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1、STRATEGIC DECISION MAKING PRACTICES AND ORGANIZATION PERFORMANCE: A CONCEPTUAL PERSPECTIVE OF MALAYSIAN ORGANIZATIONSMuhammad Hasmi Abu Hassan AsaariUniversiti Sains Malaysiahasmiusm.myRazli Che RazakUniversiti Utara Malaysiaraz1152uum.edu.myAbstractStrategic decision making has been viewed as an im
2、portant aspect among managers in an organization. Managers are required to make strategic decisions that have an impact on their organizations performance. This conceptual paper will give an overview of strategic decision making in the context on Malaysian environment.INTRODUCTIONOrganizations perfo
3、rmance has been measured substantially based on their profit achievement. None of any organizations wanted to have losses being marked for their business operations during the given accounting period. Thus managers in the organizations were urged to make profit in the course of business operations,
4、and at the end of their business accounting period. This profit achievement will be the benchmark for the board and top management to recognize their managers efforts in making profitable business arrangements and deals.Behind those profits, managers have to make strategic decisions in charting thei
5、r organizations path in achieving its objectives as directed by the board and top management. Managers needed substantial information in order for them to make a sound business decisions. Although, the managers had substantial information prior to make decisions, they may not come up with the right
6、or perfect strategic decision making for the organizations. Thus, these poor business operations will be reflected in the companys profit and loss account. Nevertheless, managers made decisions affecting the organization daily and communicate those decisions to other organization members (Zaleznik,
7、1989 and Main & Lambert, 1998 in Certo, 2003).As stated by Astley and Van de Ven (1983 in Burke and Steensma, 1998) that decision makers have significant influence on a firms performance. Thus, the focus of this paper is to evaluate the strategic decision making practices among managers toward organ
8、izations performance. Profile of managers and strategic decision making practices will be generated and evaluated. Moreover, this paper will give the insight of strategic decision making practices among managers in the Malaysian organizations. How do mangers exercise their strategic decision making
9、practices in relation to the organizations performance?LITERATURE REVIEWSManagerial FunctionsBased on Henry Fayols definition, managerial functions are identified by planning, organizing, commanding, coordinating, and controlling (Robbins and Coulter, 2005). Thus strategic decision makings are invol
10、ved in mangers during the operations of an organization. Managers have to make thousands of strategic decisions in order to keep their organization in the pace of business.Due to globalization era, managers have to think and act fast in order to capture all business opportunities. Meanwhile, they al
11、so have to eliminate, and if not mitigate, the level of threats toward their organization. Thus, managers strategic decision makings are crucial to the survival of the organization. Robbins and Coulter (2005) stated that decision is part of managerial functions. Further, decision making is important
12、 in a managers job.Behavioral Decision TheoryNutt (1976) stated that behavioral decision theory (BDT) has faced validity of satisficing and serial search do seem to portray the behavior of decision makers. Moreover, Wildavsky (1966; in Nutt, 1976) stated that decision makers do not know what they wa
13、nt because they do not know what they can get. March (1958; in Nutt, 1976) found that decision making as practiced in organizations is a serial process and that satisficing is used as a decision rule. Conrath (1970; in Nutt, 1976) stated that the decision maker is also influenced by uncertainty; as
14、uncertainty increases, so does search time, care of evaluations, and resources allocated to the search process. Finally, BDT model seems to describe what skillful decision makers often try to do when grappling with complex decisions (Nutt, 1976).Strategic Decision MakingBy definition, decision makin
15、g is the process through which managers identify organizational problems and attempt to resolve them (Bartol & Martin, 1994). Crook, Ketchen, and Snow (2003) stated that the purpose of strategic management research is to help find ways to improve their performance. Further, strategic decision making
16、s are those that determine the overall direction of an enterprise and its ultimate viability in light of the predictable, the unpredictable, and the unknowable changes that may occur in its most important surrounding environments. They ultimately shape the true goals of the enterprise (Mintzberg & Q
17、uian, 1991).Pearce and Robinson (1997) underlined the characteristics of strategic decision making as corporate level decisions (greater risk, cost, profit potential; greater need for flexibility, and longer time horizons), functional level decisions (implement the overall strategy formulated at the
18、 corporate and business levels), action oriented operational issues; short range and low risk. Modest cost; dependent on available resources, and business level decision (bridge decisions at the corporate and functional levels; which is less risky, costly, and potential profitable than corporate lev
19、el decisions, but more risky, costly, and potentially profitable then functional level decisions).Tatum et al. (2003) stated that managers make day-to-day decisions, or resolve immediate problems. They also elaborated that managers have different decision styles due to the amount of information, num
20、ber of alternatives, and attempt to integrate and coordinate multiple sources of input. Vroom (2003) in his study quoted Nutt (2002) on a study of 400 decisions that had been made by manager in medium to large organizations in the USA, Canada and Europe. Surprisingly, half of the decisions failed; e
21、ither never implemented or subsequently unraveled during the two-year observation period. Nutt (2002, in Vroom, 2003) stated that effective decision making is not merely a matter of decision quality but also of ensuring that the decision will have the necessary support and commitment for its effecti
22、ve implementation.Nevertheless, all strategic decision making must go through the decision making process in order for managers to come up with a good decision.Decision Making ProcessDecision makers and managers need to allow themselves to be in the process of decision making. This decision making p
23、rocess will give the opportunity to decision makers and managers to come up with the alternatives, evaluate each alternatives, and select the best alternative or solution to the problem.Decision making process comprise of the steps the decision maker has to arrive at his choice. The process a manage
24、r uses to make decisions has a significant impact on the quality of those decisions (Certo, 2003). Moreover, Provan (1989) stated that people who participate in the strategic decision making process are at a high level of in their organization, are competent, and are reasonably intelligent and artic
25、ulate. Strategic decision making process can be an is influenced by those major groups in the organization that are most powerful and that a rational consideration of external environmental factors may have little direct impact on how strategies are actually formulated and implemented (Provan, 1989)
26、.Basi (1988) stated that type of decision is a function of administrative level, and the style is a function of organizational culture. Administrative level is classified as institutional or executive or upper level, organizational or managerial or middle level, and technical or lower level. Meanwhi
27、le organizational culture is known as paternalistic, bureaucratic, and synergistic.Meanwhile, Nutt (1976) indicated in his study on the decision making models. He discussed 6 models of decision making of which bureaucratic model, normative decision theory, behavioral decision theory, group decision
28、making, equilibrium-conflict resolution, and open system decision making. Nutt (1976) also discussed on the limits and ways to selection the appropriate model for decision making for organization. As such organization performed unique functions; the levels identified were technological or primary le
29、vel, managerial level, and institutional level. Thus, factors which characterize the decision making environment will stipulate the appropriate model that can be optimally used (Nutt, 1976)Organization PerformancePerformance of an organization has to be measured at the end of an accounting period. T
30、his is the point where an organization, especially the decision makers and managers, will know whether the organization is making profit or loss during that accounting period. Moreover, no organization is willing to accept the notion that they are in a bad shape and loosing. Thus organization with t
31、he help of decision makers and managers need to make profit at the end of its accounting period. This profit will be reflected and distributed to their stakeholders. At the mean time, decision makers and managers are accountable on the performance of the organization as they decide collectively.Most
32、 studies indicated organizational performance indicators as the organizations financial indicators. Literatures spelled out specifically that profitability, return on investment (ROI), return on equity (ROE), growth of net assets, capital structure or leverage, and export sales (Tsekouras et al., 20
33、02; Kotey, 2005; Kannan and Tan, 2003; Skaggs and Youndt, 2004). Moreover, Burke and Steensma (1998) stated that financial indicators derived from archival sources could be used in measuring firm performance. Mahmood and Mann (1993) selected six measures representing the strategic and economic perfo
34、rmance of a firm, namely return on investment, return on sales, growth in revenue, sales by total assets, sales by employee, and market to book value (in Lee and Bose, 2002).Jurkiewicz and Giacalone (2004) stipulated that organizational culture will lead to firm performance. Thus, workplace spiritua
35、lity such as benevolence, generativity, humanism, integrity, justice, mutuality, receptivity, respect, responsibility, and trust will give an impact on individual workers; and will lead to higher productivity and will improve firm performance.Lloyd (1990, in Jurkiewicz and Giacalone, 2004) stated th
36、at organization high in workplace spirituality outperform those without by 86%. Further, such organizations reportedly grow faster, increase efficiencies, and produce higher returns on investments. This can be triangulated by three areas as such motivation, commitment, and adaptability (Jurkiewicz a
37、nd Giacalone, 2004).McNamara, Luce, and Tompson (2002) explored the relationship between the complexity of the cognitive strategic group knowledge structures constructed by TMTs and the performance of their firms. On the other hand, Kang and Sorensen (1999) studied ownership organization and firm pe
38、rformance. They discovered that ownership organization by large-block shareholders and institutional investors had an effect toward firm performance.Lee and Bose (2002) conducted and exploratory examination on relationship between IT investment and firm economic performance. They used accounting-bas
39、ed performance and market-based performance in measuring firms economic performance. Measurements employed to measure account-based performance are (1) return on assets (ROAA), (2) return on average equity (ROAE), and (3) return on average sales (ROAS). On the other hand, market-based performance wi
40、ll be based on Tobins, market value and market rate of return.THEORETICAL FRAMEWORKThe above theoretical framework will be based on the Behavioral Decision Theory (BDT) model. Managers behavior in strategic decision makings will be evaluated based on the factors of external environment, department p
41、ower, decision approach, leadership behavior, organizational justice, and intuition. These factors will be the antecedents toward organization performance. Moreover, catalyst for this relationship will be decision support systems, organizational structure, and strategic preference point.Environment
42、FactorsEnvironment or external factors influenced strategic decision makings, and subsequently affected the organization performance. Mangers made strategic decision makings based on the external factors that affect their decisions. As such, Porter (1979, in Pearce & Robinson, 1997) in his famous Fi
43、ve Forces that explained the environmental factors that affect managers strategic decision making.Moreover in Crook et al., (2003) stated that their strategic decision-making concept of competitive edge model needs to evaluate industry analysis, competitor analysis, country analysis, stakeholder ana
44、lysis, legal and regulatory analysis, and company analysis.Provan (1989) stated that the organization must deal with an environment that is determined by the strategic decisions of top management. Apart from that, Provan (1989) also listed external environment factors that has an impact on decision
45、making such as Porters “five-forces,” regulatory pressures, emergent technologies, and economic conditions.Internal FactorsProvan (1989) stated that internal organizational factors to be important in influencing the strategy formulation process, but focuses primarily on an objective, rational consid
46、eration of internal strengths and weaknesses. Company analysis needs to be considered in the process of strategic decision making (Crook et al., 2003). Further, they stated that company analysis involves internal factors such as resources, capabilities, and performance. Meanwhile, Berman, Wicks, Kot
47、ha, and Jones (1999) stated that employee and product safety/quality can help improve firm financial performance.Decision ApproachDecision making style of managers can be classified based on their approach toward the problem that they tried to be solved. Barton and Martin (1994) stated that various
48、models of decision style being adopted such as rational model, nonrational model, satisficing model, incremental model, and garbage-can model. Basically, these models are based on the individual managers perspective toward decision making. First, rational model suggested that managers engage in comp
49、letely rational decision processes, ultimately make optimal decision, and possess and understand all information relevant to their decisions at the time they make them. Second, nonrational model suggested that information-gathering and processing limitations make it difficult for managers to make optimal decisions. Third, satisficing model suggested that managers seek alternatives only until they find one th
