Strategic Decision-Making in Context

Abstract

This paper suggests that the kind of organization in which strategic decisions are made has a significant impact on the strategic decision-making process and the strategic decisions themselves. It is further suggested that the creation, maintenance and change of organizational context or character is a critical executive responsibility and an important strategic issue. The paper reports on the construction and validation of an organizational simulation laboratory intended for executive development and research on the design and impact of organizational context (climate, character, culture) on strategic decision-making. In the simulation executives are randomly assigned and re-assigned to one of three organizations, each of which has been planned to represent a different organizational character. The three organizations are the "Bank," a formal, bureaucratic, traditional and risk-averse organization; the "Holding Company," an aggressive, instrumental, hierarchical, bottom-line oriented "one man show;" and the "Consulting Firm," a collaborative, person-oriented and professional organization. In addition, there is the "Company Itself," represented by a Harvard Case. This organization does not have a preplanned organizational character. During simulations the "Bank" (bureaucratic organization) is typically involved in loan applications from the "Company Itself", the "Holding Company" (instrumental organization) is considering the "Company Itself" as a potential acquisition, and the "Consulting Firm" (collaborative organization) is doing analysis and formulating recommendations to the "Holding Company". Individuals and organizations interact by mail, telephone and in meetings during the simulations. The organizations in the lab are created through manipulation of structural variables and norms for behavior. The main mechanisms used are written instructions and the behavior of Chief Executive Officers, all of whom are role played by the simulation staff. Experience from eight implementations of the lab demonstrates that the nature of strategic analysis and quality of decisions are significantly impacted by organizational context. The differences are especially marked between the bureaucratic and collaborative organizations simulated in the lab. To validate the manipulations of organizational context and to look at some behavioral consequences, data were collected during two recent labs. After each of three simulations (and before debriefing) data were collected on perceptions of structure and norms for behavior as well as on a recently developed scale for measuring organizational self-esteem. Participants also reported their desire to work for the same organization again. Data analysis shows that individuals within organizations experienced the organizations the way they were intended. The results are in the direction that would be expected given a bureaucratic, instrumental and collaborative organization. The differences are especially marked between the bureaucratic and collaborative organizations. In conclusion, it appears that participants in the lab recognize the character of the organizations and conduct analysis and make decisions in a way that suggests that organizational context rather than indvidual "personality" influences the process of strategic decision-making as well as other behaviors.