By: Vera Ndrecaj BA (Hons). MBA
verandrecaj@yahoo.co.uk
Introduction
The paper intends to discuss the key message of the above quote and critically evaluate various schools of management thoughts and analyse how these theories have brought changes in actual behavior. Examining in depth management themes in order to recognise and appreciate how developments in the field of management could contribute in current management practises. This study also will investigate the development of strategy approaches and discover that classical approach of current management practise in context of formal consistency, top-down strategy formation and planning. Furthermore, it will compare and contrast different definition, and find out the core idea behind characteristics and components of organisational strategy and management thinking. Exploring the history of management thinking is important in sense of the development of the concept of ‘strategy’, which is poorly understood and it is over-used in modern business life (Segal-Horn, 2004). This paper will examine assumptions of top-down planning to assumptions of chaos and complexity in rapid change environment, in other words, the transition from planning to chaos in dynamic world, and conclude in significance and appropriateness of management thinking and integrated plan. To support arguments put forward academic theories will be applied.
To
achieve competitive advantage in the market, the main objective of business
leaders is to understand and develop a sustainable long-term strategy, which is
difficult in today’s’ highly competitive and unstable business environment
(Davis 2008). This emphasises the importance of strategic thinking as a effective strategy, which enable the organisation to achieve its goal, objectives and vision (Miller
(1991) and Kay (1993) in current business environment. Therefore, it is important for managers to understand what this concept is about, what strategy formulation and
implement is (Segal-Horn, 2004).
The origin of strategy comes from Greek word ‘strategos’ refer to military leaders who leads and directs his forces (Bracker, (1980); (Legge, (1995); (Lundy and Cowling, (1996). But, McKiernan, (1998) argues that strategy is a new discipline; it has attracted researchers’ attention on the last 30 years. However, Segal-Horn, (2004) declares that, referring to military and politics strategy has exits as a way of leadership thinking from thousands of years. The idea of a strategy as a deliberate and rational planning originally descended from Chandler (1962); Sloan (1963); and Whittington (2001) with ‘planning’ approach to strategic management. This approach was directed towards profit maximisation and it was top managers’ responsibility (Horn, 2004).
Nevertheless, in relation to organisation and strategic management the concept of ‘strategy’ exists since the 20th century (Chaffee, 1985). But Lynch (2008) argues that, ‘strategy’ exists earlier than 19 century since small factories needed strategy to survive and prosper against competitors, but formal structure of strategic management did not exist. However, Mullins (2004) highlighted the role of leaders and managers in strategy formulation and implementation, and stresses on the systematic development of managerial thinking as dating from the end of nineteen century with the emergency of large industries and identified problems related with structure and management.
According to Lynch, (2009) the development of strategy historically is influenced from environment. Classical management theories (Taylor and Fayol,1900 – 1910) are associated with planning, formal structure and ‘examination of management task’, continuing with the rise of large organisations which needed better management control (1910-1930) identified by Mullins (2004) as a ‘structuralism’. Another development in the strategic field was experiment on human resources in the USA (Mayo, 1930) when the epoch of technology was embracing (Mullins, 2004). Organisational theory (1940), the application of organisational theory to management task(1950) and decision- making (Mullins, 2004), research on techniques of strategic management (1960), adaption of formal techniques on strategic management (1970), the importance of human rather than competitive aspects(1980), globalisation as a concept of strategy, emphasis on the organisations’ own resources(1990), and new strategic approach in term of innovation, technology, and in (2000) corporate social responsibility takes important part in strategy (Lynch, 2009). The central part of this is the development of management thinking.
In terms of strategy as a plan, Fayol (1841- 1925) stresses the command and control, and ‘unity of direction’ one plan, one leader. Taylor (1856-1915) was obsessed with control, planning, scheduling, and with self-discipline. He has separate ‘hands’ from ‘brains’ and both are focused on product maximisation and treat people like a machine. Classical management theory, believed that formal planning is a best way of doing things. But, those theories are criticised from Jelinek (1979) and Mintzberg (1994) due to the idea of separating ‘thinking’ from ‘doing’. Fayol’s (1841-1925) command and control and Weber’s (1864-1920) bureaucracy, have identified planning as a very effective approach of formal organisation and also enhanced managers and leaders responsibility for this process. However, Jelinek (1979) argues that, Taylor’s method of study is a structure of formal planning and controlling to create pattern of operational details. Mintzberg (1994) argues that, formalisation, impassiveness, and predetermination approaches are not correct. Therefore, over planning or little planning may lead to chaos. “Several decades with experience of strategic planning has taught us about the need to loosen up the process strategy formation rather than try to seal it off through arbitrary formalisation” (Mintzberg, 1994 cited by Hannagan, 2008:122).
Ackoff (1970:1) has defined planning “...as a
design of desirable future and of effective ways of bringing it about”. Ozbekhan (1969:152) suggested planning
as an effective method “...to create control in the environment”. Wildavsky
(1973) states that non-planning exist when people don’t have objectives or
goals directed. In terms of strategy, Chaffee (1970) and Minztberg (1999) argue
that planning can cause lack of flexibility; therefore it is not efficient
anymore.
A variety of definitions has since emerged for a strategy, each with
their own emphasis and possible meaning. Minztberg (1973) noted that, the
definitions of strategy are grouped by type, but, Hambrick (1983) argues that, strategy
is multidimensional, must be situational and vary by industry. Conversely, the
literature is divided into three groups’ linear, adaptive, and, interpretive
strategy, each group with their own emphases, and that is why it is very
difficult to find consensus on the definition (Chaffee, 2001). However, Wittington (2001) laboured four groups of strategic management: classical,
evolutionary, processual and systemic perspectives.
However, there are some areas of agreement such as organisation and environment being difficult to separate from each other (Biggadike, 1981; Lenz, 1980). The strategy is useful to deal with changing environment, especially now in this unpredictable changes of business environment is important to remain flexible unstructured, non programmed, and non repetitive (Masson, 1981; Mazzoloni, 1981; Miles & Cameron, 1982) suggested that organisations’ strategy has to be made in consideration of a flexible and adaptable plan (Volberda, 2004).
“Strategy is the determination of the basic long term goals of an
enterprise, and the adaption of courses of action and the allocation of
resources necessary for currying out these goals”
(Chandler, 1962; 13).
Chaffee (2001) argued that, Chandlers’ definition emphases sequential
action involved in formal planning approach, this definition belongs to ‘liner
strategy’ model which is associated with strategic planning, strategy
formation, and strategy implementation, where top managers make decisions (top-down)
and this model is developed for
profit and productivity maximisation. However, this model is what Chandlers
(1962, 1977) calls ‘classical’ school, and Whittington (2001) has identified it
as a ‘classical perspective’; they all have in common formal planning approach
to strategy, top-down decision making and they suggest autocratic leadership
style. Teece (2010) also, criticized Chandler’s definition, strategy is not
just about formative long-term goal, and also, a goal is not strategy. Strategy involves analyses, guided
policy and logical action (Rumelt, 2009). Arguably, Johnson et al,. (2009); Ansoff
and Hayes (1976) state that, strategy is becoming more complex in nature, made
in uncertain situations, influenced operational decision, required an
incorporated approach, and involved internal and external environment changes,
therefore it is very difficult to implement formal planed strategy, hence,
emphasis moved away from formal planning.
Furthermore, classical approach is questioned by Mintzberg (1970, 1971, 1973, and 1975), Kotter (1982a; 1982b) and Stewart (1974; 1976; 1982). Mintzberg (1994:107) has argued that, planning system was expected to produce the best strategy and instruction to enable for managers to carry out this strategy effectively “strategic planning is not strategic thinking one is analysis and the other is synthesis”. Teece (2010) argues that, synthesis does not develop a single paradigm in the field of strategic management but it contains problems of this ground; drawing organisation limitations, extend dynamic capabilities, also find practicable strategy configuration, all these are key elements of future direction in strategy synthesis. Gareth (1997) declares that, classical management theory can or should be a rational system that operates in as efficient manner as possible despite the fact that classical theories put only a little attention to the humans’ aspects of organisation. Despite all the critiques of classical approach, Mullins (2004) declares that, classical approach is still relevant providing guidelines to the structuring and effectiveness.
Alternatively, Hofer (1973); Guth, (1976); Litschert and Bonham (1978); Miles et al., (1978); Mintzberg (1978); Hambrick (1980); Quinn (1980); Gluck et al (1982); and Galbraith and Schendel (1983) have criticised classical approach and Chandlers’ definition because their view is different, they are associated it with the biological evolution of the organisation and deal with adaptive strategy model which assume ‘organisation must change with environment’. Volberda (2004) noted that, adaptive approach is suggested as an alternative to a more formal, rational approach to strategy making (Burgelman, 1983; 1988; 1996) and Mintzberg (1994). ‘Classical’ and ‘adaptive’ are as alternative approaches, as a descriptive of opposite views in strategy making (Teece, 2010).
Hofer (1973) and Miles and Cameron (1982:14) suggested a possible combination between risks and opportunities in external environment and capabilities and resources of organisations for exploiting these opportunities, “...satisfactory alignments of environmental opportunities and risks, on the other hand, and organisational capability and resources on the other” in compliance with assessment of internal and external conditions. This definition suggests that, internal and external environment of an organisation continually needs to be assessed. On the other hand, Miles and Snow (1978) describe strategic adaption model as a cycle with three stages; domain choice, technology choice, and structure and processed by highlighting futures’ trends (innovation). Pettingrew (1977); Van Cauwenbergh and Cool (1982); Dirsmith and Covaleski (1983); Chffee (1984) have criticised the biological view because they believe in social contract and corporate culture.
Furthermore, Rumelt (1979) strategy is the analogy of biologists method of explaining the structure and organisations’ behaviour by functionality of systems designed to cope with particular niche. Van Cauwenbrgh and Cool (1982) have criticised this, they seen strategy as calculated behaviour in non planned situation. In the process of strategy formulation managers are in centre position, and organisation culture is in the hands of top manager as a powerful tool. But, Mintzberg (1994) and Chaffee (2001) argue that, strategy is an organisations’ wide activity not only top managers concern. To achieve adequate strategic behaviour critical factor is motivation and not information; arguably, Huinzing (2002) suggested that, more information needs to be processed in uncertain environment. Calculating style of management represents issues with planning approach and it does not represent committing style (Mintzberg, 1994). But, Selznick (1957) noted that, calculated strategy has no value, it will have value only if dedicated managers inspire and motivate them.
According to Mintzberg (1994) formal planning, by its very analytical nature has been and always will be dependent on the existing levels of strategy, corporate, business , function, type of products, structure, but real strategy change requires not rearrangement but inventing new one. Segal-Horn (2004) explained that, strategy as a planning in 1070s have been in corporate planning department which was focused on long-term planning and use only as a technique analyses quantitative method, it was no longer effective because the environment was becoming more complex. Consequently, emphases moved towards new approaches, corporate planning was out, strategic thinking and strategic management were in. A new approach has emerged, identified by Whittington (2001) as ‘The evolutionary approach’. The approach represents another side of strategy formation due to unpredictability of dynamic business which is very difficult to implement rational formal planning and deliberate process, but it is still focused in profit maximisation. Lundy and Cowling (1996) suggest that success lies with a good fit between business environment and the organisational strategy. Nelson and Winter (1982); Henderson (1989) see rational planning as an irrelevant approach because of the dynamic business environment (Volberda 2004). Ansoff (1991) explains that, business environment is becoming more turbulent and complex in the 21st century, therefore, the effectiveness of strategy emerges from the way organisations react to the environment.
However, Ashby (1956) highlighted the importance of balance between complexity and speed of organisations’ respond to the complexity and speed of environmental changes. On the other hand, Huinzing (2002) suggested that, because of the demand for more information in dynamic environment, employees and managers need to be more sophisticated and skilled, they have to learn in flexible way. But, Volberda (2004) explained that, flexible organisation facilitates creativity, innovation, and speed, although maintain coordination, focus and control, and the role of managers is to create flexible capabilities to respond to environment changes. The view would be criticised by classical planning schools because they believe in rational top-down planning (Segal-Horn, 2004). Volberda (2004:35) states that, “... strategy displays a break; with traditional notion the strategy is only regarded as a prescriptive process of top down control, formal planning and industry analyses. Alternatively, Pettigrew (1977); Van Cauwenbergh and Cool (1982); Dirsmith and Covalesky (1983); and Chaffee (1894) view the nature of strategy in a metaphorical way and essentially strategy is the focused on the participants in the organisation, and strategic behaviours develop symbols, improve interactions and relationships through open system.
Mintzberg and Waters (1985) suggested that, planed strategy of organisation has to maintain a degree of flexibility to allow strategies to emerge during their actions which foster generative and adaptive learning. This is consistent with the understanding of strategy creation and implementation. As a result of scarcity of time, resources and flow of information top-decision making does not follow formal and rational approach (deliberated approach) in strategy formation. Informal approach is suggested by Quinn (1978) and Mintzberg (1978; 1987). However Mintzbergs’ work is criticised by Ansoff (1991) as over prescriptive. However, formal approach can be successful if leaders or managers thinking before acting (Wittington, 2001). Although, Lundy and Cowling (1996:23) state that “...deliberate strategy precludes learning while emerging strategy fosters it but preclude control”. Successful strategy combines both deliberation and formality with organisation learning and flexibility.
The debate regarding the formation of strategy continues. Pettingrew (1985) explains that, strategy not only reflects view of top manager but represent a set of compromises. Rational top-down strategies are unlikely to be successful and implemented without corporation. Classical views (as explained above) and system thinkers criticised this. System thinkers’ (Granovett, 1985; Shrivastava, 1986) view is different: they see strategy as a reflection of social, geographic, political, and cultural context. But the profit maximisation is a key driver of strategy objectives. However, Whittington’s (2001) processual approach is different from profit maximisation perspectives. This approach represents high degree of confusion and complication in both internal and external environment. Strategy emerge (Mintzberg, 1987) is not suitable, managers are not able to realise and deal with huge information and radical change, learning, negotiation and compromises must take place (Legge, 1995).
The evolutionary change in business environment and development of management thinking calling for new strategic approaches because planning cannot generate strategy. (Mintzberg, 1994:112) states that,” Sometimes strategy must be left as board visions, not precisely articulated, to adapt to changing environment. Mullins (2007) pointed that, whatever the balance between philosophy and science knowledge of management theories will help with complexity of management in modern organisation. D’Aveni (1994) has come up with the concept of ‘hypercompetition’ which include dynamics, dynamic capabilities, system dynamics, search for theory and practise which are able to handle with balanced environment, which could be a threat because these theories are unable to deal with complex environments. However, Ghemawat (2002) has investigated how an organisation can deal with uncertain environment. Segal-Horn (2004:140) declared that “Chaos theory (Stacy, 1993, Complexity theory (Brown and Eisenhardt, 1998, and the strategy use of knowledge (Von Krogh et al., 2000), evolutionary biology cognitive psychology and real options theory are derived from financial theories (Schwartz and Trgeorgis, 2001) and are all being applied to strategic management and strategic choices” (2004:140). But, Joyce and Woods (2010) suggest that, in a dynamic and uncertain business environment a better strategy approach is strategic thinking and operational planning. They also highlighted the importance of skills development, knowledge, creativity and innovation.
Conclusion
No matter what the balance between science and philosophy, knowledge and
understanding theories of strategy will help with complexity of environment and
management in modern work organisation.
In term of strategy literature is divided in different groups regarding
the definition and effective strategy approach. The debates regarding the
strategy formation continue. There are arguments between classical and modern
viewers, because classical literature sees strategy by rational planning as an
efficient strategic approach but on the other hand modern literature view
support flexibility, strategic thinking, resource allocation, environment
analysis as a better choice. Therefore, non-planning strategy aids
organisations with changing environment. Organisations which tend to apply the
‘classical’ approach in dynamic environment are unlikely to survive.
Classical approach indicates, rational planning, the strategy formation process is planned and deliberate, and it stands for profit maximisation. This approach is successful if the external environment is stable, and objectives and goals of company are clear, external and internal information are consistent, and in order to adapt the best possible choice calculated decision is relevant to this approach. The top managers are responsible for strategy formation process, but the implementation is responsibility of operational managers. Leaders are likely to implement autocratic leadership style; top-down decision is implemented.
Emerging strategy or adaptive approach does not enhance advance planning. This approach relies on biological model. These support systems, environment monitoring in order to make changes based on trends, competition and stakeholders also are in focus. This approach assumes that organisation must change with its environment. However there are some assumptions related to this approach, dynamics of environment and less likely to predict as a result of high competition and trends, this enhance the importance of stakeholders. Evolutionary approach to strategy is another model which argues rational planning due to environment turbulence's. The turbulence in whole global economy is leading to a period of political and economical instability; therefore, flexible structure, strategic thinking, vision, mission, knowledge, creativity, innovation and stakeholder’s participation are core elements of competitive advantage and enable organisation to be flexible. Decision making has change from top – down to bottom – up.
References
Alkhafaji. F. A,
(2003) Strategic management: Formulation, implementation and control in a
dynamic environment. The Haworth Press, Inc. New York.
Brooks, S.B. (2005) Corporate Social Responsibility and Strategy: The Prospects for Converging Discourses. Strategic Change, vol. 14, no. 7, pp. 401-11.
Chaffee, E, E. (1985) Three Models of Strategy, Academy of Management Review, 10:1, pp 89-98, Available from: http://www.prdatta.com/Documents/DBA/Competitive%20strategy/Articles/THREE%20MODELS%20OF%20STRATEGY.pdf [accessed 31- October 2010]
Elfring, T. & Volbeda, W, H. (2004) Schools of Thought in Strategic Management:
Fragmentation, Integration or Synthesis, Available from: http://www.sagepub.com/upm-data/9388_006130ch1.pdf [accessed 02-Noveber 2010]
Banfield, C, E. (1958) Ends and Means in Planning, Available from: http://www.sims.monash.edu.au/subjects/ims5042/stuff/readings/banfield.pdf
[accessed 10 November 2010]
Fryer et al., (2004) The Practice of construction management: people and business performance. 4th ed. London. Blackwell Publisher Ltd. Available from:http://books.google.co.uk/books?id=JbtHSNwBa8QC&pg=PA1&dq=what+is+management+thinking&hl=en&ei=XVDLTK2XCsqcOouL3Z4B&sa=X&oi=book_result&ct=result&resnum=4&ved=0CEAQ6AEwAw#v=onepage&q=what%20is%20management%20thinking&f=false [Accessed 29-October 2010].
Joyce. P and Woods. A, (2001) Strategic Management: a fresh approach to developing skills, knowledge, and creativity. Kogan Page Limited. London.
Johnson. G (2006) Toward a Mid-Range Theory of Strategy Workshop. Advanced Institute of Management Research.
Teece. J. D, (2010) Alfred Chandler and ‘capabilities’ theories of strategy and management, Available from: http://icc.oxfordjournals.org/content/19/2/297.full [accessed 13 November 2010].
Freeman, R.E. (1984) Strategic Management: A Stakeholder Approach. London, Pitman.
Pascale, R.T. (1990) Managing on the Edge. Penguin. Harmondsworth.
Pascale, R.T., Millemann, M. and Gioja L. (2000) Surfing the Edge of Chaos: The Laws of Nature and the New Laws of Business. Crown Business, New York.
Porter, M.E. (1985) Competitive Advantage: Creating and Sustaining Superior Performance. Free Press, New York.
Prahalad, C.K.
and Hamel, G. (1990) The Core Competence of the Corporation. Harvard Business Review, May-June:
pp. 79-91.
Quinn, J.B.
(1978) Strategic Change: ‘Logical Incrementalism’. Sloan Management Review, Fall, pp. 7-21.
Quinn, J.B.
(1980b) Managing Strategic Change.
Sloan Management Review, summer, pp. 3-20.
Stacey R. (1993)
Strategic Management and
Organisational Dynamics.
Pitman, London.
Stacey R. (2000)
Complexity and Management: Fad or Radical Challenge to Systems Thinking?
Rutledge, London.
Stacey R. (2003)
Strategic Management and
Organisational Dynamics, (4th edition). Pitman, London.
Wernerfelt B.
(1984) The Resource based View of the Firm. Strategic Management Journal, vol. 5, pp. 171-180.
This comment has been removed by the author.
ReplyDeletegreat work!
ReplyDeleteThank you. Really appreciated
ReplyDelete