Why is strategic decision-making important? (A guide)

By Indeed Editorial Team

Published 25 May 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Strategic decision-making is an integral part of aligning a long-term plan for a company with its short-term plans. This can help improve business operations and ensure their efficiency and consistency. Moreover, employees led by great decision-making leaders are more confident because they bring clarity and direction in challenging work situations. In this article, we investigate why strategic decision-making is important and how it helps organisations achieve their goals effectively to progress business growth.

Related: Decision-Making Skills: Definition and Examples

5 steps for strategic decision-making

The steps for strategic decision-making are as follows:

1. Determining an organisation's mission and vision

The first step to implementing decision-making is following a company's mission and vision. Mission and vision refer to the fundamental purpose of the business. For example, a company's mission and vision could be to conserve the environment. It's important to be aware of an organisation's mission and vision as this can help you understand how to accomplish these goals over the long term and in daily business operations.

Make sure you have a document created by the company's leaders and shareholders. Written documents can help communicate the mission and vision more effectively to employees and stakeholders, so they can understand a comapany's expectations when making strategic decisions.

Related: What is strategy and why is it important in business?

2. Outlining long-term business goals

The next step is outlining long-term goals. Long term goals usually refer to goals that can be achieved in a five-year period or sometimes even longer. They act as a practical representation of how the company chooses to apply its mission and vision statements. They're milestones that are important to use strategic decisions. They help a business quickly make effective decisions and give measurable techniques to determine the success and progress of the business.

For example, if the aim of the business is to help save the environment, the company might decide to implement a long-term objective of minimising its carbon footprint over the next five to ten years. By maintaining focus on this long-term goal, any strategic decisions you make become compatible with the concept of the business being environmentally friendly.

Related: Objective vs. goal: What are the key differences?

3. Deciding on short-term goals for the business

Short-term goals are objectives with more immediate deadlines that may occur on a daily, weekly or yearly basis depending on the situation. They're accomplished in a shorter period than long-term objectives. A company can aim to achieve these short-term goals alongside its long-term goals and align them with the mission and vision statement. If you're working for a company that has set defined short-term goals, it's important to remember these goals and focus on achieving them in the specified time period.

Companies usually align their short-term goals to their long-term ones. This means that, as an employee, you're going to work towards achieving the long-term plans by actively reaching your short-term goals. It's essential to consider the company's mission and vision statement when making decisions about your work.

4. Determining realistic strategic objectives

Once a company has established its short-term and long-term goals, it's a good idea to formulate objectives to start the strategic decision process. Companies usually make these strategic objectives as specific as possible. They're quantifiable so a business can easily review and evaluate its progress. You may find that the business sometimes only partially achieves the strategic objectives within a timeframe but may still be making good progress. Businesses use strategic objectives to demonstrate procedures for their route to success.

For example, it's more valuable for a company to determine to decrease its carbon footprint by five per cent over the next ten years than to state it wants to reduce the carbon footprint in a significant manner. The goal of five per cent gives the business a milestone it can aim to achieve. The success of the company in achieving this goal is easier to measure by using specific goals. If the company managed to reduce its carbon footprint by two per cent in the given timeframe, it's still a quantifiable achievement you can use to measure future progress.

5. The reflecting and revising process

An important part of the decision-making process is reflecting on the progress to date and revising the goals. A business can expect to continually edit and re-evaluate strategic plans. It may decide to alter its strategy after achieving a goal. By revising plans, it can assess and change them to align with new business goals or to make improvements to an existing strategy.

Strategic aims vs. strategic objectives

When discussing strategic decisions, it's important to clarify the difference between strategic aims and strategic objectives. Both are key to the decision-making process. Strategic aims are typically larger than strategic objectives. Objectives are the smaller steps a company takes to reach its strategic aims.

Strategic aims

Strategic aims are meaningful goals and milestones a business intends to achieve through its strategies. These goals are equivalent to long-term objectives. They can be goals like increasing market share, reaching certain levels of productivity or buying new office space to avoid rental expenses. These strategic aims may take longer to achieve than strategic objectives.

Strategic objectives

Strategic objectives are typically the smaller steps a company takes towards reaching its strategic aims. They're the daily or short-term goals that employees intend to achieve in a shorter timeframe. For example, if a business' strategic objective is to increase its market share, the marketing team might decide to offer discounts to customers so they recommend the company's products to their friends. Over time, these small goals lead to achieving the more significant strategic aim.

Why is making strategic decisions important?

There are several reasons why making strategic decisions are important for an organisation. For example, it can help implement significant improvements for a business. Being able to think strategically is a useful skill for managers and team leaders as it can help drive growth. The advantages of making strategic decisions in a business include the following:

It can help make improvements in specific areas of an organisation

Decision-making can help improve an organisation in many areas, such as offering training courses for entry-level employees, improving business operations with specific software and helping team leaders act proactively. A company might also decide to create a new department. For example, if companies expect the creation of a business intelligence department, they might benefit from the reports, which can enable an organisation to forecast trends. It also helps employees recognise the aim of an organisation and become part of its success.

It's an essential business skill

Knowing how to make strategic decisions is a key skill for team leaders. You can learn this skill and put it into daily practice to give a company a competitive advantage, helping lead it to success. The decision-making process affects an organisation both directly and indirectly. It can affect how the organisation makes money, how it treats its employees and how the community views it, for example.

It can help you make better choices

One of the most important reasons a business makes decisions strategically is because it can help them make better choices. A company can extensively research before making decisions by using comprehensive processes and systems. This research can be helpful when making timely decisions and implementing them correctly for the success of the business.

It drives business growth

Making strategic decisions is also a key tool for driving business growth. A company can use it to analyse risks and find the best way of achieving business objectives. It can also help organisations accomplish their aims by making correct choices. There are different data analytics tools you can use to guide you through the decision-making process.

It can link deliberate and emergent strategies

Strategy-based decision-making can provide a link between deliberate and emergent strategies. A deliberate plan is one that is put in place on purpose and an emergent strategy is one that emerges in response to a particular situation or occurrence. Strategies for making decisions can help create the link between deliberate and emergent business strategies.

Related: Models of decision-making: descriptions and processes

Who is involved in the decision-making process?

Some companies may not implement decision-making, but you may find the success of a company is more likely if it has a decision-making strategy in place. The decision-making process can be led by the Chief Executive Officer (CEO) or by a board of directors. This may differ depending on the organisational structure or the type of decisions required. In some cases, it's the company's stakeholders who may be the decision-makers, as some decisions may directly affect them.

Related:

  • How to use the rational model of decision making (with tips)


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