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People and strategy - Coggle Diagram
People and strategy
Strategy from within
Throughout an organisation, many people with management responsibility will also contribute to the development of strategy.
The day to day decisions that are required in any organisation mean that people are constantly having to react to the internal and external forces that surround them
The decisions that they make may be guided by the strategic parameters established by others but the direct impact of their decisions will inevitably influence strategic outcome and therefore strategic direction of an organisation
The suggestion here is that anybody within an organisation who has some aspect of decision-making within their role is also contributing in some way to the strategy of the organisation
While there is not the time to formally involve all people within the strategic development process, appropriate communication structures and a culture of inclusion will ensure that a wide range of differing views are heard by those with the ultimate responsibility for the longer term development of strategy
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Different departments and influencers within an organisation will be able to contribute at particular points to the effective development of strategy
The finance department will have a key role at the outset of the development of a strategy in ensuring the appropriateness of required funding, will also act as a useful sense checker as the strategy involves and finally will be able to provide a financial measurement of success based around key performance indicators
The HR department will need to ensure that the appropriate people are in place at the outset of the strategy and throughout the life of the strategy, ensuring that appropriate succession plans are in place so that strategic failure is not caused by lack of appropriate people and knowledge. HR can be a useful source of people being available to objectively listen and react to feedback
External consultants or experts may be required on an ad hoc basis to supplement existing employees to satisfy particular or complicated short-term requirements both in the initial formulation of a strategy and potentially at key points throughout its evolution
The company secretary or governance professional can play an important part in the strategy process, dependent upon how the position is formulated and viewed within a particular organisation
Strategy from the top
The board of directors of an organisation are appointed by the shareholders and/or stakeholders to ensure that the business is run operationally with the intention of achieving the strategic objectives desired by those owners
S.172 gives each director a duty to strive towards the success of the company, this has to mean that each director is in some way involved with the establishment and oversight of strategy within the organisation
Lynch (2015) suggests that: strategic leadership is the ability to shape the organisation's decisions and deliver high value over time, not only personally but also by inspiring and managing others in the organisation. That leadership begins with the top management team - CEO, other leading directors and in large companies, the leading divisional directors'
In many organisations the CEO is seen as the chief strategist with ultimate responsibility and ownership of all strategic decisions and full accountability for its success or failure
Montgomery (2008) suggests that a CEO must be the steward of a living strategy that defines what the firm is and what it will become
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Conflicts of interest, the agency problem and information asymmetry
Agency
This perceived and actual problem is derived from the representative roles that are often taken by decision makers within an organisation and the fact that their personal beliefs may be in conflict with the role that they are expected to fulfil
The reality is that there will often be a disconnect between the mindset, needs and expectations of an individual strategic influencer and those of other stakeholders
Organisations need to recognise this reality and seek to develop strategy to avoid the risk of conflicted individual influence whenever possible
Asymmetry
One further aspect of conflict is known as information asymmetry and reflects the differing levels of information and therefore knowledge that are available to different players within the development of strategy
A board director will usually have a wide knowledge and awareness of the ultimate strategic objectives of the organisation but will often be lacking in an awareness of the short term day to day decisions that are required to enable the progression of an operational activity
A shift leader in a busy factory will have a keen awareness of what is required to fulfil the expectations of the operational output from the shift and how best to motivate the team to fulfil that short term objective. Unless they also have some other involvement within the organisation, it is unlikely that they will be able to place the direct operational objective of an individual shift within the context of the wider strategic objectives of the organisation.