Role Of Strategic Management In Companys Performance Management Essay
Executive summary: In this essay report study, researcher has reviewed and analyzed the relation between strategy planning, implementation and organizational performance in order to find out the role of strategic management. This paper of essay will reveals my understanding of strategy planning and implementation in relation to practical strategy examples from lecturer guidelines, notes, articles and various research papers. It also presents a review of strategic hindrances as an important part of strategic management. It also looks at the strategic planning and implementation processes, roles of strategic management to cope with the present tough and competitive global business environment to meet the extensive and continuing changes that have taken place in the company's environment, strategy and organization. The notion of the role of the strategic management is described and criticized with different strategic examples based on the given guide lines by lecturer and various previous research findings of strategic management sector.
Meaning of strategic: A strategy is the pattern or plan that integrates an organization's major goals, policies, and action sequences into a cohesive whole where a well formulated strategy helps to Marshall and allocates an organization's resources into a unique and viable posture based on its relative internal competencies and shortcomings. It also anticipates changes in the environment and contingent moves by intelligent opponents (Ghoshal, and Mintzberg, 2003).
Role of strategic management in company's performance:
Research has shown that there is a positive association between strategic planning and company performance, with the direction of causation from strategic planning to performance. It has further pointed out that there are some basic reasons why companies need strategic planning. First of all, it should improve the performance of companies and further explained that prescriptive strategic management theory stresses the planning of a mission, the setting of objectives (including performance objectives), and the implementation of strategies and control systems to ensure the objectives are achieved. Secondly, strategic planning can lead to indirect improvements in performance by improving the effectiveness of management throughout an organisation. These benefits include process advantages, for example, the ability to identify and exploit future marketing opportunities where the encouragement of a favourable attitude to change is the personnel advantage, and the view that strategic planning keeps the company synchronised with the external environment so that changes can be adapted to accordingly (Greenley, 1994). Researcher Boyd notes that strategic planning is one tool to manage environmental turbulence. Others have argued that it is the act of planning which is of real value (Ramanujam, and Venkatraman, 1987, Sinha, 1990).Strategic planning may therefore be effective as a process of management, regardless of the performance achieved. In the mean time, a research has conducted to examine the level to which UK companies use the tools and techniques of strategic development advocated by the classical model of strategy formulation(Thompson, and Strickland, 1995)and to examine views and attitudes towards the standard strategic planning approach(Boyd, 1991). The greatest level of commitment to strategic activities indicates that firms have a greater commitment to formulation aspects of strategy and relatively less commitment to the implementation and evaluation of strategy, research has argued (Glaister, and, Falshaw, 1999).
Culture as a critical component in strategy formulation and implementation: Research has argued that a wide body of literature during the past 10 years, strategic formulation and implementation is strongly affected by the culture of an organization because an organization's culture is a system of shared attitudes, values and beliefs, the nature of this system will define appropriate behaviours and shape the decision-making processes of its senior managers. Ultimately, strong cultures can either enhance or inhibit the ability of an organization to develop and execute effective strategies, depending on the compatibility of the culture with the chosen strategic direction (Christodoulou, and Bonn, 1999; Andrews, 1971).
Scope of Strategic Planning:
Research has argued that most companies typically produce written plans covering all the major functional areas of management. Marketing, financial and operational areas are the most popular with product development of weaker interest, along with personnel where few companies no use of written plans (McKiernan, et.al, 1992).
Major roles of strategy planning summarised by Hennery(1979) are to determine organizational purpose and management philosophy, to identify internal strengths and weaknesses, to monitor changes in the external environment, to forecast future conditions and establish planning premises, to determine threats and opportunities, to formulate specific goals, to identify and evaluate alternative policies and strategies, to select the best strategic plan, to prepare functional action plans, and to prepare action plans. Strategic planning offers an opportunity to re-examine basic strategic direction as well as the validity of the strategic implementation programmes being pursued. The systematic assessment of environmental assumptions may provide early warning signals regarding the continued validity of current strategic objectives (Asch, 1992; Kaplan, and Norton, 2001).
Implications of strategic planning:
Strategic planning which emphasizes elements of the conventional strategic management process is associated with higher performance in all the industrial environments studied. The performance effect of strategic planning does not vary significantly between the different industry groups. Hence, strategic planning is an important performance driver in all industrial settings, and enhances both economic performance and organizational innovation (Andersen, 2000).
Role of strategic planning: The environments in which public and non-profit organizations operate have become not only increasingly uncertain in recent years but also more tightly and often haphazardly and dangerously throughout the society. This increased uncertainty and interconnectedness requires a fourfold response from public and non-profit organizations. Firstly, these organizations must think, act, and learn strategically as never before. Secondly, they must translate their insights into effective strategies to cope with their changed circumstances. Third, they must develop the rationales necessary to lay the groundwork for the adoption and implementation of their strategies, and fourth, they must build coalitions that are large enough and strong enough to adopt desirable strategies and protect them during implementation. Furthermore, strategic planning can help leaders and managers of public and non-profit organizations think, learn, and act strategically. A key point that is emphasised again and again is that strategic thinking, acting, and learning are the activities that are important, not strategic planning per se. Indeed, if any particular approach to strategic planning gets in the way of strategic thought, action, and learning, that planning approach should be fragmented. Leaders and managers of government, public agencies, non-profit organizations, and communities face numerous and difficult challenges (Romeo, 2008). Bringing forward of strategic planning typically try to persuade their colleagues of its value with one or more of the different kinds of statements. Many authors argue that strategic planning can produce a number of benefits for organization. The first and perhaps most obvious potential benefit is that promotion of strategic thinking, acting, and learning, especially through dialogue and strategic conversation among key actors. Research has summarised that strategic thinking, acting, and learning are promoted by systematic information gathering about the organization's external and internal environment and various actors' interests, thoughtful examination of the organization's successes and failures, clarification of future direction, establishment of organizational priorities for action, and in general, attention to the acquisition and use of knowledge and skills. Strategic planning has become a natural part of doing business for many organizations these days. In short, strategic planning can be used to help organizing and managing effective organizational change processes in which the organization figures out what to change but also keeps the best(Bryson, 2004; Hill, and, Jones, 1995).
Difference between strategy planning and implementation:
Role: Strategy is designed by the leadership team where implemented by the management team
Function: Leadership concerned with organizational values and are driven by the vision but management is concerned with performance and are driven by the mission statement
Time: Leadership is constantly thinking about the future but management is task-driven and thinking about the day -to- day
Philosophy: Leadership uses a "big picture" or macro approach where management uses a behaviour-based or micro driven approach
Behaviour: Leadership is concentrating on controlling and monitoring but management is concerned with task completion and implementation
Root cause analysis: Leadership concentrates on problems but management often deals with issues (Romeo, 2008).
Strategic planning processes: Research has shown that companies' planning processes can be highlighted in the following figure where regular scheduled reviews, strict time limits on reviews, formal presentations, numerous observers, massive paperwork, restricted discussion, decisions optional, process emphasised, random progress reviews, limited accountability, data, numbers, facts, and uniform planning procedures are the processes of strategic planning of the most companies (Glaister, and, Falshaw, 1999; Romeo, 2008).
Source: Glaister, and, Falshaw, (1999)
Source: Migliore, et.al, 1995
Identify the need to change the present strategy:
Identify triggers for change where strategic objective, external pressures, internal pressures, and crises are the main factors of identify triggers for change
Ii) Analyse the forces for and against change where macro-evolutionary forces in the environment, micro- evolutionary forces at the organizational level: political forces at individual level resources, and policies and procedures are the forces for and against change (Kotler, 1994).
iii) Identify change management roles: leaders, change agents, line managers
Analyse the strategic options:
Identify strategic options: Porters generic strategies
Analysis suitability of options
Match options to organizational strengths
Evaluate and select strategic options:
Identify evaluation criteria: gap analysis, suitability, acceptability, feasibility, cost-benefit analysis, risk analysis
ii) Select strategic options: evaluation techniques, procedures for approving strategic investment decisions
iii) Propose a strategic plan: Making a case, communication skills, organizational skills, planning skills
Evaluate and select strategic options Identify the evaluation criteria: gap analysis, suitability, acceptability, feasibility, cost-benefit analysis, risk analysis
Select strategic options: evaluation techniques, procedures for approving strategic investment decision
Purpose a strategic plan: making a case, communication skills, organizational procedures, planning skills
Strategic implementation processes:
Research has summarised the implementation processes are staffing and training personnel and volunteers, developing organizational relationships among staff/volunteers, achieving commitment, developing a positive organizational culture, and employing personnel evaluation and reward systems (Migliore, 1995).
Processes of strategy implementation:
Top management commitment: The most important thing for the implementation a strategy is the top management's commitment to strategic direction itself. Research has concluded that top management's commitment is undoubtedly a prerequisite for strategy implementation. Therefore, top managers must demonstrate their willingness to give energy and loyalty to the implementation process. This demountable commitment becomes, at the same time, a positive signal for the affected organizational members. To successfully improve the overall profanity that strategy is implemented as intended, senior executives must abandon the notion that lower-level managers have the same perceptions of the strategy and its implementation, of its underlying rationale, and its urgency (Dahlgaard, and Martensen, 1998).
Involve middle manager's valuable knowledge: The second most important thing to understand is that strategy implementation is not a top-down approach. The success of any implementation effort depends on the level of involvement of middle managers. To generate the required acceptance for the implementation as a whole, the affected middle managers' knowledge, which is often underestimated, must already be accounted for in the formulation of the strategy. After that, it is to make sure that these managers area part of the strategy process, their motivation towards the project will increase and they will see themselves as an important part in the process (Rps, 2005). Previous research has indicated that less than 5% of a typical workforce understands their organization's strategy (Kaplan and Norton, 2001). To improve employees is an important milestone to make strategy everyone's everyday job. That is why the involvement of middle managers is essential to increase the general awareness of the strategy (Grundy, 1998; Sinha, 1990).
Communication is what implementation is all about: Research has summarised that communication aspects should be emphasized in the implementation process seems to be a very simple one. Even though studies point out that communication is a key success factor within strategy implementation (Prahalad, and Hamel, 1990) communicating with employees concerning issues related to the strategy implementation is frequently delayed until the changes have already crystallized. Research has concluded that an organization institute a two-way communication program that permits and solicits questions from employees about issues regarding the formulated strategy. In addition to soliciting questions and feedback, the communications should tell employees about employees about the new requirements, tasks and activities to be performed by the affected employees, and furthermore, cover the reason behind changed circumstances( Alexander, 1995)
Integrative point of view: Research has summarised that traditional strategy implementation concepts generally over-emphasize the structural aspects and reduce the whole effort down to an organizational exercise. It is dangerous, however, when implementing a new strategy, to ignore the other existing components. Strategy implementation requires an integrative point of view. Research has further argued that an implementation effort is ideally a boundary less set of activities and does not concentrate on implications of only one component where it is of grate importance of only one component, i.e. the organizational structure (Raps, 2005; Pearce II, et.al. 1987).
Clear assignment of responsibilities: One of the reasons why strategy implementation processes frequently result in difficult and complex problems or even fail at all is the vagueness of the assessment of responsibilities are diffused through numerous organizational units. Research has concluded that cross-functional relations are representative of an implementation effort. This indeed a challenge, because as already mentioned before organizational members tend to think only in their "own" department structure. To avoid power struggles between departments and within hierarchies, one should create a plan with clear assessments of responsibilities regarding detailed implementation activities where responsibilities are clear and potential problems are avoided (Raps, 2005; Porter, 1980).
Preventive measures against change barriers: We know that change is part of the daily life within an organization. The abaility to manage change has shown to be a core competency for corporations. A greate challenge within strategy implementation is to deal with potential barriers of the affected managers. It is argued implementation efforts often fail when these barriers are understimated and prevention methods are not adopted at the beginning and one has to be aware that barriers against the implementation of the strategy can lead to a complete breakdown of the formulated strategy (Grundy, 1998).
Emphasize teamwork activities: Research findings have declared that teamwork plays an important role within the process of strategy implementation. On the other hand, to build up effective teams within strategy implementation, the Myers-Briggs typology can be useful to ascertain person-to-person differences. Differences in personality can result in serious inconsistencies in how strategies are understood and acted on. Recognizing different personality types and learning how to handle them effectively is a skill that can be taught. Finally researcher has more than any other field of activity, implementation is the area that benefits most from a trained and personality-sensitive management team (Noble, 1999).
Respect the individuals' different characters: On the basis of convincing believable, human resources represent a valuable intangible asset. Latest research finding has indicated that human resources are progressively becoming the key success factor within strategy implementation. Researcher has strongly argued that, in the past, one of the major reasons why strategy implementation efforts failed was that the human factor was conspicuously absent from strategic planning which leads to a dual demand. Firstly, considerations regarding people have to be integrated into considerations about strategy implementation in general. Secondly, the individual behaviour of these persons is to be taken into account. It is said that individual personality differences often determine and influence implementation (Lorange, 1998).
Calculate buffer time for unexpected incidents: Research finding has stressed that one of the most critical points within strategy implementation processes is the exceeding of time restrictions which can be attributed to an underestimation on the part of many executives who do not have a clearly focused view on the complexities involved in implementing strategies and on the general process to deal with these multifaceted complexities. It is believed by everyone that it is difficult enough to identify the necessary steps of the implementation and even more difficult to estimate an appropriate time frame. One has to find out the time-intense activities and harmonize them with the time capacity. Research has further concluded that one method for accomplishing this is to work with the affected divisions and the responsible managers. In addition to calculating the probable time frame an extra buffer should be calculated to account for unexpected incidents that might occur at anytime (Raps, 2005; Barney, 991).
Conclusion: A strategy is the pattern or plan that integrates an organization's major goals, policies, and action sequences into a cohesive whole where a well formulated strategy helps to Marshall and allocates an organization's resources into a unique and viable posture based on its relative internal competencies and shortcomings where identify the need to change the present strategy, analyse the strategic options, evaluate and select strategic options, and monitor and control are the processed of strategic planning and implementation. Top management commitment, involve middle manager's valuable knowledge, communication is what implementation is all about, integrative point of view, clear assignment of responsibilities, preventive measures against change barriers, emphasize teamwork activities, respect the individuals' different characters, and calculate buffer time for unexpected incidents are the core processes of strategic management. Managers, whether profit organizations or non-profit organizations have to keep up their eyes to the strategic role of organization in order to meet their organizational objectives and fulfilling their goals and mission statement. It is totally fool to ignore and neglect the importance of strategic management in this competitive global business environment. Therefore, strategic management is the magic for the business of any business organizations whether, governmental, government, profit and non-profit organization.
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