Aspects of Running an Organization - Coursework Example

Name: Topic: Strategic Management Institution: Date of submission: Instructor Strategic Management One of the most important aspects of running an organization is strategic decision making. Strategic decision-making is a constant process that entails creating strategies to get the desired results and altering those strategies based on the observed outcomes. The senior managers within organizations are always required to evaluate various alternatives and make the appropriate decisions regarding a range of matters. The most effective organizations are the one that make quick and accurate decision that can be supported and embraced by the entire organization. Organizations that do not practice the culture of inclusivity in the strategic decision making process are bound to fail due to poor leadership. The movie Margin Call exemplifies this claim as it illustrates the danger of marginalizing employees and other stakeholders in making critical decisions. The process of strategic decision making in organization has involved analogies of organizations to political systems using the political model where’s the rationale model and garbage can model provides conceptualization of strategy development. Strategy has been established as a major influence on the performance of organizations. Organizations can be described as an association of people grouped together with a common goal that they wish to achieve. Usually, organizations have their own capital, their own premises, their own technologies and policies that are required in order to safeguard the organization from environmental influences. The rationale model as a way of strategic decision-making, assumes that human behavior has some drive. According to this model, players arrive at decision situations with clear objectives. These objectives are key in determining the extent of the effects that may result from a certain action. The actors develop a set of alternative lines of action and gather the required information. The optimal alternative is then selected. This way, they can have control over the selected standards in order to achieve satisfactory results. Organizations provide an opportunity to vastly improve the quality of whole groups of processes performed by members. By overcoming the bounded rationality of all the members without incurring much cost, organizations are able to achieve effectiveness (Jackson, 2000). The importance of organizations can be attributed to the environments they provide for developing personal behaviors and qualities. In addition, organizations provide a means for exercising power and sway over others. This is principally the case with those in senior positions. Organizations can be conceived as having a dynamic pattern of communication and relationship with persons (Langley, et al., 1995). This is because an organization is a collection of people who carry out activities of the organization. As a group, this collection of individuals is capable of performing intelligently during difficulty and complex situations, where these people is are likely to be less effective on their own. An individual who has been isolated cannot reach a high degree of rationality. Since organizations have a lot of options and boundless amount of information, an approximation to objective rationality cannot be easily conceived (Langley, et al., 1995). To put this into perspective, a case study of the movie Margin call reveals that indeed, the top-level managers have influence over other members of an organization. In the movie, the CEO of the bank in question calls meeting with his senior executives and convinces them to quickly sell the toxic assets that the back had accrued. Rogers, one of the mangers at the meeting, strongly objects to this, but the CEO exercises his power and sway to push with the proposed plan. Although activities within the organizations are generally considered as learning processes, not all of them qualify as such. When compared to the political model and the rationale model, the garbage can model in organizations emphasizes the importance of chance. According to this model, members of an organization acquire knowledge through a method of trial and error (Shapira, 2002). The members learn without a proper comprehension of the underlying causes. Although some organizations, which have embraced this model, have achieved success, this success is hard to explain. The model has also been described as organization anarchy in instances where organizations have achieved success in competitive markets. The garbage can model has been found in various organizations whereby decisions are made through a process that surpasses technological rationality. This model can however be considered as paradoxical because it was designed to criticize universities as an example of organizational anarchy. However, universities, along with the church and the military are some of the oldest organizations in the world. Decision analysis is based on several years of practical and philosophical thought about uncertainty and decision-making. Currently, there are disciplines of decision analysis that are vital in providing systematic processes for clarifying complex and confusing situations by replacing the confusing issues with clear insight. This is a key factor in achieving the desired cause of action. Organizations have two important roles which include simplifying the decisions and providing support to members in the decision making process. Organizational decision-making is associated with bounded rationality coupled with the close existences between the limitations and nature of human decision and the organizations activities. Decision making in organizations is simplified based certain assumption about the members. Given the constraining influence of systematic decision-making environment, organization members will settle for acceptable solutions rather than optimal solutions (Poister, 2004). For instance, when the senior managers of the bank portrayed in the movie margin call realized that the firm was in serious trouble over toxic assets, they decided to sell them to unsuspecting traders. This was not an optimal solution for the firm since it would strain the relationship of the organization with its customer, and further spread the risk throughout the entire financial sector. Such a decision would only attend to problems in a sequential manner rather than simultaneously, leading to repetition of standard solutions. These standards might increase depending on the success or failure of each experience. Only a part of these standards are dependent on individuals within the organization as the organizations controls them. When the unbounded rationality model is applied, it critical in establishing an organization’s scope of decision-making. However, the options are vastly limited by the prior decisions that may be either obvious or unclear. Furthermore, the organization may be limited due to the moral commitment to individuals and departments. Some organizations adopt this model, allowing them to acts as an entity, similar to the model of economizing, goal directing and learning individual. The coalition model that is involved in decision-making focuses on the decisions of the organization as well as the cost. Going by the theory of choice and the theory of search, past decisions are considered a vital part of the environments for future decisions (Langley, et al., 1995). Questions have been raised on whether organizations are capable of engaging in the type of rationality that is acknowledged in economic theory. Behavioral concepts that accept conflict of goals, multitude and ambiguity have been considered as better alternatives instead. The decision-making processes itself is often simplistic, local and reactive. It is only after the senior managers within the organization perceive problems as a serious situation, that solutions are proposed. This shows that power is significant since any alternatives that conform to certain constrains has to secure powerful backing within the organization before it can be adopted (Eisenhardt & Zbaracki, 1992). This is point is clearly illustrated by the movie margin call, which tells the story about how poor decision making and non-inclusivity in decision making can be detrimental to an organization. The movie is set at the period just before the global financial crisis. The organization in question was a bank in Wall Street. The firm had a culture that encouraged or forced employees to shun from challenging executive leadership and decisions. When the CEO of the firm had an idea, any criticisms from the sub ordinates that would slow the attainment of his goals were not welcome. Those who had alternative ideas or views were often silenced or removed, sending a clear message to other employees not to follow suit. Senior managers within the organization make continuous limited comparisons with a similar view of governmental decision-making. The exploration of alternative answers to the problems faced by an organization is usually based on simple models of how the environment functions. Searching in the in the immediate surroundings for existing solutions avoids the need for examining all aspects of a problem in a broad manner. Disjointed incrementalism as a strategy, does not conclusively analyze all the possible alternative policies (Poister, 2004). Due to the ambiguity of the problems faced by complex organizations and the likelihood for decision failures, a need for decentralized and incremental decision-making arises. Rationality is gained by the participation of a range of decision makers who wish to fulfill their own values and interest in interaction with other people. On the contrary, some organization have only one or very few people being involved strategic decision making that requires careful consideration of the various alternatives to certain problems. For instance, the bank that is portrayed in the movie Margin Call was run by a few powerful people who made selfish choices at the expense of the survival of the organization. Although the Tuld, the CEO of the bank is notified that the securities the firms intends to sell are worthless, he replies that it’s better to be first, smart or cheat. This wrong decision eventually, led to the collapse of the bank. The political and powers approach to strategic decision making in organizations has been emphasized as one of the key models. The approach proposes a three-model take on problems facing internal organizations. Distinction in this model is found on explanations that include bounded rationality, economic rationality or the utilization and positioning of authority in the organization. The rationale model explanation presents no logical importance to organizational capacity and processes. This is because they are assumed adjustable variables. The origin of the political perspective on strategic decision-making is founded on political science literature from the past. As a result, a strategy of decision making within the government was developed in a way that the conflictual nature of the legislative process was highlighted. According to this view, decisions were as an outcome of a process whereby decision makers came together through coalition, with their diverse aims, favoring a powerful win. This paradigm was well applicable to the legislative arm of the government where there were clear frontrunner, sharp defined coalitions and different goals (Eisenhardt & Zbaracki, 1992). The perception that organizations could be compared to political systems has been widely accepted through several studies. There are several real world examples that vindicate this analogy. Additionally, the movie margin call further illustrates point. When the Wall Street based bank was faced the danger of collapsing due to securities backed by toxic mortgages, a meeting of senior executives was called to chart the way forward. Each executive had varying opinions on what the cause of action should be. Cohen, one of those who were in the meeting, proposed that the firm should dump or sell the toxic assets before the buyers realize that the securities are worthless. Rogers, also a senior manager at the bank, strongly objected to Cohen’s plan, citing the fincial risk associated with such a move. He argued that such a decision would destroy the bank’s relationship with its partners. This instance shows the conflictual nature of decision-making process in organizations that draws comparisons to the legislative process in the political sphere. Another study involving some of the biggest corporations in world further asserts the model of political structures in organizations. This study revealed that organizations such as general motors, Chrysler and Quinn are acted as political systems during strategic decision-making (Eisenhardt & Zbaracki, 1992). These organizations were found to be made up of constantly changing group of persons with varying and diverse interest. Conflict and disagreements were common among the executives during decision-making, when critical choices had to be made. This trend was widely observed in many other organizations, therefore, further supporting the theory that organization are like a political system consisting of varying preference. The political model also has a key feature that asserts choices are because of backing from powerful individuals. Choices among the competing alternatives are a direct result of unbalance within the power structure. Moreover, evidence shows that powerful individuals triumph when there is a conflict of interest. For instance, a budgetary allocation was closely monitored in a major university by comparing political and rational models of choice. The study revealed that the power and influence of certain department within the organization was a key determinant of the budgetary allocation they would receive. This shows in the analogy of organization to a political system is true, since powerful individuals usually get what they want (Shapira, 2002).  To sum it up, organizations are rightfully perceived as political systems when it comes to strategic decision making, due to the conflicting nature of the interest and objectives, and inadequate cognitive ability from the key decision makers. Moreover, strategic decision-making can be described as an interaction of both political and bound rational processes. Strategic decision-making has been conceived as bound because is the decision makers are restricted cognitively in there participate and practice of the decision making process. Bibliography Eisenhardt, K. M. & Zbaracki, M. J., 1992. Strategic Decision Making. Fundamental Themes in Strategy, Volume 13, pp. 17-36. Jackson, M. C. (2000). Systems approaches to management. New York, NY [u.a.], Kluwer Academic/Plenum. Langley, A. et al., 1995. Opening up Decision Making: The View from the Black Stool. Decision Making, 6(3), pp. 260-279. Poister, T. H. (2004). Strategic planning and decision making in state departments of transportation. Washington, D.C., Transportation Research Board. Shapira, Z. B. (2002). Organizational decision-making. Cambridge [u.a.], Cambridge Univ. Press. Read More