Strategic_management_term_paper.docx

Introduction Since its inception, strategic management has proved its worth in the business sector and beyond, and it remains a useful tool for both private and public sector organizations in providing guidance towards the achievement of strategic goals (Joyce, 2015). As opposed to the private sector, strategic management in the public sector functions as an essential tool used to improve performance in order to achieve efficiency, effectiveness while still remaining economical in providing quality service delivery to citizens (Garcia, 1992). The main objective of this essay is to discuss the concept of strategic management, its application and importance in the public sector as well as the challenges encountered by strategic management implementation within the public sector. Therefore, this essay will be divided into four sections. Firstly, the concept of strategic management will be discussed. Secondly, the importance of strategic management in the public sector will be laid out. Thirdly, the application of strategic management in the public sector will be discussed and different public sector organizations will be used as examples. Lastly, the challenges encountered when implementing strategic management will be explored. Discussions on the Concept of Strategic Management Strategic management in the public sector has been emerging, step by step, as part of modern public governance and it is a process that governments use for national development (Joyce, 2015). Koteen (1991, p.18) defines strategic management as “A broad concept that embraces the entire set of managerial decisions and actions that determine the long-run performance of an organization. According to Poister and Strieb (1999, p.308), Strategic management is concerned with strengthening the long-term viability and effectiveness of public sector organizations in terms of both substantive policy and management capacity. It integrates all other management processes to provide a 1

systematic, coherent, and effective approach to establishing, attaining, monitoring, and updating an agency's strategic objectives. For Poister and Strieb (1999), strategic management is integrative in nature in the sense that it focuses attention across functional divisions and throughout various organizational levels on common goals, themes and issues. Contrary to Poister and Strieb’s perspective, Lane and Willis (2009) argue that the concept of strategic management is operational in nature, as it targets the structure of the main activities in the organization and how they are to be carried out. However, for Lamb (1984), strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involve, assesses its competitors and sets goals and strategies to meet all existing and potential competitors, and then reviews each strategy annually or quarterly to determine how it has been implemented and whether it has succeeded then take corrective measures if it had failed. Moreover, Bozeman (1983, p. 3) indicates that as a concept, “Strategic management involves the development of contingent managerial strategies that can effectively respond to changeable policies and priorities.” Bozeman’s analysis of strategic management is narrow as it assumes that strategic management process is driven by changes in policies and priorities (Halachmi, 2000). On the other hand, Nutt and Backoff (1992) define the concept of strategic management as a process that focuses on the long-term health of an organization. It primarily relies on the integration of strategic planning, resource allocation, and control and evaluation processes to achieve strategic goals. Whereas Toft (1989, p.6), sees the concept of strategic management as “An advanced and coherent form of strategic thinking, attempting to extend strategic vision throughout all units of the organization, encompassing every administrative system”. It can therefore be established that,

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strategic management serves as a link throughout all organizational activities that provides coordinated and cooperative approach towards the achievement of organizational goals. Moreover, Černiauskienė (2014) defines the concept of strategic management as a constant, dynamic and coherent process in which an organization adapts to the changes of external environment on time and uses its resources more efficiently. He further notes that process of strategic management allows developing and implementing organizational strategies as a unit of decisions that anticipates the most important future objectives of an organization as well as actions and means of achieving those objectives. Wheelen and Hungers (2006, p.3) share the same view with Černiauskienė (2014) by indicating that, “Strategic management is a set of managerial decisions and actions that determines the long-term performance of a corporation. It involves environmental scanning (both external and internal), strategy formulation (strategic or long range planning), strategy implementation, and evaluation and control”. These two definitions place more emphasis on the analysis and evaluation of the external opportunities and threats and the internal strengths and weaknesses within which the organization exists. On the other hand, according to David (1997), strategic management is the art and science of formulating, implementing and evaluating cross- functional decisions that enable an organization to achieve its objectives. Pearce and Robinson (2002) noted that strategic management involves the planning, directing, organizing and controlling of strategic related decisions and actions of the business. Despite the numerous definitions of strategic management provided by different authors, Joyce (2015) holds the view that, there is no widely accepted definition of strategic management, but he noted that according to Green (1998), authors would agree that strategic management embraces

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some excellence, vision, core competencies, learning, empowerment, transformation and sustainable competitive advantage. However, based on the above presented definitions, it can be seen that the concept of strategic management involves formulation of goals and implementation processes that are geared towards achieving organizational goals and objectives and it is a function within the public sector that is carried out at the top level of the organization with the implementation and evaluation processes being carried out at functional level. As such, strategic management is essential as it provides short and long term a sense of direction for organizations relative to their internal and external environments, which could be changing rapidly (Poister and Strieb, 1999). The Importance of Strategic Management in the Public Sector An organization without a clearly defined direction and purpose encounters difficulties in achieving its goals and objectives, as such strategic management is of significant importance in the public sector as it helps shape the direction each public entity intends to take. An old adage indicates that, "If you do not know where you are going then any road will take you there”. Jones (1981) supports this idea by indicating that, strategic management has become one of the most prominent areas of management, as it consists of comprehensive collection of management actions which supports company managers to keep the organization consistent with the environment and shows the correct path of development. Steiner (1979) adds that, strategic management provides guidance, direction and boundaries for operational management. Thus, strategic management helps determine the general direction an organization intends to take towards achieving its goals and objectives.

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Communication is a life-blood of any organization, and for every activity to be effectively carried out communication is at the center stage. Fred (2011) indicates that, strategic management plays an important role within the public sector as it enhances the communication and the interaction between managers and employees. This implies that, through improved communication which comes as a result of strategic management, all employees within the organization (managers and subordinates) better understand the mission and the purpose of the organization. That is, they become aware of what the organization intends to do, how it intends to do it and how they can contribute and commit towards the attainment of its goals and objectives. Thus, Zafar et al. (2013, p.23) caution that, In the absence of information and clear communication, rumors start flying, and people at the functional strategy level start assuming the worst and this leads to a serious mistrust and confusion among the team members and affect their efficiency in solving the problems. Therefore, through enhanced communication and participation, managers and employees can support the organization to successful strategic management (Athapaththu, 2016). Moreover, an organization with a well-defined framework for coordinating and controlling its activities significantly improves its chances of meeting its goals and objectives. As a result, Fred (2011) articulates that, strategic management serves as a platform that organizations use to develop a framework that coordinates, controls and influences the direction of the organizations activities towards achieving its strategic goals. Braduţan and Sârbu (N.D) also add that, through the framework provided by strategic management, there is consistency in strategic decision making and better coordination between all operational and tactical units within the organization. Strategic management is essential within the public sector as it helps in managing organizations due to its ability to connect all the activities in the organization so that there is unity of purpose 5

(David, 1997). David further notes that, the connectivity of activities arises because strategic management directs efforts to the core competencies of the organization. All activities will therefore, revolve around what the organization is expected to achieve and the values it stands for. Jones (1981) further maintains that, the activities undertaken in the strategic management process ensure unity of action and efficiency in the organization’s performance. Thus, “Strategic management can be viewed as broad and future oriented as it has multifunctional consequences to the organization” (Kemboi, 2011, p.5). “If you fail to plan, then you plan to fail” says an old adage. Proactive, sufficient and adequate organizational planning is at the heart of every organization success and one strong argument for strategic management is that, it serves as a basis for organizational planning, as it requires an organization to develop a long term blueprint of where it intends to go. Kemboi (2011) supports this idea by maintaining that, indeed strategic management is a planning tool which indicates what to be done, who is to do what, what time and what resources are required towards achieving the organizational goals and objectives. Athapaththu (2016) adds that, strategic management within the public sector functions as a road map which gives directions to an organization from now, where to go or where it should be in five or ten years. In Addition, embedded in strategic management is the concept of Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis which helps public sector organizations to proactively search for opportunities to do new things or to do existing things in new or better ways (Joyce, 2015). Eadie (2000) suggests that the purpose of strategic management is to maintain a favourable balance between the organization and its environment over a long period. It is also about thinking the best alternative in getting solution to a certain problem under a given circumstance. “The strategic-management process provides a basis for identifying and 6

rationalizing the need for change to all managers and employees of a firm; it helps them view change as an opportunity rather than as a threat” (Fred, 2011, p.50). Furthermore, by applying principles of SWOT analysis in the public sector, public sector organizations will be in a better position to plan on how to take on the opportunities that have been identified (for example, new donor grants) and how to address current and new threats facing the public sector (for example, climate change). In order to take on the identified opportunities and address identified threats public sector organizations utilize their internal strengths (for example, natural resources) and improve on their weaknesses (for example lack of specialized skills). Furthermore, strategic management helps identify organizational goals and ensure the optimum allocation and utilization of resources (Kemboi, 2011). The role of strategic management in organizations’ resource allocation is well explained by Rowe (1994), as he explains that, for every organization to achieve its goals and objectives, resources such as land, finances, information and personnel need to be well managed and only the appropriate application of strategic management makes it possible. As such, resource analysis helps determine whether attaining the organization mission is realistic given the available resources. For instance, allocation of resources is beneficial in the public sector organizations where resources are generally scarce, thus requiring effective and efficient and economical management. Also, embedded in the process of strategic management are the processes of monitoring and evaluation, which play a significant role in ensuring that resources are effectively allocated and put to the intended use. On the other hand, monitoring helps ensures that mistakes are promptly corrected to avoid waste of time and money that would occur when correcting errors noticed long after they were done (Kemboi, 2011). Moreover, strategic management is crucial in the public sector as it helps employees better understand their roles and responsibilities (Fred, 2011). Through the process of implementation, 7

strategic management tends to indicate the roles and responsibilities of each employee and how they are to be carried out. This makes it easy for each employee to appreciate and understand his or her value towards the overall objectives of the organization and this has a potential to keep employees motivated. Kemboi (2011, p.3-4) adds that, The application of strategic management in organizations’ activities ensures participation of stakeholders in decision making process. The collective participation improves the quality of decisions because many alternatives are obtained before choosing the most appropriate ones. It also creates a sense of belonging among staff which boosts morale and overall performance of the organization. For instance, one of the issues commonly apparent in the civil service of Lesotho is low morale among the civil servants and this leads to poor service delivery. By involving all stakeholders in decision making process, the civil servants will have a better understanding of how each of their individual roles fits into the overall well-being of the country and the economy. This has the potential of making employees more committed and motivated and therefore, leading to improved service delivery. The Application of Strategic Management in the Public Sector “Strategic management has gained a sustained prominence in the management of public services in the past two decades or so, as such, public organizations are increasingly being asked to use it as part of their management techniques” (Sulle, 2009, p.1). In the case of Lesotho, Strategic management has become an eye-catching management tool for reformers and it is perceived as a government-wide reform initiative in running the public sector. On the other hand, Berry, (2001) argues that, even though strategic management is now widely accepted and recognized, there are

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still skeptical–minded people who see strategic management as unfit for the public sector management. One of the common dilemmas facing public sector in Lesotho is the issue of scarce resources which often leads to a situation whereby different ministries or activities compete with each other for scarce resources. Resource allocation takes place at the second level of strategic management process, which is strategy implementation. At this level, organizations establish annual objectives and allocate resources so that formulated strategies can be executed (Kemboi, 2011). Therefore, through the use and application of strategic management in the public sector, resource allocation becomes easier and more effective, leading to resources being effectively allocated to the priority areas of the government (Sulle, 2009). Joyce (2015) supports this idea by maintaining that, most public organizations are likely to adopt strategic management in the public sector to assist managers to contain their budgets and maintain funding for the government’s highest priority areas. For instance, budget is one of strategic management tools that the public sector uses to distribute resources to different ministries of government on annual basis. Furthermore, In the Lesotho budget speech of 2016/2017, the Minister of Finance Dr. Majoro, revealed that, strategic management is now a compulsory activity for public organization because the treasury will have the problem of releasing annual budgets to public organizations that do not have strategic planning. Sulle (2009) also suggests that, strategic management is not a choice for ministries and agencies but a compulsory exercise imposed on them by the government in order to support and contribute to the broader national development goals such as Lesotho Vision 2020 and Lesotho Millennium Development Goals. MacMillan and Tampoe (2001) state that, an organization without a strategy appears to be directionless and incompetent. Through this line of reasoning, it can be established that the 9

application of strategic management in the public sector, indicates long-term direction and then translate that direction into specific goals, objectives, and actions (Poister and Streib 1999). This implies that, it is through the application of strategic management that public sector organizations have a sense of direction. For instance, all governmental ministries in Lesotho apply strategic management to develop their mission, purpose and define what they should be doing. Therefore, without proper application of strategic management the future of the public sector organizations appears vague. Furthermore, to improve performance of civil servants which can lead to quality service delivery, the application of strategic management advocates for adoption of the Balanced Scorecard performance management system as a strategic control measurement for employee performance in the public sector (Reddy, 2016). This implies that, through the application of Balanced Scorecard, public sector organizations benefit from both financial and non-financial information provided by Balanced Scorecard. This information will highlight areas of improvement that has potential to lead to improved service delivery. Challenges Encountered by Strategic Management in the Public Sector In an effort to meet their missions, public organizations often face a myriad of challenges that threaten the fulfillment of their mission, or implementing successful strategies in accordance with their mission (Leskaj, 2017). This is mainly because strategic management is basically a new management instrument imported to the public sector (Sulle, 2009). Lundqvist (2014) notes that, people often use the term strategy in the public sector, but no one really knows what strategy means. Hence, there is confusion about the meaning, function, role and definition of strategic management. This implies that, employees within the public sector do not see how their actions contribute towards the overall direction of the organization and this has a potential of low 10

commitment and morale leading to poor service delivery and ineffective implementation of strategic management. Strategic planning is an action-oriented type of planning that is useful only if it is carefully linked to implementation and this is often where the process breaks down (Poister and Streib, 2005). Public managers may fail to link their strategic planning efforts to other critical decision making processes (Leskaj, 2017). Poister and Streib (2005) argue that organizational decision makers do not fully integrate the strategic plan across the entire organization to facilitate plan implementation. In other words, public sector organizations create strategic plans, but fail to use the strategic plan document to implement strategic initiatives and this leads to failure in effectively carrying out strategic management initiatives. Hughes (2003) acknowledges that there are more problems and constraints in the public sector as compared to the private sector when it comes to successful implementation of strategic management and these problems emanate from separation of powers between the three branches of government (Legislature, Executive and Judiciary). Political leadership in the public sector is responsible for strategy formation (in the form of policies and strategic priorities) and an executive leadership is responsible for managing the implementation process of these policies. This division of accountability is prone to conflict and repudiation of responsibility hence it becomes difficult to successfully implement strategic management in the public sector than in the private sector (Poister and Streib, 1999). Strategic management can hardly exist without leadership. MacMillan and Tampoe (2001) support this idea by maintaining that, organizations that are leaderless or inadequately led have difficulty in defining clear strategies even if they continue to function in their day to day activities. In the case of Lesotho, current public sector leadership is made up four political parties which entered 11

into a coalition agreement. This form of leadership presents a major challenge for formulation and implementation of strategic management initiatives as there are differing political party mandates, which therefore lead to conflicting interests. Moreover, change in public sector leadership leads to change in strategies of which frustrates the current ongoing progress on the implementation of strategic management initiatives. For Lesotho, this situation is worsened by frequent change in government leadership as it has become apparent that no coalition government stays in power for more than three years as opposed to the expected five years. Among other challenges facing the public sector towards achieving set out strategic management goals is the scarcity of resources. Kemboi (2011) states that, public sector organizations are faced with challenges when allocating the limited resources to projects and activities marked for implementation in a specific period, and this leads to failure in achieving strategic management goals. For instance, ineffective utilization of scarce resources has played a significant part on the failure to achieve some of the Millennium Development Goals in Lesotho. To be specific, some of the government implementation initiatives geared towards eradicating poverty in Lesotho failed due to lack of resources and this presented a major challenge for successful implementation of strategic management goals. The effects of bureaucracy in the implementation of strategic management in the public sector are far reaching as Kalimullah et al. (N.D, p. 11) explain that, Strategic management in the civil service has been politically motivated and often geared to partisan or individual interests rather than overall national interests. Resistance against administrative reforms is generated and sustained by civil servants who perceive their interest to be adversely affected as a result of the implementation of the strategic management. Lack of professionalism among civil servants hampers this process. Lack of adequate and sustained institutional support 12

for networking is also obstacles in the way of proper implementation. Absence of necessary disciplined and systematic approach in government activities are the main barrier in proper implementation of strategic management in developing countries. Merton (1957) supports this idea by maintaining that excessive bureaucracy makes public organizations more arthritic and self-serving, less able to achieve their core missions, and less responsive to service users. It is characterized by red tape, excessive paper work, fear of innovation, poor customer service, duplication of working procedures, strict adherence to procedures, weak management practices and low morale. Thus, bureaucracy presents a major challenge for successful implementation of strategic management. Conclusion In a nutshell, strategic management is a broad concept which forces organizations to plan ahead, it helps organizations to set the direction they want to take by specifying strategic implementation initiatives that need to be carried out. Despite the multiple benefits that come with the application of strategic management in the public sector, strategic management still faces a number of setbacks before it can realize its full potential. Therefore, public sector organizations still have a long way to go towards successfully incorporating strategic management principles in their day to day operations, as this have huge potential towards improving the quality of service offered.

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