The Importance Of Strategic Decision Making

Sivakumar (2004) describes a strategic decision, a decision that significantly affects the scope of a company, requiring a high degree of commitment. Strategic decisions are interconnected with a company’s long-term goals. For example, a company’s decision to focus its expansion within their domestic market or enter a new geographical market. Strategic decisions are increasingly difficult for managers to make because of ever increasing uncertainty and lack of reliable information. When it comes to making decisions managers tend to rely on past experiences and their gut feeling when coming to a decision (Soll, Milkman & Payne, 2015). Fortunately, tools to correctly identify uncertainty and biases are available to managers. In order to improve the overall decision making process managers must address and understand uncertainty, cognitive biases and the open-endedness of strategic decisions.
According to Miliken (1987), uncertainty, a major issue managers face during the strategic decision making process, can be defined as an individual’s lack of ability to predict future events. Managers frequently encounter

Cognitive biases are thinking patterns which diverge from rationality and generally lead to irrational conclusions (Baer & Lubin, 2014). This leads managers to put too much weight on past and not enough to current circumstances (Hammond, Keeney & Raiffa1998). ). Ultimately, cognitive biases may evoke managers to dismiss the practical use of diagnostic tools or turn them towards the wrong approach (Harvard Business Review, 2013). It is difficult for managers to address cognitive biases because of the degree of self-awareness required to become aware that they are in fact suffering from them. An important step, that can reduce bias, managers can take is to question themselves and incorporate their peers feedback on their decisions (Soll, Milkman & Payne,