3.7 6 Strategic vs Functional Decision Making

Summary

In this video, Mr. Evans explores the distinction between strategic and functional decision-making in organizations. Strategic decisions, made by top management or the board of directors, focus on long-term goals and are influenced by shareholders and owners. Functional decisions, made by department heads or staff, are tactical and focused on day-to-day operations. The video emphasizes how functional decisions support strategic goals, with strategic decision-making impacting functional areas. It also highlights the different time frames and regularity of these decisions, and the responsibility each group holds towards achieving the business's mission.

Takeaways

• 😀 Strategic decision making is undertaken by top-level management, such as the board of directors.
• 😀 Functional decision making is handled by people in different functional areas, focusing on day-to-day operations.
• 😀 Strategic decisions set the long-term direction of the company, while functional decisions implement tactics to achieve that strategy.
• 😀 Strategic decisions are typically medium to long-term, while functional decisions are more short-term and frequent.
• 😀 Strategic decision making may occur biannually or annually, whereas functional decision making occurs on a much more regular basis (daily, weekly, monthly).
• 😀 Functional decision makers must align their decisions with the overall strategic goals of the organization.
• 😀 The regularity of functional decision making allows for quick adjustments and tactical changes in the business operations.
• 😀 Functional decision makers, such as department heads, are accountable to the board of directors for implementing strategy within their areas.
• 😀 The success of strategic decision making is evaluated by owners, shareholders, and investors who want to see alignment with the company's mission.
• 😀 The effectiveness of functional decision making directly impacts the success of the strategy by ensuring daily operations align with long-term goals.
• 😀 If functional areas are not executing the strategy properly, they may be held accountable, as they are expected to contribute to the overall success of the business.

Q & A

What is the difference between strategic and functional decision making?

Strategic decision making is focused on long-term goals and is typically handled by the top management or board of directors. Functional decision making, on the other hand, is about the day-to-day tactics and operations, handled by department heads or individual staff within different functional areas.

Who is responsible for strategic decision making?

Strategic decision making is undertaken by top-level management or the board of directors of a company.

Who typically handles functional decision making?

Functional decision making is handled by department heads, and sometimes even front-line staff within the specific functional departments of a company.

How do strategic decisions affect functional decision making?

Strategic decisions set the long-term goals and direction for the business, and functional decision makers must align their day-to-day actions and tactics with these strategic goals to ensure the success of the overall strategy.

What is the time frame for strategic decision making?

Strategic decision making typically spans the medium to long term, with decisions being reviewed and made on a biannual or annual basis.

How often do functional decisions occur compared to strategic decisions?

Functional decisions are made regularly, often daily, weekly, or monthly, depending on the immediate needs of the business. In contrast, strategic decisions are made less frequently, such as biannually or annually.

How does functional decision making contribute to the overall business strategy?

Functional decision making contributes by executing the tactics that help achieve the goals outlined in the strategy. Even though functional decisions are made on a smaller scale, they are critical to ensuring the strategy's success.

What is the responsibility of functional decision makers?

Functional decision makers are responsible for implementing the strategy in their respective departments and ensuring their actions align with the broader goals set by the board of directors.

What happens if functional decision makers fail to follow the strategy set by the board?

If functional decision makers fail to execute the strategy as planned, they are held accountable by the board of directors. The board may address this through discussions to understand the reasons for failure and determine what needs to be done to correct it.

Who do strategic decision makers report to, and what are their key concerns?

Strategic decision makers, such as the board of directors or management, are ultimately responsible to the owners and shareholders of the business. They are primarily concerned with ensuring the strategy aligns with the company's mission and helps achieve long-term business success.