Strategic decision making has been a favored topic in organizational as well as strategic management. Even though many studies have demonstrated the role strategic decision making (Quinn), but very limited study has been conducted which studied the strategic decision making process and its effective implementation. This implies the studies have not entirely related to understanding if the strategic implementation process was successful and if not, what went wrong. This paper tries to design and implement a strategic decision making process through a participatory strategic planning process. The question is fundamental to organization theory, as because strategic decision making is key to the element centered concepts of organizations. Further, the assumption that participatory management is a more useful tool to increase employee participation and increase knowledge sharing in the strategic decision making process is the key to this research (Nonaka).
The question arises as to the importance of top management in decision making process. Mibtzberg (1994a) has argued that the CEO must not be too deeply involved in strategic planning process. As Peter Lorange has mentioned “The CEO should not be typically be…deeply involved” in the strategic planning process, but should be “the designer of [it] in a general sense.” (Lorange 2). Clearly, there is a stress to divulge from the traditional top management tailored planning. Moreover, all the researchers earlier have tried to show planning as a process of forecasting and used it to mould company operations (Ansoff, Corporate Strategy). But no one has ever tried to understand what process is followed to make o plan those strategies? According to Mintzberg (1994a) must participate fully in the process of planning of strategy.
Now the question arises is that why managers need to get involved in the decision making process. The reason is inherent in the structure and distribution of power in the organization. Managers have the authority to make commitments which the planners lack (Mintzberg, The fall and rise of strategic planning). The managers have access to soft information regarding the organization which the planners cannot access but due to paucity of time, managers fail to reflect into being intuitive and analyze the available information. So he suggests a process wherein the managers and planners work in tandem to formulate strategy.
Much research has concentrated to understand the degree of effectiveness top management and CEO in strategic planning process is helpful to a successful implementation of the strategic plan (Papadakis and Barwise). But none have asked the question regarding the participative nature of strategic decision making process and if this is helpful in formulation of the strategy.
Here it must be mentioned that participation in strategic planning implies direct participation of all in the strategy formulation process. Participation in decision making may be defined as the “the totality of such forms of upward exertion of power by subordinates in organizations as are perceived to be legitimate by themselves and their superior.” (Lammers 205). Thus, a participatory environment in strategy planning must involve inputs from lower level managers who could bring in ideas from the core of the organization. These managers are responsible for handling the core functions of the organization and so they have the maximum knowledge as to what the organization stand for at the present. This knowledge cannot be derived from financial performance of the company.
Strategy planning process implies a set of directions ort a flow chart which shows hoe the process of strategy formulation works in the company. So this encompasses the various levels through which the decision flows, from being formulated to its actual implementation. Organizations are some highly centralized, bureaucratic and autocratic. Here strategy is a lever for social control. In such a situation if a high level of participation is inculcated in the strategy making process, it will be the purpose of exploitation (Eden and Ackermann). But it is also believed that a strategy is unique to an organization and there is no scope of replication.
Eden and Ackerman believe that in all strategy, planning there is participation of some kind and so it is better if participation is established through formal authorization. It is the managers and the staff who knows the organization and they can make a proper strategy fit for the organization. So for a strategy to be successful issues related to power and employee participation in the planning process must be considered. This is important to ensure a hassle free implementation process rather than manipulative measure.
Clearly, participation ensures a smooth process of strategy planning in organizations. But the potent question that arises is to what extent participation is desirable? Research has shown that a broad base for participation decreases the level of collaboration and the narrow base increases it (Eden and Ackermann). Increased participation increases the arrange of perspective generation in decision making process which develops the means to get higher degree of commitment. So the main rational behind a participative strategy planning is managers have knowledge and experience which may be important for strategy formulation. Thus, increased participation is desirable for two reasons: (a) batter decision and increased collaboration (Eden and Ackermann).
At times, it is seen that staffs do not want to participate as they feel that it is the job of management to form the strategy (Eden and Ackermann). But this does not imply that they are not concerned to know where they stand in the new strategy formulated. So communication of the strategy is important (Eden and Ackermann; Mintzberg, The fall and rise of strategic planning).
So a participative environment helps in formulating a more developed strategy especially in an environment where the core business of the company and the external environment are constantly changing. A participative strategy planning process will help in developing a strategy which comes from the information, knowledge, and intuition of all the managers at various levels who deal with these problems and issues regularly and are in close contact with them. Given the importance of participation in strategy, planning it is important to understand the background of the company and its external environment where the strategy is to be implemented. This is important to ascertain the success or failure of a participative strategy planning in a company.
For our analysis and discussion on implementation and reasons for difficulties arising in a proposed strategic management process, we consider XYZ China Electronics Business Unit (China Electronics BU). XYZ China operation is one of the local representative companies of XYZ Global Technologies who provides fastening and assembly solutions in more than 100 countries. The China market is currently segmented into four business units namely, Electronics, Automotive, Industrial, and Construction. Moreover, the China Electronics BU is selling a distinct set of products and services to customers in four key sub-segments namely: Telecommunication, Computing, EMS, and ODM companies, Storage. The China Electronics BU has a dotted line reporting relationship to the Global Electronics Business Unit in term of sales and marketing functions. The writer is the leader of the China Electronics BU who is responsible for USD32 million sales revenue in 2007 or about 30% of the total sales revenue for the Global Electronics BU. The vision of the Global Electronics BU is to strive for USD212million in 2010, and out of it, there is USD 50 millions for China and Taiwan market according to the three year budget plan. The China Electronics BU is comparatively a young organization consists of seven Key Account Managers, two application engineers and four customer services persons and one sourcing engineer with average ages of 33 years old. Most of the members are coming from engineering education and working background with insufficient knowledge and skills in the area of business administration. The current business model of planning could be generally considered as a long term planning to achieve goals that were set by the management. There is always an assumption that current knowledge about future conditions is sufficient and reliable. Little attention is paid on understanding and analyzing the dynamic and changing environment in the complex China market. With this important current state of the China Electronics BU in mind – the size of business; the contribution to the company; the independency of operation; the distinctive mix of resources and culture – it is critical to have a strategic management process in place in order to achieve the desired goals in the future.
XYZ Hong Kong operation and XYZ Wuxi operation are leaded by one Managing Director, so we treat both the segments as “XYZ China”. Sales organization of XYZ China is currently segmented into four business units (BU) namely, Electronics, Automotive, Industrial, and Construction. The writer is the leader of the China Electronics BU who is responsible for USD32 million sales revenue in 2007 or about 60% of the total sales revenue for the XYZ China BU. According to the 5 years plan, XYZ China BU has to strive for sales revenue of USD100 million in 2012 while it is USD 57 million in 2007. The XYZ BU is comparatively a young organization consists of 17 sales managers or engineers, three application engineers and four customer services persons and one sourcing engineer with average ages of 33 years old. The manufacturing unit in Wuxi consists of about 250 employees, including 8 Senior Managers and approx 25 middle level supervisors. Most of the members came from engineering education and working background with insufficient knowledge and skills in the areas of sales planning and business administration. The current business model of planning could be generally considered as a long term planning to achieve goals that were set by the Managing Director. Besides, there is also a limited participation from the senior managers and middle level managers during the planning process. There is always an assumption that current knowledge about future conditions is sufficient and reliable. Little attention is paid on understanding and analyzing the dynamic and changing environment in the complex China market. With this current state of XYZ China in mind:
- the size of business;
- the contribution to the company;
- the independency of operation;
- the distinct mix of resources and culture;
- the current level of manager participation.
It was thought that a participative strategic planning process should be in place in order to achieve the desired goals in the future. A participatory strategic planning process is expected to increase the flexibility of the organization to the changing industry demands and implement a process which can be beneficial to all and takes everybody’s views. Further participation in strategy making will increase the political feasibility of the strategy building process.
Aim and Objective
Implementation of a participative planning process is expected to increase the flow of knowledge bottom-up. Further, this process will ensure that in XYZ china the following is achieved:
- No need to change the culture of the organization
- The strategy thus planned will be linked to the inputs coming from the participants ‘down the line’ and so procedural justice is reinforced.
- Strategy can be implemented at the least possible time frame.
So before doing it is necessary to formalize the process of participation in strategy planning. So the main aim, of the paper is to do the following:
- Develop a working definition of participative strategic planning process for XYZ China.
- Provide a description of the current strategic planning process used at XYZ China
- List down the challenges encountered in the current strategic planning process.
- Develop an improved process for strategic planning process that will better support business growth.
- Identify the key challenges of implementing the improved process.
Develop an implementation plan for the improved strategic planning process.
This study is significant to the organization, as it will provide a deep rooted understanding as to where the strategic planning process was going wrong. The study provides a comprehensive understanding why a participative planning process is more effective and when and where its implementation is necessary. This paper will also show how participatory planning process can be implemented in an organization. This study will draw the difficulties that arise while implementing a participatory planning process.
The literature review will concentrate on understanding and analyzing how literature on strategic planning has evolved and what participative strategic planning means to the literature. The literature will concentrate on understanding the meaning of strategic planning and participative strategic planning. The review will try to understand why this is such a widely accepted and used model in the corporate world. This review will consider how important it is to the company and if there are any improvement in the performance of the company due to the implementation of the process. We will try to understand the advantages and disadvantages of the process and how can this be implemented. Then we will try to ascertain if there are any problems encountered during the implementation of the strategic planning process. This will then be evaluated along with the best practices in the industry in strategic planning. In the end, we will try to understand how important employee participation is to the strategic planning process.
Strategy has undergone an enchanting journey since the time of its inception in the last century. There has undergone a huge transformation from being an analytical plan of the top management (Mintzberg) to its present nature of synthesis (Mintzberg, The fall and rise of strategic planning). Strategic planning was seen as the panacea for organizational performance which is illustrated through the following: “the top management of any profit seeking organization is delinquent or grossly negligent if they do not engage in formal, integrated, long-range planning” (Karger and Malik 64). Given it importance and acceptability in the corporate world, it becomes important to understand what it really means. In this section, we will review what is strategic planning.
Mintzberg (1987) defined strategy as (a) “plan” that guides business, (b) is a “pattern” which can be found in a stream of actions, (c) is the “tactics” that is to be employed by business, (d) is a “position” wherein it mediates between the organization and the environment, and (e) is the “perspective” is an ingrained method of looking at the world. Given these five Ps, strategy assumes its true identity in an organization.
Strategy had been primarily been defined as “a pattern in a stream of decision” (Mintzberg and Waters 257). This definition was intended to “operationalize” the strategic intent and to provide a tangible basis for the implementation of strategy in an organization. The idea was to identify the streams of behavior from which the plan evolved and link it to the leadership intentions and designs. So they segregated strategy into two parts: intended and realized strategy. Mintzberg and Waters (1985) showed through figure 1 that all strategies to be implemented must be derived from organizational intent which is then deliberately realized. They state that to attain the intended strategy as emergent strategy, the intention is to make it become the latter deliberately. For this, the authors impose three pre-conditions:
- the intention existing in the organization has to be articulated rather precisely and in detail,
- as organization is a collective body, all intentions must have actually or virtually everyone involved in it,
- the intention must be realized as it is conceived which implies that no external force interferes in it.
Now the problem is with predictability and interference of the external environment – how can it be controlled?
This problem of environmental interferences gave the different forms of strategy formation processes that were found to be operational. They are:
- Planned Strategy: strategy which originates from a formal plan. For these kind of strategies there exists a precise intention, which is formulated and articulated by the leadership. These strategies are formally controlled to avoid any instances of uncertainty and surprise and evolve as deliberate strategy.
- Entrepreneurial Strategy: these strategies originate from a central or leadership vision. The intentions are personal and are not shared with the others in the organization. These strategies are usually not very deliberate and seldom evolve.
- Ideological Strategies: these are the strategies which originate from a shared belief. In this type, there exist intentions as a collective vision of all actors. These ideologies are ingrained in the organization through indoctrination and/or socialization. The organizations are proactive as compared to the environment and the strategies are deliberate.
- Umbrella Strategies: here strategies originate as constraints. The leadership defines the strategic boundaries to which others respond. In this case, the environment is not very predictable and strategies are partly deliberate.
- Process Strategy: the process gives rise to strategies. The leadership has control of the processes, and the content aspect is left to other actors. In this case, strategies are partly deliberate, and partly emergent.
- Unconnected Strategy: strategies evolve loosely, with actors along with the rest of the organization establishes patterns from own actions which are unlike the organizational intent.
- Consensus Strategies: here strategies originate trough a process of mutual consensus between actors. Here the actors converge on a pattern due to the absence of a common intention. Here the strategies are emergent.
- Imposed Strategies: the environment gives birth to strategies. It is the environment which dictates the pattern of actions or pre-empting the strategic boundaries, which are then internalized as organizational intent and acted upon.
Mintzberg and Waters (1985) conclude that strategy formation is based deliberate and emergent strategies. They feel that these two are the main focus (in different proportions) for strategy formulation process.
This definition had its root in describing the process of its formulation in organizations. But according to this definition, strategy is just rearrangement of existing categories. But Mintzberg rephrases this term by stating that strategy is not rearrangement of the existing categories, but finding new ones (1994).
Mintzberg provided new direction to the extensive literature available in planning. He recognized that there exists a subtle difference between planning and adaptive strategy making (Mintzberg, Strategy making in three modes). It was observed that firms which were large and were in established positions were more likely do strategic planning than those operating in dynamic environment do. In the dynamic environments, the strategy of the firms evolved through the changing conditions rather through deliberate planning. The different ways of making strategy were distinct from each other, but it was argued that a more in-depth understanding of the intended or planned strategy with the emergent strategy was required in order to form a more successful strategy (Mintzberg, Patterns in strategy formation; Mintzberg and Waters, Of strategies, deliberate and emergent). Various researches have been undertaken to study strategy based on case study and anecdotal evidence (Bower; Burgelman, A model of the interaction of strategic behavior, corporate context, and the concept of strategy; Burgelman, Strategy making as a social learning process: the case of internal corporate venturing; Burgelman and Grove, Strategic dissonance; Mintzberg, The fall and rise of strategic planning; Noda and Bower). These studies demonstrate that a bottom-up approach in the organization’s decision making process as a main source of emergent strategy even though they agree that this could rise through proactive decision by the CEO. This was demonstrated in a study by Quinn (1980) where he talks of conceptualization of the ‘logical incrementalism’. All these studies demonstrate that a bottom-up or participative strategy planning process are more successful in dynamic environment. But there has been limited empirical research to ascertain the performance of a strategy implementation process vis-à-vis its industrial environment. Several studies have tried to identify specific characteristics of strategic decision making process like speed (Eisenhardt), politics (Bourgeois and Eisenhardt), comprehensiveness (Fredrickson), etc. these studies to indicate the different aspects and characteristics of a strategic decision making process but do not indicate the process of implementation and the problems that arise out of it. Some studies have investigated the influence of middle managers in strategy making process in terms of providing important inputs to the process (Dutton, Understanding strategic agenda building and its implications for management change; Dutton and Ashford, Selling issues to top management), and their degree of participation in the decision making process (Floyd and Wooldridge, Middle management involvement in strategy and its association with strategic type; Floyd and Wooldridge, The Strategic Middle Manager: How to Create and Sustain Competitive Advantage; Floyd and Wooldridge, Middle management’s strategic influence and organizational performance ). These studies provide important insight into the strategic decision making process but does not show how a participative decision making process may be implemented and the various impediments in doing so.
The process of organizational decision making process was initially introduced so as to provide strategic decision to the actions of the organizations in a dynamic environment (Schendel and Hofer). Previous researches into strategic decision making process has been conducted relating to its performance effects through empirical research or the effect of the environment on the strategic decision making process. Present research has also indicated that strategy formulation is best done in dynamic environment (Schendel and Hofer; Hopkins and Hopkins; Brews and Hunt). But limited research is found which deals with the effect of participation of middle and lower management on strategic planning initiative of an organization.
Recent research has shown that important strategic planning initiatives arise from within the organization (Hill and Jones; Thompson and Strickland). But still there is a clear need to identify the critical process of strategy building through employee participation along with top management. There are some research which details the process of partial strategy building process and the strategic decision conceptualization (Hendry; Johnson, Melin and Whittington; Samra-Fredericks; Jarzabkowski). Strategic management literature has undergone various debates between scholars regarding participation at all levels in the strategic planning process (Mintzberg, The fall and rise of strategic planning; Mintzberg, The design school: reconsidering the basic premises of strategic management; Ansoff, Critique of Henry Mintzberg’s “The design school: reconsidering the basic premises of strategic management; Goll and Rasheed).
But various supports has been provided to the idea of participation from the middle and lower management levels in the strategy building process (Mintzberg and Waters, Of strategies, deliberate and emergent; Bourgeois and Eisenhardt; Nonaka).
The idea that strategic planning, management and prospective are one and the same thing has been argued by some researchers (Godet). He argues that these are management fads meaning one and the same thing. He argues that the central idea of all these names is to motivate people to work through different challenges. The process of getting people involved remains the goal of all the terminologies, irrespective of the outcome, and this is how a synthesis of the collective commitment may be achieved as opposed to the ideas of Mintzberg (1994). He stresses that the importance of staretgic planning lies not in its reaching the desired outcome or emergent strategy as Mintzberg coins it, but rather to get the participants to as the right questions. Thus, he states: “A problem well asked and shared by those concerned is already half solved.” (Godet 5)
Traditional authors like Lucien Poirier (1987) and Igor Ansoff (1965)have referred to the term strategy as a firm’s actions on its environment and its reflections on these actions. It was Poirier who coined the term strategic prospective.
Michael Porter (1980)used threats and opportunities which arise from the environment of the organization as the means which leads to competitive analysis. This classical view is constricted to the environment and short-term profit making but ignores the numerous uncertainties which hang in the strategy making process in the long-term and underscores the building of a broad scenario to clarify the strategic options available to the company and to ensure continuous development.
Now that we have understood, what strategy is it becomes important to understand how it can be formulated? There are various studies which have concentrated on the issue of strategy formulation and the processes that are to be followed. These, as the definitions of strategy, have evolved through time. Mintzberg states regarding strategic planning “strategies are developed through synthesis, and that does not come from analysis” (Mintzberg, Rethinking Strategic Planning Part II: New roles for planners 22). According to Mintzberg, strategy formulation must be a coordinated process between planners and mangers. Planners are important to the process as they are capable of doing analysis, but they lack in the manager’s authority. Again, managers have the access to the critical information which is important for strategy formulation, they fail to analyze or reflect on ideas. Thus, it is the planners who formulate the intention behind the strategy, which is delivered to the actors through the managers, who then communicate the idea to the organization. It is almost like the leader knowing what he wanted to do (intent) which is later given the form of strategy which is deliberately implemented. Strategic planning as practiced in most organizations takes the form of strategic programming rather than planning (Mintzberg, Rethinking Strategic Planning Part II: New roles for planners). The discussion by Mintzberg raises the question if strategy can be formed by planning or through some other means? So far, the strategy literature unanimously believes that there must be a planning in place in order to implement a strategy if a perfect condition of a deliberate strategy is not in place.
Strategic management is the art, science, and craft of formulating, implementing, and evaluating cross-functional decisions that will enable an organization to achieve its long-term objectives (David). There are numerous definitions and interpretation for Strategic Management, but many of them were defined as a process consists of the following main aspects of activities:
- Formulation of the future mission of the organization.
- Understanding the changing external factors such as competition, customers, technology and regulation;
- Development of competitive strategies to achieve the mission;
- Creation of an organization structure which deploy resources to successfully carry out its competitive strategy
- Continuous improvement through certain review and re-alignment
Strategic planning could help an organization to focus its energy, to ensure the members of the organization are working toward the same goals, to assess and adjust the organization’s direction in response to a changing environment. Therefore, a good strategic planning process is a process consists of the following key elements:
- Being clear about the desired goals
- Analyze the present situation and anticipate the future situation
- Making strategic choices and setting priorities
- Allocating resources
- Guiding and Leading through communication
- Setting action plans
- Control and Performance assessment
Strategic planning approach is often described as” top-down” approach or “bottom up” approach. In a purely top-down approach, planning strategies are determined by the top management sometimes in consultation with middle managers and external consultants. Operational managers and their subordinates may be called upon to provide information but they do not participate in the formulation of strategies. The bottom-up approach, individuals operating units are responsible for the development of their own strategic planning which is consistent with some general guidelines set at the cooperate level. However, most of the planning processes are not purely “top-down” or “bottom up” as each of them has its own disadvantages.
Participative planning is a team effort whereby a group of individuals taken an active part in the decision-making process. Synergy is built by bringing together diversified experiences and knowledge that are usually not possessed by on individual alone (Donhardt).
Thus, once all the definitions are analyzed, they turn out to be one and the same thing. Strategic planning so far as theories have shown is based on intentions of the top management which need to be established in accordance to the external and internal environment. This arises to need to turn our attention not to the definition, but to the process of strategic planning. Given all the definitions of strategic planning now we must see how these can be implemented, the various views regarding this and which is the most acceptable idea in the field.
Even though there remains widespread acceptance of strategy’s role as a mediator between the organization and the environment (Chandler; Ansoff, Corporate Strategy; Child; Miles and Snow), the scope of research in terms of strategy implementation remains narrow. The implementation is primarily based on the nature of the organization’s structure and control system (Chandler), and/or related to the organization’s product and geographic diversification (Fouraker and Stopford; Grinyer, Al-Bazzaz and Yasai-Ardekani; Rumelt). But strategy implementation may occur at the firm level or at the level of divisions/strategic business units (SBUs) forming the firm (Hambrick).
At the SBU level, the implementation of the strategic planning process depends on the following aspects:
- the characteristics of the head of the SBU (Galbraith and Nathanson),
- the internal organization of the SBU (Miles and Snow),
- the degree of corporate control over the SBU (Bower).
A research was conducted by Gupta and Govindarajan (1984) who focused their study on the effect of the characteristics of the head on the implementation of strategic planning at SBU level. Their study revealed that if the general manager has a greater ability to take risks and greater tolerance, this would help on building the SBU but not in harvesting it. These studies focused more on the market and achieving of short-term profit. Thus, this study stresses the importance of the top management in formulating strategy at a business unit level and even at the organization level.
In the 1980s, the most accepted paradigm in the field of strategic management was the competitive forces approach established by Michael Porter (1980). This approach of strategy implementation was rooted in the view that organization was linked to the environment which is basically the industry or industries in which it competes. According to this view, the industry structure strongly influenced the strategy of the organization.
This approach to implementation of strategy is a top down approach as this implementation process does not depict (implicitly or explicitly) any involvement of the middle or lower level managers. Clearly, the force, according to Porter, that shapes the strategy of a firm is driven by the market and has not internal considerations. Clearly, this approach lacks the impetus of the internal players who help in formulating the strategy.
Given the earlier models of strategic planning, it can be definitely said that strategy was practiced as a top-down approach in most companies.
Contemporary Approaches to Strategic Planning
The present approaches to strategic planning are dominated by Michael Porter and Henry Mintzberg. Strategy as a “ploy” has been derived from the game theoretic and military heritage of the subject area (Mintzberg, Ahlstrand and Lampel). Due to this background, strategy had been conceived as a top-down approach in most models.
Strategy as a ‘position’ had dominated the idea of strategy developed by Porter in his well known work on competitive strategies of firms (1980). It is Mintzberg who for the first time initialized process of strategic implementation. He emphasizes the role of learning, negotiation, and adaptation in the implementation of a strategy. He further states that planning of a strategic process is inevitable but not the correct means of doing it. He believes that emergent strategies, if evolved through the organizational process naturally, provides best fit for an organization, but planning are inevitable (Mintzberg, The fall and rise of strategic planning).
The basic problems with these theories are their emphasis of a top-down approach where it is the leader who foresees the initiation strategy and then is communicated to the actors (Mintzberg and Waters, Of strategies, deliberate and emergent). But what about the bottom level’s contribution or say in the strategy making process?
A severe criticism of the traditional theories of strategic planning was launched by Shrivastava (1986) using five operational criteria devised by Giddens (1979). According to Shrivastava, strategic management theories were ideological in nature and the strategic discourse helped establish and legitimize existing power structures. He used Habermas’ theory to enumerate this: “acquisition of communicative competence by all subjects that allows them to participate in discourse aimed at liberation from constraints on interaction” (373). Thus, the discourse of strategic management legitimizes organizational hierarchy.
This idea was legitimized by Knights and Morgan, who stated that “’corporate strategy as a set of discourses and practices which transform managers and employees alike into subjects who secure their sense of purpose and reality by formulating, evaluating and conducting strategy” (252).
Participative Strategic Planning
Historically organizational theories have stressed on the importance of coordination between the organization-human relationship to enhance productivity (Bennis; Herzberg, Work and the Nature of Man; Herzberg, One More Time: How Do You Motivate Employees?; Maslow). Participation is a process where a decision is taken in coordination among individuals who are otherwise hierarchal unequal (Locke and Schweiger; Wagner). Thus, participatory planning process creates a balance of participation between the top management and the subordinates in information processing, analysis or problem solving situations (Wagner).
Recent research has shown the necessity for involvement of middle and lower level managers in strategy formulation to ensure proper implementation of strategy. The need for participation in the strategy formulation has been identified by many scholars (Hamel and Prahalad). Thus participative management style helps in the strategic diffusion process which refers to the degree to which a strategy is effectively implemented and accepted as a part of the organization. As seen earlier, previous researches emphasizes on the need to ‘fit’ strategy with the external environment in order to achieve superior performance (Ansoff; Porter), but very little attention has been laid on the behavioral factors which help in the implementation of strategy in a participatory environment.
The process of strategic planning to be effectively implemented depends on three criteria:
- commitment (Parnell and Crandall).
The first dimension is concerned with the interaction and participation between the middle and the lower level managers who participated in the strategy formulation process. This may be shown through various techniques like the top management’s active consultation with the middle and lower level managers in the organization. Researchers have found a positive link between participative management and job satisfaction of employees (Kim; Locke, Latham and Erez; Roberson, Moye and Locke). As strategy setting requires a certain degree of goal setting, greater involvement of the middle and lower level managers increases the effectiveness of the implementation effort (Locke and Schweiger; Kim).
The concept of non-conceptual management involvement is not a novel idea in the strategic management literature and in the last decade, there has been various studies indicating the participative management can increase the effectiveness of a strategic planning process. Participative management is defined as a joint decision making process wherein a shared decision is reached by the superior and the subordinate (Wagner and Gooding). Given this definition of participative management, it must be understood why it is important to strategic planning process.
This evolves the need to understand why a participative management process is important to an organization. This is discussed in the next section where we discuss why participation of the lower levels mangers is important to formulate strategy.
Why Participative Management
The reasons behind adoption of participative management are:
- participation as a right;
- as a way towards greater commitment and better work performance;
- as a means for better coordination and control for better cooperation (Erez).
Here the first aims at an organizational democracy. The central theme is redistribution of power within the organization. Participation in management is considered to be a democratization of organization structure. Experiments of this were made by socialist governments (e.g. in Netherlands as decision was brought into legislation for achieving greater participation in companies). The conclusion that can be drawn is that any form of participation can be established only when its roots fits within the organization and makes real contribution to the business. The problem in this was that the initiators of the participative management process were not very eager to start the procedure.
The second relates to the quality of work life. Here the implication lies of humanization as well as utilizing employee knowledge to attain better decision (Heller). In this, the stress lies on task enrichment and the restructuring of the work groups in autonomous teams (Davis). Another thought process stresses on the utilization of the resources to the optimum (Heller). According this school, the process helps in gaining from the knowledge of all the managers at different levels of hierarchy. As participative management utilizes the knowledge of the all the employees, it is believed to reach at qualitatively better decisions. Another line of argument in terms of performance and participation in decision making is that employees are committed when the employees desire to be a part of an organization which provides learning possibilities (Swieringa and Wierdsma).
The third category deals with the process of coordination in the organization (Mintzberg, The Rise and Fall of Strategic Planning). Mintzberg (1994) has shown that on the basis of the type of environment, technology, and task content, different coordination activities achieve different importance. For example, in adhocracy there lies a greater need for consulting than in mechanistic bureaucracy. In the latter case, coordination mechanically falls into place through rules and regulations. So a clear problem that can be sensed in establishing a participative management is cultural difference, wherein not all cultures allow for employee participation in strategic planning (Deal and Kennedy; Pheysey).
Participative management leads to greater acceptability of plans and decisions. But not all organizations follow this rule. Heller (1988) argues that in complex organizations, changes in taxes, consumer demand, exchange rate, etc. affects the organizational performance more than the level of participation in decision making process.
Participative Planning Process
Strategic decision making process has become engrained in internal participation in the strategy making process. Managers at different levels have been indentified to participate in the strategic decision making process. Thus research shows that strategy may emerge as a political process wherein strategy evolves as a shared outcome of the coalitions of managers in organizations that encourage shared cognition (Cyert and March; Starbuck). Further, the development of strategic decision through interaction between top and middle management has been termed as an ongoing social interaction process which is primarily seen in participative decision making processes (Normann; Burgelman, Strategy making as a social learning process: the case of internal corporate venturing). It has stated that the intuitive knowledge and judgment of middle managers are critical to the decisions taken within the organization (Jelinek and Schoonhoven), and it is their intellect and inputs which ultimately develop the strategic decision through an evolutionary process (Bower; Noda and Bower).
Thus, participatory strategic planning may be considered to be the process where the ideas arise out of the lower strata of the organization. The literature has recognized the strategic decision evolving from the lower rungs as:
- Formal recognition of managers who continually give their ideas to the top management till the time they become the organization’s formal strategy (Dutton, Understanding strategic agenda building and its implications for management change; Dutton and Ashford, Selling issues to top management; Dutton, Ashford and O’Neill). This way a manager can influence the strategy making process if they push their ideas, opinions, and perspectives through the organizational hierarchy. Here the structure of the organization is decentralized wherein there is room for participation in strategic decision making which aids in bottom-up involvement. In this respect, participation in decisions may be defined as the involvement of the middle managers in the strategic decision making process.
- Another process is that decision power is dispersed throughout the organization wherein the even the managers at the lower level enjoy
certain degree of authority which allows them the space to take new decisions as per the demands of the changing business environment (Mintzberg, Structures in Five: Designing Effective Organizations). This gives managers the privilege to take certain actions on their own to certain degree which later on may assume strategic importance in the decision making process (Burgelman, A model of the interaction of strategic behavior, corporate context, and the concept of strategy; Burgelman, Strategy making as a social learning process: the case of internal corporate venturing). The authorities which the managers at lower may be given to make decisions on usually relate to budget allocation limits (Bower) or from an informal organizational climate where the managers can make certain decisions without the knowledge or interference of the top management (Mintzberg, The fall and rise of strategic planning). Hence the authority shows that manager’s de facto ability to take new initiatives in response to the environment without intimating the organizational hierarchy. Thus, distributed decision authority may be defined as the authority given to the lower rank managers to take certain decisions without consultation with the organization’s top management. Thus, there arise two distinct categories which are different in essence: first is participation in decision making and the second is authority to take decisions.
Planning of a strategy is rooted in the tradition of rational thinking. From the competitive advantage definition of strategic planning, it can be concluded that strategic planning implies a systematic approach to management wherein strategy is formulated on the basis of comprehensive analysis of the organization’s strategic environment (Porter). A strategic planning process comprises of all the mission and goals, polices and action plans at all levels of the organization – from business level to different functional units (Ansoff, Corporate Strategy). The process of strategy making comprises of a series of logical steps taken in the planning process which may include mission statement, environmental analysis, strategy formulation, implementation, and control (Schendel and Hofer). According to this strategic planning process may be defined as organizational activities which systematically discuss goals and explore the competitive environment, analysis of strategic options, and coordination to implement the decisions across the organization. Strategic planning has a focus on the central idea which takes a rational analytical approach and considers issues throughout the organization, so generally is monitored by the top management or the CEO. But it should not imply thus, that all the strategic decisions are taken by the top management and the CEO. This is seen through the strategic decision structure of the organization. Thus, participatory decision making process through participation by managers individually or through distribution of authority is considered to be a distinct strategy making mode.
Strategic planning is considered to be the organization’s analytical thinking process intended to consider various organizational processes and rationally decide how to position the organization strategically (Porter, ‘What is strategy?). The outcome of the strategic planning is reflected through the corporate policies as a means to guide various actors at a later date (Christensen, Andrews and Bower). Clearly strategic planning is not always related to resource creating decisions as they usually create a road map for the creation of a direction to the organizational processes. Clearly even though these policies are supposed to lead the way, but often, they just provide a direction which has to be rationalized and implemented by the organizational decision makers. Hence, it is possible for organizations to make the strategic decision processes an amalgamation of the strategic planning with decision structure reflecting different levels of participation in decision making and distributive decision making authority. The relative importance of strategic planning process and the participation in decision making process and distribution of decision authority characterize the organization’s strategy formation process. For analysis purpose, the focus of this paper is on participative decision making process implementation and the difficulties in the process of strategy formation following the process. Participative strategy making indicates an autonomous, experimental, and responsive strategy formation process wherein managers at all level through a participatory supervisor management. This paper focuses on the role of the company structure and management to inculcate the participatory environment which will aid in the flow of bottom-up ideas.
Various efforts have been made to form a general strategy making process for the different kind of organizational structures to aid strategy formation. For instance Mintzberg (Of strategies, deliberate and emergent), distinguished between entrepreneurial, planned, umbrella, and planned strategies. Here the entrepreneurial strategy making was described as a rather autocratic decision making process, wherein the entrepreneur made strategy the vision and intent he has without any proper dissemination of his ideas to other stakeholders. Five archetypes have been described by Bourgeois and Brodwin (1984) which are commander, change, cultural, collaborative, and crescive strategy processes. Ansoff (Corporate Strategy) on the other hand called for a systematic and generic strategy building process. Nonaka (1988) stated that an interaction between the top-down and bottom-up approach was necessary strategy formulation. This model was similar to that presented by Mintzberg (Mintzberg, Patterns in strategy formation). Thus, there has been extensive literature on a strategic decision making model to be followed.
In the present study, we intend to study the degree of participation in the decision making process of XYZ organization, and tracing the process of implementation of a strategic decision process. From the literature review it could be stated that little attention has been paid on the difficulties faced to implement a strategic decision making process and the problems faced while and after implementing a participative strategic planning process. Here we will try to trace the problems faced while incorporating a participative decision making process. The review clearly shows that there is need to research the areas pertaining to the process formation of participation in strategic decision making and the key aspects that need to be followed to do so. The paper seeks to answer the question of implementation of participatory strategic planning in XYZ China. So the broad question it seeks to answer is how should a Participative Strategic Planning Process be designed and implemented for XYZ China?
Strategic planning processes and models discussed above are complex and loosely defined with little consensus as to its applicability and structure. The model selected for implementing a strategic planning process is important as the company’s success depends on the process. Now a wrong process which eludes the structure and culture of the organization will be a complete organizational misfit and so we need to understand the present nature of participatory planning process in XYZ China and then answer the first research issue (RI 1) and the second research issue (RI 2) emerged as:
- RI1 How is participative strategic planning defined by XYZ China?
- RI2 How strategic planning currently is conducted at XYZ China?
Recent research has highlighted the importance of middle and lower level managers in strategy formulation in ensuring that the strategy is being effectively implemented. It was suggested that strategy formation and implementation could reflect a diverse array of top and middle management inputs (Mintzberg, The fall and rise of strategic planning; Nonaka). Top management simply cannot effectively develop a strategy and plan for its implementation without assistance from middle managers. The use of participative Planning approach in the development and implementation of strategic is widely recognized, and provides a number of benefits:
- Executives are encouraged to define common and definite objectives
- Clarifies the scope of responsibility for all players concerned, encouraging accountability, ownership, and sustainability.
- The process encourages all participants to be involved in planning, which leads to automatic support for the plan they have created and buy-in.
- Improve the implementability of the strategies.
With the points discussed above, the writer finds that it is important to include the 3 research issues:
- RI3 What are the challenges encountered doing strategic planning at XYZ China?
- RI4 How can improvement of the process be done?
- RI5 How the new process should be implemented to be effective?
As the research question depicts, the study aims to determine the nature of understanding of participatory management in XYZ China and how a process pertaining to a participatory management process can be implemented. Thus, the research is descriptive in nature, for there is a strong link between the theory and empirical finding which needs to be worked with. For this exploratory study, we intend to use a descriptive research method. The method that we use is based on case study which is developed through the in-depth analysis of the secondary data collected from the company archives, primary data from an exploratory survey and developing a case study. Now we will understand how a case study model is helpful in studying strategic management process.
Case Study Research Method
Case Study Method
A case study has no formal definition. It is derived from the definitions presented by Yin (1984). Apparently, a case study examines a phenomenon in its normal setting, utilizing various methods of data collection to gather information regarding one or more entities. In this research method, the boundaries of the phenomenon are not defined and there is no manipulation of the scenario is used. In other words, the case study method aims to capture the phenomenon in its natural setting. For a case study method, one important observation is that the researcher seldom has a priori knowledge about the variables of interest and how they can be measured.
There are three types of descriptive strategy methods usually used (Benbasat, Goldstein and Mead): (a) application description, (b) action research, and (c) case study research. In case study method, the clear aim is to conduct a research. The research question may or may not be made prior to conducting the research. In this forms of research, the researchers are observers rather than participants or investigators.
Now it is important to understand why a case study approach was selected. A case study approach is employed when the following are necessary (Benbasat, Goldstein and Mead):
- The phenomenon of interest has to be studies in a natural setting.
- The study relates to contemporary issues.
- When control manipulation of the subject is not required.
- The phenomenon of interest enjoys a strong theoretical base.
Clearly, a case study approach for the study of implementation of participative management process is apt as because they follow the above criteria. There are various models which may be adopted for a case study analysis. For the purpose of our study, we will consider Yin (1984).
Yin segregates case study methods into three parts viz. exploratory, explanatory, and descriptive. Our case study is a descriptive case study. A descriptive case study is employed when the case evolves out of a strong descriptive theoretical base before formulating the case study. We employ a single case strategy. This is because our case evolves from a well documented theory and also because it is unique (Yin). As Yin suggests, single case study method is most useful in theory generation and/or explaining a case on the basis of a theory.
Further, Yin (1984) suggests that for firms which are undergoing a strategic change have been historically studies through the process of case study analysis. Thus, we see that for our study the best method is that of single case explanatory descriptive case study research.
Case Study Research in Strategic Management
Case study methodology has been a well accepted and used methods of strategic management research. Early researchers in strategic management process have used the case study method to understand the strategic management process (Ansoff, Corporate Strategy). After this there arose the need by research scholars increased their adoption of quantitative techniques. But there is a swing back in the pendulum where contemporary researchers have put more stress on qualitative research methods. The primary goal of the researchers was to impart knowledge tot eh mangers and students who aspired to be managers. The viewpoint regarding adoption of case study method was clarified by Andrew showed that it is impossible to make any kind of generalization about the nature of these variable. So he states: “make useful generalizations about the nature of these variables or to classify their possible combinations in all situations” (Andrews 5). Generalization thus is not possible in case study research. The study of the corporate policies aid in making the approach familiar and along with the stills and attitudes, it is possible to “combine these variables into a pattern valid for one [italics added] organization” (Andrews 5). The most successful method to conduct an in-depth study to assess strategic planning process is though a case study methodology of single-firm or industry (Hoskisson, Hitt and Wan). Generalization is believed to be too complex for these studies as each case are considered to be unique. Further, this process helped in providing unique consultation to the companies. A more quantitative or generalized form of qualitative method may not be appropriate for strategy studies as “Knowledge generated for one set of ends is not readily applicable to another” (Learned, Christensen and Andrews). Therefore, the early researchers believed that case study method was the most valid method to attain the purpose for which the study was being conducted.
The strategies used by Learned et al. (1965/69) were very descriptive in nature but that of Chandler (1962) was less detailed and more normative or perspective in nature. But in both the cases the research method employed are inductive (Rumelt, Schendel and Teece, Fundamental issues in strategy: A research agenda).
Chandler (1962) used a historical approach to provide a detailed case of mainly four firms, Du Pont, General Motors, Standard Oil of New Jersey (presently known as Exxon), and Sears Roebuck, which he used to derive his thesis and proposition. He derived most of the information from publicly available sources, internal company records, and interviews with the top management and employees. But before conducting the case study, Chandler conducted a questionnaire survey of most of the large firms in US to gather an initial understanding of their business patterns. Using this survey and the cases of the four firms, he compared into why the firms adopted or rejected multidivisional structure. So unlike Andrews and Ansoff, Chnadler sought to generalize this research across the companies in the US.
So it can be deduced that most of the studies were normative or prescriptive in nature. Generalization of the subject was achieved through induction, with in-depth case study as a primary research tool (Rumelt, Schendel and Teece, Strategic management and economics). But all these researchers seldom sought to generalize their researches and neither was it considered feasible.
But this closed approach to strategic management research was considered to be insufficient and a need to analyze these strategies in an open system was of paramount importance (J. D. Thompson). So in need for an open system led to the development of more economic and statist ital tools to be used in strategic management research. This led to the development of various studies related to performance of the strategic management process (Rumelt, Strategy, structure, and economic performance).
But in the current research, methodologies have concentrated on a qualitative approach to research. Case study methodology along with comprehensive field-based case studies, collection of both archival and interview/questionnaire data has become a preferred method for strategy research (Collis; Doz; Hitt, Harrison and Ireland; Kotha).
Clearly, case study analysis is a used tool that has been used by many strategic management researchers. This clearly demonstrates that the analysis of the case will provide an in depth understanding of the company vis-à-vis its internal and external environment. Case study method helps to provide a comprehensive, qualitative, and detailed understanding of the strategy from all aspects. Using a combination of the present and the traditional case study methodology, we adopt a method which helps us to study the archival documents of the company to understand the company. Further, as we aim to identify the hurdles faced while implementing the participative strategic management process, we will undertake a survey to ascertain the employee participation practiced in XYZ China. Hence, we adopt this methodology for the study undertaken.
Data Collection and Analysis
Collecting data case research may be done through different methods: like documentation, archival records, interviews, direct observation, and physical artifacts (Yin). The data collection techniques used for the case development of XYZ China is through a survey of the employees in the company at various levels. Data colleting method under the Phenomenological paradigm will be mainly qualitative as it emphasizes on the quality and depth of the data. For this, we use open-ended questionnaire similar to an open-ended interview. However, quantitative data collection method will also be used to overcome potential bias and to increase the quality of the data.
The research problem refers to the writer’s organization XYZ China so the unit of analysis should be groups of people within XYZ China including Senior Managers, Middle Level Managers/Supervisor, junior managers, and Functional Leaders. A questionnaire will then be designed and be used to collect data from all levels of managers in the organization by using the purposely sampling method.
Data analysis involves reviewing recorded data, developing categories of meaning or theme areas and reducing the data into an integrated summary following previous researchers in the area (Ansoff, Corporate Strategy; Andrews; Chandler). This requires the summarizing of data, coding and analysis.
A survey is conducted among the mangers in key positions at various levels in order to understand their degree of participation in the strategic planning process. The survey questionnaire was designed to understand the external and internal environment of the firm. The questionnaire consisted of descriptive questions with multiple options to choose from the options provided. The questionnaire asked questions like the respondent’s view regarding the external environment of the company, the words which they feel should be included in the definition of strategy, their perception of the degree of importance of strategic planning process, what they feel about the planning process presently in place in the company, and the degree of participation of the middle and lower level managers in the planning process. The second half of the questionnaire asked the respondent’s view regarding the participation level of employees in the following strategy planning process: Strategic analysis, Strategic alternative / options development, Making strategic choices, Strategy implementation & change management, Strategic performance management & control, and Strategy adaptation due to emerging issues. They were asked to rank their choices along the following a 5-point scale, comprising of 1 for highly involved to 5 for highly ignored. Then they were asked to choose the people they feel formulated the strategy in the company. They were asked to choose three challenges that are faced while formulating a strategy. The respondents were also asked as to who should be involved in a participatory environment. They were even asked to suggest as to what changes are required in the XYZ Company’s strategic plan. Then three questions measured the respondent’s perception of their participation in the company. These questions were scaled using a 5 point Likert scale which were given as 1 for strongly disagree and 5 for strongly agree. The last section asked the respondent for their profile in terms of their position, functionality, and their involvement in the strategic planning process at XYZ.
The above mentioned process is a brief description of the process that will be used for the analysis of the data collected through the explorative questionnaire survey and the details will be provided in the analysis section. In the analysis section, we will analysis the responses of the survey and compare it with the present process of strategic planning established at XYZ in order to identify the gaps in the planning process.
Analysis and Findings
There are a variety of approaches and models could be used in strategic planning process including goals-directed, issues directed and scenario planning etc. The writer has selected the goal-directed process which is probably the most common, logical and easily to use model. The strategy developed with the goal directed process is called intended strategy. It is also considered as a bottom-up approach that is particular useful for a young organization like the China Electronics BU who does not have a systematic approach in strategic management. Figure 1(see Appendix) shows the proposed Strategic Management Process for the China Electronics BU. The planning process are designed with the following steps with the proposed models to use listed in the brackets:
- Get ready and Team formation
- Setting Direction –Mission, Vision and Values (Model: Collins and Porras Vision Framework)
- Setting Desired Goals
- Situation Analysis: Stakeholder Analysis, External Environmental Scan: (PEST, Porter Five Forces, Competitor Analysis), Internal Environmental Scan: (Internal Capability Analysis and Customer Analysis).
- Develop Strategy
- Budget Planning and Director Approval
- Communicate and Implement Strategy
- Evaluating and re-aligning Strategy
- Control and Performance Assessment
Step One: Get Ready and Team Formation
To assessing readiness to start a strategic planning process, the focus will be put on understanding whether an organization’s leaders are truly committed to the effort and they are able to devote the necessary attention to the planning process. Strategy planning should be conducted by a planning team. To determine who should be a part of the planning team, the following guidelines should be considered:
- A leader of the business unit- who drive the develop and implementation of the plan
- Members who equip the team with the capacity to understand and appreciate current situation of the organization
- Members who help to provide key information and knowledge to the process
Step Two: Setting Direction – Mission, Vision and Values
Collins and Porras (1991) is a proven framework through solid research which stated vision consists of two major components- a Guiding Philosophy (Core Values and Core Purpose) leads to a Tangible Image (Mission and Vivid Description). The reasons for starting off to work on a creating a vision statement by using Collin and Porras Vision Framework is:
- to resolve confusion over the purpose of the business
- prompt and reinforce the main activities that are consistent with their meaning
- provide direction in the formulation of the more specific strategy of the business unit.
It is critical that vision, mission, and values are required to agree upon and to share among the business unit to avoid creating strategy in a vacuum.
Step Three: Setting Desired Goals
Mission and vision answer big questions about why the business unit exists and how it seeks to benefit key stakeholders, but goals are what the business intends to achieve over the next few years. The desired goals in sales business unit could be measured by market share, sales volume, profit, product range, new segment obtained etc.
Step Four: Situation Analysis
Stakeholders such as customers and competitors will be analyzed in most of the strategic planning process. However, the strategic plan impacts many others, both inside and as well as outside the business unit. Therefore, Stakeholder analysis is vital to be performed at the very first beginning of the situation analysis. The analysis consists of identify possible stakeholders, define their interests and understand how those interests relate to your strategy. Normally a choice is required to make to focus on some key stakeholders, as there are too many. Whether a stakeholder can be brought aside can be determined by asking yourself following questions:
- What reactions will the stakeholders have?
- What are the likely consequences of your actions?
- How do you set priorities? What are the effects?
The possible stakeholders for a particular organization could includes, end customers, distributors, retailers, employees, stockholders, financial community, suppliers, interests groups (e.g. environmental, social advocates), public organizations (e.g. government) and students ( e.g. University projects). The top 5 important stakeholders of the strategic plan for the China Electronic BU could be customers, senior management team, employee, suppliers, and environmental interest group.
External Environmental Scan
There are several tools that can be used in the external environmental scan such as Porter’s Five Forces, PEST analysis, Scenario Planning, Industry Value Chain and Game Theory. Some tools are complement of each other. The writer has selected two comparatively exclusive models namely PEST and Porter’s Five Forces as a point of departure. PEST provides an understanding on the macro environment for all organizations while Porter’s Five Forces on the micro-environment that affects only a particular firm or firms in a particular industry. Together with a competitor analysis, it aims to know the current competitive position through more understanding about competitors.
PEST Analysis (Macro): PEST analysis stands for political, economic, social and technological forces that impact the industry. Such external factors usually are beyond the business unit’s control and sometimes present themselves as threats. However, changes in the external environment also create new opportunities. For China Electronics BU, the PEST analysis can be used as a China- specific analysis which identifies drivers of profitability and the attractiveness of fastening systems industry in China. The PEST factor is virtually unlimited and an organization must prioritize ad monitor those factors that influence its industry.
Particular area of interests for fastening systems industry could be:
- Political Analysis: Tax incentives for exporting, wage legislation, mandatory employee benefits, and Industrial safety regulations;
- Economic Analysis: Exchange rate and stability of China currency, Skill level of workforce, Labor Cost, Inflation rate, Interest rate, Economic growth rate;
- Social Analysis: Education level, Culture and Attitudes; and
- Technological Analysis: Technology’s impact on product offering and impact on cost structure.
Porter’s Five Forces (Micro): Michael Porter suggests five forces that determine industry profitability: competitive rivalry, new entrants, supplier power, buyer power, and substitute products (Crossan, Fly and Killing, 2005, P.19). Five star industries with high level of expected profitability are the one with low supplier power, low threat of entry, low buyer power, low threat of substitute products and low competitive rivalry. Again, the factors relating to each force could be unlimited. As far as the fastening systems for China electronic industry is concerned, the following areas of forces could be given priority to consider:
Threat of Entry: Economies of scale, product differentiation, capital requirement, brand loyalty and government policy:
- Supplier Power: High switching cost, number of alternative sources, standardization of material and input cost is significant portion of total costs;
- Buyer Power: Low switching cost, large volume buy for the buyers, easy of finding substitutes and relative price is significant portion of the total end product price;
- Substitute Products: High interests for the customer to evaluate alternatives and availability of alternative products with a much lower price;
- Competitive Rivalry: Growth rate of the electronic industry, easy to switch between competitors, level of competitor information transparency.
PEST macro environmental factors together with Porter’s Five Force micro environmental factors are also classified as opportunities and threats in a SWOT (Strength, Weakness, Opportunities and Threats) analysis.
Competitor analysis has three main primary objectives including:
- obtaining information about important competitors,
- using the information to predict competitor behavior,
- to develop strategies to achieve competitive advantage.
What business probably already known about their competitors are overall sales and profits, market shares, organization structure, advertising strategy and customer attitudes etc. However, information of particular interests is those relating to price competitiveness, operating excellence, effectiveness of distribution channels and technical & technology capability. The analysis could be done by following the below procedures:
- Identify your top 3 competitors
- Rank them (by giving a score of 1 to 5) in terms of price competitiveness, operating excellence, effectiveness of distribution channels and technical and technology capability.
- Identify area of strengths and weaknesses compared with your main competitors
Internal Environment Scan
Internal capability analysis: The internal environmental scan considers the situation within the organization itself. It is normally a study of the strength or weakness of an organization in the following areas:
- Operating efficiency
- Management and Leadership
- Financial resources
- Staff quality
- Production capability and capacity
- Strong Brand
- Reputation among customers
Similar to the competitive analysis, internal strength and weakness analysis could be done according to the below procedures:
- Give a score (1-10) on each areas listed above.
- identify area of weakness
- develop strategies to overcome the weakness
Customer Analysis: Customer analysis allows the organization to identify the most profitable customers. For many organization, the customer base adhere to the 80/20 rule, 20% of customers provides 80% of your revenue. So it is important that you could find the winning reasons for your golden 20% customers. The areas of focus of the analysis are listed below:
- Sales trend
- Cost reduction expectation
- Percentage of new business
- Frequency of purchase
- Decision maker
- Motivation behind purchase
- Market size and growth
- Market segment
- Buying process
Step 5: Develop Strategy
Once a clear picture of the organization and its environment situation are in hand, specific strategic alternatives could then be developed. Good strategy alternatives are those aligning to target goals, mission, and vision with the support of the gathered environment data. Michael Porter identified cost leadership, differentiation and focus as three generic strategies that may be considered when defining strategic alternatives. Sometimes you will be ended up with too many strategies to chose, and then you need to consider the urgency of the situation, the readiness of the organization and the capacity of the management team to implement change (Crossan, Fly, and Killing, 2005, P.19).
Step 6: Budget Planning and Director Approval
With strategies now developed and chosen, a high level budget framework is required to support the implementation of those strategies. An important component of the budget planning process is to estimate the required staffing and capital spending. A human resources plan aims to identify right peoples who equip with the right skills and to fill them into the right positions. Therefore, a good human capital plan is required to address the following issues:
- Personnel headcount and expense associated with the implementation of those strategies
- The impact of changing business environment and strategy on the required human resources.
- Strategic alignment between people and strategies
Once the high level budget plan and the strategic plan are developed, it is required to send to the board of director or senior management team for approval before implementation. It is quite often that the strategy is not being approved at the first submission and the planning team is asked to adjust, refine and improve.
Step 7: Emergent Strategy
The strategy developed by the above steps is going through a well defined and analytic process. It is also considered as a top-down process. However, a strategic management process should include those strategies emerge as things gradually becoming apparent. The kind of strategy is viewed as an ongoing bottom-up process of constant learning, experimentation, and risk-taking. An organization must retain the mental freedom to grab unpredictable opportunities as they emerge. Every organization will have a different mix of intended and emergent strategy. An organization is required to determine the appropriate mix by them.
Step 8: Communicate and Implement Strategy
It is critically important that employees understand your strategy. Effective communicating strategies will help employee to make better day to day decisions that support the organization vision. To communicate strategy effectively, the following actions should be taken:
- to avoid too many objectives;
- to make objectives concrete and measurable;
- To select proper communication vehicle, e.g. video conference
An effective communication of strategy will make implementation much easier. Besides, a strategy likely will be expressed in high-level conceptual terms. For effective implementation, it needs to be translated into a detail, clear wordings that can be understood at the operation level of the organization.
Step 9: Evaluate and Realign
A strategic management process is dynamic and continuous. A change in one component may lead to a change in the entire strategy. Therefore, a regular evaluation on the effectiveness and the efficiency of the strategy is required. The performances of the strategies should be evaluated by comparing them to the desired goals set earlier in Step Three. If the result is off track, an organization may need to cycle back to a previous step and make adjustments to re-align or even start the process from the beginning to create another new strategy.
Step 10: Control and Performance assessment
A control and monitoring system for the China Electronics BU could be a new business tracking report, key accounts tracker, or a scorecard. Individual performance could be assessed using a Performance Management Process (PMP) tool. PMP set the business objectives which have to be achieved by an individual at the beginning of the year, the actual performance then is measured, compared, and assessed.
Given this strategy process we will analysis what form of participation exists in this process and how the process will cause problems in participation in the process is include. The next section will analyze the questionnaire which will help in understanding the problems in the present and in the participative model.
The survey was conducted with a structured descriptive questionnaire. The questionnaire was sent to 42 participants of whom 34 complete responses were sent back. The response rate is 81 percent. The research methodology suggests that the research design is descriptive in nature.
So we will first analyze the responses according to the positions of the respondents clubbing them according into three hierarchical levels viz. top, middle, and low level. Top level comprises of director and senior managers, middle comprising of Manager/Executive/Senior Officer/Senior Engineer and Assistant Manager/Officer//Engineer/Supervisor and the low level consists of Worker/ Assistant. The responses that we received comprised of 5 from the top level and 29 from middle level. So 85 percent of the responses were from the middle management level. No responses were received from the low level. The maximum number of respondents is from marketing and sales department which is 62 percent.
When we were considering the position of the respondents to their involvement in the strategy planning process, the director mentioned that he is the leader of the planning process. All the senior managers and the BU leaders mentioned that they were part of the decision making team. So the top management was involved in the process of strategy planning. In the middle management level, the managers and the assistant managers mostly (59 percent) agreed to have been a part of the strategy planning team, while 34 percent of the middle management said that they were not involved in planning. If we segregate this level into two groups, first the managers and the second as assistant managers, then we see that the 63 percent of the middle managers were part of the planning team and 25 percent were not involved. Whereas in the assistant manager level, 54 percent were in the team and 46 percent were not involved. This shows that with decrease in hierarchy, there was a decline in participation in the planning process. These results are further segregated and we consider the departments to which the employees belong. In case of assistant managers, 70 percent of the respondents were from marketing and sales department. Out of them, 67 percent were part of the planning team and 33 percent were not involved. From R&D and finance department nobody was involved in the planning process, and 11 percent involved in the team from supply chain department. Among managers, 62 percent were from marketing and sales department. As far as involvement in the planning team is concerned, 44 percent of the middle managers from the marketing and sales department were involved. This shows that in the middle management level, more people were members of the team and more members were from marketing and sales department, with no represents from QA, IT, and manufacturing. Further, out of 4 senior managers, one belonged to HR and General Manger while two were from the marketing and sales department.
From the above analysis, we can conclude that more managers from the marketing and sales department were involved in the planning process. Apart from this, all senior managers were involved in the planning team, while 63 percent managers and 54 percent assistant managers were members of the team. This finding shows that, participation in the planning process was higher with hierarchy.
Now we consider the kind of business environment the managers feel the company is in. for this question, the managers were asked to mark all the words that they felt best described the external environment of the company. The options mentioned in the questionnaire were dynamic, diverse, competitive, challenging, unknown, stable, predictable, uncompetitive, and unchallenging. Here too we will do the analysis vis-à-vis the respondent’s position and functional department. First, we will do an overall analysis. Two of the assistant managers feel that the environment is dynamic, diverse, and competitive. 5 respondents (14 percent) believe that the environment is dynamic, diverse, competitive, and challenging. In this category, two are senior manager and assistant managers and one director. Only one assistant manager feels that the environment is unknown apart from the other characters mentioned. 2 senior managers believe that the environment is dynamic, diverse, and challenging. One manager believes that the environment is dynamic, competitive, stable, and predictable and other believe that it is dynamic.
In order to identify the environmental character that best describes the external environment of XYZ, we used the tally method. The number of occurrence of each charater was counted as 1 and then summed together. This showed that competitiveness had maximum occurrences, then diverse and challenging and then dynamic. This simple analysis showed that the external environment of XYZ is challenging, dynamic, diverse, and competitive.
Question 2 was asked with the objective to understand what the employees think about strategic planning and their view as to what should comprise in the definition of strategic planning. The options provided to the respondents were long term goal and objectives, allocation of resources, plan, position, pattern, perspective, product-market considerations, and competitive advantage. The answers were codified. Long term goal and objectives was considered to be a, allocation of resources was taken to be b, and competitive advantage as h. they were asked to mark as many options they feel is applicable. The analysis was done after using the tally method to count the frequency of each term. The terms which received the five maximum frequencies from the top were long term goal and objectives, position, allocation of resources, plan, and competitive advantage. So a definition for strategic planning process must contain the following terms. Using these terms we may define the strategic planning process at XYZ as a strategic planning process helps to attain long term goal for attaining completive advantage for the organization which helps to position the company properly, help in proper allocation of resources, and plan for future actions.
The third question aimed to understand the importance of strategic planning process in forming strategies at XYZ. The responses showed that 65 percent of the respondents feel that the strategic planning process plays a crucial role in developing strategies. Thus, strategy planning is an important part of the strategy formation process.
Then we try to ascertain the nature of the strategic planning process in XYZ. For this, we use the number of occurrence of each option in the responses. From this analysis we see that the maximum number of occurrences is for make decisions and adapt as we progress based on how situations in the market emerge. Then we get define mission and visions and get departments to develop their functional strategies on their own. Clearly, the strategy planning process is not very clear to most of the employees. They feel that the strategies which are taken mostly depend on the external environment and strategies taken by XYZ are basically to counter those situations. The second most occurrences are provided to a defined mission and vision statement but there is no initiative to transform them into their strategy. They mostly carry out functional strategies for which the departments are responsible. As figure 2 show strategic planning at XYZ is currently is based on making decisions and adapting along with the changing market conditions. This clearly indicates a lack of any input regarding the external condition.
Question 5 tries to ascertain the level of participation of middle and lower level managers in strategy planning process. 50 percent of the respondents believe that the process is participative. 21 percent believe that the process is slightly participative. 12 percent think that the process is very participative and 18 percent think that is quite participative.
To analyze question 6 we use descriptive statistics. The question asks the respondents to rank the events according to the participation level of middle and lower managers in planning process. We find out the central tendencies using mean and median. The mean for strategic analysis is 2.4 which show that most of the respondents are not involved in the process. Table 1 shows the mean and median values of different strategy alternatives. The median score is 3 for strategic analysis and strategic alternatives, which implies that the middle management is partially involved. For strategy implementation & change management and strategic performance management & control, the median score is 2, which implies they are involved. In case of making strategies and strategy adaptation due to emergent issues has a mean score of 2.6 and 2.4 respectively and a median score of 2.5 which implies that these two functions the middle managers are slightly involved.
|Strategic alternative / options development||2.6||3|
|Making strategic choices||2.6||2.5|
|Strategy implementation & change management||2.3||2|
|Strategic performance management & control||2.3||2|
|Strategy adaptation due to emerging issues||2.4||2.5|
The seventh question wanted to understand what the employees perceive the person who plans the strategies. This was done see the acceptability and their understanding the present strategy planning process and the way it was performed in XYZ. In this case, we again count the frequency of occurrence of each option in the responses and do a tally. This exercise provides the following figure. The figure plots the frequency of occurrence of each particular option. It clearly shows those maximum times respondents believe that the China Managing Director (22 times) and Asia Pacific Manager (22 times) are responsible for planning the strategies of XYZ. China Business Unit Manager also received relatively high occurrence (being voted 14 times). So we see that most of the people believe that the top management and the Director is responsible for strategy planning.
Investigating further into this question, we see that 6 respondents voted for China Managing Director as solely responsible for strategy formation, which is 17.6 percent of the responses. 38 percent of the responses show that China Managing Director along with Asia Pacific Management is responsible for strategy formation. 35 percent believe the strategy is planned by China Managing Director and China Business Unit/Segment Leader. The overall responses show that the respondents have voted only for the senior managers as the planners involved. The options all employees and others have not been selected at all. These responses indicate that the present planning process at XYZ does not have any participation from the middle and lower levels of the hierarchy. All the strategic planning is done by top management with some participation from the senior managers.
Question 8 tries to understand what the employees feel are the top most challenges faced while doing strategic planning. The respondents were asked to choose top three reasons according to them. As figure 3 shows, the top five reasons which emerged from the survey to be the strongest impediments in strategy planning are key formulators of strategy did not play an active role in implementation, insufficient employee empowerment, instructions and training given to lower level employees are not sufficient, selected strategy and related tactics are not well understood by employee, and failure to get required involvement from the leaders/managers. This shows that there are gaps in strategy formation and implementation process. And the problem that can be seen is that the planners do not participate in the implementation process. The reason behind this is lack of involvement of middle level managers who show no interest as well as are insufficiently capable or trained to complement the implementation process.
The next question wanted to understand from the respondents what they expect out of the participatory strategic planning process in terms of the groups who will responsible to plan the strategy. Figure 4 shows that frequency of the responses. The figure shows that the groups who should be involved in a highly participative strategy planning process. The respondents showed that they believe that the top three groups who should be involved in the process are senior management team, managing director, and middle level manager.
The next question asked the changes required in the XYZ strategic planning process. The top reason that emerged which required to be changed in the strategy planning process was improvement of market and competitor information collection. Both these were related to the external environment of the environment. External information may be collected by the middle level managers and front line employees. It received 4 out of 5 top management support and 14 out 19 middle management support. Further there was need to improve the alignment of the strategy thus planned with the operations i.e. there was lack of operationalization of strategy.
The next three questions were designed to understand the respondent’s level of participation in the planning process and their level of understanding according to their positions. To understand this we codify the positions into numeric codes where director is coded as 5 and worker/assistant as 1. The answers to the questions related to the employees’ involvement and understanding of the planning process is taken in 5-point Likert scale. The above table demonstrates that mean for the responses for question 11, 12, and 13 are 3.8, 3.6, and 4 respectively meaning that most of the employees believe that the respondents have a clear understanding of the strategic planning goals, process and plan.
Doing a further analysis into the responses variation of means I relation to the position of the respondents we see that at the top management level the level of understanding of the goal, process and plan is clearer at the higher level of the hierarchy. The level of understanding reduced at the lower level of the hierarchy. The table below shows, as for the understanding of goals of the strategic process is seen to be same at all positions. The director puts more input in the strategic planning process than the other positions. The director has a clear understanding about his role in the planning process. The senior managers have lesser understanding of their role in the planning process than the managers and assistant managers. This finding shows a discrepancy in the findings of previous results where the seniors managers are said to have more participation in the planning process.
|Senior Manager/BU leader||4.0||3.8||4.0|
|Manager/Executive/Senior Officer/Senior Engineer||4.0||3.9||4.5|
We observe a clear distinction in the response of the managers and assistant managers that their perception of the participation of middle managers and frontier level managers and the perception of their understanding of the strategic goals of the company. We do a correlation analysis of the responses of the middle managers regarding their level of involvement in the planning process and their understanding of the goals. The negative correlation implies that the responses for the two questions give contradictory results. A negative correlation shows that when the middle managers think that the involvement of the middle managers are high, the contradictorily answer that their understanding of the goals of the strategy is low. Intuitively it can be said that the middle managers are not very clear as to their goals and regarding their participation in the planning process.
Table 4: Correlation of Q5 and Q11 responses by middle managers:
In this section, we will develop the case for XYZ’s change in strategy planning process. Section 4.1 gave a vivid description of the present planning process that XYZ follows. From the analysis of the survey result, it is clearly understood that the planning process is not participatory in nature as whole process is conducted by the director and top management. In this section, we suggest a new method of participatory strategy planning process.
The new definition that the strategic planning process that we suggest is strategic planning process is a collective process which helps to attain long term goal of the company, completive advantage, position the company properly, and help in proper allocation of resources, and plan for future actions. This definition stresses on the four aspects, viz. collective, completive advantage, position, and allocation of resources. Collective implies it must be a participatory process which helps in attaining the plan. Competitive advantage is to be attained through the use of the strategy. The planned strategy must position the company in such a way that it gains maximum profitability and market share. Strategy should help in allocation of the resources to its optimum level. These four factors are stressed upon while framing the strategy.
The present strategic planning process is a closed process wherein the decisions are taken by the top management and the director to attain the goal. The flow of the strategy planning process as discussed in section 4.1 (see Appendix, figure1) does not show any place for participation of the middle and lower managers and no process in place through which information may be collected internally. Further, a participatory strategy planning process is desirable in XYZ as the environment is dynamic and competitive and so requires continues monitoring (Bourgeois and Eisenhardt, Strategic decision processes in high velocity environments: four cases in the microcomputer industry). This is possible when lower levels of the hierarchy are included in the strategy planning process. The present strategy planning process as according to the process flow and the responses of the survey shows that there is a lack of understanding of the external environment, plus all strategies are changed along with changing market conditions. This process must be changed, as strategy should be based on the internal strengths of the organization and not on the basis of the changing market conditions (Mintzberg, Rethinking Strategic Planning Part II: New roles for planners; Porter, Competitive Strategy). If strategy constantly changes along with the market, there is no long-term strategy. So the planning process must come out of the shell of a market and financial forecasting process.
As the level of participation of the middle mangers is low in all strategic activities, their participation must be increased. This process will help to solve three problems that have been identified: (a) strategy implementation, (b) collecting information regarding the external environment, and (c) insufficient employee empowerment. These three problems can be solved by increasing participation by middle managers.
Further from the suggestions provided by the respondents and understanding the present strategic planning process, we recommend the following as the participative strategic planning process.
After doing the case study analysis of XYZ we have the following findings:
- The external environment of XYZ is dynamic, diverse, and competitive. But the strategic planning process does not have a proper mechanism wherein they can imbibe the relevant information regarding the external environment. This makes their strategy planning process weak as the strategy intended and the emergent strategy are not filtered through the external conditions that may affect the strategy.
- Presently senior management’s participation is maximum in the planning process. The level of participation of middle level managers and frontier employee is low. But for a participative planning process, this needs to be increased. Further, the middle management along with senior managers and top management must be involved in doing situation analysis of the external environment and help in the process of implementation.
- The strategy is planned by top management but the implementation has to be done by the managers. This increases the gap between the planners and implementers. In this situation, it is necessary to include the managers in the planning process so that there is parity in what is set and what is to be delivered.
- The employees at the lower level are not clear where they stand in the strategic planning process. They do not have a clear understanding of the strategic goals.
- Lack of employee empowerment is another problem that is eminent through our research. Employees are not given enough authority to suggest their ideas in the planning process for it is a tool for top management. This set up has to be changed. This requires not only a change in the planning process but also in the organizational culture and construct.
- The planning process must be implemented in the following manner as shown in figure 7. The new planning process includes both the middle managers and frontier employee. In the new process, the situation analysis and implementation are the two areas where the middle managers and frontier staff have a key role to play.
The above discussion provides a clear idea as to what the process of planning at XYZ is supposed to be. The process must be more empowering and participative.
Participative strategy planning process is the ideal source for the development of a planning system in a dynamic environment. Given this, we developed a participative strategy planning process which empowers the employees to participate in framing the strategy of the organization. The study shows that the planning process in the case of XYZ is too autocratic for an organization which thrives in a competitive environment. The strategy presented for implementation usually gets lost because the implementers are not the planners. Here arises the classic problem that MIintzberg (1994) identified – the planners do not have the authority that the managers have. This problem is identified in the case XYZ. Top management was planning the strategy, but the implementers were not aware of the essence of the plan, and so their implementation was faulty. The only solution was co-work – both the middle and top management must work in tandem to plan and implement the process.
The improvements that are required in the present strategy planning process are to improve the process of market information collection system and competitor analysis has to be done more thoroughly. Further, there are problems with strategy identification which is due to the inadequate understanding about the company’s vision and mission. Moreover, the strategies thus formed are not properly communicated to the lower levels. Thus, there is a problem of operationalization of the strategy.
There is also the problem of who does what? The planners are the one with the incite and the ones who do the analysis. But it is the mangers that have the critical information regarding the environment. So it is upon the managers to collect the information and provide it to the planners. The study of XYZ also reveals that there is a lack of empowerment in the planning process. This implies that the planning process which is not empowered leads to deficiencies like lack of a proper strategy due to mal-information derived from the external environment and implementation issues. A process thus has been suggested which will help to overcome these problems.
The study that has been conducted has certain limitations. First, the number of surveyed people was not many. Further, no responses were available from the frontier employees. This constricted the analysis devoid of their view retarding strategic planning. Second, the analysis and the recommendations are not generalizable as the situation is unique for XYZ.
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