Design/methodology/approach – From analysis of alternative research approaches, a field survey seems to be the most appropriate methodological choice. This is a field study of real strategic decision-making process rather than an artificial setting. The questionnaire consists of items measuring the variables of primary interest; namely the independent, mediator, and dependent variables. The study was conducted in Pining Malaysia, involving small, medium, and large-sized private manufacturing firms.
To test and eliminate ambiguous or biased items and to improve the format, both for ease of understanding and to facilitate data analysis, a pilot study was conducted by computing Cockroach’s reliability alpha. Findings – The results of regression analysis indicate that the decision magnitude of impact is significantly associated with the level of rationality in the decision-making process. The results of hierarchical regression analyses indicate that the extent of rationality in the decision-making process is able to significantly change the total variations in the decision- making quality explained by magnitude of impact.
Research limitations/implications – The com plea nature Of strategic decision- aging process as a research topic places limitations on this study, particularly in the area of sample selection and data availability and collection. The major sample selection at the manufacturing firms is difficult because a firm’s perception in terms of strategic decisions may not be the same, thus it is not easy to ascertain relevant sample characteristics.
Practical implications Findings of this study indicate that a better quality decision is achieved through a rational process. Thus, organizations should encourage greater use of rationality in the decision-making process, specially when the decision that is going to be made has more impact on the various parts of the organization or it is a strategic decision. Originality/value – This study is believed to be the first to test the mediating impact of rationality of the strategic decision-making process.
This study was carried out among Malaysian manufacturing firms, and therefore comparison of its results to the findings in other countries may suggest the influence of other factors such as ideology, belief, and culture on strategic decision-making processes. This in turn may open up a promising avenue for future research. Keywords Decision making Strategic leadership, Small to medium-sized enterprises Paper type Research paper Management Decision Volvo. 46 No. 4, 2008 up. 640-655 q Emerald Group Publishing Limited 0025-1747 DOI 10. 108/00251740810865102 Introduction The recent years have witnessed rapid changes in information technology, the New World economic order, the coming of the new regional power and many others (Osama and Muting, 1998). All these changes have presented on the one hand a very dynamic world of increased population, inflation, social consumption, and on the other hand limited, scarce resources. In such a complex and fast-changing business environment, managers are faced with a multitude of problems every day. In order to solve these problems they have to make decisions.
To make too many decisions, too fast, about too many strange and unfamiliar problems introduce a new element into management, forcing executives already nervous in an unpredictable environment to make more and more decisions and at an increasingly quicker pace (Toffee, 1980). Mark (1997) concluded that for many reasons, the hardest part of managing an organization today is making the appropriate decision. Once a manager hoses an alternative and knows how to implement it, he can allocate the resources necessary to achieve the defined goal; but getting to that point can often be a long complex, and challenging process.
The difficulty arises when the most preferred alternatives are unfeasible (Nut, 1998). Since strategic decision not only affects the organization in which they are taken but also the society (Collision and Cray, 1 980), it is not surprising that strategic decision-making process has been heavily researched (Mason, 1996). However, past research on strategic decision process has been anecdotal, primarily case analyses with little generalize conclusions. Empirical studies in terms of factors that influence the strategic decision process are either limited or have produced contradictory results.
According to Paddies et al. (1998, p. 1 15). “In spite of the crucial role of strategic decisions the strategy process research has not departed significantly from a stage of being based on”, “mature paradigms and incomplete assumptions” (Eisenhower and Kickback, 1 992, p. 17). Thus, research on strategic decision- making process and factors affecting the process remains of paramount importance in the field of organizational theories and management (Style et al. , 1982), and much more empirical research is required before any definitive conclusion can be reached (Regional et al. 1993). It is evident from my literature review that: Most of the research in this area has been in the form of case studies (e. G. Style et al. , 1982), prototypes (assessed by response to a scenario, e. G. Frederickson, 1 984), or laboratory experiments (e. G. Van Bragger et al. , 1998). While these procedures may produce satisfactory results, there are differences between real-life and artificial settings. This study focused on real strategic decision rather than artificial settings.
This study is of benefit to both executives and top management teams for a better understanding of the nature Of the gap between studies that have produced contradictory results. The findings of this study will enrich the discussion on the relationship between strategic decision processes and contextual factors. This study was carried out among Malaysian manufacturing firms, and therefore comparison of its results to the findings in other countries may suggest the influence of other factors such as ideology, belief, and culture on tragic decision-making processes.
This in turn may open up a promising avenue for future research . This study is believed to be the first to test the mediating impact of rationality of the strategic decision-making process. Decision magnitude of impact 641 Derived from the above or similar discussions in my literature review, the research questions presented in this study are: RSI . To what extent does the decision magnitude of impact, influence the rationality of the strategic decision-making process? 642 ARQ. To what extent does rationality of the strategic decision-making process influence quality of the decision process output?
The choice to focus on strategic decisions is due to their nature and significance. Strategic decisions are long-term, highly unstructured, complex, inherently risky, and have a great impact on the future of the organization. Strategic decisions are those important decisions that typically require a large amount of organizational resources. These decisions influence organizational direction, administration, and structure (Christensen et al. , 1982). This investigation is limited to private manufacturing firms and focuses on only strategic decisions made from 2004 to 2006.
Objective of the study The objective of this study is to identify the role of the rationality of the strategic decision-making process between decision magnitude of impact and the quality of the decision process output. Key terms Strategic decisions. Decision-making process. Decision magnitude of impact. Decision process output. Rational model of decision-making. Literature review Decision-making is an important part of managerial function of any organization. In reality, managers must make decisions while performing managerial functions; planning, organizing leading, and controlling.
Therefore to be a good planner, organizer, leader and controller, a manager just first be a good decision maker (Rue and Bars, 1986). Thus the primary duty of managers is decision-making. These decisions may be related to planning, organizing, staffing, leading or controlling can be straight forward or complex (Main and Lambert, 1 998), short-range or long-range (Pearce and Robinson, 1985), flexible or inflexible (Sherman and Dean, 1997) and even crisis decisions (Integers et al. , 1976). In other words, managers must make decisions even if they are not willing to do so.
Pearce and Robinson (1989) indicated that decision-making is inevitable, because to explicitly avoid aging a decision is in itself to make a decision. Among managers’ decisions strategic decisions are the most important ones. A strategy is a pattern in the organization’s important decisions and actions, and consists of a few key areas or things by which the firm is distinguished from others (Digamma, 1986). Thompson and Strickland(2003) indicated that “among all the things managers do, nothing affects a company’s ultimate success or failure more fundamentally than how well its management team makes strategic decisions”.
Research in strategic management can be classified into two broad categories: research which deals with the “content” of strategies and research on the “process” which investigates the strategic decision process and factors that affect it Schemes (1995). Content research has been the primary focus while process issues have received relatively less attention (Regional et al. , 1993). Strategic decisions are ill structured, non-routine, and important to the firm, in which top management usually plays an important role.
Strategic decision making is incremental and interdependent, shaped by a variety of contextual influences arising from past events, present circumstances, and perspectives f the future (Quinn, 1980; Dads, 1 986; Nauseated and May, 1986). This study will focus on strategic decision-making process and for the purposes of this study, strategic decisions are ones that involve strategic issues and require top-management team consideration. (Hereafter, strategic decision and decision will be used interchangeably. ) Decision-making process Different researchers have developed numerous models of strategic decision- making process since 1970 (e. . , Integers et al. , 1976; Hoofer and Ascended, 1978; Dublin, 1 997; Donnelly et al. , 1998). These models comprise various numbers of stages and are generally similar to each other. Strategic decision making varies from three steps of problem formulation and objective setting, identification and generation of alternative solutions, and the analysis and choice of a feasible alternative (Cherty and March, 1963; Integers et al. , 1 976) to the five steps suggested by Frederickson (1 984): situation diagnosis, alternatives generation, alternatives evaluation, selection, and integration.
Decision’s magnitude of impact Decision’s magnitude of impact refers to the extent that the decision will impact various parts of the organization. Studies relating decision’s magnitude of impact to extent of rationality in the decision-making process have produced contradictory results, for example Paddies et al. (1998) and Hicks et al. (1986) found that decision’s magnitude of impact positively and significantly influences the extent of the rationality in the decision-making process. On the other hand, some literature (e. G.
Dean and Sherman, 1993) claimed that the importance of strategic decision is not related to the rationality of the decision. Based on the results of our literature review on strategic decision-making processes the following conclusions can be made. 1) Decision making is one of the most important functions of the managerial job thus the primary duty of managers is decision-making. (2) In terms of the decision-making process it was noted that there are numerous approaches to decision making. In spite of general similarities among them, there are some real differences that result in a lack of conceptual consensus. 3) The most important models of decision making are defined as: the rational or classical model, which is based on quantitative disciplines; 643 644 the organizational model, which is based on both behavioral and quantitative analysis; and he political model, which is almost totally behavioral. (4) While literature indicate an extensive theoretical and empirical work in the area of strategic decision-making process, to my limited knowledge, existing research has not shown in any detail how executives practice or apply the strategic decision-making processes in reality.
However, most empirical studies in terms of factors that affect strategic decisions process either are limited or have produced contradictory results. In sum, the results of our review Indicates that: Despite the literature, our knowledge of decision-making process is limited.. The impact of contextual factors and strategic decision-making process on decision-making process outputs is quite unclear. Considerable work has been carried out in the past two decades focusing on factors affecting strategic decision processes.
Research in this area has shown progress, however much more empirical research is required before any definitive conclusions can be reached. Theoretical framework and hypothesis Theoretical framework Based on the literature review and research questions I have developed a theoretical framework that is presented in Figure 1 . The model is descriptive n nature and focuses on the influence of decision specific characteristics (magnitude of impact), on the strategic decision-making process (Rationality). Also it looks at the impact of the strategic decision-making processes on quality of the decision-making process output.
Two guiding sass motions derived from literature serve as the theoretical basis for the model: contextual factors influence the choice of process; and the process choice influences output quality. The choice to focus on decision magnitude of impact is based on the following criteria.. Decision magnitude of impact had received limited attention in past studies; session magnitude of impact had produced contradictory results in previous research; and decision magnitude of impact I believed would have the most explanatory power Figure 1.
Rationality of the strategic decision-making process was selected because: . It is more frequently cited in literature, it has clearly played central roles in organization decision-making, and . It is distinct and is related to the most important and popular models I selected quality of the decision-making process output because the literature provides conceptual basis for consideration while I am not aware Of any studies that focus on process output.
The final decision outcomes is a function of decision process quality and implementation (Truly, 1966), The final decision outcomes also depends upon the quality of the process in which the decision is made (Steiner, 1972), and Since good decisions can lead to bad outcomes and vice versa, a strategic decision cannot infallibly be graded either high or low quality in terms of its final outcomes (Brown et al. , 1974). Hypothesis development The literature (e. G. Regional et al. , 1993; Dean and Sherman, 1993) indicated that the nature of the decision to be made will influence the nature of the process to be used.
The extent that a manager will be more circumspect and adheres to a more rational decision making process may also be influenced by the degree of decision magnitude of impact. Paddies et al. (1998) found that the magnitude of impact of the strategic decision is associated with the rationality of the decision process. This would mean that managers tend to be more careful and approach the decision in a more formal and rational manner, if the likely impact of the decision is great. In Contrast, Dean and Sherman (1993) found that the importance Of strategic decisions is not related to the rationality of the decision-making process.
I expect that managers’ tend to be more conservative and adopt a more formal planning process in their decision making in order to reduce risk, if the impact of the decision to be made is likely to be great. Based on these discussions HI was developed. HI . There is a positive relationship between decision magnitude of impact and the extent of rationality in the decision-making process. Decision process output am not aware of any existing empirical study of strategic decision-making that focuses on quality of the decision process output and investigates how well the decision process was carried out.
Most of the studies available have studied on one aspect of final decision outcomes namely organizational effectiveness or performance with contradictory finding (e. G. Frederickson and Mitchell, 1 984; Eisenhower and Kickback, 1992; Prime et al. , 1995). Brown et al. (1974) indicated that a strategic decision cannot be graded either high or low quality decision based on its final outcomes. This is due to the fact that a good decision can lead to a bad outcome if, poorly implemented.
Steiner (1972) believed that the decision outcome also depends upon the quality of the process in which the decision is made. Based on these 45 646 arguments believe that the decision outcomes may be investigated in two separate but reciprocal phases: (1) decision-making phase; and (2) implementing phase. In decision-making phase the quality of the decision-making process output in terms of timeliness or speed of the decision-making, acceptability to interested units and people, and adeptness’s to change can be evaluated (Regional et al. 1993). This actually defines how well the decision process is carried out. Implementation phase determines how well the selected alternative (the decision) is accomplished, the decision goals are achieved, or problems are loved. The results of these two phases of investigations, which jointly determine the decision outcomes help to differentiate between the quality Of the decision-making process and the quality of the implementation process. Thus, this study is concerned only with decision process output. Live that in a process in which the problem is well defined, various alternatives are generated, adequate information are used, alternatives are evaluated and the best possible alternative is selected, the output of the decision-making process lead to greater quality. According to Bourgeois and Eisenhower (1988) rational analysis improves the initial quality of the decision. Based on these discussions posit the following hypothesis for testing the quality of the decision process output: H2O.
There is a positive relationship between the extent of rationality in the decision-making process and quality Of the decision process output. Mediating effect of process choice that focuses on the relationship between decision magnitude of impact and quality of the decision-making process output while rationality of the strategic decision-making process function as a mediator between these variables. According to international psychology, contextual variables (decision magnitude of impact) are the major direct influence on managers adjustment to choose a particular strategic decision-making process (Nelson, 1990).
On the other hand decision-making process directly influences the quality of the decision process output thus, contextual factors will have indirect effect, through a decision-making on quality of the decision process output. Based on these discussions the following hypothesis for testing in this study was proposed: HA. The relationship between decision magnitude of impact and quality of the session process output is mediated by the extent of rationality in the decision-making process.
Methodology Research approach Several different approaches were reviewed and compared in their ability to make the most efficient contribution towards satisfying the proposed research objectives. These approaches include experimental designs, case studies, survey research, and scenario survey. According to Dean and Sherman (1996) laboratory studies are ill suited to assessing the impact of contextual factors on strategic decision process, especially, in complex organizational setting. Case study has limitations that made it unsuitable for the purposes of this study.
For instance consideration of the effect of contextual factors requires a relatively large number of cases while the intensive case study is expensive in terms of the time of both researcher and the subjects of the study (is necessary to repeatedly interview several top managers). Miller and Ferries (1978) indicated that “there are two levels of abstraction involved in the use of the data.. .First the case writer must interpret the situation, then the researcher must interpret the written case each step may cause distortion of data”.
From this analysis of alternative research approaches, a field survey seems to be the most appropriate methodological choice. This study is a field study of real strategic decision-making process rather than an artificial setting. Environmental characteristics are those as perceived by the individual, varying from individual to individual and therefore, making any aggregation (for organization or team level analysis) meaningless. Similarly other variables such as familiarity and perceived impacts of decision also vary from individual to individual. For these reasons, the unit of analysis is the individual level.