Tools and Concepts of Strategic Management - Essay Example

The advantages and disadvantages of applying the tools and concepts of strategic management to organizations in the public sector (2006) INTRODUCTION The era of public administration, where services emanating from public enterprises are done with a view of rendering beneficial services with disregard for the quality of service rendered, that has fizzled out with the contemporary public management. Public management since the 1980s has seen public organizations taking cue in the practice of modern management techniques, such as total quality management (TQM), Cost benefit-analysis, Strategic management, the current Strategic Human Resource Management, and Users participation and involvement in service provision and delivery. The ever increasing demands of the people in the quality service rendered to them by public organizations, is one that has awoken the need for public sector organizations to adopt the implementation of modern management techniques. In this view Richardson (2006), puts it that "Traditionally, public service organizations have had little need to worry about market share and increasing competition, since they operate in a monopolistic environment. But in recent time, the emphasis on New Public Management/ Public sector management approaches has forced public organizations to pay closer attention to their services delivery as con summers have begun to expect and demand more for their tax dollars". In this instance, no consumer of public goods and services are content with grumbling about poorly- produced goods and services and the under-qualified, untrained employees who render these services to them. Hence, as societies become more critical and litigious, public service organizations must seek all possible avenues for improving their output and providing the satisfaction their clients require and deserve. This couple with the complex nature of governance in contemporary times, where government partakes in nearly every sector of the economy (statism) in service provision (though there is a reduction in this through the privatization policies of must governments), then there is the need to ensure that quality service is delivered. Strategic management is usually associated with private organizations that operate in a competitive environment, but now it is a noticeable management technique adopted in the New Public Management, as a concept and practice, by public sector organizations. This essay tends to look at the advantages and disadvantages associated with the adoption of strategic management in public sector organizations. Also, the argument on the difference context of strategic management in the private and public sectors would be deliberated upon. CONCEPTUALIZATION OF TERM Strategic Management: strategic management involves a rational planning process directed towards achieving clearly defined coherent goals. According to Armitage (1992), strategic management is a continuous process that works to fit an organization into its changing environment. Strategic management is a broader concept than strategic planning. In the sense that strategic planning (or long- range planning) is traditionally regarded as a period process to develop long-range plans for the organization. On the other hand strategic management encompasses both strategic decisions making and strategic planning. Thus, strategic management focuses on any strategic decision that must be made, regardless of its time frame and the planning necessary to complement that decision. Strategic management is then conceive as "a continuous activity of setting and maintaining the strategic direction of the organization and its business, and making decisions on a day- to day basis to deal with changing circumstances and the challenges of the business results; it is all about people, leadership, technology and processes. Effective combination of these elements will help with strategic direction and successful service delivery (OGC, 2005). New Public Management: the concept of new public management differs from the traditional public administration in the sense that, the variables of managerialization and marketization associated with private organization are introduced in modern public management. Here, the focus is on clientelism and delivery of services to meet the desired need of the users of these services. Hitherto, public administration has been a bureaucratic process, more dominated by ritualistic adherence to rules. But now, the new public management imbibes more of modern management techniques of strategic management and Total quality management in effective service delivery. According to Ferlie & Fitzgerald (1996), there are increasing attempts to create 'quasi-markets' within the public sector, whereby previously line- managed organizations disaggregate into purchasing and providing wings, with relations between them governed by contracts rather than hierarchy. Within central government, an increasing number of devolved and quasi-autonomous agencies have been created (the so-called 'Next Steps' agencies). The financing of such quasi-markets remain public, but an increasing number of independent providers may compete for contracts. Other public functions, like civil service roles, are currently subject to market-testing. Whereby, such quasi-markets are seen by their proponents as one way of empowering users. Thus, the new public management is seen as a movement to the management of change where there is more visible, active and individualistic forms of leadership in the public services. THE CONTEXT OF STRATEGIC MANAGEMENT IN PUBLIC ORGANIZATION, IN RELATION TO PRACTICES OBTAINABLE IN PRIVATE SECTOR ORGANIZATIONS The adoption of strategic management is usually more associated with organizations that operate in the private sector. This is adduced to the competitive environment in which they operate in. each private organization in an attempt to gain competitive advantage over their rivals result to a more effective and result oriented strategic management plans. Hence, most tools in strategic management are fashioned in line with the operations of the private organizations and the competitive environment in which they operate. At this juncture, it is pertinent to ask if the practice of strategic management is differently enforced in the public sector organizations, than what is obtainable in the private sector And hoe feasible is strategic management in public organizations The private organizations exist to provide investors with a more returns on their invested funds in the organization, thus, they operate to create value to satisfy customer in measurable terms with investors' returns. This spur them into the challenge of strategic management as a w ay of increasing the speed to effect the necessary operations, in order to adapt with the complex market forces in reducing predictability and increasing ways of delivering superior returns. This environment in which private organizations operate is different compare to what is obtainable in the public sector. The public organization are established to create services to the masses at the widest range and in more lesser cost. Thus, the drive for public organizations is not the maximization of profit, as obtainable in private organization, but the delivery of services to benefit the greater number of the public. In the course of these service delivery, the public organizations are influenced by several interest groups, thus, this has resulted in re structuring values creations from these government owned organizations. The increasing demands of the public on value creation from public organization since the 80's till contemporary times, coupled with the diverse interest groups demands, have potent a complex and more challenging arena for public organization to operate. Hence, the need to effectively deliver better service calls for a change in the status quo operating pattern. And this has led many public organizations in different countries to adopt strategic management as a way out of this clog mere. As Collier et al (2000) puts it, "the need for strategic management in the public sector is thus assumed, given that public sector organizations are being made more accountable for achieving best value performance, often within a more market- focused arena". The changing political economy environment where public organizations operate in 1980s led to the emergence of the 'New public Management'. Thus, this change in balance of power shift and management practice in public organization is brought about by the following adduced occurrences: First, there has been a clear decline in the power of the public sector unions, partly caused by the changes in the legal framework and also contracting-out. Alongside this, there has been a shift from traditional forms of collective bargaining to more contracts-and performance based forms of reward and appraisal. Secondly, there is the presence of some erosion of the autonomy of professionals within the public sector. Professionals are retaining autonomy in their core tasks and that managerialization and marketization are confined to the periphery of public organizations. As a result, 'transformatory change' remains an unlikely outcome in these accounts. Thirdly, public sector managers are seen as a gaining group. They have been instruments in which many changes have been forced, empowered by the doctrine that 'management must manage', lower down the hierarchy, there has been a proliferation of operational management posts in business management, finance, audit, and information. Fourthly, the rise of a non-elected elite, or appointee state, directing these new-style public services in their role a s non-executive directors. In this instance, elected and staff representatives have been removed from the boards of many public sector organizations and replaced by appointees. Thus, the hitherto rubber stamped personnel are replaced with influx of senior and skilled personnel, usually drawn from the private sector. Finally, the emergence of public management has been seen as aggravating a democratic deficit, removing traditional channels of local accountability, replaced by development of new forms of market-based accountability, giving consumers greater choice between producers (Ferlie & Fitzgerald, 1996). The practice of strategic management in the public sector is usually perceived as requiring a different approach to what is obtainable in the private sector. This is usually attributed with the political environment in which these public organizations operate, and the level of accountability and value creation associated with public organizations. As previously stated, the private organizations operate within a more dynamic and competitive business environment, and thus, have to strategise more effectively in order to curve a niche for themselves and gain competitive advantage. The difference in the approach to strategic management in public sector and private sector organizations arise from the difference in value generations. As earlier stated, value generation in public sector organization is determined by an 'authorising environment' i.e. the institution granting the public organization its power to conduct its functions and provide/ authorise the necessary budget. According to Andersen & Lawrie (2002), this authorising environment comprises a complex web of stake-holders often with conflicting interests, e.g. tax payers ting to pay less and welfare recipients wanting to receive more, but both exercising their influence over what should constitute public value generation through democratic processes. The priorities of politicians are thus influenced directly by the electoral cycle, but these priorities are challenged by the varying demands from interest groups". Therefore, politicians tend to maximise their influence by appealing to several interest groups simultaneously, which result in an ambiguous and broaden directional statement that pose as a tasking and challenging strategic direction and priority setting for public organizations. But for private organizations, values are created with the single view of satisfying customers in the anticipating for increase in investors' returns. Another factor leading to the variance in approach to strategic management between public and private organization has to do with the level of accountability facing organizations in the different sectors. Public organizations are majorly scrutinized by the public; hence they are more accountable to the public than the private organization. With the adoption of public management practices, in the public sector, there is a shift of focus in accountability from elected politicians to employed public managers, this according to Andersen & Lawrie (2002), has resulted "in potential negative impact on radical performance improvement caused by political 'abuse' of public accountability by structural changes separating steering from rowing, and the importance of internal accountability between layers of management with public sector organization". The private sector organizations on the other hand are always subjected to constant market testing as targets for future performance as well as results from past performance are normally tested and compared against those of relevant competitors (ibid). The pattern of resource allocation differs from both public sector and private sector organizations. The nature of resource allocation to public sector organization has contributed to the challenges and complexity associated with strategic management in organizations in this sector. The resources available to public sector organizations include tangible resources, such as monetary budgetary allocation from government, and intangible resources, such as power in law enforcement, tax collection and environmental protection etc. This potential of public organization having the power to save or derive cost from appropriate use or abuse of this power, differentiate how strategic management, in regards to resource planning, is being carried out in the two sectors. (Moore 1995, cited in Andersen & Lawrie, 2002). These aforementioned factors have made the difference in approach to strategic management in public sector organizations and that obtainable in the private sector organization. ADVANTAGES AND DISADVANTAGES OF APPLYING STARTEGIC MANAGEMENT IN PUBLIC ORGANIZATION The basic need for adopting strategic management for any organization is to bring about the delivery of quality service and at the same time the utilization of the available resources in an organization in the most effective way in order to meet the organization's long term goal and its immediate objectives. For the public organizations in their embarking on strategic management, the following advantages are ascribed to them: i. Public organization are equipped with the ability to face new uncertainties and new challenges, especially in this contemporary rapid c hanging political environment, even locally, nationally and globally. With the aid of strategic management adequate plans are made on ways to adapt with current global trend, even nationally and locally. The globalization phenomenon is one that has turned every countries' economy into an easy access, thus, there is the need to strategise so as to compete favourably and be in turn with current trends that is being adopted in the global village. To this end, UNESCO (2002), has it that, "This evolution towards a globalize system can not help but have an impact on the form of political organization that have predominated throughout the world in modern times. In relativizing the notion of borders, taking away from the state some of its prerogative and greatly reducing its margin fro manoeuvre, and consecrating the reign of global enterprises, the new global system has led to a profound crisis of the nation-state, whose authority is now increasingly challenged by the world market". Thus, the adoption of strategic management in public organizations has positioned them in a more vintage point in facing current challenges emanating from transnational transactions and the challenges of operating in a global village. ii. Another aspect in which strategic management has constituted advantageous to public organization is in making them meet the ever increasing demands of the users of public services. The complex environment in which public organizations operate in contemporary times, is further aggravated by the transnational operations (i.e. operating across organizations boundaries) this has led to a wider network of stakeholders with vested interest of operations in these public enterprises. To adequately meet these challenging demands of these stakeholders there is then the need to adopt the practice of strategic management. Some public organizations have partnered with private organization as a strategy to survive the challenges and demands of the modern era. In this view Andersen & Lawrie (2002), state that public sector managers therefore need to adopt an approach to strategic management that helps them clarify the expectation of their authorising environment, communicate amore consistent strategic direction internally, while at the same time demonstrate externally their organization's ability to interpret and respond to frequently changing political signals and priorities. The increased flexibility as well as clarity and communication of strategic direction point to the need for improved strategic control in public sector organization. iii. Adoption of strategic management has helped public organization in enforcing the practice of users' participation in the process of service delivery. This ahs gone a long way in improving the quality of service delivery made available top users. To Cornell & Gaventa 92001), effective participation in social policy requires looking beyond national institutions to enhancing the capacities of citizens to influence supranational, as well as national policy. These changing circumstances raise important opportunities and challenges fro participation. They require the re-evaluation of the concepts of citizenship and of participation itself in shaping social policy, and look more closely at the processes through which policies are formulated and enacted. This can be attained through an effective implementation of strategic management. iv. The adoption of strategic management has also increased the profile of leadership in the public sector. In recent years management and leaders of public organizations are positioned to develop a clear strategic vision a nd strategise in coping with uncertainties and the challenges of modern management. This has brought them to equal terms with management in the private sector, thus, showing a clear difference of the absence of competent leadership in years prior to the adoption of strategic management. v. Lastly, with the aid of strategic management the performance evaluating and measures to improve performance in public sector is easily carried out. Strategic management has helped the implementation of best value, audit and quality of service provision. Thus, resources are best allocated in pattern that would generate more effective results Looking at the disadvantages or challenges associated with the implementation of strategic management in public organization, Andersen & Lawrie (2002) argues that this come in two forms: first, the long term policy consistency required to accommodate the planning and implementation of the organizational changes often triggered by the introduction of new management techniques, such as strategic management , is hard to obtain. Secondly, the complex nature of the hierarchical structure in public sector organizations has made the practice of strategic management very tasking, sometimes leading to its ineffectiveness. The setting of strategic priorities sometimes lead to division of accountability and is prone to erupt conflict and repudiation of responsibility, unlike in private organization where the authority structure is simple, management are responsible to Board of Directors, this make the practice of strategic management easy. CONCLUSION The practice of strategic management in public sector organization has being more of an effective and successful tool in bringing about the delivery of quality services. This also enhanced the position these organization in meeting with the challenges of modern management. Thus, it is showed that the adoption of strategic management by organization is a right tool needed at the right time to meet the challenges of the present time. REFRENCES Andersen, H.V. & Lawrie, g. (2002), "Examining Opportunities for Improving Public Sector Governance through Better Strategic Management" 2GC Working Paper, May http://www.2gc.co.uk/pdf/2GC-IPSG.pdf (18/05/06) Armitage, Jack l. (1992), "Strategic management for Public accounting (the CPA Manager) http://www.nysscpa.org/cpajournal/old/12543369.htm (10/05/06). Collier, N. et al (20000, "The Processes of Strategic Development in the Public Sector" in Scholes K. & Johnson G. Exploring Public Sector Strategy. Harlow: Financial Times Prentice Hall Cornwall, A. & Gaventa, J. (2001), "From Users and Choosers to Makers and Shapers: Repositioning Participation in Social Policy" http://www.socialplatform.org/module/Filelib/participationinsocialpolicy.pdf (15/04/06) Ferlie, E. Fitzgerald, L. & Pettigrew A. (1996), The New Public Management in Action. Oxford: Oxford University Press. OGC (2005), "OGC Successful Delivery Toolkit http://www.ogc.gov.uk/sdtoolkit/deliveryteam/breifings/businesscharge/stratmang.html (10/05/06) Richardson, Margaret A. (2006), "recruiting Strategies Managing / Effecting the Recruitment Process http://unpan/.un.org/intradoc/groups/public/documents/UNUNPAN021814.pdf (05/05/06) UNESCO (2002), "From Social Exclusion to Social Cohesion: a policy agenda" Policy Paper no 2 Management of Social Transformations (MOST) http://digital-library.unesco.org/shs/most/gsdl/cgi-bin/library (23/04/06) Read More