THE RELEVANCE OF STRATEGIC MANAGEMENT TO ORGANIZATIONAL PERFORMANCE
- BACKGROUND OF THE STUDY
The spate of competition among organizations has necessitated the need for improved performance if they are to realize their corporate goals. The socio-political environment of businesses is also ever changing and imposes upon these entities the challenge of managing that change in order to sustain performance. Management researchers have maintained that at the heart of organizational performance are three determinants: Strategy, capability and the environment. Strategic management harnesses these elements and thus provides organizations with a tool for managing performance.
Strategic management is a process for developing and enacting plans to reach a long-term goal that takes into account internal variables and external factors. It encompasses an integrated, future-oriented managerial perspective that is
- outwardly focused
- forward-thinking and
- Performance-based (see Kiggundu 1996).
Strategic managers identify long-range targets, scan their operating environments, evaluate their organization’s structures and resources, match these to the challenges they face, identify stakeholders and build alliances, prioritize and plan actions, and make adjustments to fulfill performance objectives over time.
Brinkerhoff (1991 and 1994) characterizes strategic management as looking out, looking in, and looking ahead. “Looking out” means exploring beyond the boundaries of your organization to set feasible objectives, identify key stakeholders, and build constituencies for change. “Looking in” implies critically assessing and strengthening your systems and structures for managing personnel, finances, and other essential resources. Finally, “looking ahead” entails melding your strategy with structures and resources to reach your policy goals, while monitoring your progress and adjusting your approach as needed.
Balancing strategic management’s outward-, inward-, and forward-looking functions helps you develop a vision and a strategy for where and how to move health sector reform forward. Balancing these different perspectives is the essence of managing strategically (Brinkerhoff 1991)
Using strategic management tool involves essentially a way of thinking, a mental framework or approach, as well as a set of analytic tools. For strategic management to be effectively used, the manager must develop and acquire a strategic mentality or outlook.
The strategic approach or mentality consists of four main elements:
- First, the strategic approach is oriented toward the future. It recognizes that the environment will change. It is a long-range orientation, one that tries to anticipate events rather than simply react as they occur. The approach leads the manager to ask where his/her organization wants to be after a certain period, what it will need to get to where it wants, and how to develop strategies and the means to get there, and finally, how to manage those strategies to achieve the organization’s goals and objectives. It is recognized that the future cannot be controlled, but the argument can be made that by anticipating the future, organizations can help to shape and modify the impact of environmental change.
- Second, the strategic approach has an external emphasis. It takes into account several components of the external environment, including technology, politics, economics and the social dimension. Strategic thinking recognizes that each of these can either constrain or facilitate an organization as it seeks to implement policy. Politics will determine the policies that are to be implemented, economics will determine the organization’s level of resources, and social factors might well determine who the organization’s beneficiaries will be. In particular, strategic thinking recognizes and emphatically takes into account politics and the exercise of political authority. Managers are not free to do anything they decide. Managers must be sensitive to the needs and respond to demands of constituents over whom they have little or no control. Among those constituents, political actors are perhaps the most important.
- Third, the strategic approach concentrates on assuring a good fit between the environment and the organization (including its mission and objectives, strategies, structures, and resources) and attempts to anticipate what will be required to assure continued fit. Under conditions of rapid political, economic and social change, strategies can quickly become outmoded or no longer serve useful purposes; or the resources traditionally required by the organization to produce its goods and services may suddenly become unavailable. The strategic approach recognizes that to maintain a close fit with the environment, the different elements of the organization will need to be continuously re-assessed and modified as the environment evolves.
- Finally, the strategic approach is a process. It is continuous and recognizes the need to be open to changing goals and activities in light of shifting circumstances within the environment. It is a process that requires monitoring and review mechanisms capable of feeding information to managers continuously. Strategic management or planning are not one-shot approaches, they are ongoing. When all taken together, these attitudes and behaviors are really a way of approaching or thinking about how to manage or how to implement policy change. Strategic management (or planning) is not something that can be applied only once and then forgotten about or ignored. In that sense it is more than a tool; it is a mental framework.
From the above, it is evident that strategic management is a dynamic process of aligning strategies, performance and business results; it is all about people, leadership, technology and processes. Effective combination of these elements will help with strategic direction and successful service delivery. It is a continuous activity of setting and maintaining the strategic direction of the organisation and its business, and making decisions on a day-to-day basis to deal with changing circumstances and the challenges of the business environment. This concept referred by others as strategic planning has become more of a buzzword than it ever was before. Organizations have turned on the “strategic planning” process: For some, it meets stakeholders’ demands; for others it has been used to justify ‘downsizing’; and for an even smaller number, it has been done because the organization truly understands the need for a strategic blueprint to guide the decision-making process.
But out of all organizations which go through a strategic planning process and subsequently develop a strategic plan, how many successfully implement their plan? How many know if the implementation was successful? The impacts and benefits to an organization engaged in strategic management or planning appear not to be measured in any concise way. This lack of evaluating the impact has consequences on organizations, both in terms of monies spent on planning processes, and organizational commitment to planning and implementation. Many organizations are currently engaged in developing a strategic plan, while others are implementing strategic plans. What impact has the strategic management had on changing the culture and improving the performance of an organization? It is imperative that once an organisation engages in this process that it is known what type of impact the plan has had. Because some stakeholders do not believe in strategic planning, this lack of feedback could serve to further discredit the process. This therefore provides the basis for examining the relevance of strategic management on organisational performance in African Petroleum Plc & TOTAL Nigeria Plc