An effective strategic choice process positions an organization for making sustainable strategic decisions.
At the heart of effective strategic planning lies the ability to surface the truly important issues and to make good choices, in the process of deciding how to address these issues.
I define strategic planning as a systematic, formally documented process for deciding the handful of key decisions that an organisation, viewed as a corporate whole, must get right in order to thrive over the next few years. The process involves choosing strategically and results in the production of a corporate strategic plan.
Strategic decision making is a manager’s responsibility
In general management strategic choice refers to the view that, because of the power relationships in various organizational contexts, people in roles with managerial accountability are not simply restricted by obvious contextual factors such as technology available or environmental factors such as market demand, but they exercise sometimes considerable discretion.
Suggesting that organizational executives have a considerable degree of choice is in contrast to some extreme versions of a contingency interpretation of managerial work. It is sometimes suggested that managerial behavior within organizational structures is ‘contingent’ on these various contextual factors, like size, technology, and environment trends.
I take the view that managers are in fact to become aware of what choices they can exercise, even where the context seems to constrain them to a great degree. Strategic planning is a key process or tool to enable them to do this.
The thorough exploration of any possible strategic options can also prepare managers for the inevitable departures from plan that life will throw up. Strategic decisions and contingency planning for these circumstances go together.
The process of strategic planning creates a corporate strategy for the organization. The process involves exploring a variety of strategic options on the road to isolating the hand full of major strategic decisions that become the essence of the corporate strategy.
These choices may be about such things as a business choosing when and where to compete, or how to win against the competition in the industry segments it has chosen.
For a nonprofit like a school it may involve choices about the student groups to be educated.
What kinds of choices might we face in a strategic planning process?
Those responsible for the planning process are engaged in a process of surfacing the really important strategic issues. Then, in the face of a range of uncertainties, they need to explore the shape of the issues, the relationships among them, comparing their relative potential effects on organizational performance, With the strategic issues understood arrayed before the planning team, they can explore the strategies in the 'choice space' open to them to address the issues or strategic elephants.
The full process of strategic planning will be dealt with elsewhere. However before setting out what is special about a choosing strategically, I will illustrate them with a few examples.
The ultimate strategic choice
Right at the beginning of the process there is a need to agree and state, or reaffirm, the fundamental purpose of the organization. This is often set down in some founding charter of some kind. It should include a clear definition of who are the intended beneficiaries of the organization, and explain unambiguously the kind of benefit they are entitled to expect from the organization. To guide the management of the organization in pursuing this purpose, they and the governors of the enterprise will need some measure of performance. These selections of intended beneficiaries, nature of benefit, and indicator of delivering benefit to the beneficiaries, each represent a most significant choice. The governing body and top management of the organization in question need to be in clear agreement about each choice made in defining the fundamental purpose of the organization.
Strategic choice and corporate performance
With these clear there is a need to set target levels of the overall performance in terms of benefit to beneficiaries. Setting these levels in terms of deciding what would be failure and what would be satisfactory performance each represent a major choice.
Good corporate behavior is a choice
Setting the code of corporate conduct to be adhered to by the organization as it strives to achieve the targets set for it may entail some other important strategic decisions.
This does not mean having some generic and bland but oh so fashionable statements about corporate social responsibility. Most of these statements do not represent real choices, just empty slogans.
It does mean being very clear about what groups have a legitimate interest in the way the organization performs to achieve its performance and how it behaves while doing this. It also means as a minimum choosing to abide by the ‘no harm’ principle. More proactively an organization could make the choice to engage constructively and positively with these interest groups, and have them actively supporting the organization in its pursuit of its purpose.
How to pursue the organizational purpose involves choosing strategically
In deciding a corporate strategy of major actions and projects to achieve the desired levels of corporate performance, the corporate strategic planning team must thoroughly analyze a number of key factors. These will include assessing the most important capabilities of the enterprise, and honestly evaluating the shortcomings of the organization. Additionally a review of the environment of the enterprise is called for. This involves a search for trends likely to impact the organization, whether positively or negatively. This analysis will be summarized in a short listing of the most important strengths, weaknesses, opportunities, and threats for the organization, or SWOT analysis.
The selection of what aspects of the organization and its environment to focus on could involve significant choices.
Going back a few steps to the beginning of the process, the decisions on who to include in or exclude from the strategic planning process could be another important area of choice.
Jumping to nearer the end the strategic planning process, decisions on final strategic plans will involve creating strategic options to address the strategic issues surfaced through the preceding analysis. The task of exploring these choices to find the best package of decisions is a creative and challenging one. The package of a few big strategic decisions selected from the many possible options, is one that the organization becomes committed to as the way forward for the next few years.
Having indicated some key points of the strategic planning process that could require strategic decisionI will now talk more about the nature of these choices.
Learn the A B C of choosing strategically
Actually that is the A, B, C and D, as you will see below.
I am strongly of the view that many strategic plans suffer from those responsible formulating strategy not having really faced up to the need for making important choices during the planning process.
Sometimes this is because the planning team simply does not know what they are looking for. So let me list the key attributes of a strategic choice to help you spot the choices in the sometime complex and shifting picture faced by those trying to decide the future of an organization.
In the context of planning for the long term future performance of an organization a sound choice is characterized by these four attributes:
Authenticity, Believability, Communicability and Deliverability.
Such choices must be authentic choices. For a strategic decision situation to be authentic, it should be made from a number of, at least two, options which represent viable alternatives. For these choices to be authentic they must stated so clearly that it is obvious what an organization will do by following the options, and equally important what it will not do.
The entity must choose who it exists to serve in some beneficial way. It must choose what benefit tit will provide. For a business it must be clear which customers it will cater to, and which markets it will not service. Authentic choices may also include choosing the basis on which the business will compete, or how the firm will achieve competitive advantage in the chosen customer segments of the market, and what it will not do to compete.
An inauthentic choice does not plainly spell out what the organization will and won’t do as a result. For example, many companies pride themselves on being committed to a customer focus. Are we to honestly believe that any business would state in its strategic plan that it will not focus on the customer, or even deliberately ignore the customer? No genuine choice here.
I suppose that if the companies in question did find that their competitors were choosing to deliberately follow the road not taken, that is, ignoring the customer, we might reinstate the customer focus as a genuine choice!
If competitors take options rejected by particular organizations then we might say that a strategic choice was authentic, was addressed, and taken.
A believable choice is one that can be traced back to some real basis in terms of the evidence and commitments of the members of the team responsible for the strategic planning.
Believable choices are based on relevant, representative, and trustworthy evidence or are derived from such facts by sound logic. This stress on facts and logic does not preclude some role for the intuition, emotional commitments, or personal beliefs and values of the participants. However, it does acknowledge them, and their possible influence on the strategic choice process.
In a well designed strategic planning process, the logic applied to the data can traced, clearly stated, and be open to assessment.
Strategic choices and decisions flowing into the strategic plan from them will be less believable, or convincing, to those required to implement them, if conditions are not right. For example if strategic choices are perceived to be unduly influenced by the relative political position of key players or their relationship with other participants in the planning process, they will be less believable.
Anything that compromises the open and rigorous testing of strategic choices through the planning process may undermine their believability, and the confidence people have in the overall plan. For example, overuse of particular data to support a prejudicial position may be as concerning as too little data.
Opinions, and apparent hunches, or just gut feelings may be useful inputs to generating or discussing strategic choices. This is because they may be the product of many years of relevant experiences and knowledge in the field under consideration. A few decades of working in an industry subject to seasonal fluctuations may give a manager a set of mental models of change in an industry that can be a valuable and believable resource in considering a particular strategic choice being considered by a planning team.
However rather than disregarding these ‘gut instincts’, and just like the ‘harder’ data in the more formal accounting models, they need to be assessed for believability by the planning team as a whole.
A strategic choice may be authentic, and it may be believable, however, if it not in a form that enables it to be effectively and efficiently communicated, it is a waste of time. ‘Message received and not understood’. This is not simply a matter of the way it is expressed or written. It is also about whether or not the choice is compelling.
When communicated through other forms of planning as well as the complex webs of formal and informal communication channels required to get anything done in an organization, any the choice made should be engaging to a variety of audiences. These audiences include people who may have been remote from the formation of the strategic choices. Yet these same people may be expected to implemented the associated decisions, or at least adjust to their impact on them.
The communicability of the strategic choice becomes a kind of test of the management team commitment. Members of the organization remote from the decision making process, and yet with responsibilities for executing the strategic plan will judge the enthusiasm of the management team by the way in which the top managers communicate the strategic choice or choices. They will of course test the logical sense of the strategic choice against their own experiences and, if found wanting, the strategic choice will not have been fully communicated because it may be rejected by the recipients. “Message received, understood, and not accepted’.
In addition to the factual content of the choice, the managers who have taken this position need to also communicate their determination to make a choice to change direction from current strategies. They also need to communicate their seriousness, and willingness to do whatever it takes to help the organization through the transition to this new position arising from the strategic choice made.
This brings us to the last major attribute of good a strategic choice, deliverability.
Surfacing the really important issues or strategic elephants, exploring choices relevant to addressing these issues is all very well. Narrowing the choices to a small number that meet the A, B and C already outlined is fine. However, a strategic choice is not much use unless it can be executed.
That means the choice is not only Authentic, Believable and Communicable. It must also be Deliverable, or Doable, or…Executable. Enough with the alphabet block already!
Strategic choices that have been shortlisted for inclusion in a corporate strategy need to be capable of being broken down into a series of doable steps to be taken immediately, and can be further broken down into medium and long-term achievable actions, with clearly stated deliverables.
These larger authentic, believable, communicable corporate strategic choices must also be able to be carried out in the real world. They must be capable of being translated into clear budgets. Projects or action plans, with clearly assigned accountabilities. They must be at least adequately resourced. As importantly they must be planned with associated risk management practices in place to deal with the inevitable obstacles that arise.
Structure of the strategic choice space
There are five main sets of procedures in the approach to strategic planning followed here at simpley-strategic-planning.com. They are-
In terms of decision processes within this set of activities there are three key components of the strategic planning process which generate the space in which sound strategic choice may be made. They are-
The strategic choice space is in the area of overlap among these three components, as depicted in this diagram. The shaded background suggests the pervasiveness of contextual influences on the process.
Consideration of the other overlaps between pairs of components may stimulate discussion and possible other thoughts to clarify what are the really important elements in any decision about strategy.
Between intent and issue analysis there may be no feasible options apparent. Before giving up it may be worth looking to see if the alignment between factors raised in the analysis which seem relevant to objectives have been misread, or are alternative forms of issues already aligned in the central strategic choice space.
Between intent and options it may be possible to identify early on that some options are just not feasible.
There will of course be options thrown up that seem feasible, and to fit the issues raised to some extent, and yet do not align well with the objectives. They may be overly risky, or not align with the code of corporate conduct of the organization.
However, it is only in the space created by all three component circles overlapping, that we find any logical candidate strategic choice for inclusion in the final corporate strategy.
Honest and evidence based exploration of this space enables a reasonable and possible set of strategies to emerge as if by magic. The ‘magic’ is that which comes with of systematic hard work, and honesty in facing up to the really big challenges or strategic elephants facing the organization, in its pursuit of longer term sustainable performance.
When managerial ego becomes involved, or a deep rooted organizational culture is at play, it may be very difficult to follow the logic as presented.
It will be tempting to argue for a change in strategic intent in order to get in a favored strategic option.
A suggested but infeasible strategic choice which seems very attractive might have influential supporters, so the evidence regarding its feasibility needs to be sound and fully available to the planning team may need to be carefully argued with clear evidence in support. Choosing what not to do, is as important to agree and record as part of the planning process, as the finally agreed strategic choices.
Nonprofit organizations and the Strategic Choice Approach
An alternative view to the approach mostly taken at simply-strategic-planning.com is that of the Strategic Choice Approach (SCA) to planning.
The SCA builds on action research work initiated in the1960s at the Tavistock Institute for Human Relations in London. The early projects focused on policy-making in local governments, employing teams of operational research and social scientists. Their work questioned the then conventional views of how public policy work should be done. Despite how rule ridden these environments are, these pioneers of SCA demonstrated the vital importance of informal networks of constructive cooperation in achieving pr0gress in decision making in very complex, uncertain, and often highly politicized environments.
Much of this centered on practices designed to reduce various forms of uncertainty about the working environment, about values and about other behavior of a range of players external to the immediate decision situation. Unlike many other workers who focus primarily on the disposal and use of power in these situations, the SCA focused on processes for achieving improved understanding across the usual battle lines in building consensus about what is feasible an desirable in the way of decisions that move to getting things done, while not closing off options for future action, leaving some scope for people to change their minds, and rake advantage of new and usually unforeseen opportunities for making improvements.
The progressive expansion of the empirical evidence base of this work led to a set of methods for facilitating decision-making in complex situations.
In the Strategic Choice Approach, planning is seen as a continuous process of adjustment, and involving a fair amount of reflection on the nature of the decision making process itself. It is a process of a process of reflecting on and clarifying the strategic choices available at any given time, and building commitment to moving forward with a small number of feasible solutions in the form of ‘commitment packages’. The use of the term "strategic" refers more to the way in which decisions are developed and communicated for commitment to action rather than being focused at say the corporate level of an enterprise. So it is not strategic planning in the sense used here.
The most useful explanation of this Strategic Choice Approach is that of Planning Under Pressure, by J. Friend, and A. Hickling.
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