Strategic Decision Making: Risk Tolerance and Cultural background
Strategic Decision Making is an essential component in the success of any firm. However, the strategic decision making process can be wrought with challenges. The purpose of this discussion is to investigate how senior Management influence peers to adopt cultural change within a decision making context. More specifically the discussion will focus on factors such as risk tolerance and cultural background that influence the decision making process. The research will also take into account the individual and organizational influences. Let us begin our discussion by defining what strategic decision making is and why it is important.Strategic Decision Making and its Importance Strategic decision making is what separates successful companies form companies that are not successful. At every level of management that are decisions that must be made to ensure that the company is performing in the manner that it is capable of. With this being understood senior mangers have a unique responsibility in that the decisions that they make impact the decisions that lower level managers make which in turn affects the performance and direction of an entire company. As a result of this cause and effect relationship it is also
Once this has been determined, the company can use risk control methods and risk management products to decrease natural exposure to increasing jet fuel prices (Culp 2001). In addition management is often forced to become increase both their competence and professionalism (Warner 2001). This "culture" is passed on from generation to generation as people learn a unique language, value system and how to regard certain modes of behavior (Warner 2001). "Harbison and Myers (1959) expound upon this definition of logic further by explaining that it is based on the notion that the process of industrialization is based on a certain factors that all societies must engage in if they desire industrialization to be successful. The organizational changes are instrumental in bringing about other alterations in the organizational structure including increased specialization, dependence upon rules, and decentralization. Excessively ambiguous or immeasurable risk tolerances make no sense. However, when senior management is influenced by culture as it relates to decision making, this influence is most often do to a overwhelming sense of obligation to the culture or to the ideals expressed in that culture. These models also assert that senior management must apply objective criteria to strategic decisions to establish the most suitable organizational strategy (Klimoski et al 2001). According to Culp (2001) the majority of owners and beneficiaries of a company's risk management process usually work together to establish tolerances associated with the risks that the company is exposed to. Senior managers are greatly influenced by the amount of risk tolerance that is present when making a decision. The research found that in certain cultures the decision making process can almost be predicted based on the cultural norms of the society. In addition those in management positions that make decisions must become more professional and management style becomes participatory (Warner 2001). As you can see risk tolerances place a significant role in strategic decision making. The bad news is that you don't know whether your particular product will be the one that makes it big (Frame 2003). In addition, many large multinational companies combat this issue by hiring managers that are of the same culture as the rest of the employees so that when change is implemented the employees feel more assured and confident with the decisions that are made.
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