Business Insight #5


Strategy Series

 

There are many implications and problems that arise with an organization’s strategic planning processes. These are often in the forms of the company’s structure and culture as well as cooperation and coordination. Most organizations are structured and coordinated as hierarchical, modular systems and defined as primarily multidivisional secondly incorporating the matrix structure (Grant, 2013, p. 155). A typical annual strategic planning cycle is generally performed in stages where the CEO is the individual who initiates the process. The outcome are strategic plans that tend to have a length of up to five years that combine top-down directives and bottom-up strategy proposals (Grant, 2013, p. 144). The fiscal year is divided into quarters and at the end of the first quarter, the board of directors and CEO will meet to discuss the organization’s strategic plans and performance targets for the next fiscal year.

 

Once this is complete, the strategy is then executed through the operating plan around the middle of the third quarter. This is where the locations receive direction regarding “motivation and accountability, through performance management; and to resource allocation, through capital budgeting” (Grant, 2013, p. 146). The executive managers of the individual geographic locations or departments and their senior managers review the operating plan and build the annual operating budget. Around the same time frame, the individual business units are preparing their business plans and once approved by the location’s or department’s senior managers, prepare their capital expenditure budgets for the following fiscal year.

 

I would change the line of communication with regards to the organization’s implementation of the strategic plan. The cooperation and coordination is flawless until the information reaches the individual geographical locations or departments. It seems that there is a “silo” mentality at this point in the vertical line as senior management tends to partially disclose the operating plan because it is directly linked to the annual operating budget for that location or department. I do think it is a form of control over the individual business units within that location or department as per their own business plans which are the basis of their capital expenditure budgets.

 

The culture here is quite clear, there is a lack of trust and openness with management at the senior manager level where the information provided is purposely micromanaged which in turn gives them a false sense of control. With little to no guidance and the lack of details regarding the overall corporate strategy, this causes implications for the managers within the individual business units to properly maximize profits of which they are accountable for. This enables the pursuit of the manager’s individual agendas which are not aligned with the organization’s strategy forming a culture within the individual business units opposite to what the organization as a whole is hoping to achieve.

 

Grant, R. M. (2013). The Role of Analysis in Strategy Formulation. Contemporary Strategy Analysis Text and Cases (8th ed., p. 24). Chichester, West Sussex, UK: John Wiley & Sons Ltd.