Strategic management brings benefits to an organization
Strategic management is a scheduled and sequenced means of running an operation (Hunger and Wheelen, 2007). This article will examine the components of strategic management, the benefits that the strategic management process brings to an organization, how strategic management affects organizational decision making and financial performance and how strategic management affects the way an organization responds to its environment.
I have over twenty years of successful leadership and entrepreneurial experience in the field of health care and used strategic management as an ongoing assessment tool and to improve an operation's readiness for potential threats.
The major components of strategic management according to Hunger and Wheelen (2007) are financial planning, forecast-based planning, externally oriented planning and 'strategic management'. Each of these components must be supported and held accountable to be effective. Basic financial planning relates to the idea that an organization must seek better operational control relative to an annual budget while the organization maps out expenses and anticipated income on a yearly basis and attempts to meet its goals.
Forecast-based planning refers to an organization trying to anticipate and react to changes in business growth beyond one year (Hunger & Wheelen, 2007, p. 3). The company attempts to prepare for needed resources human and financial into the long term where the organization uses its basic financial plan as its base.
For externally oriented planning, as indicated by Hunger and Wheelen (2007), an organization attempts to respond to markets and competition in a strategic manner (p. 3). Trends in demand are weighed into a larger picture as are responses to new competitors.
The final component to strategic management according to Hunger and Wheelen (2007) is 'strategic management' (p. 3). This refers to the competitive edge an organization seeks while evaluating, implementing, and operating after targeted changes have been identified.
An organization's missions and values are important to strategy formulation because they are the foundation that the organization is built upon. Hunger and Wheelen (2007) describe an organization's mission as, 'its purpose, or reason for its existence' (p. 3). It is the defining statement that announces a company's scope and unique qualities.
The benefits that a strategic management process brings to a health care organization are that it helps to ensure a company's success (Hunger & Wheelen, 2007, p. 1). A strategic management process helps to act as a compass to direct a company forward. The process defines where a company is currently if change does not happen and offers actions to be undertaken if the suspected orientation is not satisfactory. A strategic management process should weigh risks and rewards for action and inaction and help set a course for long-term performance and success. A strategic management process should be flexible to allow proper responses to an ever-changing environment.
Change, in health care is inevitable (Swayne, Duncan, & Ginter, 2009, p. 6). Successful organizations will require managers and leaders who can adjust and respond to rapid and ongoing change. Developing strategic management skills helps organizations navigate change and create successful visions for the future. Leaders of healthcare, per Swayne, Duncan, and Ginter (2009) need to understand change and know how to develop effective strategies for addressing change (p. 6).
The strategic management process has a positive effect on an organizations decision making and financial performance. Hunger and Wheelen (2007) indicate that organizations that take part in strategic management 'outperform those that do not.' The importance of a strategic management process is not necessarily the outcomes produced but the process itself. Companies that regularly take part in strategic planning are better able to respond to changes as they present themselves. Small companies may meet informally and irregularly and the planning may only include the president and select a few managers. The process may be quick and decisive. For larger organizations, the process may involve many people and take long periods, need to be organized and rolled out in a more advanced manner.
The strategic management process improves the way an organization responds to its environment. This environment may be a competition, changing legislation, or a change in market. Much of strategy development is stable, but there are irregularly appearing periods of change. Changes in the environment are what Hunger and Wheelen refer to as 'triggering events'.
Strategic management is a process that helps an organization address the challenges and the changes that will present. Strategic management includes financial planning, forecast-based planning, externally oriented planning, and strategic management. To be effective an organizations strategic management process should mirror its primary reason for existing, or its mission and values. A company that engages in the process of strategic management improves its ability to make decisions that will ensure its existence and improve its financial standing. A strategic management process will also help to improve an organization's workforce's ability to respond to changes that will present themselves.