One of the primary functions of a company’s leadership team is to determine the strategic direction of the organization. In order to improve their position in the market, they must be able to design and commit to a strategic plan that addresses the company’s current situation, where they would like to take the company in the future, and how they intend to get there. Therefore, management teams employ a strategy creation process which includes: (1) development of the strategic vision, (2) setting objectives, (3) crafting a strategy, (4) executing that strategy, and (5) monitoring the strategy and making the necessary adjustments.
1. Developing Strategic Vision, Mission, and Values
In developing a strategic vision and mission, executive team members articulate their views about the future direction of the business. The vision is a distinctive and specific statement that acts as a directional path and reference point for managers to follow. In order for the vision to be effective, executive team members must ensure that the statement is forward-looking, focused, flexible, feasible, makes good business sense, graphically appealing, and memorable. Once the strategic vision is drafted, executive team members must also communicate the vision down the ranks to lower level managers and team members.
While the strategic vision outlines the future focus of the company the mission seeks to describe the organization’s current business situation and purpose. It addresses the who, what, and why of their existence and creates an overall identity for the company.
Executive team members must also identify their core values during the development phase of the strategic planning process. These values guide team members in their pursuit of the company’s vision and mission, often addressing the behavioral norms, beliefs, and traits that they expect the employees to exhibit.
2. Setting Objectives
The second phase of the strategic planning process involves setting objectives. At this point, managers must convert their strategic vision into specific, quantifiable targets. Objectives that are clearly stated can be measured and are designed with specific deadlines in mind.
Quite often, management sets financial objectives and strategic objectives in an effort to communicate both their target financial goals (financial objectives), as well as their competitive market goals (strategic objectives). In fact, organizations are able to achieve better financial results when they are also able to achieve strategic objectives that improve their position in the market. By maintaining a balanced scorecard, management can evaluate where they are in pursuit of those strategic objectives at all levels of the organization.
3. Crafting a Strategy
Once the goals are set, company managers must design a strategy outlining exactly how they intend to achieve those goals. In smaller organizations, the CEO is generally in charge of leading the overall process of strategy making and executing. However, in larger companies with multiple business units, strategy design involves four levels of the organization including the corporate level, business unit level, functional-area level, and the operational level.
At the corporate level, the board of directors, CEO and senior executives select the overall strategy that will be used, and determine which actions to take based on recommendations from lower level managers. At the business strategy level, business unit heads guide the actions and approaches used for their respective lines of business, and oversee the design of the lower level strategies to ensure that they too are in line with the vision of the organization. In the functional-areas, specific business-level strategies are addressed (ie. a marketing strategy for the marketing department, an HR strategy for the HR department, and a product development strategy for the new product development department). Any additional details are added to the functional and business strategies at the operational level.
4. Executing strategy and Evaluating Performance
During phase three of the strategic planning process, the plan is converted into actions at the operational level. This strategy execution requires the entire management team to assist in motivating the employees to adopt the plan. However, they must also have the ability to create a work environment that supports the strategy and exceeds performance goals. Finally, the management team must continue to monitor the external competitive environment, the progress of the organization towards the vision, and make adjustments accordingly.
5. Corporate Governance
The senior management in an organization is responsible for developing, setting, crafting, executing, and evaluating strategic process. However, the company’s board of directors is responsible for overseeing the process and making sure that the strategy is conducted in a way that is in the best interest of both the shareholders and other stakeholders. Boards members also have to be strong and independent enough to challenge the strong-willed nature of CEOs who may want to follow their own agendas as opposed to doing what is in the best strategic interest of the organization.
In order to establish a strategic competitive advantage, corporate leadership teams must be able to see the company’s strategy through from development to execution. They must then ensure that the strategy has good fit, establishes a competitive advantage, and displays a strong performance. Finally, by having a strong board to provide oversight on behalf of the shareholders, the organization will be in a better position to obtain a strategic competitive advantage.
Sources
Thompson, Jr., A. A., Strickland III, A. J. & Gamble, J.E. (2009). Crafting & Executing Strategy (17th Ed.) New York: McGraw Hill/Irwin.
