Importance of Ethics, Culture and Social Behaviour in Strategic Decision-Making - Coursework Example

Strategic Decision-Making Name Institution Name Date Introduction A strategy in simple terms is a long-term plan. Strategic decisions in an organization are therefore those that determine the long-term direction that an organization intends to take. These decisions affect key areas in the organization that determine the success of failure of the organization. Due to their profound impact on the organization, they are made by the most qualified personnel in consultation with other members of staff. The strategic decision making process is a long one. It involves analysis of the organizations resources for example labour, machines and funds. The analysis is meant to establish how to best use the resources to achieve the organizations long-term goals as stated in the mission and vision. The process is complex and requires a unique set of skills. It also requires a clear understanding of the organizations activities and it desired progress. Strategic decision making is the single most important process in an organization since it determines the direction the company takes, it affects how the short term decisions are made and hence the day to day running of the organization. The purpose of this essay is to critically analyze and justify the importance of ethics, culture and social behaviour in strategic decision making. Ethics These are generally acceptable standards of behaviour or morals in a specific environment or society. It relates to values, it determines the wrongness of rightness of actions (Munier, 2011). Ethics is a very broad area of study. Different organizations have different codes of conduct for their employees (Harrington, 2009). What may be unethical in one organization may not be considered unethical in another. They are several standard ethical practices, which are common in all organizations. Ethics has been a key part of organization activities since the days or the early philosophers. It has always affected how all decisions in the organization are made, strategic decisions not being an exception. Ethics influence the organization in several ways (Davis & Davis, 2010). It affects the quality of goods that the organization produces by affecting the acceptable raw materials, the type of staff to be hired and the acceptable quality standards. Ethical practice would for examples not tolerate the hiring of an unqualified person to the organization this have a direct impact on the organizations performance and quality standards (Harrington, 2009). An ethical procurement process would ensure the raw material is purchased at the best possible price enabling the company to save it would also ensure the right quality is obtained. Ethics ensures efficiency by emphasizing on time management, making sure employees are hired on merit and setting rules on absenteeism and late coming (Davis & Davis, 2010). Ethics make employees behave responsibly because of fear of the consequences of unethical behaviour, this saves the organization money that may be spent as a result from unethical behaviour for example expenses of legal suits due to negligence and fraud. Ethics help to establish an organization culture which boosts employee morale and productivity since they know exactly what is required of them (Munier, 2011). Ethics foster relations in the organization between the employees as none feels exploited or overworked while another benefits from it, everyone’s hard work is rewarded (Tschappeler & Krogerus, 2011). Ethics guide the employees in their day-to-day activities limiting the time wasted in decision-making, as acceptable practices are known and in some cases documented in the code of conduct (Harrington, 2009). The ethical code of conduct stipulates disciplinary measures to be taken and hence limits time that would be wasted in forming disciplinary committees and money that would be wasted in the fighting of legal actions by vindictive employees (Munier, 2011). Ethics ensures that all employees are happy and none finds offence in the others activities since most codes of ethics are inclusive of all employees taking into consideration their cultures, values, beliefs and religious affiliations (Davis & Davis, 2010). Ethical practices directly affect the profitability of the organization as it determines the way its customers perceive it and its products. A company with good ethical practices would be viewed by its customers as desirable and would therefore attract a wider customer base. People are more willing to identify with a company that appears to have cultivated a culture that is in line with their values, beliefs and acceptable standards or behaviour (Munier, 2011). Ethics also determines the organizations relations with other stakeholders such as creditors. Ethical companies tend to have good relationships with their creditors increasing their credit worthiness, such companies are viewed as reliable and they always keep their word. Ethics cannot be separated from strategic decision making as ethics sets the standards while strategic decision-making determines how to achieve them. Strategic decisions also determine the achievability of standards hence have an effect on ethics (Davis & Davis, 2010). Ethics and strategic decisions are both meant to affect the organization in the long term. Both aim to make the company successful in the long term. Strategic decisions find answers to questions like how can we be the best? How can we achieve our vision? Ethics determine if the answers to these questions are right or wrong (Harrington, 2009). That is whether the chosen strategies are acceptable or not basing of the organizations moral standards. Strategic decisions are about winning and staying ahead, ethics ensure that the organization wins and stays ahead in right way (Munier, 2011). Good ethics results in good business resulting in proper returns; this is the whole aim of strategic decision-making. Ethical management is one of the key tools in corporate management; it can therefore not be ignored in making successful strategic decisions. In order to incorporate ethics in the making of strategic decisions we need to ask ourselves key questions such as what are our corporate values? What do we stand for as an organization? What is our main purpose for operation? To really make ethics part of strategic decisions does not engage in unethical practice in the first place for example the business should not be illegal (Davis & Davis, 2010). Obey the business laws as may be required in the area of operation. Clearly articulate ethical values in all your strategies and how they affect the overall plan. The values mentioned must be true and reflected in actual employee behaviour. Do not rely on external parties such as auditors to enforce ethical practices, do it internally so as to ensure success of the strategic decisions. Ethics is meant to ensure accountability this should be emphasized as it is key in making strategic plans successful. Emphasize more on key fixed principles rather than numerous ever changing rules (Harrington, 2009). A framework should be created to resolve all ethical issues that may occur in the day to day activities that contribute towards success of the overall strategy. Ethics can only be effectively monitored by a proper organization structure hence this is mandatory in the achievement of the strategic plan. Rewards should be based on performance (Davis & Davis, 2010). Ethics should be part of the strategy, as the strategy should also consider ethics. Employees should be shown the importance of ethics in the achievement of the strategic decisions and in the process of making them (Munier, 2011). There should be an evaluation of ethical performance periodically in order to facilitate achievement of strategic goals decided on. The evaluation should focus on transparency and accountability. Every employee’s contribution towards the strategic goal should be determined. Plans should be made based on the evaluation to better interlink strategic decisions and ethical issues. Culture The term refers to shared patterns of beliefs, values, attitudes and customs that distinguish a group of people from another. An individual’s culture affects his work and decisions as it influences his or her perception of what is right or wrong. This implies that the people making decisions in the organization will be influenced by their individual cultures (Davis & Davis, 2010). They also need to consider the culture of the surrounding community or their target customers and all other stakeholders in all their decisions, strategic decision being no exception (Harrington, 2009). Various aspects of culture affect strategic decision making process. The aspects include cultural identity, cultural awareness, language, values, religion, customs and traditions. Culture has several impacts on an organization and its operations. The organization culture, which refers to the general pattern of behaviour in the organization, sets the general mood of the organization and determines what is acceptable or not. This will in turn affect the organization performance (Davis & Davis, 2010). Cultural backgrounds of colleagues affect their interaction with each other. Factors such as religion and beliefs may result in conflicts at the workplace. All employees should be encouraged to appreciate other people’s culture to avoid problems (Munier, 2011). Customer’s culture affects what the company produces and how it markets it. It would not be wise to sell pork products in a country that is predominantly Muslim or sell hijabs in a country without Muslims (Harrington, 2009). The customer’s culture thus influences the decision making process. Managers should understand the culture of other firms that they are competing against or ones they may be interested in making deals with for example suppliers, mergers and acquisitions. They should be able to ensure harmonious coordination between employees of different cultures to ensure maximum output. Culture would affect how the organization chooses areas of corporate social responsibility. Culture affects how strategic decisions in organizations are made. When making long term plans cultural implications have to be considered lest the plans fail to be achieved. Market research is done bearing in mind the culture of consumers; this information is used in strategic decision making (Davis & Davis, 2010). Strategic decisions often include ways of motivating employees in order to achieve the organizations long term objectives. Motivating employees requires a clear understanding of their individual cultural backgrounds. Aspects of culture such as religion affect strategic decisions since when strategies are formulated the religious beliefs and practices of both employees and customers have to be considered (Harrington, 2009). Events such as the holy month for the Muslims cannot be ignored if you have Muslim staff in the organization or if the organization is serving Muslim customers. Culture widely operates outside one’s awareness and thus it is essential in developing a common ground for employees within a given organization (Munier, 2011). As already noted in the above discussion, culture has massive effect on the well being of an organization as well as its overall success as it is made up of employees shared beliefs, symbols, ethics, together with cultural guides which are held at an unconscious level (Davis & Davis, 2010). The main characteristics of organizational culture is its ability to provide a sense of unity which on the manifests the organization’s working climate at an observable level; this is so because behaviours and strategies are managed by organizational goals. It has been established that there are four fundamental types of organizational culture are create, collaborate, control and compete (Harrington, 2009). Each of these cultures has contrasting behavioural sets and work patterns that must be recognized for productivity progress to be realized. Similarly, an organizational workplace can support more than one culture effectively because of the distinct nature of cultures. Organizational culture is regarded as a controlling variable particularly in the strategic decision making process as well as in the implementation of the strategic decision (Harrington, 2009). For instance, a firm needs a strong organizational culture that will help in clarifying organizational goals and practices to enhance its performance and overall productivity (Munier, 2011). For an organization to make and implement strategic decisions, flexibility and tolerance of organizational culture is essential. On the other hand a competing organizational culture is a threat to the firm’s overall well being as it has a high potential of affecting decision makers as well as limit the alternatives and/or involuntarily. A strategic decision is formulated with a singular objective of shaping the performance of the organization’s core business activities. For this reason, strategic decisions makers must ensure that the organization they work for are in position to manage the turbulence of the corporate world. Implementation is considered the last stage of strategic decision making process, which is preceded, by intelligence, design, and choice. During the strategic decision implementation, decision makers are obligated to use a well designed reporting system that has the capacity of delivering routine reports as the solution progresses (Davis & Davis, 2010). Collaborative organizational culture is key ensuring that this is achieved and will also ensure that problems experienced during strategic decision implementation are not encountered such as competing activities and cultural crises divert the attention, extended times, ineffective coordination of activities, and inadequately monitored activities (Harrington, 2009). Corporate culture and strategic decision implementation are extremely essential for the success of the strategic decision (Nutt & Wilson, 2010). Underestimation of strategic decision implementation due poor organizational culture will significantly affect the organization’s success, which might in turn culminate into disappointments. The organizational cultural mesh defines what an organization is and what on organization has. It comprises of different elements that must be managed must be managed directly to ensure successful decision making such as communication, control system changes, incentives, and organizational structure (Davis & Davis, 2010). It is also important for the organization to detect potential threats and opportunities to the decision making process. Openness together with critical evaluation cultures provides an ideal environment for decision making. In general, organizational culture plays a critical role in strategic decision making process depending on the model used to predict and think of decision making behavioural patterns in a given organizational culture (Harrington, 2009). Social behaviour This refers to the interaction between members of the same species. It is a communication process. Examples of social behaviour include shyness, aggression, altruism and scapegoating. The way in which employees relate to each other is key to the success of the organization. People should respect and value each other’s opinions even if they do not necessarily agree with them (Davis & Davis, 2010). Communication is crucial employees should be encouraged to give their own views on issues concerning them and to share their ideas. There should be a proper organization structure with clear job descriptions for all employees to facilitate building of the relevant communication channels (Harrington, 2009). Team building activities should be organized to enable employees interacts and knows more about one another. In order for the organization to operate efficiently there must be proper coordination between different jobs, tasks, groups or departments (Munier, 2011). The only way to achieve this is through communication and proper interaction among the concerned employees. Social behaviour also affects how people interact with their customers (Davis & Davis, 2010). It is important to know your customers language and their needs based on their social behaviour. For example an area where the settlers are mostly seventh day Adventist church faithful you would not expect much trade to be done on a Sabbath. Social behaviour is key in making strategic decisions since in order to make these decisions a consensus has to be reached. People must have proper socialization in order to discuss issues in a sober manner and agree (Harrington, 2009). The ability to communicate effectively by listening and also giving your view on the matter is important in reaching an agreement. Behaviours such as aggression may be interpreted as rude and hence people may not agree with your argument. Shyness my also result in loss of very good ideas (Davis & Davis, 2010). In the making of strategic decisions, the social behaviour of all stakeholders is considered. The employee social behaviour is considered in order to determine how to best use their trends to achieve results (Munier, 2011). The customers social behaviour is considered so as to determine the opportune time to launch a product, sell the product and how to best communicate with them through advertisements and feedback. The social behaviour of investors is important to ensure that they do not pull out their investment due to the strategic decisions. Policy makers or company decision makers largely rely on behavioural principles to boost or increase participation or inclusiveness particularly in retirement – savings plans. Behavioural economics is currently the field that money managers use extensively to get insights about rationality limits with regard to understanding investor behaviour as well as in exploiting stock – pricing anomalies (Harrington, 2009). Similarly, marketing managers have an inherent understanding w as to why some promotions significantly entice customers while others don’t. It has been discovered that only few corporate strategy decision makers make an effort of consciously taking into consideration the cognitive biases; the systematic tendencies to move away from or deviate from the rational calculations that are particularly revealed by behavioural economics (Davis & Davis, 2010). For instance, in strategic decision making mangers need to recognize their own cognitive biases. Behavioural economics is an awareness that strategic decision makers must fully understand to make decisions that will be acceptable by the larger organization rather than fulfilling the interest of a few (Munier, 2011). Cognitive biases among strategic decision makers largely affect the quality of strategic decision made by even the smartest managers in best and exceptional companies (Harrington, 2009). Cognitive biases are as a result of social behaviour; in order to significantly reduce cognitive biases managers need to de-bias meetings, allowing the participation of all, gathering data, discussing analogies, and stimulating debate. This norm can be supported by using a simple language for recognizing and discussing biases, a language that exhibits the reality of corporate life as opposed to the academic language. Holistically, this represents an important commitment and more significantly organization’s cultural change. Competent corporate strategists always take into account cognitive biases when making strategic decisions (Davis & Davis, 2010). However, it is also important to note that the prevalence of social biases in corporate decision is to a significant percentage due to a function of habit, training, executive selection as well as corporate culture (Munier, 2011). More fundamentally, cognitive biases are pervasive due to ones social behaviour especially that that is hardwired and extremely resistant to feedback. To improve strategic decision making therefore, not only demand for limiting one’s own and other’s biases but also formulating a decision making process that highly confront biases as well as limiting their impacts (Sinofsky & Lansiti, 2009). Building the above mentioned strategic decision making procedure requires an inherent and comprehensive understanding of the biases that should be addressed by the process. There are various subsets of biases, which strategic decision making personnel need to be equipped with; these biases include: Counter pattern – recognition biases by changing the angle of vision: this is the ability identify patterns which helps to separate humans, however, it may come with misinterpretation of conceptual relationships (Davis & Davis, 2010). Biases under this category include saliency biases (leading strategic decision makers to overweigh recent or highly memorable events) and the confirmation biases (the habit or tendency, which once a hypothesis has been made to ignore the evidence disapproving it). Counter action – oriented biases by recognizing uncertainty: some corporate strategists always feel the need to take action; contrastingly, the actions taken may be as a result of optimism about the future and specifically their own ability to influence it (Harrington, 2009). Counter stability biases by shaking things up: this bias makes strategic decision makers less prone to depart from the status quo than they should be. This bias category includes anchoring biases and aversion biases (Munier, 2011). Counter interest biases by making them explicit: this occurs due to misalignment of incentives. “Silo thinking” this is where organizational units are associated with defending their own interests. Counter social biases by depersonalizing debate: also referred to as corporate politics that are deeply rooted in human tendencies. This kind of bias is also exhibited even when nothing is at stake; some strategic decision makers tend to conform to the dominant views of the group they belong to or departments they are leading (Davis & Davis, 2010). From this discussion, it is clear and evident that social behaviour is a key determinant in strategic decision making (Harrington, 2009). It is human nature to be biased, however, strategic decision makers are supposed to make decision that are free from shackles of bias for their decisions to help organization to move forward as a whole (Davis & Davis, 2010). Making strategic decisions that are all inclusive will automatically propagate the organization to a good new strategic level that will enhance its performance as well as its overall productivity (Munier, 2011). Conclusion A strategic decision is a long term plan formulated by a company or an organization and is aimed at directing the latter into the future. Strategic decisions in an organization are therefore those that determine the long term direction that an organization intends to take. These decisions affect key areas in the organization that determine the successes or failures of the organization. These decisions are influenced or affected by different factors including ethics, corporate culture, and social behaviour. This paper has extensively discussed the importance of ethics, culture and social behaviour in decision making. Ethics are generally regarded as the acceptable standards of behaviour or morals in a specific environment or society. It comprises of values, it determines the wrongness of rightness of actions. The ethical codes of a given company dictate the type of strategic decision made by this company. Culture refers to shared patterns of beliefs, values, attitudes and customs that distinguish a group of people from another. From the discussion above, it is true that the corporate culture of a given organization largely influences how the strategic decisions of that organization are made. Like ethics and culture, social behaviour also plays a crucial role in strategic decision making as seen from the discussion above. References Davis, C., & Davis, E. (2010). Managerial accounting for strategic decision making, preliminary edition. New York: John Wiley & Sons Harrington, J. (2009). 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