Every day, in every organization, multiple decisions are made. However, not all of them can be considered strategic.
A decision is strategic when it has repercussions on the destiny of the company, on the future of the organization.
Strategic decisions are those that refer back to the environment in which the company operates and all resources, including the people who make up the company.
Generally, strategic decisions involve a high degree of uncertainty and risk. A strategic decision involves making choices connected to future strategy and options for strategy improvement, in terms of direction and method.
Executives and managers make strategic decisions when planning the future of the organization. When they define long-term goals, determine responses to the forces of their particular market environment, or consider their company’s business or their organization’s role, they seek to carry out their mission so that the strategic vision, sometimes called future vision, is realized (while following corporate values, or course).
We can add a little detail by saying that decisions are strategic when they:
- are long-term decisions;
- involve future planning;
- are taken in accordance with the mission and organizational vision;
- are related to general planning;
- deal with organizational growth.
Therefore, they are complex decisions that take into account situations of uncertainty, which affect administrative and operational decisions, require an integrated company / environment approach, and lead to fundamental change in company destiny.
From this it should be clear that strategic decisions are different from administrative and operational decisions. The former are day-to-day business decisions that support strategic or operational decisions; the latter are the technical decisions that help in the execution of strategic decisions.
Let’s look at an example.
Reducing costs is a strategic decision for any organization that, to be implemented, requires an operational decision–for example, reducing the number of employees. In turn, this operational decision will lead to an administrative decision addressing how that move will be implemented–through simple layoffs or through a voluntary termination program.
Of course, there are other ways to reduce costs. Eliminating waste of raw materials and redesigning inefficient operations are, as a rule, smarter alternatives.
What strategic decisions have you made recently?