Benchmark – The Value of Taking Risks
Leaders often operate in risk-averse environments, modeling tepid behavior to followers who, in
turn, avoid putting any pressure on the system. This mentality destroys creativity and innovation,
often resulting in catastrophic failure. However, when well-reasoned, deliberate risk is embraced,
organizations can move forward with extraordinary effectiveness. It is a leader’s responsibility to
mitigate possible adverse consequences of the risks. In a complex dynamic system, downstream
effects can be difficult to determine, but measures must be taken to assess the impacts of
decisions. When a concern is identified, corrective action can be taken. Cultural differences can
also play a significant role when leaders engage in risk-taking when making strategic decisions.
Leaders must be cognizant of how their behavior can impact collocated teams as well as cross
cultural virtual organizations. In this assignment, you will revise your prior work on the
theoretical approach to leadership and explore the leader’s role in taking risks when making
strategic decisions, evaluating risk mitigation strategies, evaluating organizational structures, and
managing risk in collocated and virtual global environments.
General Requirements:
Use the following information to ensure successful completion of the assignment:
- Refer to previous paper “Benchmark – Leading Strategic Decision Making” PART 1
(SEE UPLOADED FILE).
- You are required to use APA style for this writing assignment.
- This assignment requires a minimum of 5 NEW scholarly research sources in addition
to the 10 previously used in PART 1 paper (please select at least 5 new sources from
the following list on the second page) related to this topic, and at least one in-text citation
from each source referenced to be included.
- Include an UPDATE to the abstract, introduction, and conclusion section in your paper.
Directions:
Part 1 (Using Previous Paper)
- Start with the previous paper titled Benchmark – Leading Strategic Decision Making
(uploaded).
- Incorporate and merge into one paper the NEW additions required in PART 2 and be sure
to revise the introduction and thesis statement to allow PART 1 and PART 2 papers to
connect seamlessly into one paper.
Part 2 (NEW Added Sections To Existing Paper From PART 1)
Write an additional 1,200-1,350 words discussing the leader’s role in taking risks when making
strategic decisions, evaluating risk mitigation strategies, evaluating organizational structures, and
managing risk in both collocated and virtual global environments. The NEW sections of PART 2
should flow naturally from the revised paper of PART 1 and combine to form one final paper. You may also need to revise the introduction and thesis statement to allow the papers to connect.
Include the following in the new added sections:
- A research-based explanation of why it is important for leaders to take risks when making
strategic decisions.
- A research-based evaluation of risk mitigation strategies. Which strategies most probably
reduce the likelihood of adverse effects of the decisions?
- A research-based discussion of the organizational structures most conducive to risk-taking.
Why are some organizational structures better than others for encouraging risk-taking?
(Benchmarks C6.1: Evaluate organizational structures and determine the feasibility of each.).
- A description of at least two differences in risk-taking when making decisions in collocated
versus cross-cultural virtual organizations.Available Scholarly Research Sources
(please add at minimum 5 sources from this listing to the existing references)
Ertac, S., & Gurdal, M. Y. (2019). Preference communication and leadership in group decision
making. Journal of Behavioral and Experimental Economics, 80, 130–140.
doi:10.1016/j.socec.2019.03.004
Giones, F., Brem, A., & Berger, A. (2019). Strategic decisions in turbulent times: Lessons from
the energy industry. Business Horizons, 62(2), 215–225.
doi:10.1016/j.bushor.2018.11.003
Hallo, L., Nguyen, T., Gorod, A., & Tran, P. (2020). Effectiveness of leadership decision-
making in complex systems. Systems, 8(1), 5. doi:10.3390/systems8010005
Hock-Doepgen, M., Clauss, T., Kraus, S., & Cheng, C.-F. (2020). Knowledge management
capabilities and organizational risk-taking for business model innovation in SMEs.
Journal of Business Research. doi:10.1016/j.jbusres.2019.12.001
Jung, K. B., Kang, S.-W., & Choi, S. B. (2020). Empowering leadership, risk-taking behavior,
and employees’ commitment to organizational change: The mediated moderating role of
task complexity. Sustainability, 12(6), 2340. doi:10.3390/su12062340
Kelman, S., Sanders, R., & Pandit, G. (2017). “Tell it like it is”: Decision making, groupthink,
and decisiveness among U.S. Federal subcabinet executives. Governance, 30(2), 245–
- doi:10.1111/gove.12200
Lau, K. W., Lee, P. Y., & Chung, Y. Y. (2019). A collective organizational learning model for
organizational development. Leadership & Organization Development Journal, 40(1),
107–123. doi:10.1108/lodj-06-2018-0228Nordbäck, E. S., & Espinosa, J. A. (2019). Effective coordination of shared leadership in global
virtual teams. Journal of Management Information Systems, 36(1), 321–350.
doi:10.1080/07421222.2018.1558943
Leading strategic Decision Making
Abstract
The role of a leader in decision making is undeniable. Leaders can implement several approaches to improve the position of the organization and guarantee overall success. Such decisions are dependent on various organizational factors, such as culture. Companies whose leaders make quick decisions to deal with extreme pressures are likely to take a different direction than one lacking such capabilities. The communication structure of the company also determines the approach to decision making with the diligence-based approach most suitable for organizations in the current business environment. The rationale for selecting the approach is based on the personality of leaders, which influences the perception of company problems and how to solve them. This strategy requires a balance between the amount of information and timeliness of the decision and can be achieved by implementing the performative model. Most importantly, leaders can participate in the development of the strategy through implementing management by objective or relationship-oriented management style to influence the behavior of subordinates towards supporting the approach. Ability to take high risk while making strategic decisions is another important quality of effective leadership. Organizations in the modern market are operating in a highly unpredictable environment that necessitate leaders to take risk while making strategic decisions. Various strategies and organizational structures can help leaders in taking risks while making decisions.
Keywords: strategic decision-making, strategic management, diligence approach, risk-taking, organizational structure
Benchmark – Leading Strategic Decision Making
In strategic decision-making, leaders play an important role by taking part in the process of evaluating, planning, and implementing strategies that improve and maintain a competitive advantage. The process of decision-making is crucial since it affects the entire organization, including employees and other stakeholders (Abubakar, Elrehail, Alatailat, & Elçi, 2019). Thus, it becomes necessary for leaders to assess the company’s social, political, and cultural conditions and therefore apply the best theoretical approach as a guide in the decision-making process. In the highly unpredictable business environment, leaders are also required to sometimes take high-risk decision in order to meet the demand and expectations of consumers. Strategies such as VUCA and knowledge management as well as organization structures such as empowering leadership and shared leadership can help leaders take risk while making strategic decisions. This paper seeks to discuss the rationale for selecting a theoretical approach to decision-making, the importance of timeliness of knowledge, and the role of leaders in implementing the approach.
Organizational Climate
The climate in which a business operates plays a role in influencing the strategic decisions made within the organization. An important aspect is how managers react under conditions of extreme pressure. The ability of a company to react to pressure affects their decision-making approach. According to Netz, Svensson, and Brundin (2019), companies that have well-trained managers who are capable of reacting quickly to extreme conditions can apply fast strategic decision-making approaches. Such environments also require an effective business communication structure to facilitate information gathering and sharing to make fast decisions. Urbig, Muehlfeld, Procher, and Witteloostuijn (2020) emphasize the importance of communication in the organization and culture since it facilitates the transfer of information, and type of decision-making approach, dependent on how the organization processes and comprehends information. As such, the authors also explain that the type of language used within the company affects the level of comprehension with a decrease in comprehension resulting in problems in thinking that resultantly affect decision making. Therefore, companies that use language understandable by most, make it easier for managers and stakeholders to comprehend and therefore select an appropriate approach to decision making.
The shared beliefs of organizational culture also affect the selection of a decision-making approach. Yee, Tan, and Ramayah (2017) assert that organizational culture affects how information is shared, which then influences the decision-making process. Organizational cultures that are knowledge friendly also encourage information sharing, which results in the development of knowledge throughout the company, thus shaping how managers think and react. Dynamic capabilities also influence the decision-making approach and determine how a company can identify and seize opportunities, manage threats, and restructure its operations to maintain growth (Pitelis & Wagner, 2019). Organizations that foster an environment where leaders have dynamic capabilities aligned with organizational capabilities are better positioned to take advantage of all opportunities.
Selecting a Theoretical Approach
According to the diligence-based approach, the process of managing and formulating a strategy is determined by how managers drive business success resultant of advantages gained from available capabilities and technology. Speaking of this strategy, Powell (2017), explains that current leaders have shifted attention from traditionally big strategies to more fundamental activities that guarantee success such as managing culture, customer service, and supply chain management. This diligence-based approach indicates that managers’ decisions are more reliant on data, behavioral perseverance, and measurement tactics.
Type of decision-making approach is also determined by leader personality. Based on personality theory, an individual’s behavior affects the way they perceive their environment, with a variety of personal factors affecting decision-making, values, intuition, and emotional intelligence (Remenova & Jankelova, 2019). These factors make up the characteristics of the decision-maker, which guides their way of thinking about problems as well as the approach needed to solve issues within the organization. Personality traits also influence individual rationality, which then affects how leaders engage in decision-making. As explained by Scott and Thomas (2017), the decision for a leader to allocate funding, time, and company resources to the collaborative process is determined by their purpose and personal interests.
Another personality aspect, perception of leaders, is also influenced by existing regulations and incentives. Since personality traits guide decision-making, leaders apply intuitive logic to manage their intuition and assumptions and form shared and new interpretive frames which are necessary to improve decision making. According to Wayland (2019), the intuitive logical scenario approach is useful for leaders to widen their strategic perspectives and gain insight on the state of uncertainty. For leaders, understanding influence in the approach is important in predicting how decision making eventually affects the whole organization.
Information and Decision Timeliness
The balance between timeliness of the decision and the amount of information required to guarantee the success of the diligence-based strategy is crucial. According to Yee et al. (2017), incorporating knowledge into the daily decision-making processes of a company is critical since the degree of knowledge integration implemented influences the success of projects. To balance knowledge and timeliness of decision-making, the authors suggest use of a performative decision-making model. The model includes three levels, mainly actors, tools, and effects. Actors work collaboratively to determine the allocation of resources; tools represent new organizational processes, whereas the effect is the company’s strategic environment, which produces new innovations and knowledge within the firm (Yee et al., 2017). Leaders can achieve balance by ensuring knowledge is continuously transferred between actors to understand routines that are necessary for encouraging the development of new knowledge.
Furthermore, leaders can achieve balance through knowledge management. This process involves using methodical steps to obtain, design, manage, and distribute knowledge in the company for better performance (Abubakar et al., 2019). Through this approach, leaders identify, capture, share, and store useful information that will then be applied in the future, ensuring that the company has sufficient information needed to make decisions.
Role of the Leader
Leaders play a crucial role in implementing the diligence-based approach, with most human resource capabilities being presented by managers. Managers can ensure the successful implementation of the diligence-based strategy by helping the organization to effectively utilize its resources and take full advantage of capabilities, especially in terms of knowledge management. According to Cao, Duan, and Cadden (2019), managers are effective interpreters of mechanisms that maximizing the strategic value of information processing. This is exemplified by the different styles that leaders can use to influence organizational culture and foster an environment that encourages proper knowledge management to ensure the diligence-based strategy is effective. Leaders can also support the diligence-based strategy by initiating management styles that support the approach. Azeska, Starc, and Kevereski (2017) assert that leaders can employ two types of management styles, management by objective and relationship-oriented. With the former mainly focusing on achieving goals while the latter is focused on building relationships with juniors. The choice of management style is dependent on the personality of the leader, meaning that leaders who integrate personality traits into their management styles are capable of guaranteeing success. Therefore, the success of the diligence-based approach is dependent on the leader’s ability to incorporate their personality traits into their management style, which affects the overall organizational behavior and culture.
Importance of Risk Taking by Leadership
Leaders are mandated with the responsibility of making strategic decisions to enable their organization to move in the right direction. According to Giones et al. (2019), making strategic decisions in the modern world marred with a rapidly changing and highly competitive business environment is not an easy task. It requires careful consideration of all factors to make the right decisions that will benefit the organization (Giones et al., 2019). Nevertheless, for a business to prosper in the current highly competitive and dynamic environment, leaders need to take risks while making strategic decisions. Success in leadership entails finding different solutions to the existing and emerging issues or problems that are preventing an organization from realizing its full potential (Goines et al., 2019). Fear of falling can have drastic consequences on the organizational performance. Preferences of customers and even employees are changing rapidly, and it is crucial for leaders to take risks while making strategic decisions to offset the imbalance created by the changing environment. Some decisions may involve an investment of huge amounts of capital in innovation to create new products or improve the existing ones in a bid to keep up with the changes occurring in the market. However, as Hock-Doepgen et al. (2020) indicate, well-calculated risk-taking is crucial because making some strategic decisions is accompanied by uncertainties. If not well calculated, risk-taking can jeopardize the existence of an organization. Thus, as suggested by Ertac and Gurdal (2019), leaders should engage their followers in their risk-taking decisions and instill a positive mindset into their teams to succeed. Leaders must understand that risk-taking while making important decisions, is a crucial part of achieving results.
Risk Mitigation Strategies
Giones et al. (2019) suggest that one of the most efficient strategies of reducing the likelihood of adverse effects of decisions is the application of the VUCA framework. VUCA is a business environment characterized by volatility, uncertainty, complexity, and ambiguity. According to Giones et al. (2019), the model can help leaders to combat unconscious bias associated with the prospect of succeeding. Biases can impact how leaders frame or reframe a problem as well as phrase a decision. The attention of a leader can also be biased as a result of their memory of what has worked in the past, particularly in times of stress and risk-taking. VUCA will help leaders to identify elements prone to abrupt changes, determine the more important options in complex environments, break down the perception of uncertainty, and prepare their organizations to deal with unexpected results (Giones et al., 2019). Dealing with these elements prior to decision making will help leaders to make well-calculated risks with reduced chances of adverse effects.
Hock-Doepgen et al. (2020) suggest that knowledge management is a crucial strategy in reducing the adverse effects associated with high-risk decisions. In their study, Hock-Doepgen et al. (2020) found that effective management of external knowledge by companies promotes their business model innovation (BMI). With adequate external knowledge concerning the demands and expectations of the market, leaders will be in a position to make risky decisions that will not have an adverse impact on the organization’s operations (Hock-Doepgen et al., 2020). A positive relationship between adequate external knowledge management capabilities and high tolerance to risk-taking behavior suggests that firms with sufficient information concerning the market dynamics are more willing to make risky decisions than those with inadequate external information. Thus, if leaders apply a knowledge management strategy effectively, their strategic decisions are less likely to result in adverse effects on the organization’s operations (Hock-Doepgen et al., 2020). Instead, it will help them to promote innovation through models such as BMI and reduce the chances of their businesses being replaced by newcomers with products and services that meet the expectation of consumers.
Organizational Structures Most Conducive To Risk-Taking
The organizational structure of a firm can determine its risk-taking tendency and chances of success when risky decisions are made. One of the most successful organizational structures in fostering risk-taking behavior in an organization is shared leadership. Nordbäck and Espinosa (2019) state that if shared leadership is well-coordinated, it can improve the effectiveness of a team, including the decision-making process involving risky situations. Leaders practicing shared leadership distribute their leadership roles to help challenge and stretch individual and collective capacity (Nordbäck & Espinosa, 2019). They communicate purpose with a great sense of transparency, honesty, tenacity, and grit in a manner that resonates among followers, a phenomenon that conveys trust and integrity. Jung et al. (2020) indicate that empowering leadership is relationship-centric, and individuals practicing it must have the ability to manage creative tensions, competing ideas, and changing roles. Thus, they should not only engage in delegating duties but should be perceptive and engage in continuous analytical thinking (Jung et al., 2020). The empowering leadership approach is important in improving risk-taking behavior among leaders while making a strategic decision because it entails leaders communicating their intention to their followers, who in turn give their views about the intended decision. By carefully analyzing all views provided by employees and other stakeholders, leaders can make risky decisions with confidence as opposed to those who make such decisions by themselves. Jung et al. (2020) assert that risk-taking behavior among employees will also increase if an organization is governed through empowering leadership. Leaders with a high tendency to make risky decisions are more likely to impart this behavior to their employees. Thus, Jung et al. (2020) conclude that empowering leadership improves employees’ commitment to organizational change via risk-taking behavior. Nonetheless, Nordbäck and Espinosa (2019) suggest that if poorly executed, shared leadership can have a detrimental impact on the team. Leaders in this arrangement should manage their teams and analyze every view about decision-making with great precision. Some views can reduce a leader’s confidence in making risky decisions. Shared leadership or empowering leadership is effective in improving risk-taking behavior in an organization than hierarchical, in that the latter restricts decision-making to leadership, and followers have little or no influence on the decision-making process. In such a scenario, leaders may lack confidence when making decisions that may later have an adverse impact on the organization due to inadequate consultation. In addition, if they make a sole decision and it fails to produce the expected results, they may become less confident in the future, especially in instances requiring high-risk decisions. Moreover, followers in hierarchical leadership are not given a chance to forward their ideas, some of which can boost leadership confidence in making risky decisions.
Risk-Taking difference between Co-located and Cross-Cultural Teams
Risk-taking when making decisions in a collocated organization is different from the one in a cross-cultural virtual organization (Nordbäck & Espinosa, 2019). A cross-cultural virtual organization consists of individuals from different geographical locations and backgrounds working towards achieving a common goal, collaborating through technological connections. Such individuals could be from different cultural, language, and religious backgrounds. Consequently, they are marred with cultural and communication barriers. Making risky decisions in such a scenario compared to co-located teams would require comprehensive discussion, questing and reevaluation, and adequate valuable information (Hallo et al., 2020). With communication barriers among the team members, rushing to make a risky decision could have adverse effects on the outcome of the intended results. Leaders in this case should perform a thorough investigation to ensure that all members are comfortable with the decision and all necessary tools to implement the intended decision are available (Nordbäck & Espinosa, 2019). For a co-located team, since leaders spend too much time with their members, they are conversant with their needs, strengths, and weaknesses, and making a risky decision will not take much time like in cross-cultural virtual team.
Team cohesion is an important attribute in any decision-making process. Team cohesion in co-located teams is stronger than in cross-cultural virtual teams where members come from different backgrounds (Nordbäck & Espinosa, 2019). Hence, leaders in co-located teams do not need to improve cohesion among team members before taking a risky decision. Team cohesion is important regarding taking risks during decision-making. Leaders in less cohesive teams are less likely to take a risky decision compared to those in more cohesive teams. Leaders, in cross-cultural virtual teams, would therefore be required to strengthen cohesion among members through electronic media before taking risky decisions to reduce chances of failure (Nordbäck & Espinosa, 2019).
Conclusion
Organizational environment plays an important role in determining the approach to decision making by leaders. Specifically, an environment where leaders can quickly react to extreme pressures has a different approach to decision making compared to environments whose managers lack such capabilities (Yee et al., 2017). The communication structure also affects the approach to decision making with a highly effective structure guaranteeing equal sharing and comprehension of information, therefore ensuring that decision-making is uniform (Urbig et al., 2020). Considering the high dependency on innovation and technology for competitiveness, the diligence-based approach is effective in utilizing technology in decision making. Knowledge management can also be implemented to capture and store useful information for use during decision-making. Additionally, the performative decision-making model can complement the effort and ensure the balance between knowledge and timeliness is achieved. Ultimately, the success of the approach is dependent on the role of the leader determined by an ability to implement a relationship-oriented or management by objective style to influence organizational behavior and guarantee success of the approach. It is also apparent that leaders should take risk in making strategic decisions. Various strategies such as VUCA and knowledge management can help leaders reduce adverse effects that may result from the process of strategic decision-making. Organization structures may also impact risk taking ability of leaders while making strategic decisions.
References
Abubakar, A. M., Elrehail, H., Alatailat, M. A., & Elçi, A. (2019). Knowledge management decision-making style and organizational performance. Journal of Innovation & Knowledge, 4(2), 104–114. doi:10.1016/j.jik.2017.07.003
Azeska, A., Starc, J., & Kevereski, L. (2017). Styles of decision making and management and dimensions of personality of school principals. International Journal of Cognitive Research in Science, Engineering and Education, 5(2), 47–56. doi:10.5937/ijcrsee1702047a
Cao, G., Duan, Y., & Cadden, T. (2019). The link between information processing capability and competitive advantage mediated through decision-making effectiveness. International Journal of Information Management, 44, 121–131. doi:10.1016/j.ijinfomgt.2018.10.003
Ertac, S., & Gurdal, M. Y. (2019). Preference communication and leadership in group decision-making. Journal of Behavioral and Experimental Economics, 80, 130-140.
Giones, F., Brem, A., & Berger, A. (2019). Strategic decisions in turbulent times: Lessons from the energy industry. Business Horizons, 62(2), 215-225.
Hallo, L., Nguyen, T., Gorod, A., & Tran, P. (2020). Effectiveness of Leadership Decision-Making in Complex Systems. Systems, 8(1), 5.
Hock-Doepgen, M., Clauss, T., Kraus, S., & Cheng, C. F. (2020). Knowledge management capabilities and organizational risk-taking for business model innovation in SMEs. Journal of Business Research.
Jung, K. B., Kang, S. W., & Choi, S. B. (2020). Empowering Leadership, Risk-Taking Behavior, and Employees’ Commitment to Organizational Change: The Mediated Moderating Role of Task Complexity. Sustainability, 12(6), 2340.
Netz, J., Svensson, M., & Brundin, E. (2019). Business disruptions and affective reactions: strategy-as-practice perspective on fast strategic decision making. Long Range Planning, 101910. doi:10.1016/j.lrp.2019.101910
Nordbäck, E. S., & Espinosa, J. A. (2019). Effective coordination of shared leadership in global virtual teams. Journal of Management Information Systems, 36(1), 321-350.
Pitelis, C. N., & Wagner, J. D. (2019). Strategic shared leadership and organizational dynamic capabilities. The Leadership Quarterly, 30(2), 233–242. doi:10.1016/j.leaqua.2018.08.002
Powell, T. C. (2017). Strategy as diligence: Putting behavioral strategy into practice. California Management Review, 59(3), 162–190. doi:10.1177/0008125617707975
Remenova, K., & Jankelova, N. (2019). How successfully can decision-making style predict the orientation toward well- or ill-structured decision-making problems. Journal of Competitiveness, 11(1), 99–115. doi:10.7441/joc.2019.01.07
Scott, T. A., & Thomas, C. W. (2017). Unpacking the collaborative toolbox: Why and when do public managers choose collaborative governance strategies? Policy Studies Journal, 45(1), 191–214. doi:10.1111/psj.12162
Urbig, D., Muehlfeld, K., D. Procher, V., & van Witteloostuijn, A. (2020). Strategic decision making in a global context: The comprehension effect of foreign language use on cooperation. Management International Review, 1-35. doi:10.1007/s11575-020-00412-z
Wayland, R. (2019). Three senses of paradigm in scenario methodology: A preliminary framework and systematic approach for using intuitive logics scenarios to change mental models and improve strategic decision-making in situations of discontinuity. Technological Forecasting and Social Change, 146, 504-516. doi:10.1016/j.techfore.2017.09.005
Yee, Y., Tan, C., & Ramayah, T. (2017). Connect the silos: Knowledge management, absorptive capacity, leadership styles, organisational cultures. Proceedings of the International Conference on Intellectual Capital, Knowledge Management & Organizational Learning, 310–315.
