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Developing Strategy

People & Strategy

Strategy from the top

- board of directors of an organisation are appointed by the shareholders to ensure that the business is run with the intention of achieving the strategic objectives desired by those owners.

- each director is in some way involved with the establishment and oversight of strategy within the organisation. This forms part of what is generally known as governance of an organisation

- CEO is seen as the chief strategist with ultimate responsibility and ownership of all strategic decisions, and full accountability for its success or failure.

- There is danger when its strategy is too closely aligned, on a personal level, with the character and work of the CEO

- Success in such circumstances can lead to significant overconfidence

- investors may often be led to buy or sell shares based around the character of the CEO rather than the successful operation (or otherwise) of the organisation.

Strategy from within

- many people with management responsibility will also contribute to the development of strategy.

- anybody within an organisation who has some aspect of decision-making within their role is also contributing in some way to the strategy of the organisation

ADVANTAGES

*greater knowledge of the day-to-day pressures of the operation

*people will find workable solutions to ensure a task is achieved

*people are always working at the latest ‘today’ position as opposed to the point where an original strategy was established

* people will be more motivated to help when they recognise that the development of the strategy has involved others who are directly involved in and understand the requirements.

DISADVANTAGES

*lack of understanding of a wider strategic vision from within the organisation

*a lack of confidential information that is required to understand the longerterm vision

*the risk of negative and inappropriate reaction to short-term operational and task failure.

Other strategy makers

1. finance - to ensure appropriateness of required funding / provide a financial measurement of success based around key performance indicators

2. HR - appropriate people are in place at the outset of the strategy and throughout the life of the strategy

3. consultants & experts - to help with complicated short-term requirements both in the initial formulation of a strategy and potentially at key points throughout its evolution.

4. CoSec - to provide independent link between directors, chair and the chief executive / to observe directors and others within meetings, identifying areas of weakness and training need / building of an independent oversight and history of strategic successes and failures

Conflicts of interest, the ‘agency problem’ and information asymmetry

Conflict of Interests

- range of different personalities involved in the formulation of strategy - there will often be conflicts of interest

- people may be taking diametrically opposed views of a particular opportunity situation; or seeking to gain personally from influencing a strategic decision

Declared conflicts are managed usually through using a control mechanism such as a register of conflicts and managing the conflict itself.

Agency

- personal beliefs of directors may be in conflict with the role that they are expected to fulfil.

- remuneration should be more closely aligned with longer-term strategic objectives.

Information Assymetry

- A board director will usually have a wide knowledge and awareness of the ultimate strategic objectives of the organisation, but will often be lacking in an awareness of the short-term day-to-day decisions that are required to enable the progression of an operational activity.

- A shift leader in a busy factory will have a keen awareness of what is required to fulfil the expectations of the operational output from the shift, and how best to motivate the team to fulfil that short-term objective

- it is unlikely that they will be able to place the direct operational objective of an individual shift within the context of the wider strategic objectives of the organisation.

STAKEHOLDERS

- the nature of holding a ‘stake’ implies the expectation of some sort of return or counter-action from the organisation in response to the involvement.

1. Owners - expectation of profit or market-share; financial return;

2. Employees - remuneration in line with contract; invest time, knowledge & effort to achieve a return;

3. Customers - fulfil service/product requirement, fulfil contractual obligations to deliver; without the customer there is no organisational purpose

4. Other supply chain stakeholders - suppliers, bank, government. the ability to satisfy each of these stakes and their contractual obligations needs to be taken into consideration as the strategy is developed.