STRATEGIC MANAGEMENT DECISIONS: HOW NOT TO MAKE MISTAKES AND TO FALL INTO A TRAP

Author
, professor, Kharkiv, Pushinska, 77

In heading

 Economic theory;

Signed print

 28.03.2024

Issues number

 2024 - 1 (56)

Page

 55-77

Type of articles

 Scientific article

Code UDK

 005.5:330.16

ISSN print

 2411-5584

Abstract

 Problem setting. Making strategic management decisions is the task of top managers. Is it possible to trust the intuition, accumulated knowledge and administrative experience of manager during its development and implementation? Or on the contrary should we rely mainly on rational actions?
Recent research and publication analysis. Currently, we have a lot of research and publications on the issues of justifying the choice and implementation of strategic management decisions. At the same time, O. Sibony, D. Kahneman, C. R. Sunstein and others are interested in the nature of traps that managers can fall into when making strategic decisions.
The purpose of the article is to summarize theoretical and applied research on the development and adoption of strategic management decisions, the reasons of being trapped of strategists, and to formulate recommendations for effective management.
Paper main body. The author of the article proves that strategic management decisions have significant features and cannot be made only based on the intuition and experience of managers. Such decisions concern the purely future development of the organization and influence it, made in conditions of uncertainty and unpredictability, have no analogues, are complex and multi-level, related to the development and implementation of corporate, business and functional strategies, require appropriate information support and various analytical methods. Constantly neglecting rational thinking will result in unconscious, cognitive biases, even if managers don’t want to acknowledge it. A manager can make repeated mistakes, fall into cognitive traps, among which the most dangerous are: the trap of overconfidence in one’s abilities; the trap of unconscious social comparison; “rooting disease”; the trap of constantly waiting for a threat to business; the trap of excessive caution and indecision; the trap of confirmation bias; the trap of joining the opinion of the most authoritative advisers and consultants and others.
However, conscious management decisions also don’t protect strategists from mistakes and traps. These are rational analytical decisions according to a certain algorithm, with the determination of the causes of the problem that has arisen and limitations in its elimination, creation of alternative solutions and their evaluation, selection and implementation of the optimal in the manager’s opinion solution. But rationality in making management decisions is limited. Strategic limitations can include external factors: insufficient market demand for a product or service; low attractiveness of the business sector; numerous public restrictions – social, technological, political, military, civil, legislative, etc., associated with the need to comply with certain standards and compliance. Strategic constraints also contain the internal environment of the company: resources and budgets of the organization, competencies of the company, policies, processes and procedures of the company, management principles, ethical standards, organizational culture. Besides the manager must have the ability to work with information, be able to distinguish strategic information from tactical and operational information. Gaps in management training and incompetence of managers in using modern management technologies have nothing to do with prejudice. But they can lead to specific traps of strategic planning, traps of prediction and forecasting, traps of inefficient management.
Conclusions. How not to make mistakes and fall into strategizing traps? Appropriate internal and external fuses must be provided. These can be: 1) collective decision-making; 2) mandatory creating of alternative management solutions; 3) strict adherence to the management decision-making methods established by the company - with the establishment of procedures and rules that should be common to all managers and eliminate disagreements in their actions; 4) formation of a new culture of strategic management with elements of learning from experience and mistakes.
Short abstract for an article
Abstract. The author of the article reveals the nature of strategic management decisions, analyzes the ways managers fall into strategizing traps - traps of unconscious prejudices and traps of conscious management decisions (strategic planning, forecasting, inefficient management). The author considers that companies need to have internal and external fuses against managers falling into the traps of individual cognitive biases. Among them are: collective decision-making, mandatory creating of alternative management solutions, strict adherence to the management decision-making methods established by the company, formation of a new culture of strategic management with elements of training managers from experience and mistakes.

Keywords

 strategy, strategic management decision, unconscious biases, cognitive traps, traps of conscious management decisions, limited rationality.

Reviewer

External reviewer

Article in PDF

 55-77

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Code DOI

 https://doi.org/10.31359/2411-5584-2024-56-1-55

28.03.2024