Strategic Management

STRATEGIC MANAGEMENT What is strategic management? Strategic management can be used to determine mission, vision, values, goals, objectives, roles and responsibilities, timelines, etc. What is strategic planning? Strategic planning is a management tool, period. As with any management tool, it is used for one purpose only: to help an organization do a better job - to focus its energy, to ensure that members of the organization are working toward the same goals, to assess and adjust the organization's direction in response to a changing environment. In short, strategic planning is a disciplined effort to produce fundamental decisions and actions that shape and guide what an organization is, what it does, and why it does it, with a focus on the future. (Adapted from Bryson's Strategic Planning in Public and Nonprofit Organizations). A word by word dissection of this definition provides the key elements that underlie the meaning and success of a strategic planning process: The process is strategic because it involves preparing the best way to respond to the circumstances of the organization's environment, whether or not its circumstances are known in advance; nonprofits often must respond to dynamic and even hostile environments. Being strategic, then, means being clearr bout the organization's objectives, being aware of the organization's resources, and incorporating both into being consciously responsive to a dynamic environment. 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. The process is disciplined in that it calls for a certain order and pattern to keep it focused and productive. The process raises a sequence of questions that helps planners examine experience, 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 be made in order to answer the sequence of questions mentioned above. The plan is ultimately 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 this world, strategic planning implies that some organizational decisions and actions are more important than others - and that much of the strategy lies in making the tough decisions about what is most important to achieving organizational success. The strategic planning can be complex, challenging, and even messy, but it is always defined by the basic ideas outlined above - and you can always return to these basics for insight into your own strategic planning process. What is the difference between strategic planning and long-range planning? Although many use these terms interchangeably, strategic planning and long-range planning differ in their emphasis on the "assumed" environment. Long-range planning is generally considered to mean the development of a plan for accomplishing a goal or set of goals over a period of several years, with the assumption that current knowledge about future conditions is sufficiently reliable to ensure the plan's reliability over 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 planning assumes 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 the environment is indeed changeable, often in unpredictable ways. Strategic planning, then, stresses the importance of making decisions that will ensure the organization's ability to successfully respond to changes in the environment. What is strategic thinking and strategic management? Strategic planning is only useful if it supports strategic thinking and leads to strategic management - the basis for an effective organization. Strategic thinking means asking, "Are we doing the right thing?" Perhaps, more precisely, it means making that assessment using three key requirements about strategic thinking: a definite purpose be in mind; an understanding of the environment, particularly of the forces that affect or impede the fulfillment of that purpose; and creativity in developing effective responses to those forces. It follows, then, that strategic management is the application of strategic thinking to the job of leading an organization. Dr. Jagdish Sheth, a respected authority on marketing and strategic planning, provides the following framework for understanding strategic management: continually asking the question, "Are we doing the right thing?" It entails attention to the "big picture" and the willingness to adapt to changing circumstances, and consists of the following three elements: formulation of the organization's future mission in light of changing external factors such as regulation, competition, technology, and customers development of a competitive strategy to achieve the mission creation of an organizational structure which will deploy resources to successfully carry out its competitive strategy. Strategic management is adaptive and keeps an organization relevant. In these dynamic times it is more likely to succeed than the traditional approach of "if it ain't broke, don't fix it." What Strategic Planning Is Not! Everything said above to describe what strategic planning is can also provide an understanding of what it is not. For example, it is about fundamental decisions and actions, but it does not attempt to make future decisions (Steiner, 1979). Strategic planning involves anticipating the future environment, but the decisions are made in the present. This means that over time, the organization must stay abreast of changes in order to make the best decisions it can at any given point - it must manage, as well as plan, strategically. Strategic planning has also been described as a tool - but it is not a substitute for the exercise of judgment by leadership. Ultimately, the leaders of any enterprise need to sit back and ask, and answer, "What are the most important issues to respond to?" and "How shall we respond?" Just as the hammer does not create the bookshelf, so the data analysis and decision-making tools of strategic planning do not make the organization work - they can only support the intuition, reasoning skills, and judgment that people bring to their organization. Finally, strategic planning, though described as disciplined, does not typically flow smoothly from one step to the next. It is a creative process, and the fresh insight arrived at today might very well alter the decision made yesterday. Inevitably the process moves 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 on a commuter train, but rather like a ride on a roller coaster. But even roller coaster cars arrive at their destination, as long as they stay on track! What is a strategic plan? In strategic planning it is critical to formally consider how your organization will accomplish its goals. The answer to this question is a strategy. There are a variety of formal definitions for strategies, but everyone fundamentally agrees that a strategy is the answer to the question, "How?" "Strategies are simply a set of actions that enable an organization to achieve results." MAP for Nonprofits, St. Paul, MN. "Strategy is a way of comparing your organization's strengths with the changing environment in order to get an idea of how best to complete or serve client needs." Jim Fisk & 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 the strategy: Organizational strategy outlines the planned avenue for organizational development (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 providing information and intake services in welfare offices). Functional strategies articulate how to manage administration and support needs that impact the organization's efficiency and effectiveness (e.g., develop a financial system that provides accurate information using a cash accrual method). When should a strategic plan be developed? Strategy development follows the creation and affirmation of the organization's purpose statement, environmental and program data collection and analysis, and identification of critical issues. It is critical that strategy development follow these steps because the information gathered and decisions 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 the organization's ultimate goal, provides the direction to which the strategies should ultimately lead. External market data and program evaluation results provide critical data to support strategy development. Without this information and insight, the organization's strategies will not be in alignment with or effective in the marketplace. The critical issues list serves as the specific focus and framework for the activities of the organization and the pattern of these activities (developing and selecting the strategies). How are strategies developed? Strategy formulation is a combination of rational, scientific examinations and educated, intuitive best guesses. Many individuals are overwhelmed by the idea of developing strategies, but it can be a fun and invigorating process. The process entails: examining the organization's critical issues determining how the organization's strengths and skills can be employed to address the critical issues analyzing opportunities and strengths and looking for ways to synthesize the two exploring and choosing the best approaches for the organization. During this evaluation ask these key questions: Does the strategy meet/address critical issues? Is this aligned with our mission? Is this approach financially viable? One effective method of strategy generation is to list critical issues and organizational strengths onto flipcharts and then have staff or board members brainstorm possible uses of those strengths or other skills to address the critical issues. Once the brainstorm session is completed, use a roundtable discussion to investigate and evaluate the possible strategies. Remember to develop a list of alternative strategies to investigate and keep in the contingency planning file. It is important not to discount the ideas that come to people during non-working hours. The Polaroid camera is the result of a three year old's question to her father: "Dad, why can't I see the picture now?" What are some tools for for analysis and planning? A number of analytical tools have been developed to assist organizations with the planning process. Many nonprofit organizations have adapted these tools, modifying the questions and criteria to align with their own specific services and markets. Listed below are analytical tools frequently used by nonprofit and for-profit organizations. What is SWOT Analysis? SWOT analysis is a methodology of examining potential strategies derived from the synthesis of organizational strengths, weaknesses, opportunities and threats (SWOT). The partnering of the different elements and the extensive data collected as a result of the analysis can serve as a spark for roundtable discussions and refinement of current strategies or generation of new strategies. What is the MacMillan Matrix? This strategy grid, developed by Dr. Ian MacMillan, is specifically designed to assist nonprofit organizations to formulate organizational strategies. There are three assumptions underlying this approach: the need for resources is essentially competitive and all agencies wanting to survive must acknowledge this dynamic given that resources are scarce, there is no room for direct duplication of services to a single constituency -- this is wasteful and inefficient mediocre or low quality service to a large client population is less preferable to delivering higher quality services to a more focused population. These assumptions have 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 competing aggressively with those programs that are less effective or efficient. MacMillan's matrix examines four program dimensions that guide placement on the strategy grid and indicate implied strategies. Alignment with Mission Statement: Services or programs that are not in alignment with the organizational mission, unable to draw on existing organizational skills or knowledge, unable to share resources, and/or unable to coordinate activities across programs should be divested. Competitive Position: Competitive position addresses the degree to which the organization has a stronger capability and potential to fund the program and serve the client base than the competitive agencies. Program Attractiveness: Program attractiveness is the complexity associated with managing a program. Programs that have low client resistance, a growing client base, easy exit barriers, and stable financial resources are considered simple or "easy to administer." The level of program attractiveness also includes an economic perspective or a review of current and future resource investments. Alternative Coverage: Alternative coverage is the number of other organizations attempting to deliver or succeeding in delivering a similar program in the same region to similar constituents. The MacMillan Matrix provides ten cells in which to place programs that have been reviewed in terms of these four dimensions. Each cell is assigned a strategy that directs the future of the program (s) listed in the cell (e.g., aggressive competition, joint venture, orderly divestment, etc.). One cell of the matrix, "Soul of the Agency," requires additional explanation. These are the difficult programs for which the organization is often the clients' "last, best hope." Management must find ways to use the programs in other cells to develop, piggyback, subsidize, leverage, promote, or otherwise support the programs in this category. KNOWLEDGE MANAGEMENT What is knowledge management? Getting the right information to the right people at the right time -- to enable the right actions. How are innovation and knowledge management related? Innovation is the most evolved stage in the development of knowledge management. The first stage is data, the second is information, the third is knowledge, and the fourth is innovation. INFORMATION MANAGEMENT What is information management? Information management (IM) is the harnessing of the information resources and information capabilities of the organization in order to add and create value both for itself and for its clients or customers. Information management is the management of organizational processes and systems that acquire, create, organize, distribute, and use information. We adopt a process view of information management. In this view, IM is a continuous cycle of five closely related activities: • 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 systematically manages its human resources or financial assets, it should do likewise for its information resources and processes. All the classic functions of managing an organizational activity apply to IM as well: defining goals, providing leadership, developing policies, allocating resources, training staff, evaluation and feedback. What are the benefits of information management? Generally speaking, there are four 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. What is the difference between data, information and knowledge? Consider a document containing a table of numbers indicating product sales for the quarter. As they stand, these numbers are Data. An employee reads these numbers, recognizes the name and nature of the product, and notices that the numbers are below last year’s figures, indicating a downward trend. The data has become Information. The employee considers possible explanations for the product decline (perhaps using additional information and personal judgment), and comes to the conclusion that the product is no longer attractive to its customers. This new belief, derived from reasoning and reflection, is Knowledge. Thus, information is data given context, and endowed with meaning and significance. Knowledge is information that is transformed through reasoning and reflection into beliefs, concepts, and mental models. What is an information strategy? An information strategy describes the overall direction and general framework in which the organization’s information resources and processes should be managed so that the organization would achieve its most important goals. An Information Strategy typically consists of the following: IM goals and objectives that are well aligned with the organization’s mission and vision IM principles that articulate desirable outcomes and form the foundation for developing information policies One or more areas of strategic focus: this could be some critical information content; common information to be shared; some information-intensive process; or new information-based products or services. PROJECT MANAGEMENT What is the purpose of project management? To provide management with valid, auditable status on which to base management decisions. Why should the project be planned? The main reason for planning a project is for cost expediency. Proper project planning will insure that the amount of work to be accomplished, the time allotted to satisfactory complete the work scope, and the resources required to complete the work scope are equally balanced. Every project undergoes some amount of change while in progress. Proper planning allows for the assessment of the impact of change prior to implementing the change. What is the most important safe guard provided by project planning? Proper planning includes the documentation of the work scope in language that is understandable by the individuals who must accomplish the work scope. This single step when properly accomplished will save many false starts as well as preventing the waste of resources working on efforts which are not required to obtain the desired goals of the project. Why should a company have a project management system? The customer may wish to know how the company manages a project. The customer wants some assurance that the company can deliver the project on time and within budget. Senior management wants a valid insight on how the project is progressing. History is required of past performance so that new proposals can be created based on fact. The company desires to be a superior performer when compared to the competition. Does each project have to create its own management system? The style of the individual project manager will normally vary for each project. It is the responsibility of senior management to put in place a policy and procedure, supported by a selection of project management tools and formats, which will assure that the status reporting is readable, auditable, and valid. What are the tools needed for a project management system? A work definition policy and format, a scheduling procedure, a resource budgeting methodology and format, a real time data collection/reporting system, a material control and accountability subsystem, a change control subsystem, and a monthly formal status review format to be used by senior management. What should the project manager look for in a scheduling system? The three basic elements that the project scheduling systems should provide are; a common basis for communication at all operational levels of the project, a basis for regular status reporting, the use of the management by exception technique. What is a Work Breakdown Structure (WBS)? The work breakdown structure defines the total project. A work breakdown structure is a product oriented, family tree composed of hardware elements, software elements, and service elements. The work breakdown structure relates project elements or work scope definitions to each other and to the end product. The work breakdown structure is not an organization chart of company personnel. DELEGATION MANAGEMENT Why use delegation? Although delegating is one of the most difficult aspects of any management job, there are many important benefits derived by the organization as well as the manager when tasks and responsibilities are properly delegated. Through delegation, you can ease the job of managing and thereby increase your own effectiveness and that of the work group. What are the benefits of delegation to the manager? Everybody wins with effective delegation, but delegation is especially important if you want to survive and grow in an organization. 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 don't have people in the department who are trained to handle responsibilities, you will be shackled to one area and won't 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 supervisor's 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 don't delegate don't have trained team members to take their places. Managers who aren't able to delegate at their current level won't be able to delegate at the next. Their ineffectiveness thus multiplies with each level in the organization. What are the benefits of delegation for team members? Your team members are more 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 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. How does delegation help decision making? Effective delegation makes for faster, more effective decision making. An organization is most responsive to change in the environment 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 an intelligent decision. Decision making can be achieved more expediently through delegation, thus allowing the organization to be more responsive and hence more competitive. When team members participate in decision making there is an increase in employee motivation, morale, and job performance. The greater the employee participation, 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 allows for greater flexibility of work assignments. When someone is absent or a crisis requires people to assist with tasks not regularly a part of their jobs, they will already be familiar with the assignment. Delegation prepares more individuals for promotion or rotation of responsibilities. And it allows you to appoint someone to supervise the work group when you're absent.