CEOs and Strategic Decision-Making, Article Critique Example

It is not uncommon for business students to hear that more and more organizations are decentralizing their decision making processes, implementing informal communication channels, and involving people at all organizational levels in strategy formulations. Often-cited benefits are greater employees’ motivation, faster decision making, and improved communication between the management and the followers. This is in contrast to the findings of Lewin and Stephens (1994) as mentioned in the case study that leaders who are high achievers tend to prefer formal processes for decision making and lateral communication. Looking at examples of some of the most successful CEOs in recent times such as Apple’s CEO Steve Jobs and Amazon’s Jeff Bezos, Lewin and Stephens’ findings make sense because Jobs would always tell his followers what he wanted and which direction Apple would take (Sinsky, 2011). Not surprisingly, the study mentioned in the case has also found that high achievers do tend to centralize decision-making. One reason may be that high achievers do not want to leave anything to chance and they have high degree of confidence in their own judgment and decision-making capabilities.

The theory of ‘environmental determinism’ makes sense when it argues that the size of the firm is negatively related to the CEO’s ability to influence decision-making. This is because it requires much more efforts to run large organizations than small organizations and, thus, span of control and decision making authority is often shared by individuals at the management level. The study also found that CEO’s tenure is positively related to hierarchical decentralization and communications. The possible explanations may be that tenure means CEOs do not have to worry about the security of their job or power politics, thus, they are more willing to delegate power and decision-making authority to others. The case does mention that even though it has reached the conclusion through its study that long-tenured CEO engage in more-rational decision-making, studies by Tushman and Romanelli (1985) and Bantel (1993) found the opposite. I seem to agree with the case authors because long-tenured CEOs  have extensive experience, thus, they should know that rational decisions are more beneficial in the long-term. The experiences should also make long-tenured CEOs better at identifying their personal biases and develop a preference for objective data.

The authors also found that uncertainty avoidance is related to standardized decision making processes. This may explain why innovative organizations are usually the ones that are not afraid to think outside the box and have high-risk tolerance. They understand that the opportunities with the most potential often have high degree of uncertainty, thus, they have to be bold and willing to take risks.

The authors suggest that CEOs wishing to influence strategic decisions cannot rely solely on their hierarchical position since strategic decision-making is more a team effort. Even though the study was focused on Greek companies, its implications also seem to apply to American companies. One cannot help but wonder if the authors are implying that leaders should rely less on legitimate power and more on other sources of power such as expert power and reward power (Merchant). In addition, it may also pay for the leaders to be able to inspire others. It is clear from the case study that CEO’s individual powers have been declining and in most cases, decision-making has become a democratic process in organizations.

References

Merchant, P. (n.d.). 5 Sources of Power in Organizations. Retrieved August 12, 2012, from http://smallbusiness.chron.com/5-sources-power-organizations-14467.html

Sinsky, R. (2011, August 25). Why Apple employees avoid getting in the elevator with Steve Jobs. Retrieved August 12, 2012, from http://venturebeat.com/2011/08/25/michael-dhuey-apple-engineer/