Making fast strategic decisions in high-velocity environments
From AcaWiki
Citation: Kathleen M. Eisenhardt (1989) Making fast strategic decisions in high-velocity environments. The Academy of Management Journal (RSS)
Tagged: Business (RSS) strategy (RSS), high velocity environments (RSS), leadership (RSS), top leadership teams (RSS)
Summary:
In this article, Eisenhardt asks, "how do executive teams make rapid decisions in the high-velocity microcomputer industry?" The paper argues that certain environments are marked by a higher velocity of change and that they are likely to be characterized by special, or perhaps different, contexts around strategic decision-making. She breaks the question down into two parts:
- How are fast strategic decisions made?
- How does decision-speed link to performance?
To answer these questions, the paper presents and inductive study based on a series of interviews in 8 companies in a multiple case study design. Shes uses CEO interviews, interviews of the entire top management team, questionnaires, and secondary source. Eisenhardt comes up with a series of propositions that is basically the idea of generating plausible ideas. She can't test between mechanisms:
- Proposition 1: The greater the use of real-time information, the greater the speed of the strategic decision process.
- Proposition 2: The greater the number of alternatives considered simultaneously, the greater the speed of the strategic decision process.
- Proposition 3: The greater the use of experienced counselors, the greater the speed of the strategic decision process.
- Proposition 4: The greater the use of active conflict resolution, the greater the speed of the strategic decision process.
- Proposition 5: The greater the integration among decisions, the greater the speed of the strategic decision process.
- Proposition 6: The greater the speed of the strategic decision process, the greater the performance in high-velocity environments.
The third proposition is not support. That said, Eisenhardt believes that counselors don't actually answer questions and often don't point leadership in the wrong direction but rather help leaders frame their thinking and helps lead them to consider alternatives that you wouldn't think of others. In other words, it becomes sort of an antecedent of her first proposition.
For proposition 2, the prior was that the more choices that you have, faster things work, which is a somewhat counterintuitive result.
In terms of her second question, Eisenhardt finds evidence of a strong link between decision-speed and performance. The quick deciding firms did very well and the slowly deciding firms failed or did poorly.
Theoretical and practical relevance:
Eisenhardt's paper is the seminal paper in the literature on high velocity environments. It is also highly influential in work on multiple case study designs as an early and powerful examle of the model and in the literature on organizaional theory, top leadership teams, and strategy more generally.
It has been cited more than 1,600 times since it was published 21 years ago.
