Running a business means joining several number of trade-offs in order to clarify in principle the short and long term objectives and also the patterns used to achieve them. Moreover it means defining the inner workings in order to create the conditions so the individuals making up the organization can work in an environment as cohesive as possible that allows them to work in the best conditions. Another task of the manager is to make sustainable over time the medium and long-term objectives defined by corporate strategy; it’s also necessary to determine a suitable system of measurement for that.
The CEO, with his executive team, exerts his choices:
- in terms of human resources, in order to determine a set of work units able to create value for the company and for the customer;
- in terms of financial resources, in order to build an appropriate system of budget and control of financial flows;
- in terms of physical resources, thus defining the set of goods and material instrumentals of the company;
- in terms of productivity, developing mechanisms and systemic structures with which the company implements its processes;
- in terms of marketing, trying to identify through research the needs of customers and then defining an adequate offer;
- in terms of innovation, related to product and process and understood as the engine of sustainable competitive advantage;
- in terms of corporate social responsibility, defining the strategy of profit maximization within the boundaries imposed by law and by the rules of the market and holding in mind the multidimensional concept of sustainable economy linked to ethical and ecological value and to equal consideration about the stakeholders of the company;
- in terms of profit, which is the true limit, because a enterprise without income doesn’t have the resources to develop the themes so far mentioned.
This set of objectives and strategic intentions make the “deliberate strategy of the CEO”, which can be defined as the ultimate evolution of the decision-making process of top management.
The phases of the decision-making process can be divided in different critical steps, the first requirement is to define the scenario, because if on the one hand the problem solving assumes the knowledge of the problem, on the other hand the solution may not seldom cover a range of alternatives, each one with a different risk profile not able to fully solve the extent of the problem. It’s therefore necessary to define a perimeter of possible solutions such as to guarantee the best scenario in terms of the efficiency and effectiveness.
The second step of the decision-making process is the definition of the critical elements through facts and knowledge that must be as wide as possible. “Homo economicus”, as such has imperfect knowledge and the decision has risks that are inversely proportional to the level of knowledge. So, to know the level of knowledge of the facts, it means to determine concretely what are the alternatives and their significance, the advantages and disadvantages, potential returns, risks, costs, efforts, impact and timing. Only after a careful examination of the facts, might you be to choose rationally. After making the choice, you get to the third and last step of the decision-making process which requires that a choice has to be followed by an action, the manager can’t be interested in the mere knowledge of the solution if the next step isn’t one or more concrete action.
The company is the specific object of the manager, his specific interest and his specific responsibilities that must be adapted to the needs of decision-making.The CEO makes its decisions on three different macro-levels within the company, they pass through the enterprise without contain it in its entirety. The first is the physical level, the company exists at the physical level as an organized aggregate of materials goods such as plants, machines, tools, materials, etc. The second level is the economic one, the company is also a set of economic values (goods) for economic purposes (production, profit). The third level is related to human resources, the enterprise is a collection of individuals making up the organizational structure for pursuing common and individual goals.
Each of these three levels in turn contains three internal levels:
(1) companies must meet both internal and external environmental requirements in which they operate;
(2) the actions and decisions in the enterprise must work to make a contribution to overall profitability;
(3) the enterprise lives simultaneously in at least two temporal dimensions: the short period and the long period. The manager has to know how to balance the needs of the two time dimensions.
In this scenario of different levels that cross the enterprise, the ultimate decision-making processes of the CEO it’s to achieve a competitive advantage over the competition and make it as sustainable over time.
The competitive advantage must be built on the basis of internal expertise. The management of a company has to be able to develop their own capacities in its strategy, developing within the main functional areas distinctive skills difficult to imitate for competitors and reporting these types of skills with the products/services offered. In this context, organizational capacity, meaning the ability of the company to be able to standardize its production process of transforming inputs into outputs enhancing economies of specialization according to efficient criteria. This all plays an important role in achieving a sustainable competitive advantage over time.
Developing these skills means to better integrate the knowledge and skills of the individuals in order to obtain the correct combination of tangible and intangible resources and correlate it with market needs through adequate marketing processes, because only when consumers recognize a high value sign inside proposed offer, then efficiency is not an end in itself but is translated into effective completing a virtuous path that led to achieving a real and sustainable competitive advantage over time.
In conclusion, I think we can say that if the decision-making process can be considered the cornerstone for the construction of a good strategy, the latter to ensure a sustainable competitive advantage over time, it must be able to combine with good management of dynamic strategic and operations meant as a tool to cover the gap between the requirements of corporate level strategy and the current situation. All this is done by building a competent and cohesive top-management team, capable of communicating the strategy, designing a coherent organizational structure, defining a process of adequate market positioning and finally being able to state the theme of efficiency and effectiveness as fundamental values of any company earnings.