable if not imperative matter for increasing the effectiveness of the

SDMP (Camillus, 1982), both these perspectives were addressed together in the present

review.

6
 RATIONALITY

The next two sections will address the concept and role of rationality in strategic decision-

making in turn.

THE CONCEPT OF RATIONALITY IN DECISION-MAKING

‘Rationality is the reason for doing something and to judge a behaviour as reasonable is

to be able to say that the behaviour is understandable within a given frame of reference’

(Butler, 2002: 226). Put another way, rationality characterises that behaviour which is

logical in pursuing goals (Dean & Sharfman, 1993b). This broad conception underlies

many social science models of rationality.

Given the historical evolution of rationality, scholars developed some constructs of

rationality to be distinguished from more global conceptions of rationality, which have

overtones of decision-maker omniscience (Simon, 1978). These constructs represent

measures of the extent to which the SDMP approximates to the rational model of decision-

making (see Table 1). In this case, decision-makers are rational to the limits of their own

capabilities (i.e. bounded rationality); as Snyman & Drew (2003) stress, bounded

rationality emphasize decision-making process which is limited by cognitive and political

realities. Given these limitations, decision-makers aim to achieve objectives which are

‘good enough rather than the best’ (Eisenhardt, 1997, p. 1).

Although these constructs all derive from the rational model of decision-making, there

are many differences between them. Authors have used different labels in measuring

rationality. Moreover, studies which use the same label may use different indicators to

operationalise it. For example, Khatri (1994) uses comprehensiveness as one indicator of

what he calls strategic rationality. He measures this indicator as a whole using one item

of a Likert-type scale, while both Fredrickson & Mitchell (1984) and Jones et al. (1992)

7
divide comprehensiveness into two components: analytical and integrative. Although

both Fredrickson & Mitchell and Jones et al. divide comprehensiveness into the same two

components and define them in a similar way, they operationalise them differently.

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RATIONALITY AND STRATEGIC DECISION-MAKING

Eisenhardt & Zbaracki (1992) argue that the debate over whether decision-makers are

rational or boundedly rational is no longer very controversial, where empirical research

clearly supports the following. First, the existence of cognitive limits to the rational

model of decision-making; Janis (1989), for example, points out that executives are likely

to take any of the following decision shortcuts to overcome cognitive limitations, namely,

satisficing, simple decisions rules, incrementalism, and nutshell briefing rule. Second,

the pursuit by many strategic decisions of the basic phases of problem identification,

development and selection, but they cycle and recycle through the various stages of

decision-making, frequently repeating, often going deeper, and always following

different paths by fits and starts. Third, the complexity of the problem and the conflict

among the decision-makers often influence the shape of the decision process.

Jones et al. (1992) identify three main obstacles to adopting rational decision processes.

First, the organisation may lack the required resources to search for and analyse the

relevant information. For example, it has been argued that the rational model assumes

that information will be available when needed but neglects the cost of providing this

information (Braybrooke & Lindblom, 1970). However, even if the organisation has the

required resources, the comprehensive processes may lead to ‘achieving tomorrow’s

8
solution to yesterday’s problem’ (Braybrooke & Lindblom, 1970, p. 121). Second, as

noted above, the decision-makers may have limited cognitive capabilities. Third,

executives may be apprehensive about upsetting the organisation’s existing political

structure and dealing with its consequences.

The relationship between rational decision processes and organisational outcomes

seems to be problematic because it has been a subject of continuing controversy among

researchers, and no consensus has yet emerged (Goll & Rasheed, 1997). Empirical

evidence exists for all possible relationships between rationality and organisational

outcomes: positive relationships, negative relationships and no relationship (see Table 2).

Fredrickson and his colleagues conducted a series of studies on this relation. They find

a negative relationship between rationality and performance in an unstable environment

(Fredrickson & Mitchell, 1984). A positive relationship was found in a stable

environment (Fredrickson, 1984). Through a longitudinal extension of these studies,

Fredrickson & Iaquinto (1989) found that levels of rationality exhibit considerable inertia.

Contrary to Fredrickson and his colleagues, Dean & Sharfman (1996) hypothesise that

the relationship between procedural rationality and decision effectiveness will be stronger

in unstable environments than in stable ones. Bourgeois & Eisenhardt (1988) find a

positive relationship between rationality and performance for firms in a high velocity

environment. Further empirical support for this position is provided by Goll & Rasheed

(1997); Judge & Miller (1991); Miller & Friesen (1983); and Priem et al. (1995).

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9
 On the basis of a review of relevant previous theory and research, we suggest seven

possible reasons for the contradictory results of previous studies, listed below.

First, a lack of clear and systematic treatment of environmental variables: in the sense

of focusing on some environmental variables (e.g. uncertainty) and failing to consider the

effect of others (e.g. hostility-munificence and complexity) (Dess & Beard, 1984). For

example, environmental complexity may need to be rationally treated in decision-making

so as to understand the different environmental variables which affect the decision.

Second, conducting research in different cultures: for example, consensual decision-

making is more common among Japanese managers than among U.S. ones because of the

high emphasis which Japanese culture places on consensus (Rajagopalan et al., 1993).

Some authors have provided empirical support for the need to take the effect of culture

into account when conducting research on strategic decisions in different cultures (e.g.

Brouthers et al., 2000).

Third, failure to include other strategic process variables: although the SDMP is

multidimensional, most of the existing studies have focused only on rationality, whereas

these studies have paid less attention to other process characteristics (e.g. participation

and politics) (Papadakis et al., 1998). As a result, these studies do not totally capture the

complexity and variety of the phenomenon of decision-making (Hart & Banbury, 1994).

Fourth, methodological differences: there are many methodological differences

between previous studies such as data collection methods; variation in sample size;

statistical techniques; type of industry; and number of industries.

Fifth, variations in the operationalisation of the SDMP dimensions: scholars use

different constructs of rationality. Although these constructs are derived from the rational

model of decision-making, there are many differences among them (see Table 1). For

10
example, Kukalls (1991) declares that one of the reasons for the contradictions between

his results and those of Fredrickson & Mitchell (1984) is the use of a different

conceptualisation of the planning comprehensiveness construct. In their comparison of

six prior studies concerning the relationship between rationality and firm performance,

Priem et al. (1995) find wide differences between these studies in the operationalisation

of both rationality and performance.

Sixth, variations in the level of analysis: some authors focus on organisational level and

investigate organisational performance (e.g. Fredrickson & Mitchell, 1984); while some

choose decision-level as a focus instead of organisational level and examine decision

outcomes (e.g. Butler et al., 1993).

Seventh, failure to investigate more complex relationships: for example, Rodrigues &

Hickson (1995) report that successful decisions were more likely to result from decision

processes for which resources were available. According to Rodrigues & Hickson,

resources refer to quantity and timeliness of resources (e.g. money, materials and

technology), and the quantity, timeliness and accuracy of information. On the basis of

this, one may argue that the success of a decision is a function of the availability of both

resources such as money, material and technology (a product of good performance) and

information (a dimension of rationality). These findings may suggest a positive

interaction between rationality and performance, which in turn influences strategic

decision success.

In summary, the above arguments on the possible reasons for the contradictory results

of previous studies should be considered by researchers when interpreting and comparing

their results with earlier ones.

11
 POLITICAL BEHAVIOUR

‘Since, strategic decisions are made among people by people for people they are a welter

of action, interaction, and counteraction’ (Hickson et al., 1986, p. 54). The interaction

of interests, conflict and power means that the SDMP can be characterised as political in

nature (Wilson, 2003). The origin of the political perspective on strategic decision-

making is the political science literature of 1950s, when various authors developed a view

that the conflicting goals and interests of people affect decision-making in government

(Eisenhardt & Zbaracki, 1992). This view assumes that decisions are the result of a

process in which decision-makers have different goals, form alliances to achieve their

goals, and the preferences of the most powerful prevail.

The political model attacks the model of the group as rational (Eisenhardt, 1997). As

a group, people may share some objectives, such as the welfare of the organisation, but

they have conflicting preferences and interests which arise from different expectations of

the future, different positions inside the organisation and clashes. For example, some

may be interested in growth while the other may favour profitability (Allison, 1971).

THE CONCEPT OF POLITICAL BEHAVIOUR IN DECISION-MAKING

There is a lack of uniformity in defining politics. Gandz & Murray (1980, p. 237) divide

definitions of politics into two categories. In the first category, politics are defined in ‘a

“neutral” fashion as the occurrence of certain forms of behaviour associated with the

use of power or influence’. Within this category, there are three subdivisions. The first

one considers any conflict over scarce resources as political behaviour. The second

subdivision expands the definition of politics to include conflict over any policy decision.

Lastly, some broaden the definition to include any use of power or influence. The second

12
category defines politics in terms of consciously self-serving behaviours against others in

the organisation.

The political behaviour may reflect power which is technically considered illegal.

Consequently, it is divisive and conflictive, often pitting people against the other system

of influence, i.e. formal authority, accepted ideology, and/or authorized expertise, or else

against each other (Mintzberg & Waters, 1985). Political behaviour as a part of human

behaviour in decision-making seeks to ‘get others to do what we want, when they might

not elect to do so’ (MacMillan & Jones, 1986, p. 1).

In strategic decision-making, researchers see political behaviour from two points of

view. On the one hand, there are the authors who are interested in examining politics

inside organisations. From this perspective, there are two categories. The first category

inspects politics among organisational members. It investigates political tactics among

the actors; and their attempts to affect the outcomes of decision processes to serve their

self-interests. In addition, it examines the relationship between political dynamics and

organisational outcomes (e.g. Dean & Sharfman, 1996). The second one investigates

politics among organisational units; and the acquisition by these units of the power to

influence the decision process (e.g. Pfeffer & Moore, 1980).

On the other hand, there are the authors who use a broad approach to include all kinds

of influence on decision processes from both internal actors (organisational members

and/or organisational units) and external parties (e.g. government agencies and

customers) (e.g. Mintzberg et al., 1976). What ties together the above two points of view

is the belief of the individuals, whether they are working inside or outside the

organisation, that they will be affected by the decision outcomes. For this reason, they

attempt to satisfy their personal or institutional needs by influencing the decision process.

13
POLITICAL BEHAVIOUR AND STRATEGIC DECISION-MAKING

Many researchers have been interested in investigating the role of political behaviour in

the SDMP and its effect on organisational outcomes (see Table 3). Hickson et al. (1986)

argue that not every executive or unit within the organisation essentially affects the

decision-making processes where they are influenced only by a specified set of interest

units or executives, i.e. ‘decision-set’. The decision-set of interests brings political tactics

into decision-making to exert influence upon the decision processes in order to ensure

that their objectives are embedded in the decision. Some of these tactics which have been

addressed by previous authors are: coalition formation (e.g. Child & Tsai, 2005); agenda

control (e.g. Eisenhardt & Zbaracki, 1992); tactics of timing (e.g. Hickson et al., 1986);

the use of outside expert consultants (e.g. Pfeffer, 1992); negotiation or bargaining (e.g.

Papadakis, 1998); the use of power (e.g. Krishnan & Park, 2003); and tactics of

information such as manipulation and control of crucial information (e.g. Pettigrew,

1973).

Most previous researchers have supported a negative relationship between political

behaviour and organisational outcomes (e.g. Dean & Sharfman, 1996; Gandz & Murray,

1980). The following reasons may help to account for this negative relationship.

First, political tactics contrast with the straightforward influencing tactics of open

discussions and sharing information among decision-makers (Eisenhardt & Bourgeois,

1988). For example, politics may lead to a distortion of information (Pfeffer, 1992).

Moreover, political behaviour often involves restricting the information flow (Pettigrew,

1973). Therefore, managers may make decisions depending on incomplete information

which could lead to disappointing outcomes (Dean & Sharfman, 1996).

14
 Second, political decision processes are divisive and therefore time-consuming.

Therefore, they may lead to delay for the decision, with a possible loss of opportunities

and profits (Pfeffer, 1992). This problem will be more obvious in competitive and rapidly

changing environments in which decisions should be made fast (Eisenhardt, 1989).

Third, as argued by Dean & Sharfman (1996), political behaviour may lead to

incomplete understanding of the environmental constraints, resulting in the undermining

of strategic decision effectiveness in two ways. (A) Political tactics are directed toward

the interests, power bases and positions inside the organisation rather than on what is

feasible, given the present environmental forces. Hence, decisions which result from such

processes are less likely to consider environmental constraints. Second, political

processes may exclude some feasible alternatives because they are in conflict with

powerful individuals’ interests, undermining the likely success of strategic decisions.

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INTUITION

In contrast to rationality, there is little in the way of applied research on intuitive processes

in strategic decision literature. The majority of serious scholarly works on this subject

are theoretical in nature and produced almost exclusively by psychologists; empirical

research in applied management settings is quite limited (Agor, 1989c) and this scarcity

has persisted until recently. Therefore, the extent to which executives use intuition in

strategic decision-making remains a topic for future research. This review addresses this

neglected but important process (intuitive synthesis) in the SDMP to the hope of

15
providing a more realistic view of the way in which strategic decisions-makers actually

act.

THE CONCEPT OF INTUITION IN DECISION-MAKING

It is difficult to describe intuition but it is easy to recognize (Sadler-Smith & Shefy, 2004).

Eisenhardt & Zbaracki (1992) state that intuition refers to more incremental adaptations

based on deep and intimate knowledge of the situation faced by decision-makers.

Intuition is a synthetic psychological function in that it apprehends the totality of a given

situation. It is often associated with having a hunch or a strong feeling of knowing what

is going to occur (Vaughan, 1989) without explaining the rationale behind it (Nutt, 1998).

Butler (2002) argues, most models of intuition can be seen as ways of trying to push

the decision process as far as possible towards the computational strategy. Parikh (1994)

observes that intuition could be a form of intelligence which decision-makers can use

when they cannot access rational processes. Sadler-Smith & Shefy (2004: 76) argue that

intuition can now be understood as ‘a composite phenomenon involving interplay between

knowing (intuition-as-expertise) and sensing (intuition-as-feeling)’. Similarly, In their

review of intuition in strategic decision making, Miller & Ireland (2005) mention that

intuition can be conceptualised as automated expertise and as holistic hunch.

Khatri & Ng (2000) suggest that intuition is subconscious; complex; quick; a

component of all decisions; not emotional; and not essentially biased. Moreover, they

propose three indicators of intuition, namely, reliance on judgement, reliance on

experience and the use of gut feeling. These indicators have been widely addressed by

previous studies and will be discussed in turn.

1. Reliance on judgement: Decision-makers use intuitive synthesis when decisions

should be made fast, information is not adequate and there is no precedent. Such

16
situations call for judgement. Butler (2002) argue that judgement is central to the process

of solution building. Daft & Lengel (1986) propose that if work is not analysable,

managers have to employ judgement and experience rather than computational routines.

Bunge (1975) suggests that judgement is a part of intuition, while Simon (1987) treats

intuition and judgement as synonymous concepts.

2. Reliance on experience: intuitive synthesis represents a form of experience which is

based on a deep knowledge of problems related to a specific job or environment (Prietula

& Simon, 1989). Agor (1989a) finds a relationship between good intuitive decisions and

the numbers of years of experience. Wally & Baum (1994) point out that intuition is an

ability to learn from experience. Depending on semi-structured telephone interviews with

60 managers across different industries and geographic locations in the United States,

56% of interviewees thought that intuitive decisions are based on experience (Burke &

Miller, 1999). In his study of the tactics used by decision makers to evaluate alternatives

during strategic decision making in 317 organisations, Nutt (1998) identified four types

of evaluation tactics, analytical, barraging, judgmental and subjective. In the judgmental

tactics, 'choices were made intuitively by the decision makers, drawing on their prior

experience or knowledge of the situation' (Nutt, 1998, p. 349). Floyd & Lane (2000)

argue that decisions to acquire needed assets are initiated at operating levels by managers

experimenting with novel solutions to emerging problems. Based on their knowledge of

the organization's context, middle managers assess the long term implications of such

experiments, and they advocate the most promising ones as initiatives to top management.

3. Use of ‘gut-feeling’: Parikh (1994) describes intuition as a process of feeling out the

problem or trusting one’s gut feeling. Therefore, if the decision which is founded on

intuition turns out to be wrong, decision-makers will have no defence because they cannot

17
articulate the reasons on which the decision was based (Schoemaker & Russo, 1993).

Decision-makers simply know that they are right, or they have a strong feeling about the

decision. In Burke & Miller’s (1999) study, 40% of the subjects mention that intuition is

based on a person’s feelings or emotions. They declare that this characterisation is

consistent with the interpretation of intuition as a gut feeling.

In conclusion, in contrast to rationality and political behaviour, there is little in the way

of the operationalisation of the intuitive processes in the strategic decision-making

literature. As a result, the concept of intuition is still ‘unrefined and poorly understood’

(Clarke & Mackaness, 2001); and scholars, who have explored it, have widely different

perspectives about what it actually is and how it works. As Miller & Ireland (2005, p.

29) suggest ‘intuition presents itself as a troubling tool’. Therefore, any exploration you

conduct of the existing literature on intuitive synthesis will leave you more than frustrated

(Agor, 1989b).

INTUITIVE SYNTHESIS AND STRATEGIC DECISION-MAKING

One of the basic assumptions about management in general and decision-making in

particular is that rational processes yield choices which are superior to those coming from

intuitive processes. However, this assumption has recently come ‘under fire’ (Khatri,

1994). For example, Miller & Ireland (2005) claim that many managers embrace intuition

as an effective approach to strategic decision making. Grant (2003) argues that rapid

change requires approaches to strategy formulation which are ‘flexible and creative’.

Making decisions by intuition is increasingly viewed as a viable approach in today’s

business environment because few strategic decisions have the advantage of complete,

accurate and timely information. The decision making literature suggest that the

evaluation of alternatives tends to be intuitive, unless managers are forced to involve

18
others (Nutt, 1998). Burke & Miller (1999) report that executives outline various benefits

of the use of intuition in decision-making. These are to expedite decision-making; to

improve ultimate decisions; to facilitate personal development; and to promote decisions

compatible with the company. They argue that intuition may be beneficial in certain

scenarios and at times may be the primary decision approach available. The reason for

this is perhaps that intuitive processes can deal with more complex systems than those

which can be dealt with by our conscious minds (Parikh, 1994).

Papadakis & Barwise (1997) suggest that decision-makers need to combine both

rationality and intuition. Fredrickson (1985) found empirical evidence that managers

could be simultaneously rational and intuitive. In her study of strategic decision-making

in eight microcomputer firms, Eisenhardt (1989) supported this notion. She found that

effective managers in these firms made strategic decisions in a somewhat surprising way.

They generated a large number of alternatives, but did not analyse them thoroughly, they

gathered information from multiple sources, but then focused on only a few of them. It

seems that these managers were using a combination of rationality and intuition.

Several authors have suggested that top executives use intuition in an unstable

environment (e.g. Agor, 1989a; Mintzberg, 1994; Quinn, 1980), but none of them

explicitly examines whether intuition in fact have any bearing on organisational

outcomes. For example, Eisenhardt (1989); Judge & Miller (1991); and Wally & Baum

(1994) investigate the impact of intuition on the pace of strategic decision-making, but

they do not directly investigate the relationship between intuition synthesis and

organisational outcomes. In one of the very few applied studies which have addressed

the role of intuition on organisational outcomes, Khatri & Ng (2000) found that the use

19
of intuitive synthesis in the SDMP is positively associated with organisational

performance in an unstable environment, but negatively in a stable one.

Using intuition in decision-making is not without its shortcomings or criticism. Sauter

(1999), for example, mentions that managers using intuition may become impatient with

routine or details; and they may reach conclusions very quickly, ignore relevant facts, or

follow an inspiration when it is clearly bad. Nevertheless, Sauter suggests some methods

to manage these negative tendencies. For example, when decision-makers use intuition,

they must understand their strengths and weaknesses; they must assess all intuitively

obtained information using appropriate analytical tests and consider all factors carefully

without bias.

In summary, most of the few empirical studies which have investigated the role of

intuition in the SDMP are still initial research efforts and have some shortcomings.

Eisenhardt (1989; 1990) and Bourgeois & Eisenhardt (1988), for example, showed that

intuition played a significant role in increasing the speed of strategic decisions in a high

velocity environment. However, their results may not be sufficiently generalisable

because they depended on a small number of case studies and a single industry (see Table

4). Isenberg (1986) finds that intuition supported managers’ efficiency through reducing

the information required to make a decision. Nevertheless, the generalizability of his

findings is limited because of the small sample size and the focus on students and general

managers. Moreover, most of these research efforts do not clearly examine the

relationship between intuitive synthesis and organisational outcomes.

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20
 CONCLUSION

The key conclusions of this review are organised in the following way. First, we discuss

substantive extensions. Second, methodological implications are highlighted and

addressed. Finally, we suggest a number of implications for managers.

SUBSTANTIVE EXTENSIONS

First, the synoptic and incremental debate. While the synoptic and incremental debate

has been much contested, it has not been adequately tested in empirical terms and a gap

is said to separate the strategic decision researchers using the incremental and the

synoptically based perspectives. This gap requires the SDMP to be investigated from

both perspectives. This review shows that the strategic decisions which companies take

are not entirely based upon one process, but may arise from a number of processes.

Therefore, the use of a multi-dimensional empirically grounded representation of the

SDMP dimensions to examine the process-outcome relationship (e.g. Dean & Sharfman,

1996) is an advantage over empirical efforts which focus on specific process dimensions

(.e.g. Jones et al., 1992).

Second, implementing strategic decisions. To complete the model of strategic

decision-making and success, one needs to include how well decisions are implemented

because of the potentially significant impact of implementation on strategic decision

success (Baum & Wally, 2003; Nutt, 1993; Wilson, 2003). For example, Hickson et al.

(2003) concludes that the way decision implementation is managed appears to be vital for

decision successfulness. Nutt (1999) reports that half the decisions in organisations fail.

Nutt suggests that the key reasons of failure take place predominantly during decision

implementation rather than during decision-making.

21
 Third, process capability. Enhancing our understanding of strategic decision-making

would require greater attention to the role of process capability. Nutt (2004) claims that

decision-makers should generate a pool of ideas to avoid failed decisions and in so doing

to expand the alternatives search by finding an appropriate arena of action, using broad

objectives and searching from several perspectives. Simon (1987) argues that it is

doubtful that decision-makers depend only on either intuition or rationality; rather, it is

more likely that there is a continuum of decision-making styles involving an intimate

combination of the two kinds of process. Decision makers might achieve a more balanced

perspective by considering both intuitive and rational processes as complementary or dual

processes (Sadler-Smith & Shefy, 2004). For example, intuition can be brought in after

rational processes have done the groundwork and provide data and analyses as the basis

for intuitive processes (Sauter, 1999).

Fourth, the role of political behaviour. The following are suggestive questions which

may need to be answered to provide academics and managers with a more realistic picture

of the dynamics of political behaviour in decision-making.

1. How can managers overcome the negative effects of political tactics? The answer

may be through improved mutual trust (Papadakis & Barwise, 1997) or common goals,

clear areas of responsibility and humour (Eisenhardt, 1999).

2. Is political behaviour necessarily dangerous? Although most previous studies take

a negative view of politics, some authors argue that politics may be harmful in some

situations and helpful in others (Stevenson et al., 1985). Eisenhardt et al. (1997), for

example, argue that in a rapidly changing environment, politics may be beneficial because

they serve as an important mechanism for organisational adaptation. Nutt (1998) suggests

that barraging reduce uncertainty and increase acceptance.

22
 Mintzberg (1998) points out that politics should be evaluated according to their effect

on the ability of an organisation to pursue the appropriate mission efficiently in the long

term. He suggests some functional roles for politics over the SDMP stages. In the

preparation stage, politics can ensure that all sides of the decision are fully debated. Then,

in the decision making stage, politics can work as a kind of ‘invisible underhand’ to

promote a necessary change blocked by the legitimate systems of influence. Lastly, in

the execution stage, politics can ease the path for the implementation of a strategic

decision.

To answer the above questions, new conceptions and research designs need to be

developed. For example, more studies such as that of Simmers (1998) expressing and

investigating a political perspective in two ways, i.e. competitive and collaborative, can

be useful here.

Fifth, the role of the broader context. While this review tells us something about the

role of some contextual variables, e.g. environmental uncertainty, in the SDMP, we still

know a little about the role of other contextual variables in the SDMP. For example, what

is the role of the national context in the SDMP? What is the relationship between top

management characteristics, which may affect their perceptual and evaluational processes

and the SDMP? Is there a relationship between the time and information available to

decision makers and decision process? What is the role of 'information load' in making

decisions (Huber & Daft, 1987)? Do time and information required moderate the

relationship between decision process and outcomes? Is there a relationship between the

type of information, e.g. real time or planning information, and the SDMP? Does the way

in which decision-makers categorise and label a strategic decision in the early stages of

decision-making influences the subsequent responses of the organisation? Do external

23
actors lead to more rational or political decisions? What is the role of company size in the

context of strategic decision making? Given such questions and the above discussion, a

next logical step in this line of critical review would be to review the role of contextual

variables in the SDMP.

METHODOLOGICAL IMPLICATIONS

First, longitudinal research designs. One of the limitations of most previous research,

especially questionnaire-based research, is that the data are cross-sectional; analysis was

post hoc; and data were collected after the decisions were made and their outcomes were

clear. Therefore, a more accurate understanding of the causal relationships between

process and outcomes requires the adoption of longitudinal research designs (Bowman et

al., 2002). This will enable researchers to investigate how relationships between context,

process and outcome unfold over time and to achieve a better understanding of the degree

and direction of causality among the main variables (e.g. the long debate on the causal

relationship between performance and rationality) (Van de Ven, 1992).

Second, the consistency between unit of analysis and outcome measures. Outcome

measures should be consistent with the unit of analysis. If the unit of analysis is the

overall SDMP of an organisation (e.g. Child & Tsai, 2005; Jones et al., 1992),

organisational outcomes such as ROA and organisational effectiveness will be more

appropriate. If the study examines isolated strategic decisions (e.g. Hough, 2005; Miller

et al., 2004), the overall economic performance of an organisation may bear only a weak

relationship to any individual decision; therefore, decision outcomes such as decision

quality or effectiveness will be more appropriate. This choice avoids the problem of

ambiguity in the causal ordering, which would accompany the choice of organisational

performance as a focus and provides a close link between the SDMP and its outcome,

24
which is essential in the light of the many exogenous effects on organisational

performance (Pearce et al., 1987).

Third, better conceptualisation. Montgomery et al. (1989) identify loosely defined

variables as a major problem in empirical strategic decision-making field; therefore, a key

requirement for the development of this field is to improve measurement approaches

(Bowman et al., 2002). Hence, one clear opportunity for future research lies in better

conceptualisation of the SDMP dimensions (in particular, intuition concentrating on its

content validity).

It is appropriate, also, to reveal that some authors have criticised the existing

conceptualisation of decision and strategic decision making. For example, Chia (1994, p.

781) points out that the attempts to replace decision by other terms, e.g. action and change,

ignore the ontological status of the decision making process. He argues that ‘decision is

better understood as a series of interlocking pre-definitive acts of punctuating the flow of

human experiences in order to facilitate sense-making and to alleviate Cartesian anxiety’.

Similarly, Hendry (2000) argues that existing conceptualisations of the SDMP (i.e.

rational, action and interpretative perspectives), while each affording valuable insights

to some aspects of the issues raised, offer only partial and disconnected perspectives on

the strategy process as a whole that leave important questions unaddressed. To overcome

this problem, he develops an empirically grounded conceptualisation of strategic

decisions as elements of a strategic discourse that is itself the most prominent feature of

strategy as a social practice. The suggested conceptualisation provides a common

foundation for the competing rational, action and interpretative perspectives of strategic

decision-making. According to Hendry, the conceptualisation of strategic decisions as

discourse has some immediate implications for empirical research. For example, it allows

25
researchers to consider the instrumental and sense making roles of strategic decisions as

parallel, interacting features of the strategic decision process rather than as rival

interpretations, and so to address a wide range of questions that effectively escape the

existing partial and disconnected perspectives. The above discussion opens up a very

promising avenue for future research on the conceptualisation and operationalisation of

strategic decisions.

Fourth, the perceptual measures. The perceptual measures of decision process may not

truly reflect the phenomenon of interest. As argued by Mintzberg et al. (1976), tapping

the memories of the executives could introduce distorted information. It is expected that

some information, such as unsuccessful steps and political tactics, as well as

unsatisfactory results of decisions went unreported (Larimo, 1995). It is recommended

that this limitation be remedied by a number of methods. These are to take full advantage

of the different aspects of validity and reliability of the constructs; to reverse scale anchors

in several places to reduce response bias; to use multiple sources of data, i.e. triangulation

of evidence; and to confirm that all the information will be completely anonymous and

confidential.

POLICY AND PRACTICAL IMPLICATIONS

This review may, it is hoped, provide a number of managerially relevant guidelines and

insights for decision-makers in order to help them improve their decision-making process.

First, managers have the power to influence the success of strategic decisions, and thus

the fortunes of their organisations, through the processes which they use to make

decisions.

Second, organisational politics are generally seen as having long-lasting detrimental

effects, inefficient and unpleasant. The evidence is that managers engaging in political

26
tactics make less effective decisions than those who do not. This has some implications

for top management. (1) They should be aware that political tactics could lead to

unsuccessful decisions and consequently poor company performance. (2) They need to

defuse political tactics in order to achieve successful decisions. However, this is not to

say that effective managers never need to use political behaviour themselves. Of course,

they need to be aware of the politics inside their organisations and to know how to get

their proposals accepted (Papadakis & Barwise, 1997).

27
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 TABLE 1
CONSTRUCTS AND CONCEPTUALISATIONS OF RATIONALITY
Study Construct of Conceptualisation
rationality

Langley Formal analysis Written documents reporting the results of some

(1989) systematic study of a specific issue

Kukalls Planning The completeness of the strategic planning process

(1991) comprehensive- and the number of areas in which strategic planning
ness is applied (e.g. capital spending, investment
planning and new product development)

Dean & Procedural The extent to which the decision process involves
Sharfman rationality the collection of information relevant to the decision
(1996) and the reliance upon analysis of this information in
making the choice

Khatri (1994) Strategic An explicit (formal), systematic and analytical

rationality approach to decision-making

Schwenk Decisional The extent to which decision–makers follow a

(1995) rationality systematic process in reaching carefully thought-out
goals

Fredrickson Comprehensive- The extent to which organisations attempt to be

(1984); ness exhaustive or inclusive in making and integrating
Papadakis et strategic decisions
al. (1998)

Butler (2002) Rationality The reason for doing something and to judge a
behaviour as reasonable is to be able to say that the
behaviour is understandable within a given frame of
reference

Hough & Availability and Availability captures the degree to which the
Ogilvie pervasiveness available cues were known by the team when they
(2005) and made their decisions. High availability indicates
Hough & that the team had a great deal of knowledge about
White (2003) the issue. Pervasiveness assesses to what extent
were all team members informed of the available
information.

33
 TABLE 2
A SUMMARY OF EMPIRICAL RESEARCH: RATIONALITY
Methodology
Study Analysis (level of Description Major findings
Sample Design
analysis)

Fredrickson & 109 executives Experiment; cross- Correlation The relationship between Comprehensive processes are
Mitchell in an unstable sectional; Scenario- (decision-level) comprehensiveness and positively related to performance in a
(1984) environment based structured performance stable environment and negatively in
interviews an unstable environment.
Fredrickson 152 executives
(1984) in a stable
environment

Fredrickson & 159 executives Experiment; Correlation & The relationship between Comprehensiveness exhibits
Iaquinto in both stable longitudinal multiple regression comprehensiveness and considerable inertia
(1989) and unstable (decision-level) performance
environments

Fredrickson 321 MBA laboratory study; MANOVA The effect of decision Variation in decision motives and
(1985) students and cross-sectional; (decision-level) motive and performance performance level affects the decision
116 executives Scenario-based on SDMP processes recommended by
structured interviews inexperienced executives

Bourgeois & Four computer A multiple case; Content analysis How do executives make The more rational SDMP, the better
Eisenhardt firms longitudinal; a multi- (organisation- strategic decisions? performance of the firm
(1988) method level)

Langley Three Canadian Case studies; Content analysis The purposes behind the Four purposes of formal analysis:
(1989) organisations longitudinal; a multi- (organisation- use of formal analysis information, communication,
method level) symbolic and control

34
 TABLE 2 (Continued)
Methodology
Study Analysis (level of Description Major findings
Sample Design
analysis)

Jones et al. 70 international Field study; cross- Correlation The relationship between A positive relationship
(1992) firms sectional; mail survey (organisation- rationality and
level) organisational
effectiveness

Dean & 57 strategic Field study; cross- Multiple The conditions affecting Competitive threat, external control
Sharfman decisions sectional; structured regression procedural rationality and decision uncertainty are related to
(1993a) interviews (decision-level) procedural rationality

Khatri (1994) 241 companies Field study; cross- Correlation; The role of rationality in Rationality is positively related to
in three sectional; a multi- ANOVA SDMP performance in a stable environment
industries method (decision-level)

Dean & 52 strategic Field study; Multiple The relationship between Procedural rationality is positively
Sharfman decisions longitudinal; regression procedural rationality and related to decision effectiveness
(1996) structured interviews (decision-level) decision effectiveness

Goll and 62 large Field study; cross- Correlation; The influence of Rationality is associated with
Rasheed manufacturing sectional; mail survey multiple regression environment on the performance in high munificent and
(1997) firms (organisation- relationship between dynamic environments.
level) rationality and
performance

Papadakis 38 Field study; cross- Pearson The relationship between A positive relationship
(1998) manufacturing sectional; a multi- correlation performance and
firms method (decision-level) rationality

35
 TABLE 2 (Continued)
Methodology
Study Analysis (level of Description Major findings
Sample Design
analysis)

Papadakis et As that of As that of Papadakis Multiple The relationship Rationality is affected by both
al. (1998) Papadakis (1998) regression; factor between contextual decision-specific characteristics and
(1998) analysis (decision perspectives and internal context
level) rationality

Hough & 400 decisions Simulation One way analysis The moderating role of Dynamism may moderate the
White (2003) of variance; dynamism relationship between rationality and
correlation; decision quality.
logistics regression
(decision level)

Hough & 749 executives Simulation A structured How cognitive style Intuiting/Thinking managers used their
Ogilvie equation model affects strategic decision intuition to make cognitive leaps based
(2005) (decision level) outcomes on objective information

36
 TABLE 3
A SUMMARY OF EMPIRICAL RESEARCH: POLITICAL BEHAVIOUR
Methodology
Study Analysis (level of Description Major findings
Sample Design
analysis)

Pfeffer & The University A case study; Correlation; The effect of subunit Powerful departments get more of
Salancik of Illinois longitudinal; a multi- multiple regression power on resource scarce resources
(1974) method (organisation- allocation
level)

Gandz & 428 graduates Field study; cross- Content analysis; Managers’ perceptions Politics are pervasive and detrimental
Murray and MBA sectional; mail survey K-W ANOVA; of politics to organisational effectiveness
(1980) students Friedman test;
correlation
(organisation-
level)

Pfeffer & Two campuses A case study; Correlation; A model of budgeting in Budget allocations were a function of
Moore of a university longitudinal; a multi- multiple regression a university student enrolment and department
(1980) method (organisation- power
level)

Hickson 150 strategic Case studies; Content, The influence of interest SDMP is influenced by a wide variety
et al. (1986) decisions longitudinal; a multi- correlation and units on SDMP of interesting units
method discriminant
analyses (decision-
level)

Eisenhardt & Eight computer A multiple case; Content analysis Political behaviour of Politics arise from power
Bourgeois firms longitudinal; a multi- (organisation- SDMP centralisation; they are associated with
(1988) method level) poor performance.

37
 TABLE 3 (Continued)
Methodology
Study Analysis (level of Description Major findings
Sample Design
analysis)

Dean & 61 strategic Field study; cross- Factor analysis The relationship Political behaviour and rationality are
Sharfman decisions sectional; structured (decision-level) between political independent dimensions of the SDMP
(1993b) interviews behaviour and
rationality

Dean & 52 strategic Field study; multiple- Multiple The relationship A negatively relationship
Sharfman decisions respondents; regression between political
(1996) longitudinal design (decision-level) behaviour and decision
effectiveness

Eisenhardt et 12 technology- A multiple case; Content analysis The interplay of Successful strategic decisions are most
al. (1997) based longitudinal; a multi- (organisation- conflict, politics and likely to be made by teams which
companies method level) speed in SDMP promote active and broad conflict over
issues without sacrificing speed

Papadakis 70 strategic Field study; cross- Correlation; The relationship Some interesting correlations but with
(1998) decisions sectional; a multi- (decision-level) between political no clear pattern
method activities and individual
performance measures

Nutt (1998) 317 strategic Field study; ANOVA; a The tactics used to Political tactics (bargaining) were
decisions longitudinal; a multi- Duncan test; evaluate alternatives rarely used but highly successful
method content analysis
(decision-level)

38
 TABLE 3 (Continued)
Methodology
Study Analysis (level of Description Major findings
Sample Design
analysis)

Simmers 140 senior Field study; cross- Correlation; factor The relationship Different relationships between
(1998) officers sectional; a multi- analysis; multiple between politics and collaborative politics and outcome
method regression outcomes measures measures
(organisation-
level)

Papadakis et As that of As that of Papadakis Multiple The relationship Politics are mainly influenced by
al. (1998) Papadakis (1998) regression; factor between contextual decision-specific and firm
(1998) analysis (decision- perspectives and politics characteristics
level)

Papadakis et An important Case history; Content analysis Strategic decision- Different motives lead to different
al. (1999) Greek chemical longitudinal; a multi- (decision-level) making from a crisis to processes of decision-making
company method an opportunity

Hickson et 55 strategic Case studies; Content, Strategies for Executives should communicate
al. (2003); decisions longitudinal; a multi- correlation and successfully effectively with the key stakeholders in
Miller et al. method factor analyses implementing strategic the implementation process to avoid
(2004) (decision-level) decisions political tactics.

Child & Tsai Three Case studies; Content analysis The dynamic between Multinational corporations take
(2005) multinational longitudinal; a multi- (organisation- firms' environmental political initiatives through public
corporations method level) strategies and relations, cooptation and collective
and four local institutional constraints lobbying.
firms

39
 TABLE 4
A SUMMARY OF EMPIRICAL RESEARCH: INTUITION
Methodology
Study Analysis (level of Description Major findings
Sample Design
analysis)

Mintzberg et 25 strategic Case studies & Content analysis How organisations Analysis was used infrequently.
al. (1976) decisions longitudinal; a multi- (decision-level) make unstructured Judgment was used when managers
method decisions decide without explaining their
rationale.

Quinn (1980) Nine Case studies; a multi- Content analysis How companies arrive Firm is a political system. The strategy
corporations method (organisation-level) at strategic change process is typically fragmented,
evolutionary, and largely intuitive

Eisenhardt Eight computer A multiple case; content analysis; How executive teams Aided by intuition, managers can react
(1989) firms longitudinal; a multi- (organisation-level) make rapid decisions quickly and accurately to changing
method stimuli; fast decision-makers use more
information and alternatives,

Wally & 151 CEOs Scenario-based LISREL analysis Determinants of the Use of intuition associated positively
Baum (1994) questionnaire; cross- (decision-level) pace of SDMP with speedy decisions
sectional; a multi-
method

Sabherwal & 81 companies Field study; cross- Cluster analysis An empirical Five ways of making decisions-
King (1995) sectional; mail survey (decision-level) taxonomy of decision- planned, provincial, incremental, fluid
making and political

Brouthers et 80 firms Field study; cross- Descriptive Examination of the Small firms tend to rely on intuition
al. (1998) sectional; mail survey statistics SDMP and at best make moderately rational
(organisation-level) decisions

40
 TABLE 4 (Continued)
Methodology
Study Analysis (level of Description Major findings
Sample Design
analysis)

Krabuanrat & Five Thai-based Case studies; Semi invasive The use of heuristics Heuristics are commonly used both
Phelps companies longitudinal design; approach (decision- (e.g. past experience) individually and in combination with
(1998) in-depth interview level) in decision making rationality.

Nutt (1998) 317 strategic Field study; ANOVA; a Duncan The tactics used to Analytical tactics are widely used and
decisions longitudinal; a multi- test; content evaluate alternatives most types are quiet successful.
method analysis (decision- Intuitive tactics are rarely used and
level) successful.

Khatri & Ng 221 companies Field study; cross- ANOVA and Relationship between A positive relationship in an unstable
(2000) sectional; mail survey regression analyses intuition and environment; a negative relationship in
(decision-level) performance a stable environment.

Hickson et 55 strategic Case studies; Content, correlation Strategies for Managers can plan the implementation
al. (2003); decisions longitudinal; a multi- and factor analyses successfully of strategic decision better when they
Miller et al. method (decision-level) implementing strategic have previous similar experience (a
(2004) decisions dimension of intuition)

41
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