Strategic Management overview

What is strategic management?

Strategic management is a dynamic process of aligning strategies, performance and 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. It is a continuous activity of setting and maintaining the strategic direction of the organisation and its business, and making decisions on a day-to-day basis to deal with changing circumstances and the challenges of the business environment. As part of your strategic thinking about advancing the business, you (and your partners) will have set a course for a particular direction, but subsequent policy drivers (such as new performance targets) or business drivers (such as increased demand for services) could take the organisation in a different direction. There could be implications for accountability when you decide whether to take corrective action to get back on course or to go with the new direction. Similarly, there could be implications for governance if relationships with partners change.

Figure 1: Strategic management

 

 

Why is it important?

Your organisation has to be able to respond effectively to challenges - both problems and opportunities - as they arise. For example, the citizen has increasing expectations of service standards and availability. In response, organisations are working towards an outward-focused view of the way services should be provided - a fundamental shift from the traditional focus on internal concerns. At the same time, major opportunities for improvement may arise from developments such as new information and communications technologies, and the availability of additional financial resources such as the Invest to Save Budget. In many cases the response to the problem or opportunity will:

• require the continuous attention of senior management

• affect most or all of the organisation

• have long term implications

• require substantial resources

• be interconnected with other issues and developments.

Key success factors

What characterises effective strategic management? There must be:

• a clear business strategy and vision for the future

• a strategic direction endorsed by senior managers, taking account of partners and other stakeholders

• a mechanism for accountability (to the citizen in meeting their expectations, as well as to the centre in meeting policy targets)

• a framework for governance at several levels (government-wide down to internal reporting arrangements) that ensures you can coordinate everything (multiple goals) even when there are competing priorities and different goals (see Governance).

• the ability to exploit opportunities and respond to external change (turbulence) by taking ongoing strategic decisions

• a coherent framework for managing risk - whether it is balancing the risks and rewards of a business direction, coping with the uncertainties of project risk or ensuring business continuity (see Risk management).

Who is involved in strategic management?

Key roles include:

• senior executives and business managers in public sector organisations; they need to seek out opportunities for new ways of working that will help the organisation to realise the agenda for change in the public sector; they also need to be aware of the implications of realignment if the strategic direction is changed

• senior management responsible for reviewing and redefining the requirements for delivery of core services, and for acquiring the means to deliver them

• staff responsible for developing and reviewing the business strategy in their organisations; they need to appreciate the wider business context partners and other stakeholders affected by the strategy.

Principles

The strategic issues facing the organisation and its response to them will call on the organisation's skills in strategic management - its ability to recognise and deal successfully with strategic issues. In the public sector, these will include:

• addressing the needs of the citizen, not the convenience of the organisation

• greater efficiency and value for money

• improved and innovative service delivery to the public

• joined-up policy making

• increased communication with customers and partners

• greater local-central government coordination

• improved performance and the implementation of Public Service Agreements

• realisation of the government's e-government strategy (an enabling framework of key principles such as interoperability and supporting technical standards).

Although the strategy process may incorporate timetabled events which fit in to the wider management processes - such as the cycles of financial planning in the public sector - strategic management is a continuous process. Managers at all levels in the organisation may need to make decisions on business issues at any time, and some of these decisions could be regarded as 'strategic' - even though they may not appear so at the time. Any business-focused strategy, must be flexible enough to accommodate the demands of continuous change.

Processes

Strategic management has a co-ordination and integration role, seeking endorsement of the business and supporting strategies (such as HR workspace and IT) and assuring the appropriateness of strategic themes, see Strategic Management workbook (PDF) for a more detailed step-by-step approach.

The task of strategic management, in collaboration with partners, is to manage the continuous processes of:

• maintaining an appropriate relationship between the organisation and its environment - preparing the organisation for an uncertain future

• developing and executing approaches for the implementation of the agenda for strategic change - progressing the themes of the strategy

• developing, reviewing and monitoring the policies which scope and constrain management decisions and implementation plans

• technology tracking to identify opportunities for innovation.

A strategy for the organisation - whether for the business as a whole or for its information systems - should include:

• a strategic 'vision' - a long-term view of how the organisation wishes to position itself in relation to its business environment - for example, its role and functions, the products or services it will deliver, its relationship with customers or competitors

• the agenda for change - the significant areas of change the organisation will engage in, in order to respond to the problems and opportunities - the 'strategic issues' - facing it; these will be the 'themes' of the strategy, which may address topics such as organisation and structure, business functions and activities, product and service delivery, management and staffing issues, technology, or external relationships; a theme is progressed over a medium to long time scale

• the policies which will guide the decision-making processes, and provide a framework for management decisions - they will influence the patterns of behaviour which drive the organisation forward towards the desired future (see Business and supporting strategies).

Your route to the desired future should be mapped out at a high level in terms of the themes of the strategy. Themes can be regarded as the 'strategy success factors' - the things which the organisation must get right if the business is to move in the direction of the desired future.

Strategic decisions

What constitutes a 'strategic' decision? It is likely to be strategic rather than tactical or operational if:

• the decision has major financial or other resource implications - for example, on staffing or equipment

• the decision will involve a significant amount of change in the organisation

• the decision will affect the whole organisation or a large part of it

• the decision constrains or commits the organisation in significant respects for a long period of time

• the decision will have a major impact outside the organisation - for example, on customers or other bodies

• the decision entails significant risks to the business

• the decision will involve major changes in the business of the organisation, such as the products or services it offers

• the decision is related to other important decision areas, and raises issues of complexity and 'cross-cutting' interactions

• it will be difficult or impossible to reverse the consequences of the decision.

If the organisation has to take a strategic decision unexpectedly, the decision will be taken and the strategy updated in parallel. A strategy is a guide to action, not a straitjacket; you should remain open to the need for changes in strategy when the business requires them.

Review

You must keep the strategy under constant review, as part of the continuous task of monitoring organisational performance. You should consider:

• is our 'vision' for the organisation still valid? Does our view of the desired future for the organisation match the pressures on us, the way our business is developing, and the changes that have taken place - and are likely to take place - in our business environment?

• are the themes of our strategy still appropriate? Do we need to consider additional themes which should be added to the agenda for change, because of changed business circumstances, new technologies, pressures from the environment or changes in corporate capabilities? Are any of our strategic themes no longer relevant to the organisational agenda for change?

• what progress are we making in our strategic themes, and do we need to re-prioritise or replan to ensure that the rate of change meets our business requirements?

You must keep all these levels of strategy and planning under constant review:

• the strategic 'vision'

• the route chosen towards the vision (the 'themes' of the strategy)

• the detailed plans for implementation.

Further information:

See the briefings on identifying direction for the future, business and supporting strategies and positioning for the future.

For more detailed guidance, see the publications How to Manage Business and IT strategy and Management of Risk: Practitioner Guide.

See also the checklist in the Tools section