Strategic deicions making

  • Stéphane THION
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Why does methodology matter?
Why does methodology matter? 150 150 Stéphane THION

John D. Sterman (2000) wrote: “People are poor intuitive scientists, generally failing to reason in accordance with the principles of scientific method”. Sterman then goes on to explain his thinking with examples:

  • We do not generate sufficient alternative explanations or consider enough rival hypotheses.
  • Our judgements are strongly affected by the frame in which the information is presented.
  • We suffer from overconfidence in our judgements, wishful thinking and the illusion of control.
  • We violate basic rules of probability, do not understand basic statistical concepts such as regression to the mean or Bayes’ rule.
  • Memory is distorted by hindsight, the availability and salience of examples, and the desirability of outcomes.”

In other words, data can be biased because people are biased. Even scientists are biased. For instance, Hogarth (1987) discusses 30 different biases and errors documented in decision-making research.

Further evidence that highlights the importance of methodology in the difficult process of managerial decision-making.

This is probably why analytical thinking is the skill that will be most in demand in the business world between now and 2027, according to WEF Future of Jobs 2023 and 2025.

  1. Sterman, J. D., 2000, Business Dynamics, Systems Thinking and Modelling for a Complex World, Boston, McGraw Hill, p.30.
  2. Hogarth, R. M., 1987, Judgment and choice, 2nd Edition, New York: Wiley.
  3. World Economic Forum (2023), Future of Jobs Report 2023: Insight report, Figure 4.6 p.43

  • Stéphane THION
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Does decision process matter?
Does decision process matter? 150 150 Stéphane THION

This was the question posed by Dean & Sharfman nearly 30 years ago in their paper: ‘Does decision process matter? A study of strategic decision-making effectiveness’ (Academy of Management Journal, 1996, n°39).

To examined whether decision-making processes are related to decision effectiveness, they studied 52 decisions in 24 companies. More specifically, the goal was to determine if procedural rationality and political behaviour influence decision success.

The main finding of their research was that ‘managers who collected information and used analytical techniques made more effective decisions than those who did not’. And ‘those who engaged in the use of power or pushed hidden agendas were less effective than those who did not’. But their research also confirmed that ‘environmental instability and quality of decision implementation play important roles in influencing decision effectiveness’.

If this well-known research confirms the importance of rationality, in an increasingly unstable environment, most chief executives and managing directors acknowledge the importance of analytical thinking in skills management.

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