Strategic Leadership and Decision Making

PART ONE

The Environment of Strategic Leadership

and Decision Making

1

OVERVIEW

What good is experience if you do not reflect?

Frederick the Great

STRATEGIC LEADERSHIP DECISION MAKING (SLDM)

COURSE OBJECTIVES

GIVEN THE STRATEGIC, GLOBAL ENVIRONMENT, INCLUDING A U. S. FOCUS ON THE JOINT, INTERAGENCY, AND COALITION NATURE OF NATIONAL SECURITY, THE SLDM COURSE WILL DEVELOP STUDENTS' CAPABILITIES TO:

1. ANALYZE AND EVALUATE THE CREATIVE DEVELOPMENT AND PERFORMANCE REQUIREMENTS FOR STRATEGIC LEADERS. EVALUATE LEADER DIFFERENCES AND THEIR APPLICATION TO STRATEGIC LEADERSHIP AND DECISION MAKING.

2. ANALYZE AND EVALUATE THE USE OF TACTICS, TECHNIQUES, AND TOOLS BY HIGH PERFORMING TEAMS IN STRATEGIC DECISION MAKING SITUATIONS.

3. ANALYZE AND EVALUATE LEADERSHIP REQUIREMENTS IN LARGE, COMPLEX ORGANIZATIONS. EXAMINE THE MANAGEMENT OF CHANGE, NEGOTIATION, AND THE USE OF POWER IN GOVERNMENT AND INDUSTRIAL SECTORS, IN NATIONAL AND GLOBAL ENVIRONMENTS, AND DURING PEACE TIME AND CRISIS CONDITIONS. 

4. DEVELOP AND APPLY A FRAMEWORK FOR ANALYZING THE FORMULATION OF NATIONAL SECURITY POLICY IN BOTH THE PUBLIC AND PRIVATE SECTORS.

Introduction

All ICAF students have performed decision making functions involving varying degrees of volatility, complexity, uncertainty, and ambiguity. Some of these decisions have used explicit, systematic procedures designed to ensure relevant variables are included, while other decision making procedures have been largely intuitive and perhaps even "off the top of the head." The estimate of the situation and mission area analysis are two widely used procedures for systematic decision making. At the strategic level, something else is needed. As problems get more complex, multiple perspectives and more elaborate frameworks are required to accommodate the multidisciplinary and often inter-related decision inputs.

This chapter provides an introductory overview to the Strategic Leadership and Decision Making (SLDM) Course, discusses the unique nature of strategic decisions, reviews the literature on executive-level leadership, and analyzes how leader performance requirements change as a function of organizational level. What you should come away with is a framework for understanding strategic leadership and decision making. As we move through SLDM, you will "flesh out" the framework in increasing detail.

What is a strategic decision, and how is it different from other types of decisions?

The Character of Strategic Decisions

Strategic decisions are far reaching and consequential for the organization and typically involve the commitment of vast resources. They play out over long time frames and have significant opportunity costs. Strategic decisions should be made within the context of a long-term view or vision, of both the desired end-state and potentially undesired end-states brought about by the contemplated course of action. The desired end-state and potentially undesired end-state can be differentiated by the intended and unintended second- and third-order effects of a strategic decision.

Strategic decisions often must be made under conditions of substantial uncertainty, particularly when complex policy objectives must be reformulated in the face of a dynamic, sometimes volatile strategic environment. Initial assumptions about the environment and other players may be incorrect or incomplete. The complexity of policy decision making within large, bureaucratic systems is evident in national policy debates about taxes, entitlements, and budget deficits. While most wish for a balanced budget, there is-in an era of increasing competition for resources- strident position-taking with regard to how to do it. Drug war and trade agreements such as NAFTA are other examples of complex issues. The range of factors relevant to these decisions is seldom fully known, at least to any one player in the decision process. And the total range of possible effects-direct, second-, and third-order-of a given policy decision may be so complex that even the most exacting search misses something.

VUCA

V

VOLATILITY

U

UNCERTAINTY

C

COMPLEXITY

A

AMBIGUITY

Added to the problems of volatility, uncertainty, and complexity is the difficulty of determining the validity of inputs to the decision process. Many key events are ambiguous, especially when dealing cross-culturally, leading to differences in interpretation and contextual meaning. Such conditions foster ideological biases, special interests, and tensions between organizational subcultures. Thus, a strategic leader must know how to identify sound inputs embedded in a swamp of biased arguments. This task is made more difficult when inputs come from a wide variety of disciplines beyond the scope of any single executive. And, many strategic decisions must be made in crisis situations or under other stressful conditions.

Strategic decisions often emerge from arenas of strong partisan competition for resources. The national political arena is intended to foster debate about the allocation of resources for the national good. Partisan competition for resources reflects the advocacy positions of the major parties as they represent their constituencies, and their positions are represented in an adversarial manner. The hard bargaining often takes the form of positional negotiating, rather than in a process searching for common goals and pathways acceptable to all constituencies.

The decision making process must ensure that all competing views are heard and that priorities among them are sorted out. More importantly, the process must ensure some reasonable level of agreement or consensus about the intended end-state and a commitment to the course of action. Without agreement on goals, there can be little hope of collective effort.

There also is the dilemma of assumptions. Some assumptions taken as incontrovertible may in fact be questionable. In the decision making process, these assumptions are often not questioned, to the chagrin of the decision maker. A good example is the "Domino Theory" that guided many policy decisions in the 1960s and 1970s. It was assumed that containment of communism required a band of non-Communist states encircling the Communist powers be maintained. The insurgent challenge to the Republic of Viet Nam thus was construed as a challenge to global security and to U.S. objectives. McNamara (1995) asserts this assumption was fundamentally flawed because it ignored a thousand years of history in Indo-China and intense Vietnamese nationalism. An unbiased study of that history would have revealed the flawed assumptions.

Direct/Indirect Effects

Some decision effects are indirect, often unforeseen, and therefore unintended. A given policy decision may set into motion a string of cause-and-effect events that play out over a number of years. Some of these second- and third- and even fourth-order effects may be unanticipated, and undesired. Effective strategic decision making requires planned responses to second- and third-order effects; it is more like chess than checkers. There are more options, the game is not linear, and the plethora of potential outcome often is unanticipated.

The contrast between the peace agreements of the two World Wars is illustrative. Following World War I, peace agreements were traditional within the context of a thousand years of European existence. The agreements severely punished the aggressor. By contrast, the strategic vision of Marshall and other Western political leaders after World War II established the necessary conditions for re-emergence of former aggressor nations as respectable members of the world community. The narrow and foreshortened vision of the 1917 decision makers reflected a lack of understanding of the indirect effects of their policies, and of the complex, dynamic system of cause and effect associated with their decisions.

Other effects are hard to gauge and may be badly estimated. This is particularly true when the system involved is complex, incompletely understood, or when the policy impacts across cultural boundaries. The economy is an example of a system that is incompletely understood. In balancing the budget, some argue for cutting capital gains taxes, citing higher total revenues obtained when lower capital gains tax rates have been applied. Others ask the question, "How can that be?" The answer lies in the dynamics of the system and the assumptions one makes about how the capitalist system works.

Assumptions about direct and indirect effects of different monetary policies are also different, reflecting incomplete understanding of the economic system, including its dynamic interrelationships with other systems. (For example, the emphasis on education, on the one hand, and tax reduction, on the other hand, reflect different assumptions not only about direct and indirect effects, but also about the interrelations between economic and non-economic factors important to the nation's global competitiveness.) Finally, the two opposing U.S. political parties reflect two different subcultures. Culture, broadly speaking, is the collection of beliefs, values, assumptions, and expectations held by members enabling them to understand the actions of others. This understanding gives meaning to their work, and tells them how to behave in harmony with others. To the extent major differences between the parties remain unresolved, so will the debates remain unresolved and a unifying vision of shared national goals and objectives will remain obscured.

STRATEGIC DECISION

The decision making process at the national level is similar to that at lower levels, but there are important differences. First, most decisions are shaped and made by small groups involving diverse personalities, ideologies, and organizations. Second, because of the small-group process, negotiation and compromise are the norm. Third, decisions are rarely final; rather, the dynamic environment requires continuous reassessment. Fourth, the large amount of relevant data from diverse disciplines at the national level necessitates the use of sophisticated techniques to integrate quantitative and qualitative factors in a manner not found in lower levels of decision making.

OBSTACLES TO EFFECTIVE

STRATEGIC DECISION MAKING

The decision making process just described has inherent problems. It often is slow and frustrating to executives accustomed to making firm decisions based on professional judgment. Negotiation and compromise can lead to the least common-denominator solution, especially if the decision making process is poorly managed. Groups and organizations tend to develop official "definitions of situations" that discourage diverse views and can fall into a malaise described as "groupthink" (Janis 1983). And, bureaucratic ploys and strategies lead to power struggles, confrontation, and adversarial relationships. These contaminating variables distort the process, and lead to less than rational decisions.

Strategic decision making is the ability to think insightfully about consequential events over time, to understand what causes long-range effects in and on complex and dynamic systems, and to bring partisan, competing interests together under shared goals. Within the context of decision making, "strategic" implies consequential, long-term, complex, system-wide and, at times, poorly understood, ambiguous, and uncertain characteristics. Increasingly, the worldwide environmental context of strategic decision making is also fast-changing and volatile.

Some of the skills effective for decision making at the operational level are, of course, appropriate at strategic policy-making levels. Sound judgement, analytical abilities, and a systematic approach to problem solving are critical skills at all levels. Other skills may, however, not be transferrable, and can even be obstacles to problem solving at more senior levels. Thus, the transition from operational decision making and problem solving at lower levels to performance at the strategic level is essential.

Foundations for Strategic Leadership and Decision Making

This leaves open the nagging question of how best to prepare for effective performance in the arena of national security decision making. The complexity of the strategic process argues against standardized formats. Rather, it is more appropriate to develop an executive skill referred to as perspective-taking. This skill- one not always easily or equally well-provides a base for national security decision making.

The existing literature on executive leadership has been categorized into four bodies of major theories: conceptual complexity, behavioral complexity, strategic management, and visionary/inspirational leadership (Zaccaro 1996). While the four bodies are distinct in many aspects, there are some common views about what it takes for executives to be successful.

Conceptual Complexity Theories. The basic premise of conceptual complexity theories and models is that executives operate within increasingly complex environments, characterized by greater information processing demands, and by the need to solve more ill-defined, novel, and complex organizational problems. To survive and thrive, executives require significant conceptual abilities to make sense of, and successfully navigate within, these complex environments (Zaccaro 1994).

Stratified Systems Theory (SST) posits seven naturally occurring levels in large organizations. Each level has an associated level of complexity. The key personality variable in Stratified Systems Theory is conceptual capacity, defined as the generalized set of abilities that help an individual to cope in task environments characterized by volatility, complexity, ambiguity, and uncertainty (McGee, Jacobs, Kilcullen, & Barber 1996; McGee 1997). As an individual rises through the hierarchy of an organization, higher levels of conceptual capacity convey competitive advantage to that individual and to the individual's organization.

QUINN'S COMPETING VALUES MODEL* 

FLEXIBILITY PREDICTABILITY
INTERNAL  

MENTOR

COORDINATOR

FACILITATOR

MONITOR
EXTERNAL  

INNOVATOR

DIRECTOR

BROKER

PRODUCER

*Adapted from Zaccaro 1996

Behavioral Complexity Theories. Emphasis in behavioral complexity theories and models is on multiple roles and behavioral patterns required of executive leaders (Zaccaro 1996). Major theories include Mintzberg's (1973, 1975) classification of managerial roles, Tsui's (1984) multiple constituency framework, and Quinn's (1988) competing values framework.

Executives deal with multiple constituencies that make differing demands. These constituencies can be internal to the organization (e.g., superiors, peers, subordinates) or external to the organization (e.g., competitors, investors, the media). Executives must display differing behaviors to be effective because these constituencies have differing values. What the media values is very different from what Congress values.

MINTZBERG'S MANAGERIAL ROLES*

INTERPERSONAL ROLES

FIGUREHEAD

LEADER

LIAISON

INFORMATION ROLES

MONITOR

DISSEMINATOR

SPOKESMAN

DECISIONAL ROLES

ENTREPRENEUR

DISTURBANCE HANDLER

RESOURCE ALLOCATOR

NEGOTIATOR

*Adapted from Mintzberg, 1975, reported in Zaccaro, 1996.

Strategic Management Theories. Strategic management theories and models argue that executive effectiveness emerges from an appropriate fit between the organization and its environment. The role of the executive is analysis, creation, and management of this fit. Executives scan and analyze the environment, formulate appropriate coping policies and strategies, implement these policies and strategies, and evaluate consequences given subsequent organizational conditions.

Empirical support for strategic management theories and models focuses on executive characteristics of strategic leadership and decision making, with demographic and personality variables receiving the most empirical support (Zaccaro 1996).

Visionary/Inspirational Leadership Theories. Visionary/inspirational leadership theories and models include theories of charismatic and transformational leadership. The common theme is that leaders develop and use their vision to structure and to motivate collective action. Considerable emphasis is placed on empowerment and development of human resources, especially subordinates. These models of leadership offer a number of characteristics that enhance a leader's ability to lead, including cognitive abilities (e.g., creativity, reasoning skills, intelligence, verbal ability, cognitive complexity), self-confidence, motivation, propensity for risk, and social skills.

Stratified Systems Theory (SST). A key notion in the development of executive-level leaders is the changing nature of performance requirements as a function of organizational level. What we need is a tool for understanding the nature of those differing performance requirements.

Stratified Systems Theory is a body of theory that asserts leadership tasks at the top of large-scale organizations are quite different from those at the lower levels. This is because the nature of work changes as an individual moves up through the hierarchy of an organization.

Levels of Organizational Stratification Proposed by Stratified Systems Theory*

There are three broadly defined strata to most large-scale organizations: the top levels (strategic), the midlevels (organizational), and the bottom levels (production or action-oriented). Relatively inexperienced leaders-ensigns, lieutenants, and captains-at the lower levels are responsible for getting things done, so they are action-oriented. They have little latitude in the decisions they make, procedures they use, and the degree of innovation they can employ. They may improvise but rarely can they innovate because, at their level of leadership, consistency of action is important.

The midlevels are responsible for setting midterm goals and directions and developing the plans, procedures, and processes used by the lower levels. Plans, procedures, and specified processes are major tools for coordinating effort, particularly in large-scale organizations with many independent parts that must act in a coordinated way. The mid-levels are also responsible for prioritizing missions and allocating resources to tailor capability at the lower levels. This includes supervising resource allocation plans that implement concepts developed at higher levels, as in the Department of Defense's Planning, Programming, Budgeting, and Execution Systems.

Top-level leaders-three and four stars-are responsible for the strategic direction of their total organization within the broad context of the strategic environment-increasingly global. By its very nature, the term "strategic" implies broad scale and scope, a mode of forward vision extending over very long time spans-in some cases out to fifty years or more. So, strategic leadership and decision making is a process by which those responsible for large scale organizations set long-term directions and obtain, through consensus building, the support of constituencies necessary for the commitment of resources.

The ICAF Experience

Your ICAF year marks a transition from duties you have had to responsibilities of an increasingly strategic nature with far-reaching influence. To be effective, you will need to be more proactive, rely less on established ways of doing things, and depend more on analytic, integrative, and evaluative thinking skills.

The national security decision making system includes the federal bureaucracy, the statutory functions of the major components, and the interrelationships among them. For example, in the defense budget, we need to understand the Planning Programming Budget Execution System (PPBES), the role each organization/agency/office plays in the process, and the influence of strategic constituencies, including foreign and domestic. In the formulation of foreign policy, we follow a similar procedure and need to understand, the National Security Council (NSC), the Congress, relevant governmental departments, and strategic constituencies outside of our government, including foreign nations.

However, the formal part of a social system is only the tip of an iceberg. The essence of the larger system is the informal subsystems within which personal-bureaucratic-political proposals and policies emerge. Formal systems are described in rational, logical terms that are comfortable to deal with. Informal systems are described in nonrational (not irrational) psychological terms. There is a world of difference.

The ICAF curriculum addresses both the content and the process of national security decision making, to include both formal and informal aspects. The Strategic Leadership and Decision Making course examines the human element of the process.

| Return to Top | Return to Contents | Next Chapter |