Strategic management as group of human beings

You can’t develop clear strategy without clear definition of your strategy makers ...

May 2013

By Miroslav Šebek

Mission, vision, future, responsibility, implementation, values, culture, long-term, goals, structure, customer preference, competition, position, SWOT, environment, changes, financial crisis, credit, focus, advantage

Motto:

What is this presentations about ? There is vast content on strategic management as managerial activity or process in literature and internet too. On opposite, there is almost no material on strategic management as organizational body comprising human beings in these sources. To make matters worse, the rare definitions are as vague as following one in Wikipedia:

“Strategic management includes the management team and possibly the Board of Directors and other stakeholders.”

In result, many organizations really don’t know what is their strategic management, let alone why. They suppose tacitly that the word ‘strategic’ is mere label for top ranks and ‘strategy’ is a substance diffusing from top management to the rest of an organization.

The goal of this presentation is to find exact borders of strategic management in an organization and explain in a few examples why such exact definition matters.

Strategy has been defined many times in many ways. Author personally preferes following definition :

Successful strategy – such strategy which ensures attainment of selected goals or at least survival in real world conditions (=limited resources, limited information, uncertain future)

Strategic management – such part of an organizational management, which actually faces decision making on strategy.

Strategy is a pattern of behavior consistent over some period of time.

A few definitions :

Such definition of strategy is very general, usable even for non-thinking entities like sharks, ants or collective leaderships.

Let’s imagine that strategists of some organization just identified following ‘needs’ of their organization’ (8 resource points for full satisfaction of a ‘need’) :

Technologic Equipment

Human Resources

Advertising Campaigns

Research & Development

Prestigious address of HQ

Expansion into new markets

Competitive Intelligence

Legal defence

So in this simplified example, they have 8x8=64 ‘need’ points

Unfortunatelly, they have only 42 universal (next simplifaction !) resource points to satisfy all their needs above

Note: Neither methods of identifying of the ‘needs’ nor development of necessary strategic metric is subject of this presentation.

What to do ?

Supposing they are honest (so they avoid ‘solutions’ like to pretend 42 = 64, do nothing or hand it over to a consultant) , they may develop e.g. following strategic solution :

Technologic Equipment

Human Resources

Advertising Campaigns

Research & Development

Prestigious address of HQ

Expansion into new markets

Competitive Intelligence

Legal defence

Now the strategists can formulate Clear, Unambiguous, Attainable and Fully funded instructions for the rest of the organization.

This is the accurate spot, where strategic management ends (and where operational, tactical or project management begins)

Previous example from non-strategic managers’ point of view:

Strategic management to technical director:

Buy or refit your technological equipment up to 7/8 of the best available. You’ll be provided with sufficient funds for such task. We realize that some competitor may be at 8/8, however such competitor would have to have weaknesses in other fields. Don’t try to surpass your goal (7/8) by overloading of your subordinates. Their morale is very important for us.

Sufficient level of Human Capital will be only 4/8 of the best available. We realize in our strategy that HR will be our obvious weakness, so we want to exploit it as a bait for our competitors. Our employees will be notified we don’t expect very much from them with respect to their low wages. Nonetheless, their morale is very important for us.

Strategic management to HR director:

If feeling of sanity of strategic management is very important for the rest of an organization, feeling of its competency does even better work!

By the way, business is not military, higher number of divisions doesn’t guarantee victory.

Organizational

Unit A Organizational Unit B

Organizational Unit C

Organizational Unit D

Organizational Unit E

Organizational Unit F

Organizational Unit G

Organizational Unit H

Thinking in categories of organizational units instead measurable strategic qualities (like the ones at previous slides) causes many hard to solve problems and is not strategic at all – it’s mere portfolio management, if any.

Once again : Strategic management is the part of an organization, which transforms Scarcity of resources, Uncertainty about future and Complexity of environment into Clear, Unambiguous, Attainable and Fully funded instructions for the rest of an organization. This is for which is strategic management responsible.

The rest of an organization carries out the clear and attainable instructions from strategic management. It also provides strategists with necessary information and feedback too. This is for which is the rest of an organization responsible.

Graphics used in this slide will be used in the rest of this presentation : strategists in green, rest of an organization in blue and red line separating them.

Next slides exploit the definition above to identification of strategic management body and assessment of its functionality in most common types of corporate structures.

1. CEO is the only strategist

CEO & Advisors

The rest of an organization

Top officers

In this model of strategic management, CEO alone or with advisors (which are not managers) decides on resources allocation and formulates clear and attainable instructions for top officers of staff.

Simplicity; clear motivations of participants

Overloaded CEO

This model is common in SME, start-ups

2a. C-suite is collective strategist

C-suite

The rest of an organization

Top officers

In this model of strategic management, C-suite is collective strategist deciding on resources allocation and formulating clear and attainable instructions for top officers. C-suite members have no great organizational structures below them, this is role of Top officers of staff.

Sufficient ‘brain power’ for crafting of strategy even in large organization

High costs of strategic leadership; C-suite members may have higher ambitions than ‘mere’ crafting of strategy

This is just theoretical model. In reality this model has mutated into the one on the next slide...

2b. C-suite sitting on two chairs

CEO

The rest of an organization

CXOs = top officers

In this model of strategic management, C-suite tries (unsuccessfully!) to decide on resources allocation, giving up formulation of clear and attainable instructions for top officers of staff, because the officers are the same members of C-suite. Feel free to imagine all kinds of problems (motivational, managerial, strategic, political etc.) which are introduced by such dichotomy in role of C-suite members.

Unfortunatelly, this is the most common model of corporate strategic management. Its frequent using results in general impression that business strategy is something vague and blurred.

Could you imagine an executive which would agree with allocation of modest resources for HIS/HER department ?!

Could you imagine an executive which would agree with inferior role of HIS/HER department in corporate strategy ?!

3. SBU (=Strategic Business Unit) model

Corporate top management

In this model, corporate top management has only portfolio management role, maybe doing some little transfers of money. Real strategic role lies with SBU’s leaderships, because they really deals with Scarcity of resources, Uncertainty of future and Complexity of their environments.

Robust structure of corporation = no single strategic mistake can endanger whole corporation

Little resources at hand for SBU leadership; ‘Little’ leaders in SBUs, because you can’t expect great strategist in such small units

Most famous corporation for using of this model is GE.

SBU’s leaderships

SBU 1 SBU 2 SBU 4 SBU 3 SBU 5

4. Pockets of strategy

Any top management

In this unwanted model top management pretends to be strategic, but really does no decisions on allocation of scarce resources. Instead usually demands infinite stream of ‘analyses’ and ‘decision materials’. So other people and groups of people must do necessary strategic decisions instead of top management. Some of them are driven by their own personal responsibility, the others simply can’t carry out all tasks assigned to them owing to insufficient resources.

Many companies just before collapse use this ‘model’.

Obviously, this is not a viable model. Desperate decisions of uninformed and insufficiently sourced middle-managers can’t substitute for missing decisions of top management for a longer period.

5. External strategists

Any top management

External strategists may not be necessarily some consultants. In-house strategic planning staff acts in the same way. The essence of this model is in passivity of top management which only ‘rubber-stamps’ ready-to-use decisions on resources allocation made by external strategists.

External strategists

Ready-to-use strategy

External strategists may be experienced experts in the field of corporate strategy

Costs of ‘outsourcing of strategy’ – experts may be expensive; Limited motivation of external strategists to daring decisions and great changes; Collection of data for strategists may be seen as audit-like bothering by staff; Corporate top management is perceived as non-functional

This model is in fact very common despite strong belief of all top managers of the world that they are the ‘real’ strategists and some advisors only support them.

It hides itself behind clouds of ink

Are you still unsure who is real strategist in your organization? Here is the simplest key:

How the suspect usually behaves in difficult or unclear situation?

He/she makes decisions (even painful)

No, this is not strategist but an octopus Yes, he/she may be your strategist

All my presentations on strategy and corporate culture

Personal planning of strategist http://www.slideshare.net/kerimek/personnal-planning-of-strategist

My glosses to famous Sun Tzu’s The Art of War http://www.slideshare.net/kerimek/the-art-of-war-glosses

Surprising roots of bad organizational culture http://www.slideshare.net/kerimek/roots-of-badculture

Surprising roots of bad organizational culture – shortened version

http://www.slideshare.net/kerimek/roots-of-bad-culture-shortened-version

Strategic management as group of human beings http://www.slideshare.net/kerimek/strategic-management-as-group-of-human-beings

Thank you for your attention!

Looking forward to your feedback, you can use my e-mail

miroslav.sebek@seznam.cz

or send me message at LinkedIn