The purpose of this assignment is to discuss and analyse the reasons for and the backgroung behind the icresing speed of decision making as organisations find themeselves in an increasingly competitive environment. In the first half of the essay I wpuld like to discuss the theoretical backgroung, than support them with examples and finally to draw conclusion. DISCUSSION Decision speed has been found to be a vital factor in influencing firm performance in high velocity environments1. This finding -inductively derived in the study by Bourgeois and Eisenhardt- was deductively tested and quantitatively supported by Judge/Miller who argued:
“The conclusion that (decision) speed and performance are associated is certainly in keeping with the experiences of a growing number of corporations that are relying on organizational speed to improve their financial performance. For example, Bower and Hout argued that organizations that make fast decisions ‘are like World War II fighter pilots- they win by making faster decisions which preempt the opposition’s moves.” According to Judge/Miller it is due to the increasingly global markets and shortened product life cycles that the attention given to speed of the strategic decisionmaking process is growing. Stalk from the Boston Consulting Group and Thomas state that:
The ways leading companies manage time represent the most powerful new sources of competitive advantage.” and “The big don’t outperform the small, the fast outperform the slow.” Besides the relevance of decision speed in the practical business environment, the speed of strategic decisions also represents an essential unit of analysis in the theoretical field. Eisenhardt states in this matter: “Although decision speed seems to affect firm performance in high-velocity environments and is a key characteristic differentiating strategic decisions2, there has been little research on fast strategic decision-making.”
In addition to the established correlation between decision speed and firm performance in high velocity environments, another point of discussion in the literature is whether speeding decisions has implications for the quality of the strategic decisions, which in turn has been shown to affect firm performance3. In this respect, Wally/Baum articulate, “Although fast decisions may not necessarily be better decisions, speeding decisionmaking also need not diminish the quality of outcomes.” From the preceding paragraphs the practical and theoretical justification, relevance and potential benefits from studying the speed of strategic decisions have become apparent. This conceptualization from the data goes along with Eisenhardt, who qualitatively assesses decision speed as the perceived speed of executives’ decisions and supports it by quantitatively measuring the duration of the decision.
Eisenhardt states as follows: “I assessed the overall speed of decision-making from interview and story data. These qualitative assessments were corroborated with measurement of the duration of each strategic decision studied. Following prior research4, I measured duration using the beginning and end times for each decision, with starting time indicated by the first reference to a deliberate action such as scheduling a meeting or seeking information and ending time indicated by the time at which a commitment to act was made.”
Following Eisenhardt, Judge/Miller define decision duration as “the time between the first reference to deliberate action such as scheduling a meeting or seeking information, to the time in which a commitment to act was made.” Because decision duration reflects the slowness of a decision, we reversed the scale for our dependent variable to reflect decision speed. This reverse scaling was achieved by subtracting decision duration from 25, yielding a more intuitive metric for decision speed in which high values reflect fast decisions and low values, slow decisions.”
The notion of perceived decision speed and quantitatively measured duration is also supported by Wally/Baum, who derives primary information about the pace of decision-making from scenario responses. The specific measures used by Wally/Baum are as follows: “Decision-making pace 1: The respondents recorded the number of days that their firms would most likely take to reach decisions on each of six events as they occurred. This measure captured the perceived speed of decision-making. Decision-making pace 2: We asked three 5-point Likert questions about the respondents’ firms’ decision-making speed. (…) An index of responses on the second pace measure (70) served to validate the primary measure of organizational decision speed.”
Interest in studying the speed at which strategic decision-making occurs emerged from the work of Bourgeois/Eisenhardt, who inductively pointed to an association between firm performance and speedy decision-making. The fact that decision speed is a more recent field of research with a lower number of contributions in the field is pointed out by Eisenhardt: “There has been little research on fast strategic decision-making.” Referring to Bluedorn/Denhardt, Judge/Miller quote similarly: “Despite the growing recognition of the importance of the speed with which decisions are made, little is known about this phenomenon.”
In the Eisenhardt’s observation and analysis of high velocity environments has put special emphasis on the following influencing factors of decision speed: (1) planning and real-time information, (2) timing and number of alternatives, (3) power and the role of counselors, (4) conflict and resolution and (5) fragments and decision integration. (1) Planning and real-time information: Eisenhardt’s empirical evidence suggests that fast decision makers use more, not less information, than do slow decision makers. This finding contradicts prior research, which suggests that the consideration of few alternatives, obtaining inputs from few sources of expertise and limited analysis shortens the strategic decision process
This traditional perspective, which argues that the greater the use of information, the slower the strategic decision process also argues that comprehensiveness slows the strategic decision-making process. As opposed to this prior stream of research, Eisenhardt proposed that the greater the use of real-time information, i.e. information about a firm’s operations or environment for which there is little or no time lag between occurrence and reporting, the greater the speed of the strategic decision process.
Eisenhardt assumes three reasons why the use of real-time information quickens the pace of strategic decisionmaking: The first reason lies in the fact that real-time information speeds issue identification, allowing executives to recognize problems and opportunities sooner- The second line of argumentation reasons that managers who attend to real-time information actually develop their intuition, which aids them to react quickly and accurately to changing stimuli in their firm or environment. The third reason claims that frequent review of real-time information develops social routines in a group, needed to respond rapidly when pressing situations arise.