Strategic Decision Making: The Influence of CEO Experience and Use of Tacit Knowledge

Article excerpt

At any given moment one is conscious of only a small section of what one knows. Intuition allows one to draw on that vast storehouse of unconscious knowledge that includes not only everything that one has experienced or learned either consciously or subliminally, but also the infinite reservoir of the collective or universal unconscious, in which individual separateness and ego boundaries are transcended.

Unlimited access to Vaughan's reservoir of knowledge would be akin to Nirvana for strategic planners. Accessing that information would be a strong basis for strategic planning and crucial to the long-term survival of any organization. Therefore, if strategic decision makers could tap only a portion of this incalculable knowledge resource during strategy formulation, better decisions should develop and ultimately result in improved organizational performance. Furthermore, as less formalized methods of decision making prove capable of accessing this knowledge inventory, they bear closer scrutiny. One potentially fruitful, albeit controversial, informal decision-making method relies on the use of tacit knowledge.

A manager's tacit knowledge inventory (TKI) (Sternberg et al., 1995) is analogous to Vaughan's (1979) reservoir of knowledge. Tacit knowledge is defined as work-related practical know-how that is learned informally on the job (Wagner and Sternberg, 1986); it is manifest by people knowing more than they can tell (Polanyi, 1966). It is sometimes associated with intuition, which is defined as choice made without formal analysis (Behling and Eckel, 1991), since intuition serves as a conduit for knowledge transfer (Anthony et al., 1993; Parikh et al., 1994).

Today's practitioners are continually plagued by a perceived inconsistency in their thought process. They sense an expectation for purely rational thought (Mintzberg et al., 1995), but have discovered through experience that their use of tacit, or hidden, knowledge is quite beneficial (Isenberg, 1984). Such benefits include a faster decision-making process (Eisenhardt, 1990), effective decisions (Agor, 1985a), and fewer pertinent factors necessary for a decision (Wagner, 1987).

Tacit knowledge is particularly germane to strategic decision making. Strategy is plagued by a stigma of unsystematic reasoning (Ansoff, 1988). incomplete searches for strategic alternatives, satisficing, and bounded rationality (Simon, 1960) influence this perception. In fact, instead of problems seeking a solution, an organization may draw from its "garbage can" of ready-made solutions and apply them to problems as they arise (Cohen et al., 1972). Perhaps more appropriately, these seemingly unsystematic decision methods may simply be applications of tacit knowledge. They are examples of what Mintzberg et al. (1976) refer to as managers trying to apply str-ucture to unstructured decisions as they attempt to identify whatever is familiar to them early in the decision process. That is, the use of tacit knowledge may be useful in explaining why many of the seemingly unsystematic decision are in fact logical.

The purpose of this study is not to condemn the traditional and analytical methods of making decisions. We agree with Herbert Simon that "The effective manager does not have the luxury of choosing between analytic and intuitive approaches to problems" (1987: 63). Each decision must be a balanced combination of both, much like the brain depends on both hemispheres for proper operation and orientation (Mintzberg, 1994). We seek to identify critical variables that affect the use of tacit knowledge. This study expands previous work linking the experience level of the decision makers with their use of tacit knowledge by focusing on the cognitive process of the key strategy maker. Specifically, this study examines the effect of experience and intuition on the use of tacit knowledge in the strategic decision-making process of Chief Executive Officers (CEOs). …