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In a volatile business environment, change is inevitable. Often strategic change involves large scale projects such as acquisition, or entry into another market, or the development of a new technology or project or information system. Strategic change is essential for improving the competitive advantage of the organization and driving up business growth.
However, the process of managing change is always accompanied with resistance to change. Some of the reasons why this is so include:
â€¢ Employees and other managers being content with the old ways of doing things. Some employees dislike change and are always comfortable with the same tried and tested ways of performing tasks.
â€¢ Uncertainty about the nature or impact of the changes. Sometimes it is the fear of the unknown that increases this resistance to change.
â€¢ Anxiety on the part of employees and other managers over the ability to cope with changes. If the change process is deemed to be demanding more effort from the staff than they are used to, they are more likely to resist.
â€¢ Failure of top management to communicate change initiatives to lower levels resulting in no commitment.
â€¢ Managers not being able to modify the structure and the culture of the organization to reflect the change in strategy.
â€¢ Lack of resources in terms of time, financial and managerial to support the change programme.
â€¢ Lack of co-ordination between managers, employees and various stakeholders of the organization.
â€¢ Belief in better options. Sometimes, if employees believe there are better alternative ways of doing things, they will disregard what's being offered to them by their superiors.
For strategic change initiatives to be successful, managers should take into account external and internal factors as these have an influence on the outcome. External factors are normally outside the control of the organization, for example legal, competitive, technical, social, political and economic factors.
With internal factors such as structure, culture, internal power, time, skills, history, scope, readiness and resource availability, the organization has overall control of them. For example, the organization is in a position to decide on how quickly the change is needed (time), what degree of change is required (scope), what resources to be made available to manage the change and who to employ capable of managing the change (skills).
Once the managers have identified and acted on the external and internal factors influencing the change process, they can then implement either one of the following strategies or more for a successful change programme:
â€¢ Educate those at the lower levels the reasons and benefits of implementing the change process.
â€¢ Facilitate the change process, for example, through investing in training and rewards. This has the benefits of reducing resistance to change, motivating the staff and allowing total co-ordination and commitment.
â€¢ Involve those affected in the change process. Getting their views and opinions is key to achieving total participation from them as they feel empowered to support the vision of the organization.
â€¢ Where necessary, negotiate and make a compromise with those affected. However, care should be taken that a compromise will not result in the organization abandoning and modifying its vision of strategic change. A bargain should only allow minimal changes to the original strategy.
Models of Strategic Change
There is no one perfect strategic planning model for each organization. Each organization ends up developing its own nature and model of strategic planning, often by selecting a model and modifying it as they go along in developing their own planning process. The following models provide a range of alternatives from which organizations might select an approach and begin to develop their own strategic planning process. Note that an organization might choose to integrate the models, e.g., using a scenario model to creatively identify strategic issues and goals, and then an issues-based model to carefully strategize to address the issues and reach the goals.
The following models include: "basic" strategic planning, issue-based (or goal-based), alignment, scenario, and organic planning.
Model One - "Basic" Strategic Planning
This very basic process is typically followed by organizations that are extremely small, busy, and have not done much strategic planning before. The process might be implemented in year one of the nonprofit to get a sense of how planning is conducted, and then embellished in later years with more planning phases and activities to ensure well-rounded direction for the nonprofit. Planning is usually carried out by top-level management. The basic strategic planning process includes:
1. Identify your purpose (mission statement) - This is the statement(s) that describes why your organization exists, i.e., its basic purpose. The statement should describe what client needs are intended to be met and with what services, the type of communities are sometimes mentioned. The top-level management should develop and agree on the mission statement. The statements will change somewhat over the years.
2. Select the goals your organization must reach if it is to accomplish your mission - Goals are general statements about what you need to accomplish to meet your purpose, or mission, and address major issues facing the organization.
3. Identify specific approaches or strategies that must be implemented to reach each goal - The strategies are often what change the most as the organization eventually conducts more robust strategic planning, particularly by more closely examining the external and internal environments of the organization.
4. Identify specific action plans to implement each strategy - These are the specific activities that each major function (for example, department, etc.) must undertake to ensure it's effectively implementing each strategy. Objectives should be clearly worded to the extent that people can assess if the objectives have been met or not. Ideally, the top management develops specific committees that each have a work plan, or set of objectives.
5. Monitor and update the plan - Planners regularly reflect on the extent to which the goals are being met and whether action plans are being implemented. Perhaps the most important indicator of success of the organization is positive feedback from the organization's customers.
Model Two - Issue-Based (or Goal-Based) Planning
Organizations that begin with the "basic" planning approach described above, often evolve to using this more comprehensive and more effective type of planning. The following table depicts a rather straightforward view of this type of planning process.
1. External/internal assessment to identify "SWOT" (Strengths and Weaknesses and Opportunities and Threats)
2. Strategic analysis to identify and prioritize major issues/goals
3. Design major strategies (or programs) to address issues/goals
4. Design/update vision, mission and values (some organizations may do this first in planning)
5. Establish action plans (objectives, resource needs, roles and responsibilities for implementation)
6. Record issues, goals, strategies/programs, updated mission and vision, and action plans in a Strategic Plan document, and attach SWOT, etc.
7. Develop the yearly Operating Plan document(from year one of the multi-year strategic plan)
8. Develop and authorize Budget for year one(allocation of funds needed to fund year one)
9. Conduct the organization's year-one operations
10.Monitor/review/evaluate/update Strategic Plan document
Model Three - Alignment Model
The overall purpose of the model is to ensure strong alignment among the organization's mission and its resources to effectively operate the organization. This model is useful for organizations that need to fine-tune strategies or find out why they are not working. An organization might also choose this model if it is experiencing a large number of issues around internal efficiencies. Overall steps include:
1. The planning group outlines the organization's mission, programs, resources, and needed support.
2. Identify what's working well and what needs adjustment.
3. Identify how these adjustments should be made.
4. Include the adjustments as strategies in the strategic plan.
Model Four - Scenario Planning
This approach might be used in conjunction with other models to ensure planners truly undertake strategic thinking. The model may be useful, particularly in identifying strategic issues and goals.
1. Select several external forces and imagine related changes which might influence the organization, e.g., change in regulations, demographic changes, etc. Scanning the newspaper for key headlines often suggests potential changes that might effect the organization.
2. For each change in a force, discuss three different future organizational scenarios (including best case, worst case, and OK/reasonable case) which might arise with the organization as a result of each change. Reviewing the worst-case scenario often provokes strong motivation to change the organization.
3. Suggest what the organization might do, or potential strategies, in each of the three scenarios to respond to each change.
4. Planners soon detect common considerations or strategies that must be addressed to respond to possible external changes.
5. Select the most likely external changes to effect the organization, e.g., over the next three to five years, and identify the most reasonable strategies the organization can undertake to respond to the change.
Model Five - "Organic" (or Self-Organizing) Planning
Traditional strategic planning processes are sometimes considered "mechanistic" or "linear," i.e., they're rather general-to-specific or cause-and-effect in nature. For example, the processes often begin by conducting a broad assessment of the external and internal environments of the organization, conducting a strategic analysis ("SWOT" analysis), narrowing down to identifying and prioritizing issues, and then developing specific strategies to address the specific issues.
Another view of planning is similar to the development of an organism, i.e., an "organic," self-organizing process. Certain cultures, e.g., Native American Indians, might prefer unfolding and naturalistic "organic" planning processes more than the traditional mechanistic, linear processes. Self-organizing requires continual reference to common values, dialoguing around these values, and continued shared reflection around the systems current processes. General steps include:
1. Clarify and articulate the organization's cultural values. Use dialogue and story-boarding techniques.
2. Articulate the group's vision for the organization. Use dialogue and story-boarding techniques.
3. On an ongoing basis, e.g., once every quarter, dialogue about what processes are needed to arrive at the vision and what the group is going to do now about those processes.
4. Continually remind yourself and others that this type of naturalistic planning is never really "over with," and that, rather, the group needs to learn to conduct its own values clarification, dialogue/reflection, and process updates.
5. Be very, very patient.
6. Focus on learning and less on method.
7. Ask the group to reflect on how the organization will portray its strategic plans to stakeholders, etc., who often expect the "mechanistic, linear" plan formats.
Need of Strategic Management
Thompson Strickland, one of the respected writers on strategic management, once wrote that for a company to qualify as excellently managed, it must exhibit excellent execution of an excellent strategy. It is against this canvas that I wish to paint an abstract on the realisation of the need for strategic thinking and planning in relation to SoEs (State owned Enterprises) vis-à-vis privatisation.
The establishment of most SoEs was not as a result of deliberate desire to conduct business. The driving force behind their establishment was a movement towards self-reliance. This was increasingly important during Ian Smith's Unilateral Declaration of Independence (UDI). One very obvious development from this era is the Tanzania-Zambia Pipeline (TAZAMA) and Tanzania-Zambia Railways (TAZARA).
Self-reliance therefore required that there be a broad based array of companies to make the country almost self contained. There was Mansa Batteries in Northern Province, Luangwa Industries in Eastern Province, Mwinilunga Canneries in North-Western, Kapiri Glass in Central Province, Nitrogen Chemicals and Kafue Textiles in Lusaka Province and Livingstone Motor Assemblers in Southern Province. The structure of some of these firms was such that they were integrated. NCZ uses coal gasification of coal to yield ammonia gas a key base for its products. This coal came from Maamba Collieries. Fertiliser so manufactured was used in agriculture for crops such as maize for the milling companies and cotton for the textile industry. Products such as ammonium nitrate for explosives was used in the mines as well as sulphuric acid, all produced at NCZ.
The creation of employment was also a motivating factor for the setup of industry. At the time it was not important to consider the optimal levels of employment. In the event of a company making a loss, Government would subsidise through ZIMCO Limited, the holding company. The economy then was monopolistic hence there was no threat from new players in the market. Strategic management was not a key issue therefore. Down the corporate road, management became relaxed and the quality of the product/service reduced. The customer had no alternative and so did not complain. The black market developed and thrived providing smuggled goods creating a parallel unofficial alternative to the customer.
The loss making parastatals did not contribute to the Treasury, they instead helped deplete it through subsidies. For those companies which made a profit, proceeds were used to finance the loss making ones. However, this could not go on forever. Lack of funds meant that recapitalisation was a problem. Companies could not get the necessary upgrades of equipment, send staff for training, usually abroad as plants were country specific. Production which ultimately drives the economy was affected. However, the over employment was maintained and companies remained inefficient.
The change of government in 1991 brought in a liberalised economy. Anyone who wanted to conduct business could do so provided they adhered to the set conditions. Institutions such as the Zambia Privatisation Agency were created to divest Government interest in SoEs. Government made a decision that they should remove themselves from the business of business.
Most people have understood privatisation to mean outright sale when in reality there are about sixteen methods of privatisation, to mention a few; lease or management contract, dilution of shares held by government by offer of additional shares, concession and public offering of shares. It is common to hear people talk of how company x was sold for a song, etc. A starting point to understanding the process is an appreciation of the situation as discussed already, that is the origins and state of these parastatals or SoEs.
Most investors have vast experience in the sectors they have acquired SoEs. They operate businesses strategically. Management in the current world economy can not afford to lag behind and involves a continuous process of change. Privatised SoEs therefore require strategic management, which is the management of change. The process of strategic management consists of five core managerial tasks which are not isolated from each other:-
Decisions on what business a company will be in and hence the vision where the company wants to be results in the creation of purpose which gives the long-term path of the company.
The strategic mission/vision has to be assessed to determine the most critical issues the business must address to achieve the vision/mission.
A strategy then has to be crafted to achieve the desired result. How exactly will the resources be allocated in the right places.
The strategy has to be effectively and efficiently implemented by involving from the beginning of the process, parties that will help carry out the strategy.
The results are therefore evaluated making adjustments on a continuous basis.
It follows, therefore, that when an investor conducts his due-diligence of a company to be privatised he first looks at how the company will fit into his plans as the first step of strategic management. Orientation of the business may be altered in his plan. He may choose to do away with certain sections of the business, improve on some or add new areas of business. Most investors shy away from taking over social assets. The rationale is that they are masters of a particular field and cannot concern themselves with management of what they do not know. Key to strategic management is to identify a competitive strength, that which you do well, and use it to attain competitive advantage over your competitors. The social asset can, however, also be leased out to an experienced operator. For example a guest lodge can be given to an experienced firm in the hospitality business to run on behalf of the investor. This allows the investor to concentrate on the core business.
Most investors have praised Zambian staff in parastatals earmarked for privatisation. They have expressed surprise at how the staff are able to operate in usually very difficult circumstances. One major noticeable handicap has been the failure by management to make decisions that will chart the course for these companies. This has been attributed to the already discussed backdrop of a socialist and monopolistic economy where there was no motivation to excel in business.
The investor with his different and usually seasoned background will definitely have different expectations from the existing SoEs. A private investor could be seen as a redeemer who is going to pay a premium for the company and transform it for the better. Whilst agreeing to transform the business, the investor is tasked with grooming a viable business. This involves curving the company into a very efficient unit that will be strategically sound, that is with the right staffing levels, acceptable remuneration and quality of work life, quality product/service, good corporate citizen status and a leader in the industry of operation. To achieve this, usually, the company has to be recapitalised, reequipped and systems replaced or improved upon. This costs money and most investors would rather invest into businesses than advance a huge payment for the company. Employment is likely to be created in support or spill-over businesses.
The value of the transaction therefore ought to be a balancing act of what is advanced in form of payment (the purchase consideration) and what is to be invested by way of equipment, staff training, quality of the product, liabilities assumed and recapitalisation. The business has to survive in a competitive environment, competing for funding, creating value for the owners and giving back to the community in which it operates to gain the elusive goodwill. Later, payoffs will manifest in form of a company which will pay taxes, remunerate the scaled down workers well, etc. The business is just that, a business and not a charity.
As Michael E. Porter sums it all up, the essence of formulating competitive strategy is relating a company to its environment ...the best strategy for a given firm is ultimately a unique construction reflecting its particular circumstances.