The right business decision can have a long-term impact on the success and efficiency of a company.
According to Gartner, 65% of business decisions involve more stakeholders and choices than they did two years ago. This means that traditional approaches to decision-making are increasingly becoming obsolete.
Therefore, organizations need ways to make decisions requiring higher complexity while remaining as responsive to opportunities and market disruptions.
Different Types of Business Decisions
Every organization typically makes three types of business decisions: strategic, tactical, and operational.
These are big-picture decisions that set an organization up for success down the road. Mission statements and long-term business plans are cornerstones of strategic decisions. Typically made by senior management, strategic decisions are the "what" and "why" of a company.
For instance, these often include plans regarding annual budgets and audits or the hiring of new executives.
Strategic decision-making usually begins with the following questions:
- In what shape is the company now?
- Where do we want to take it?
- And how are we going to get it there?
Strategic decisions focus on ways to expand, what new services to introduce, and building ideal customer profiles. Strategic decisions are the first to be made and all other decisions flow from them.
Tactical decisions are the next class of critically important business decisions. They focus on more specific implementations of the general strategy with a medium-term effect on a business. For example, developing a sales strategy or assigning tasks to staff members are tactical decisions.
However, a tactical decision can act as a prompt response to a changing market environment. For example, a decision to introduce discounts as a response to price changes from competitors.
Generally, operational managers and other staff members make operational decisions. An operational decision influences day-to-day activities and only has a short-term impact on a business. These include scheduling employees or equipment use, what products to purchase from suppliers, executing a billing calculation for a patient, and determining how much inventory to keep are only some of the examples of operational decisions.
Note that nowadays, the differences between tactical and operational decisions are often blurred.
Strategic Decisions Aren't Rigid
Even though strategic decisions focus on long-term goals it doesn't mean that they are set in stone. Instead, a properly constructed strategic plan is flexible and responds to important changes.
Understanding Operational Decisions
Operational decisions breathe life into your business strategy and make sure that the company operates efficiently, from top to bottom. This is why these types of decisions have far-reaching implications for the sustainability and growth of companies.
An operational decision structure is made up of these steps:
- Input data
- Decision logic
- Conclusion or action
Operational decisions are the foundation of every business, regardless of size, in every industry. Many businesses have hundreds, if not thousands, of operational decisions to make on a daily basis, which is why they're essential to the functioning of organizations.
One of the most important features of operational decisions is the ability to be applied in many different cases. They are often made quickly; sometimes even while customers are waiting.
Even though operational decisions are frequently made about clients, they can also involve suppliers and staff members.
For instance, decisions such as vehicle dispatching, shipment, and setting warehouse routines.
Operational Decisions Features
Operational decisions are structured and are typically repetitive so the decision-making can constantly be repeated. In other words, once an operational decision has been modeled, it can then be reused and run countless times against hundreds of thousands or even millions of records and transactions. These decisions are closely measured, improved, and validated with testing.
Common examples of operational decisions include:
- How much commission should this sales representative get?
- Determining the services that can be offered to a client.
- Is this transaction fraudulent?
- How are difficult cases handled in the insurance claim process?
- Is the business compliant with relevant state regulations?
These are only some of the countless business decisions made daily in every organization by different personnel.
Operational Decisions and Strategic Decisions
Without operational decision-making, strategy is little more than wishful thinking with little chance of materializing. Conversely, operational decisions that are not underpinned by strategic decisions are typically random and lack a common thread that determines a company’s growth plans.
Therefore, operational decisions are about how businesses execute their strategic decisions. They are growth-focused and they are geared toward the production process - operational decisions are how an organization meets its strategic goals.
Properly Implementing Operational Decisions
The repercussions of poor operational decision-making can range from loss of revenue and market share to expensive compliance violations. To make matters worse, these decisions are not set in stone, which means that companies need to make continuous changes to their operational and tactical decisions.
Fortunately, both operational decisions and tactical decisions are ideal candidates for smart automation.
That's why businesses of all sizes rely on Higson to create, manage, and automate operational and tactical decisions more effectively.
Higson is a rules engine that can be set up to run as a decision management system that delivers best-in-class decisions. Subject-matter experts can deploy decisions that drive innovation, scalability, and growth without having to rely on support from the IT team.
From automating insurance underwriting processes to making product recommendations to website visitors, Higson empowers companies to modify decisions in response to changing market conditions.
We've also integrated a user-friendly interface so that non-technical users can create, manage, and update decisions when the need for operational changes arises. With Higson, deploying and making changes to critical operational decisions takes mere minutes!
If you would like to learn more about how Higson can help generate business value for your company, schedule a free call with one of your experts today.