Driving performance through strategic managementPosted on: November 28, 2022
Today’s business leaders need to build agility and flexibility into every aspect of their businesses in order to survive the fast-changing, unpredictable and crowded global marketplace.
Many understand the critical role that organisational strategy plays in shaping business practices in both the short, medium and long-term if core goals and missions are to be achieved; a competitive strategy, supported by strategic planning processes, helps businesses to remain relevant, functional and profitable. While many can likely point to the value of malleability and innovation in response to evolving scenarios, statistics indicate that plenty of businesses are still labouring under misguided, insufficient strategies:
- 90% of businesses fail to meet their strategic targets
- 7.5% of strategy potential is lost due to poor resource allocation
- 33% of leaders rate their organisation as ‘poor’ or ‘very poor’ at implementation of strategy
- 85% of leadership teams spend less than one hour per month discussing strategy
- 95% of employees do not understand their organisation’s strategy.
Weak implementation, poor resource planning, lack of dedicated strategy formulation and review, failing to understand the strategic vision: it’s unsurprising that many businesses are missing out on key opportunities to grow and expand. So, how can gaps in strategy be addressed, what are the most critical areas to tackle, and how can changes be implemented?
What is strategic management – and why is it important?
Strategic management – also known as management strategy or corporate strategy – is the process of developing, implementing, monitoring and adapting business initiatives to achieve core aims. It’s integral to overarching business growth and ambition, placing particular focus of the proper allocation and use of an organisation’s resources.
Only through continuous, planned management – which adapts to weather changes in internal and external environments, such as consumer demands or staffing issues – can a company remain resilient and leverage its assets in a way that serves its goals. It’s a universal company strategy, relevant to businesses of all sizes who need to evaluate progress, performance, and make changes to activities and align them with goal-driven action plans.
Continuous, responsive strategic management allows companies to:
- attain key goals, targets and ambitions – such as increasing market share
- communicate ambitions to stakeholders, forging a cohesive corporate culture and shared mission
- align overall strategy with day-to-day work, systems and processes
- prioritise activities, projects, products and services in a way that supports sustainable, structured growth
- measure and monitor performance in relation to strategic targets
- increase competitive advantage.
This last is particularly important. Business leaders and chief executives who are strategy, goal and plan-focused are, by association, forward-thinking. This outlook – which keeps tabs on market changes, consumer habits and behaviours, constraints, adverse events and other factors – helps to limit damage and seize opportunities. Such businesses, who strive for iterative improvement and take a proactive approach to their roadmap, are also likely to reap additional benefits such as attracting top talent and increasing employee satisfaction.
The strategic management process
Strategic management cannot occur without strategic thinking. Business leaders and managers should follow a four-step framework when developing strategies:
- Analysis – this initial stage requires leaders to clarify any business intentions. Starting with the company mission statement, the aim is to evaluate alignment between objectives, performance and progress. A SWOT analysis is a valuable tool in this phase, as is risk management evaluation and sourcing information from relevant stakeholders. After identifying the primary aims, leaders are in a position to start developing their strategic roadmap.
- Formation – next, leaders should develop a sequenced action plan to meet the primary objectives. All stages and activities detailed in the action plan should be specific, measurable, achievable, realistic and time-bound (SMART). Alongside this framework, having contingency plans to account for unforeseen events is recommended.
- Execution – this stage begins when the action plan is in motion. All relevant stakeholders should be briefed – and aware of the individual and collective responsibilities required of them – and all necessary elements for implementation should be in place. For example, specific business units may be ready to adopt new processes, or newly created teams to work on new projects.
- Evaluation and control – the final stage requires leaders to revisit overarching goals, assessing the process and its results in order to benchmark progress. Leaders may decide further strategic decision-making and correction action is required, depending how much headway has been made with the roadmap. Each action should move business operations closer to the core aims.
Measuring the success of a strategic plan
How can business leaders be confident that their strategic plans are effective?
The balanced scorecard (BSC) is a series of measures that enables leaders to gain a thorough, yet speedy, insight into how their companies are performing. Developed by Robert S. Kaplan and David P. Norton – who believe that fiscal-based, traditional means of measuring success are not sufficiently detailed to deliver true, actionable insights – the BSC goes beyond basic metrics, such as simply whether or not activities produce a return-on-investment (ROI).
Modern businesses require more valuable, holistic feedback on their strategic plans. In order to stay relevant in competitive environments, other measures need to be used. To gain a fuller picture of organisational performance and health – and reduce information overload for leaders – the scorecard focuses on:
- financial analysis – including ROI, profitability and operating income
- customer analysis – such as customer service, customer retention and investments in this area
- internal analysis – focusing on the internal environment, such as how ways of working and processes are linked to strategic planning goals
- learning and growth perspective – including employee perspectives, satisfaction and retention, together with data and feedback from company information systems.
Evaluating business performance from these four, disparate core competencies serves to highlight the most urgent areas requiring development and improvement. Using this data, evidence and feedback, leaders can then make decisions, troubleshoot problems and begin re-forecasting, developing fresh action plans that are organised into specific, measurable steps.
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