Strategic Management in Hierarchy Organizations - Literature review Example

Strategic Management – Evaluation of the Article Hierarchy is the most commonly used method of strategy execution by organizations. It is mainly used in strategy formulation, planning and management. In organizations running hierarchy, most of the managerial processes are assigned and dedicated on the system. They may include, staffing, budgeting, planning and other organizational management activities. Hierarchical organization has been in existence since the 29th century and is still being relied upon to date. The reason being, it is easier to coordinate and direct actions of all employees within and organization, Colman (2014). Coordination of individual can be done effectively over several miles; geographic locations are not a limitation. In Miguel’s et al. European Management Journal, (2011), hierarchy is often used as a structure to achieve deployment and success in strategy. The following part of the essay will analyse strategic processes and how they succeed under hierarchy organization. Also of major concern will be the strategies in organizations and how they may be explained and implemented through various strategy theories. In the essay there will also include an evaluation criteria by means of auditing. It will majorly explore on management issues of hierarchical systems. In several areas where many people are involved in accomplishing a specific task, people find a way of coordinating what they are doing in their parts in order to mutually achieve optimum goals. There are various hierarchy theories under strategy management that bring out the most out of activities done. Among the most common theories that explain coordination are the cognitive hierarchy theory, social projection theory and the theory of team explanation. Schelling (1960) showed how decisions made by humans are undeniable hinged on coordinative actions and expectations of other people’s actions. A brief explanation of the hierarchical theories explains how the theories are related to the organization system and how they may be used to influence actions taken for better strategy execution. The cognitive hierarchy theory was proposed first in the years 1945 and 1946. This theory was built to make individuals who have varying reasoning levels to coordinate and move at a higher regulated pace. Team reasoning, on the other hand, is a theory that utilizes the motivation of individuals working on a goal. In the circumstances where individuals are motivated, there is maximized standard effort that raises each individual’s expectations. In such collaboration, decision making is collectively preferable and usually the theory of team reasoning and others that involve people working toward a specific goal, Kotter, (2011). A hierarchy structure often acts as a blue print of any organization’s employee positions and managerial positions. In Miguel’s et al. (2011:491-503) article, strategy execution has been approached from a hierarchy execution system angle, where activities are approached in a linear manner. With the defined theories, one can be able to apply them on the article’s ideas on strategy execution. On 31st March 2013, an audit was conducted on Suzuki’s Maruti. The audit was carried out mainly on the company Suzuki based in India. The whole purpose of the process was to evaluate and give to date reports on Maruti’s financial statements. According to the audit report, responsibility heavily leant on the company’s management. Thus the management was to formulate the financial statements and determine whether they were true and from a considerable view of the financial state of the company. With reference to the hierarchical system, Maruti’s management was accorded with the task of ensuring that procedures and processes were in place. Also, major decisions such as deciding the action to take after the audit, or evaluating the financial statements, was mainly the duty of the management, Krueger, (2008:399) cited in Colman et al. (2014). Several audits are usually conducted in a hierarchical manner. Using a hierarchical system has been considered as a standard by many organization. Maruti’s Audit was no different as it was conducted by hierarchical teams. Using this approach has its own disadvantages and advantages. The following were noted in Maruti’s audit. In a hierarchical audit system, there is less complexity in influence on what the auditors think is the work to be done or the practices to be followed. Usually, audit processes present a challenge where both the junior and the senior auditors want to make the final decisions. In Maruti’s case however, the hierarchy was able to solve this conflict. However, there is a major disadvantage of using this approach; one that Maruti’s audit also experienced. Since a hierarchical system follows the order of authority, the audit committee in this audit always felt like they had an obligation to submit their occasional findings to the management. Moreover, though the auditing team is mostly aware of its duties, the management may require certain changes in the auditing. This often as a result of the management’s habit of making decisions in most occasions. As per a study conducted in the year 2010 about strategic management, there are certain facts that emerged about organizations’ management and the whole organization structure. Three major findings were that; a significant amount of an organization’s member were not aware of the strategy of the management, of those involved in the strategic development, there was an increased number of those who were aware of their organization’s strategic plans as compared to their counterparts that do not have a major role in the management Chia, and Holt (2009). On other aspects of the findings, in most of the organizations analysed, strategies often came to the top of the management and went down hierarchically to the employees in lower positions. Finally, it was also found out that hierarchy could harm execution of strategies Miguel, (2011:491-503). In such a working environment, finding two could be resolved implementation of cognitive hierarchy theory that puts individuals at par with their organization’s strategy implementation and the execution process too. This way, hierarchy cannot so much hurt strategy execution since all individuals will be aware of their part and will execute their roles as they should. Though hierarchy may be a limited mode of strategy implementation, the setbacks may be eliminated by applying the relevant organizational structures which maximize on coordination of individuals working under a specified task Gronn, (2011:437-454). References Chia, R and Holt, R 2009, Strategy without Design. Cambridge: Cambridge University Press. Colman, A et al. 2014, Explaining Strategic Coordination: Cognitive Hierarchy Theory, Strong Stackelberg Reasoning, and Team Reasoning, American Psychological Association, University of Leicester Gronn, P 2011, Hybrid configurations of leadership, The Sage Handbook of Leadership, London: Sage.437–454. Kotter, J 2011, Hierarchy and Network: Two Structures, One Organization, Harvard Business Review, Viewed 28 April 2014, http://blogs.hbr.org/2011/05/two-structures-one-organizatio/ Miguel, P et al. 2011, Beyond Addiction: Hierarchy and Other Ways of Getting Strategy Done, European Management Journal, School of Business and Economics, Rua Marques de Fronteira, Lisbon: Portugal. Vol. 29 p.491-503. Schelling, T 1960, The Strategy of Conflict, Cambridge, MA: Harvard University Press. Read More