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Strategic management


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Strategic management

  1. 1. STRATEGIC MANAGEMENTWhat is strategic management? Strategic management can be used to determinemission, vision, values, goals, objectives, roles and responsibilities, timelines, etc.Top of CategoryWhat is strategic planning? Strategic planning is a management tool, period. As withany management tool, it is used for one purpose only: to help an organization do abetter job - to focus its energy, to ensure that members of the organization are workingtoward the same goals, to assess and adjust the organizations direction in response to achanging environment. In short, strategic planning is a disciplined effort to producefundamental decisions and actions that shape and guide what an organization is, what itdoes, and why it does it, with a focus on the future. (Adapted from Brysons StrategicPlanning in Public and Nonprofit Organizations).A word by word dissection of this definition provides the key elements that underlie themeaning and success of a strategic planning process: The process is strategic because itinvolves preparing the best way to respond to the circumstances of the organizationsenvironment, whether or not its circumstances are known in advance; nonprofits oftenmust respond to dynamic and even hostile environments. Being strategic, then, meansbeing clearr bout the organizations objectives, being aware of the organizationsresources, and incorporating both into being consciously responsive to a dynamicenvironment.The process is about planning because it involves intentionally setting goals (i.e.,choosing a desired future) and developing an approach to achieving those goals. Theprocess is disciplined in that it calls for a certain order and pattern to keep it focusedand productive. The process raises a sequence of questions that helps planners examineexperience, test assumptions, gather and incorporate information about the present,and anticipate the environment in which the organization will be working in the future.Finally, the process is about fundamental decisions and actions because choices must bemade in order to answer the sequence of questions mentioned above. The plan isultimately no more, and no less, than a set of decisions about what to do, why to do it,and how to do it. Because it is impossible to do everything that needs to be done in thisworld, strategic planning implies that some organizational decisions and actions aremore important than others - and that much of the strategy lies in making the toughdecisions about what is most important to achieving organizational success.The strategic planning can be complex, challenging, and even messy, but it is alwaysdefined by the basic ideas outlined above - and you can always return to these basics forinsight into your own strategic planning process.Top of CategoryWhat is the difference between strategic planning and long-rangeplanning? Although many use these terms interchangeably, strategic planning andlong-range planning differ in their emphasis on the "assumed" environment. Long-range
  2. 2. planning is generally considered to mean the development of a plan for accomplishing agoal or set of goals over a period of several years, with the assumption that currentknowledge about future conditions is sufficiently reliable to ensure the plans reliabilityover the duration of its implementation. In the late fifties and early sixties, for example,the US. economy was relatively stable and somewhat predictable, and, therefore, long-range planning was both fashionable and useful. On the other hand, strategic planningassumes that an organization must be responsive to a dynamic, changing environment(not the more stable environment assumed for long-range planning).Certainly a common assumption has emerged in the nonprofit sector that theenvironment is indeed changeable, often in unpredictable ways. Strategic planning,then, stresses the importance of making decisions that will ensure the organizationsability to successfully respond to changes in the environment.Top of CategoryWhat is strategic thinking and strategic management? Strategic planning is onlyuseful if it supports strategic thinking and leads to strategic management - the basis foran effective organization. Strategic thinking means asking, "Are we doing the rightthing?" Perhaps, more precisely, it means making that assessment using three keyrequirements about strategic thinking: a definite purpose be in mind; an understandingof the environment, particularly of the forces that affect or impede the fulfillment of thatpurpose; and creativity in developing effective responses to those forces. It follows,then, that strategic management is the application of strategic thinking to the job ofleading an organization.Dr. Jagdish Sheth, a respected authority on marketing and strategic planning, providesthe following framework for understanding strategic management: continually askingthe question, "Are we doing the right thing?" It entails attention to the "big picture" andthe willingness to adapt to changing circumstances, and consists of the following threeelements: formulation of the organizations future mission in light of changing externalfactors such as regulation, competition, technology, and customers development of acompetitive strategy to achieve the mission creation of an organizational structurewhich will deploy resources to successfully carry out its competitive strategy. Strategicmanagement is adaptive and keeps an organization relevant. In these dynamic times itis more likely to succeed than the traditional approach of "if it aint broke, dont fix it."Top of CategoryWhat Strategic Planning Is Not! Everything said above to describe what strategicplanning is can also provide an understanding of what it is not. For example, it is aboutfundamental decisions and actions, but it does not attempt to make future decisions(Steiner, 1979). Strategic planning involves anticipating the future environment, but thedecisions are made in the present. This means that over time, the organization muststay abreast of changes in order to make the best decisions it can at any given point - itmust manage, as well as plan, strategically. Strategic planning has also been describedas a tool - but it is not a substitute for the exercise of judgment by leadership.
  3. 3. Ultimately, the leaders of any enterprise need to sit back and ask, and answer, "What arethe most important issues to respond to?" and "How shall we respond?" Just as thehammer does not create the bookshelf, so the data analysis and decision-making tools ofstrategic planning do not make the organization work - they can only support theintuition, reasoning skills, and judgment that people bring to their organization.Finally, strategic planning, though described as disciplined, does not typically flowsmoothly from one step to the next. It is a creative process, and the fresh insight arrivedat today might very well alter the decision made yesterday. Inevitably the processmoves forward and back several times before arriving at the final set of decisions.Therefore, no one should be surprised if the process feels less like a comfortable trip ona commuter train, but rather like a ride on a roller coaster. But even roller coaster carsarrive at their destination, as long as they stay on track!Top of CategoryWhat is a strategic plan? In strategic planning it is critical to formally consider howyour organization will accomplish its goals. The answer to this question is a strategy.There are a variety of formal definitions for strategies, but everyone fundamentallyagrees that a strategy is the answer to the question, "How?" "Strategies are simply a setof actions that enable an organization to achieve results." MAP for Nonprofits, St. Paul,MN. "Strategy is a way of comparing your organizations strengths with the changingenvironment in order to get an idea of how best to complete or serve client needs." JimFisk & Robert Barron, The Official MBA Handbook.Essentially, there are three different categories of strategies: organizational,programmatic, and functional. The difference among the categories is the focus of thestrategy: Organizational strategy outlines the planned avenue for organizationaldevelopment (e.g., collaborations, earned income, selection of businesses, mergers, etc.).Programmatic strategy addresses how to develop, manage and deliver programs (e.g.,market a prenatal care service to disadvantaged expectant mothers by providinginformation and intake services in welfare offices). Functional strategies articulate howto manage administration and support needs that impact the organizations efficiencyand effectiveness (e.g., develop a financial system that provides accurate informationusing a cash accrual method).Top of CategoryWhen should a strategic plan be developed? Strategy development follows thecreation and affirmation of the organizations purpose statement, environmental andprogram data collection and analysis, and identification of critical issues. It is criticalthat strategy development follow these steps because the information gathered anddecisions made in these phases are the foundation for strategy creation and selection.Each of these steps provides the following: The purpose statement, the statement of theorganizations ultimate goal, provides the direction to which the strategies shouldultimately lead.External market data and program evaluation results provide critical data to supportstrategy development. Without this information and insight, the organizations
  4. 4. strategies will not be in alignment with or effective in the marketplace. The criticalissues list serves as the specific focus and framework for the activities of theorganization and the pattern of these activities (developing and selecting thestrategies).Top of CategoryHow are strategies developed? Strategy formulation is a combination of rational,scientific examinations and educated, intuitive best guesses. Many individuals areoverwhelmed by the idea of developing strategies, but it can be a fun and invigoratingprocess.The process entails: examining the organizations critical issues determining how theorganizations strengths and skills can be employed to address the critical issuesanalyzing opportunities and strengths and looking for ways to synthesize the twoexploring and choosing the best approaches for the organization. During this evaluationask these key questions: Does the strategy meet/address critical issues? Is this alignedwith our mission? Is this approach financially viable? One effective method of strategygeneration is to list critical issues and organizational strengths onto flipcharts and thenhave staff or board members brainstorm possible uses of those strengths or other skillsto address the critical issues.Once the brainstorm session is completed, use a roundtable discussion to investigateand evaluate the possible strategies. Remember to develop a list of alternativestrategies to investigate and keep in the contingency planning file. It is important not todiscount the ideas that come to people during non-working hours.The Polaroid camera is the result of a three year olds question to her father: "Dad, whycant I see the picture now?"Top of CategoryWhat are some tools for for analysis and planning? A number of analytical toolshave been developed to assist organizations with the planning process. Many nonprofitorganizations have adapted these tools, modifying the questions and criteria to alignwith their own specific services and markets. Listed below are analytical toolsfrequently used by nonprofit and for-profit organizations.Top of CategoryWhat is SWOT Analysis? SWOT analysis is a methodology of examining potentialstrategies derived from the synthesis of organizational strengths, weaknesses,opportunities and threats (SWOT). The partnering of the different elements and theextensive data collected as a result of the analysis can serve as a spark for roundtablediscussions and refinement of current strategies or generation of new strategies.Top of Category
  5. 5. What is the MacMillan Matrix? This strategy grid, developed by Dr. Ian MacMillan, isspecifically designed to assist nonprofit organizations to formulate organizationalstrategies. There are three assumptions underlying this approach: the need forresources is essentially competitive and all agencies wanting to survive mustacknowledge this dynamic given that resources are scarce, there is no room for directduplication of services to a single constituency -- this is wasteful and inefficientmediocre or low quality service to a large client population is less preferable todelivering higher quality services to a more focused population. These assumptionshave implications that are difficult and painful for many organizations and individuals.It might mean terminating some programs to improve core services and competencies,giving programs and clients to more efficient, effective agencies, or competingaggressively with those programs that are less effective or efficient. MacMillans matrixexamines four program dimensions that guide placement on the strategy grid andindicate implied strategies.Alignment with Mission Statement: Services or programs that are not in alignment withthe organizational mission, unable to draw on existing organizational skills orknowledge, unable to share resources, and/or unable to coordinate activities acrossprograms should be divested.Competitive Position: Competitive position addresses the degree to which theorganization has a stronger capability and potential to fund the program and serve theclient base than the competitive agencies.Program Attractiveness: Program attractiveness is the complexity associated withmanaging a program. Programs that have low client resistance, a growing client base,easy exit barriers, and stable financial resources are considered simple or "easy toadminister." The level of program attractiveness also includes an economic perspectiveor a review of current and future resource investments.Alternative Coverage: Alternative coverage is the number of other organizationsattempting to deliver or succeeding in delivering a similar program in the same regionto similar constituents.The MacMillan Matrix provides ten cells in which to place programs that have beenreviewed in terms of these four dimensions. Each cell is assigned a strategy that directsthe future of the program (s) listed in the cell (e.g., aggressive competition, jointventure, orderly divestment, etc.). One cell of the matrix, "Soul of the Agency," requiresadditional explanation. These are the difficult programs for which the organization isoften the clients "last, best hope." Management must find ways to use the programs inother cells to develop, piggyback, subsidize, leverage, promote, or otherwise support theprograms in this category.Top of CategoryKNOWLEDGE MANAGEMENTWhat is knowledge management? Getting the right information to the right people atthe right time -- to enable the right actions.
  6. 6. Top of CategoryHow are innovation and knowledge management related? Innovation is the mostevolved stage in the development of knowledge management. The first stage is data, thesecond is information, the third is knowledge, and the fourth is innovation.Top of CategoryINFORMATION MANAGEMENTWhat is information management? Information management (IM) is the harnessingof the information resources and information capabilities of the organization in order toadd and create value both for itself and for its clients or customers. Informationmanagement is the management of organizational processes and systems that acquire,create, organize, distribute, and use information. We adopt a process view ofinformation management. In this view, IM is a continuous cycle of five closely relatedactivities: identification of information needs; acquisition and creation of information; organization and storage of information; information dissemination; information use.The idea underlying IM is that just as an organization purposefully and systematicallymanages its human resources or financial assets, it should do likewise for itsinformation resources and processes. All the classic functions of managing anorganizational activity apply to IM as well: defining goals, providing leadership,developing policies, allocating resources, training staff, evaluation and feedback.Top of CategoryWhat are the benefits of information management? Generally speaking, there arefour kinds of benefits from managing information strategically: reduce costs; reduce uncertainty or risks; add value to existing products or services; create new value through new information-based products or services.Top of CategoryWhat is the difference between data, information and knowledge? Consider adocument containing a table of numbers indicating product sales for the quarter. Asthey stand, these numbers are Data. An employee reads these numbers, recognizes thename and nature of the product, and notices that the numbers are below last year’sfigures, indicating a downward trend. The data has become Information. The employeeconsiders possible explanations for the product decline (perhaps using additionalinformation and personal judgment), and comes to the conclusion that the product is no
  7. 7. longer attractive to its customers. This new belief, derived from reasoning andreflection, is Knowledge. Thus, information is data given context, and endowed withmeaning and significance. Knowledge is information that is transformed throughreasoning and reflection into beliefs, concepts, and mental models.Top of CategoryWhat is an information strategy? An information strategy describes the overalldirection and general framework in which the organization’s information resourcesand processes should be managed so that the organization would achieve its mostimportant goals. An Information Strategy typically consists of the following: IM goalsand objectives that are well aligned with the organization’s mission and vision IMprinciples that articulate desirable outcomes and form the foundation for developinginformation policies One or more areas of strategic focus: this could be some criticalinformation content; common information to be shared; some information-intensiveprocess; or new information-based products or services.Top of CategoryPROJECT MANAGEMENTWhat is the purpose of project management? To provide management with valid,auditable status on which to base management decisions.Top of CategoryWhy should the project be planned? The main reason for planning a project is for costexpediency. Proper project planning will insure that the amount of work to beaccomplished, the time allotted to satisfactory complete the work scope, and theresources required to complete the work scope are equally balanced. Every projectundergoes some amount of change while in progress. Proper planning allows for theassessment of the impact of change prior to implementing the change.Top of CategoryWhat is the most important safe guard provided by project planning? Properplanning includes the documentation of the work scope in language that isunderstandable by the individuals who must accomplish the work scope. This singlestep when properly accomplished will save many false starts as well as preventing thewaste of resources working on efforts which are not required to obtain the desiredgoals of the project.Top of CategoryWhy should a company have a project management system? The customer maywish to know how the company manages a project. The customer wants someassurance that the company can deliver the project on time and within budget. Seniormanagement wants a valid insight on how the project is progressing. History is required
  8. 8. of past performance so that new proposals can be created based on fact. The companydesires to be a superior performer when compared to the competition.Top of CategoryDoes each project have to create its own management system? The style of theindividual project manager will normally vary for each project. It is the responsibility ofsenior management to put in place a policy and procedure, supported by a selection ofproject management tools and formats, which will assure that the status reporting isreadable, auditable, and valid.Top of CategoryWhat are the tools needed for a project management system? A work definitionpolicy and format, a scheduling procedure, a resource budgeting methodology andformat, a real time data collection/reporting system, a material control andaccountability subsystem, a change control subsystem, and a monthly formal statusreview format to be used by senior management.Top of CategoryWhat should the project manager look for in a scheduling system? The three basicelements that the project scheduling systems should provide are; a common basis forcommunication at all operational levels of the project, a basis for regular statusreporting, the use of the management by exception technique.Top of CategoryWhat is a Work Breakdown Structure (WBS)? The work breakdown structuredefines the total project. A work breakdown structure is a product oriented, family treecomposed of hardware elements, software elements, and service elements. The workbreakdown structure relates project elements or work scope definitions to each otherand to the end product. The work breakdown structure is not an organization chart ofcompany personnel.Top of CategoryDELEGATION MANAGEMENTWhy use delegation? Although delegating is one of the most difficult aspects of anymanagement job, there are many important benefits derived by the organization as wellas the manager when tasks and responsibilities are properly delegated. Throughdelegation, you can ease the job of managing and thereby increase your owneffectiveness and that of the work group.Top of Category
  9. 9. What are the benefits of delegation to the manager? Everybody wins with effectivedelegation, but delegation is especially important if you want to survive and grow in anorganization. Here is how delegation can help the manager: Allows the manager to achieve more. Probably one of the most signifi- cant benefits is that you can achieve greater productivity. Through the proper selection, assignment, and coordination of tasks, you can mobilize resources to achieve more than would have been individually possible. Allows time for managerial activities. Delegation gives you an opportunity to handle aspects of the job that no one else can do. These activities might include project planning, monitoring team members, and handling personnel problems as they arise. Using delegation, you can focus on doing a few tasks well rather than too many tasks poorly. Increases managerial promotion potential. Personal advancement. If you dont have people in the department who are trained to handle responsibilities, you will be shackled to one area and wont be considered for promotion. John Henry Patterson, founder of National Cash Register Company, used to walk into his departments and order the managers to take two-week vacations. His motive: to determine whether a team member had been adequately trained to take over the supervisors job on short notice. The key to such training, Patterson believed was delegating--providing the team member with the experience, knowledge, and responsibility needed for a smooth transition. Managers who dont delegate dont have trained team members to take their places. Managers who arent able to delegate at their current level wont be able to delegate at the next. Their ineffectiveness thus multiplies with each level in the organization.Top of CategoryWhat are the benefits of delegation for team members? Your team members aremore highly motivated with effective delegation. Develops team members skills. Failure to effectively delegate deprives team members of opportunities to improve their skills and assume greater responsibility. Team members realize that they are not learning and gaining the experience they could. As a result, they may leave the firm for more challenging and supportive environments. Unfortunately, the most talented team members are the most likely to leave and those you least want to lose. A routine task for you is often a growth opportunity for a team member. Delegating a wide variety of assignments not only serves to train team members, it allows for backup personnel in times of emergency or termination of other employees. When others are well-versed in handling the responsibilities of different areas, you attain maximum flexibility and ensure that the project will not be at a standstill in your absence. Increases team member involvement. Proper delegation encourages team members to understand and influence the work the department does. It allows team members a chance to incorporate their values in the workplace and, in many cases, to work on activities that especially interest them. Increasing team members involvement in the workplace increases their enthusiasm and initiative. Increases promotion potential. As with managers, a team member who
  10. 10. receives extensive delegation will be ready and able to advance to new positions. In this regard, delegation serves both to train and to test an employee. Benefits to the Organization If both managers and team members benefit from delegation, it follows that the organization as a whole benefits. Maximizes efficient output. When you delegate tasks according to the skills and abilities of each member of the work group, the department as a whole is likely to produce a higher level of work. Work will also be completed more efficiently. Delegation helps you make the best use of available human resources and achieve the highest possible rate of productivity. In addition, it allows new ideas, viewpoints, and suggestions to flourish. Produces faster, more effective decisions.Top of CategoryHow does delegation help decision making? Effective delegation makes for faster,more effective decision making. An organization is most responsive to change in theenvironment when decisions are made by those individuals closest to the problems;that is, responsibility and decision making are pushed further down in an organization.Individuals closest to the problem have the most information on which to base anintelligent decision. Decision making can be achieved more expediently throughdelegation, thus allowing the organization to be more responsive and hence morecompetitive. When team members participate in decision making there is an increase inemployee motivation, morale, and job performance. The greater the employeeparticipation, the greater the employee commitment to the job and the organization!Increases flexibility of operations.Effective delegation trains many people to do the same assignments. This overlap allowsfor greater flexibility of work assignments. When someone is absent or a crisis requirespeople to assist with tasks not regularly a part of their jobs, they will already be familiarwith the assignment. Delegation prepares more individuals for promotion or rotation ofresponsibilities. And it allows you to appoint someone to supervise the work groupwhen youre absent.