Setting strategic direction: a top down or bottom up process?

Purpose – The paper examines the process by which the strategic direction of an organization is set. The paper asks if strategic direction is defined and set at the top of the organization and then trickled down or is it set by members making their own decisions based on well‐known rules and the organization's strategic direction is the aggregation of these decisions. Design/methodology/approach – Individual in‐depth semi‐structured interviews were carried out with members of a professional services organization. Findings – The research suggests that an agent‐based approach may more closely represent the process of strategic direction setting for certain kinds of firm than does the traditional text‐book trickle down approach. Research limitations/implications – The research was carried out on a legal services firm. Future extensions of the research could be to other kinds of large professional services firms, for example accountancy practices. Practical implications – While this research was carried out on a professional services firm the findings could be appropriate to other kinds of organization in the knowledge economy where individual agents carried out non‐routine tasks or tasks that require substantial individual judgment, for example: universities or research centers. Originality/value – The usual text book model of strategy formulation and implementation suggests that strategy is defined by top management with objectives cascaded down through the organization. This research suggests an alternative approach where individual agents in the organization make decisions according to given rules and that the strategic direction of the organization is determined by the aggregation of these decisions. This suggests a new role for top managers as rule‐makers rather than objective‐setters.