Strategic Decisions - Definition and Characteristics

Strategic decisions are the decisions that are concerned with whole environment in which the firm operates, the entire resources and the people who form the company and the interface between the two.

Characteristics/Features of Strategic Decisions

1. Strategic decisions have major resource propositions for an organization. These decisions may be concerned with possessing new resources, organizing others or reallocating others.
2. Strategic decisions deal with harmonizing organizational resource capabilities with the threats and opportunities.
3. Strategic decisions deal with the range of organizational activities. It is all about what they want the organization to be like and to be about.
4. Strategic decisions involve a change of major kind since an organization operates in ever-changing environment.
5. Strategic decisions are complex in nature.
6. Strategic decisions are at the top most level, are uncertain as they deal with the future, and involve a lot of risk.
7. Strategic decisions are different from administrative and operational decisions. Administrative decisions are routine decisions which help or rather facilitate strategic decisions or operational decisions. Operational decisions are technical decisions which help execution of strategic decisions. To reduce cost is a strategic decision which is achieved through operational decision of reducing the number of employees and how we carry out these reductions will be administrative decision.

The differences between Strategic, Administrative and Operational decisions can be summarized as follows-

Strategic Decisions	Administrative Decisions	Operational Decisions
Strategic decisions are long-term decisions.	Administrative decisions are taken daily.	Operational decisions are not frequently taken.
These are considered where The future planning is concerned.	These are short-term based Decisions.	These are medium-period based decisions.
Strategic decisions are taken in Accordance with organizational mission and vision.	These are taken according to strategic and operational Decisions.	These are taken in accordance with strategic and administrative decision.
These are related to overall Counter planning of all Organization.	These are related to working of employees in an Organization.	These are related to production.
These deal with organizational Growth.	These are in welfare of employees working in an organization.	These are related to production and factory growth.

Strategy Formulation vs Strategy Implementation

Following are the main differences between Strategy Formulation and Strategy Implementation-

Strategy Formulation	Strategy Implementation
Strategy Formulation includes planning and decision-making involved in developing organization’s strategic goals and plans.	Strategy Implementation involves all those means related to executing the strategic plans.
In short, Strategy Formulation is placing the Forces before the action.	In short, Strategy Implementation is managing forces during the action.
Strategy Formulation is an Entrepreneurial Activity based on strategic decision-making.	Strategic Implementation is mainly an Administrative Taskbased on strategic and operational decisions.
Strategy Formulation emphasizes on effectiveness.	Strategy Implementation emphasizes on efficiency.
Strategy Formulation is a rational process.	Strategy Implementation is basically an operational process.
Strategy Formulation requires co-ordination among few individuals.	Strategy Implementation requires co-ordination among many individuals.
Strategy Formulation requires a great deal of initiative and logical skills.	Strategy Implementation requires specific motivational and leadership traits.
Strategic Formulation precedes Strategy Implementation.	STrategy Implementation follows Strategy Formulation.

Importance of Vision and Mission Statements

One of the first things that any observer of management thought and practice asks is whether a particular organization has a vision and mission statement. In addition, one of the first things that one learns in a business school is the importance of vision and mission statements.

This article is intended to elucidate on the reasons why vision and mission statements are important and the benefits that such statements provide to the organizations. It has been found in studies that organizations that have lucid, coherent, and meaningful vision and mission statements return more than double the numbers in shareholder benefits when compared to the organizations that do not have vision and mission statements. Indeed, the importance of vision and mission statements is such that it is the first thing that is discussed in management textbooks on strategy.

Some of the benefits of having a vision and mission statement are discussed below:

• Above everything else, vision and mission statements provide unanimity of purpose to organizations and imbue the employees with a sense of belonging and identity. Indeed, vision and mission statements are embodiments of organizational identity and carry the organizations creed and motto. For this purpose, they are also called as statements of creed.
• Vision and mission statements spell out the context in which the organization operates and provides the employees with a tone that is to be followed in the organizational climate. Since they define the reason for existence of the organization, they are indicators of the direction in which the organization must move to actualize the goals in the vision and mission statements.
• The vision and mission statements serve as focal points for individuals to identify themselves with the organizational processes and to give them a sense of direction while at the same time deterring those who do not wish to follow them from participating in the organization’s activities.
• The vision and mission statements help to translate the objectives of the organization into work structures and to assign tasks to the elements in the organization that are responsible for actualizing them in practice.
• To specify the core structure on which the organizational edifice stands and to help in the translation of objectives into actionable cost, performance, and time related measures.
• Finally, vision and mission statements provide a philosophy of existence to the employees, which is very crucial because as humans, we need meaning from the work to do and the vision and mission statements provide the necessary meaning for working in a particular organization.

As can be seen from the above, articulate, coherent, and meaningful vision and mission statements go a long way in setting the base performance and actionable parameters and embody the spirit of the organization. In other words, vision and mission statements are as important as the various identities that individuals have in their everyday lives.

It is for this reason that organizations spend a lot of time in defining their vision and mission statements and ensure that they come up with the statements that provide meaning instead of being mere sentences that are devoid of any meaning.

Social Responsibilities of Managers

Social responsibility is defined as the obligation and commitment of managers to take steps for protecting and improving society’s welfare along with protecting their own interest. The managers must have social responsibility because of the following reasons:

1- Organizational Resources - An organization has a diverse pool of resources in form of men, money, competencies and functional expertise. When an organization has these resources in hand, it is in better position to work for societal goals.

2- Precautionary measure - if an organization lingers on dealing with the social issues now, it would land up putting out social fires so that no time is left for realizing its goal of producing goods and services. Practically, it is more cost-efficient to deal with the social issues before they turn into disaster consuming a large part if managements time.

3- Moral Obligation - The acceptance of managers’ social responsibility has been identified as a morally appropriate position. It is the moral responsibility of the organization to assist solving or removing the social problems

4- Efficient and Effective Employees - Recruiting employees becomes easier for socially responsible organization. Employees are attracted to contribute for more socially responsible organizations. For instance - Tobacco companies have difficulty recruiting employees with best skills and competencies.

5- Better Organizational Environment - The organization that is most responsive to the betterment of social quality of life will consequently have a better society in which it can perform its business operations. Employee hiring would be easier and employee would of a superior quality. There would be low rate of employee turnover and absenteeism. Because of all the social improvements, there will be low crime rate consequently less money would be spent in form of taxes and for protection of land. Thus, an improved society will create a better business environment.

High Social Overhead Cost - The cost on social responsibility is a social cost which will not instantly benefit the organization. The cost of social responsibility can lower the organizational efficiency and effect to compete in the corporate world.But, manager’s social responsibility is not free from some criticisms, such as -

2. Cost to Society - The costs of social responsibility are transferred on to the society and the society must bear with them.
3. Lack of Social Skills and Competencies - The managers are best at managing business matters but they may not have required skills for solving social issues.
4. Profit Maximization - The main objective of many organizations is profit maximization. In such a scenario the managers decisions are controlled by their desire to maximize profits for the organizations shareholders while reasonably following the law and social custom.

Social responsibility can promote the development of groups and expand supporting industries.

Own the Future: Insights from Recent Research into Strategizing for the Future

This article discusses the ten qualities needed for companies to stay ahead of the competition and win the race for the market in the next decade. With so much of rapid change and accelerating trends, it is important for companies to be, the biggest and the best or else they run the risk of getting left behind and becoming also ran companies.

• Adaptable
  The winners of tomorrow will be those companies that are best at identifying and anticipating market shifts and managing complex and multi-company systems. The need for shorter cycles and faster reaction time is greater as the pace of change is rapid and only those companies that can adapt to it will succeed.
• Global
  It is a fact that everybody is competing with everyone from everywhere. This means that the future markets for growth in Asia would take many business leaders out of their comfort zones. Hence, what works in Munich might not work in Mumbai and therefore there is a need to understand the fluid marketplace.
• Connected
  As the world gets smaller because of greater integration and better communications technologies, there are changes in the realm of strategy, which the business leaders of tomorrow must embrace. This means that the companies of tomorrow must deal with newer forms of customer behavior and newer business models.
• Sustainable
  With the ever-looming threat of climate change and environmental catastrophe, businesses need to pursue growth strategies that are sustainable and ensure that they use limited resources more efficiently. These strategies lead to all round stakeholder development instead of profits for the firms alone.
• Customer First
  For companies to achieve greatness, they must develop deep and lasting emotional bonds with their consumers. They need to transform consumers into repeat buyers and in some cases, they need the customers to be brand evangelists which means that the customers are the best source of advertising for the companies.
• Fit to Win
  The art of execution is one of the core drivers of competitive advantage and the truly great companies strategize in a manner that drives improvement in the critical areas identified for success. These companies have flat and agile structures that speed up the flows of information, improve decision-making, and have sophisticated pricing models.
• Value-Driven
  It is a fact that companies must create value for all their stakeholders, this is something that is ageless, and timeless which makes the companies and their legacies enduring for all stakeholders. The value that a company creates has two components, which are earnings and growth. It is impossible to separate the two and since they work in tandem, the value that the company creates must be both short-term profits and longer term success.
• Trusted
  Though trust does not appear on a company’s balance sheet, it is the most valuable asset for the companies. Hard to build and harder to sustain as well as easier to squander, trust reposed by the customers determines how successful a company is over the longer term. The digital revolution offers never before opportunities to expand and accelerate reputational aspects of the companies.
• Bold
  If companies do not evolve with the times, they run the risk of becoming redundant. Hence, companies need to be forward looking and reinvent themselves to keep pace with their competitors. These companies would not be blindsided and outpaced by competition. This means that companies must experiment on a continual basis and not be afraid to embrace radical change from outside and from within.
• Inspiring
  Finally, the business leaders of tomorrow are inspirational figures much in the mold of religious and mythological figures from history. This means that epic leadership is needed from the leaders of tomorrow as they go about setting the agenda that their followers can adapt and emulate, if possible that translates into an inspired workplace as well as external respect.

4 Common Types of Organizational Structures

What does it take for companies and organizations to be successful?

There are many answers to that question. Some would say it’s having an effective mission; others would say it’s selling a product or service that’s in high demand.

Ultimately, it’s a company’s organizational structure that helps determine success.

An organizational structure is defined as “a system used to define a hierarchy within an organization. It identifies each job, its function and where it reports to within the organization.” A structure is then developed to establish how the organization operates to execute its goals.

There are many types of organizational structures. There’s the more traditional functional structure, the divisional structure, the matrix structure and the flatarchy structure. Each organizational structure comes with different advantages and disadvantages and may only work for companies or organizations in certain situations or at certain points in their life cycles.

“Poor organizational design and structure results in a bewildering morass of contradictions: confusion within roles, a lack of coordination among functions, failure to share ideas, and slow decision making bring managers unnecessary complexity, stress and conflict,” wrote Gill Corkindale in the Harvard Business Review. “Often those at the top of an organization are oblivious to these problems or, worse, pass them off as challenges to overcome or opportunities to develop.”

Ultimately, it’s important to get a group’s organizational structure correct in order for its aims to be successful.

Types of Organizational Structures

Functional

If you’ve had a job, you likely worked in a functional organizational structure.

The functional structure is based on an organization being divided up into smaller groups with specific tasks or roles. For example, a company could have a group working in information technology, another in marketing and another in finance.

Each department has a manager or director who answers to an executive a level up in the hierarchy who may oversee multiple departments. One such example is a director of marketing who supervises the marketing department and answers to a vice president who is in charge of the marketing, finance and IT divisions.

An advantage of this structure is employees are grouped by skill set and function, allowing them to focus their collective energies on executing their roles as a department.

One of the challenges this structure presents is a lack of inter-departmental communication, with most issues and discussions taking place at the managerial level among individual departments. For example, one department working with another on a project may have different expectations or details for its specific job, which could lead to issues down the road.

In addition, with groups paired by job function, there’s the possibility employees can develop “tunnel vision” — seeing the company solely through the lens of the employee’s job function.

Divisional

Larger companies that operate across several horizontal objectives sometimes use a divisional organizational structure.

This structure allows for much more autonomy among groups within the organization. One example of this is a company like General Electric. GE has many different divisions including aviation, transportation, currents, digital and renewable energy, among others.

Under this structure, each division essentially operates as its own company, controlling its own resources and how much money it spends on certain projects or aspects of the division.

Additionally, within this structure, divisions could also be created geographically, with a company having divisions in North America, Europe, East Asia, etc.

This type of structure offers greater flexibility to a large company with many divisions, allowing each one to operate as its own company with one or two people reporting to the parent company’s chief executive officer or upper management staff. Instead of having all programs approved at the very top levels, those questions can be answered at the divisional level.

A downside to this type of organizational structure is that by focusing on divisions, employees working in the same function in different divisions may be unable to communicate well between divisions. This structure also raises issues with accounting practices and may have tax implications.

Matrix

A hybrid organizational structure, the matrix structure is a blend of the functional organizational structure and the projectized organizational structure.

In the matrix structure, employees may report to two or more bosses depending on the situation or project. For example, under normal functional circumstances, an engineer at a large engineering firm could work for one boss, but a new project may arise where that engineer’s expertise is needed. For the duration of that project, the employee would also report to that project’s manager, as well as his or her boss for all other daily tasks.

The matrix structure is challenging because it can be tough reporting to multiple bosses and knowing what to communicate to them. That’s why it’s very important for the employees to know their roles, responsibilities and work priorities.

Advantages of this structure is that employees can share their knowledge across the different functional divisions, allowing for better communication and understanding of each function’s role. And by working across functions, employees can broaden their skills and knowledge, leading to professional growth within the company.

On the other hand, reporting to multiple managers may add confusion and conflict between managers over what should be reported. And if priorities are not clearly defined, employees, too, may get confused about their roles.

Flatarchy

While the previous three types of organizational structures may work for some organizations, another hybrid organizational structure may be better for startups or small companies.

Blending a functional structure and a flat structure results in a flatarchy organizational structure, which allows for more decision making among the levels of an organization and, overall, flattens out the vertical appearance of a hierarchy.

The best example of this structure within a company is if the organization has an internal incubator or innovation program. Within this system, the company can operate in an existing structure, but employees at any level are encouraged to suggest ideas and run with them, potentially creating new flat teams. Lockheed Martin, according to Forbes, was famous for its skunkworks project, which helped develop the design of a spy plane.

Google, Adobe, LinkedIn and many other companies have internal incubators where employees are encouraged to be creative and innovative in order to promote the company’s overall growth.

A benefit of this system is it allows for more innovation company-wide, as well as eliminating red tape that could stall innovation in a functional structure. As for the negatives, the structure could be confusing and inconvenient if everyone involved doesn’t agree on how the structure should be organized.

Financial & Strategic Objectives

When a business consistently is losing money, top leadership may vent a frustration and an urgency that department heads are not doing the kinds of things necessary to prevent the operational demise that is unfolding and to deal with it effectively. To right the organization's operating ship, senior executives may formulate fresh financial and strategic goals that functional heads must follow to the letter.

Financial Goals

Financial goals touch on everything money-related that a company wants to achieve within a given period — say, one month, quarter or fiscal year. These objectives may span a shorter stretch if top leadership must cope with an immediate operational crisis, the kind that may happen if a major customer owing substantial amounts suddenly files for bankruptcy. For a company, economic objectives may be making a specified amount of money at year-end, increasing sales by 15 percent, cutting costs by 20 percent in segments that are bleeding cash and raising long-term debts on credit markets by targeting interest rates between 4 and 5 percent and avoiding lender restrictions that are too stringent.

Strategic Objectives

Formulating strategies is what company executives do to cope with competitive tedium, understand the tactical moves that rivals surreptitiously are making, deal with the hybrid problem of customer loyalty and brand positioning, hire competent professionals and nurture the company's mid-level brass. Strategic objectives may cover things like expanding market share overseas and domestically by 8 percent and 10 percent, respectively; reducing the corporate employee turnover ratio by 2 percent; cultivating more amicable ties with lenders, business partners and shareholders; and communicating with regulators more effectively. Employee turnover deals with how many employees leave a company compared to its total work force.