TABLE OF CONTENTS 1.0 Introduction........................................... 1 1.1 Overview........................................... 1 1.2 Problem Statement..................................3 1.3 Definition of Terms................................5 2.0 Literature Review on Strategic Management for Organizations.......................................... 8 2.1 The Importance of Strategic Management.............8 2.2 Competitiveness of Non-Profit Organizations.......12 2.3 Strategic Management for Competitive Advantages in NPOs.............................................. 16 3.0 Discussion and Recommendations........................20 4.0 Conclusion............................................ 23 References................................................ 24
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Strategic management starts with strategic planning. In the
strategic planning process, there are five general steps:
goal/objective setting, situation analysis, alternative
consideration, implementation and evaluation (Crittenden
and Crittenden, 2000).
The traditional process for developing strategy consists
of analyzing the internal and external environments of the
company to arrive at organizational strengths, weaknesses,
opportunities, and threats (SWOT). The results from this
“situation analysis,” as this process is sometimes called, are
the basis for developing missions, goals, and strategies. In
general, an organization should select strategies that take
advantage of organizational strengths and environmental
opportunities or neutralize or overcome organizational
weaknesses and environmental threats. After strategies are
formulated, plans for implementing them are established
and carried out (Thompson and Strickland, 1996). Figure 1
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below shows the strategic management process in the
organization.
Figure 1: The Strategic Management Process (Thompson and Strickland, 1996)
Non-profit organizations are limited in terms of
resources, thus necessitating the need for situational
analysis. As shown in Figure 1 above, strategic
management is responsible not only to set the direction of
the organization through its vision, mission and values
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statements but also to ensure strategic controls of
resources, building relationships, design structures, and
develop control system measure and evaluate performance.
Non-performing organizations are not viable in a
competitive environment.
Thus, through strategic management, an organization
ensures the direction of the organization and there is a clear
guidance on how to reach the goals of the organization.
Stokely (2005) argues that the world is a fast changing
place. In recent decades, organizations including NPOs have
also undergone changes. According to Stokes, change
makes success formulas obsolete. It is important for the
organization to be proactive in doing what is necessary to
anticipate and respond to change. Thus, strategic
management ensures that these changes are addressed
from time to time. Otherwise, the alternative is
obsolescence of the organization.
According to Porter (1996), the core purpose of
strategy is to create a unique and valuable position that
leads to sustainable competitive advantage. The challenges
are to realign the organization’s activities based on the
market position and to carefully position the organization to
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achieve the corporate vision. A successful positioning
strategy or “value proposition” must differentiate the
organization’s services from those of the competition.
Porter (1996) also added that marketing is the process
of getting and retaining customers. For non-profit
organizations, customers come in the form of those who
benefits from the services provided by the NPOs. Thus, even
though the NPOs are not profit-oriented, they are still
obliged to meet their corporate vision, missions and goals
and ensure customer satisfaction. In addition, NPOs are also
facing competition from similar service providers. These
organizations are fighting for grants, government aids and
funds from various sources. In order to qualify and obtain
these funds, the organization must be competitive and
shows its ability to meet the corporate objectives.
Kenneth Andrews (1971) stated that there are four
integral elements of strategy: (i) market opportunity; (ii)
corporate competence and resources; (iii) personal values
and aspirations; and (iv) acknowledge obligations to
segments of society other than stockholders (p. 19). Thus,
this implies that a strategy must define what could be done
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(opportunities), what can be done (resources), what one
considers worth doing (goals) and what should be done
(responsibilities).
2.2 Competitiveness of Non-Profit Organizations
Non-profit organizations in today’s environment are not free
from competition, risks and uncertainties. Moore (1996)
stated that the adoption of strategic management is now
widespread in all types of organizations as the executives
try to control their environment and reduce uncertainty.
Strategy becomes the art of bringing values and resources
together to influence and shape the future.
One of the critical resources of NPOs is funds. NPOs are
dependent on grants and funds provided by several bodies
as well as through revenue from its services provision.
However, most NPOs have limited funds and thus budgeting
becomes important. Blumentritt (2006) stated that strategic
management and budgeting are different but they have
inter-related activities. When properly applied, both
processes improve the organization’s ability to create and
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sustain superior performance. With superior performance, it
would be easier for the NPO concerned to apply for
extension of grants or request for new and larger amount of
funds.
For any organizations, strategic performance indicates
two aspects of the organization – its operational goals which
include introducing new services, getting more customers,
or improving efficiencies. Another aspect is financial
performance which considers money-based outcomes such
as revenue growth, margins and return on investments
(Blumentritt, 2006).
In NPOs, it is also critical to have excellent financial
performance because surplus (profit) from its services
provision can ensure continuing providing the services to
stakeholders as well as to provide efficient service delivery
through good management system, adoption of new
technology, training and development for executives and
staffs and so on.
Blumentritt (2006) explained that strategic
management is designed to set a firm’s courses of action,
identifying the strategies it will use to compete in the
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marketplace and how it will organize its internal activities.
Budgeting, on the other hand, is used to efficiently allocate
the firm’s available financial resources and to monitor the
performance of managers and staffs.
Besides fund, NPOs also face some challenges in
manpower issues. NPOs might not be able to engage
workers with the best human capital assets due to
competiveness in the job market. These human assets
contain skills, competence, commitment, motivation and
loyalty of employees. Some of the key components include:
know-how, technical expertise and problem solving
capability, creativity, education, attitude and
entrepreneurial spirit (Marr, 2005).
People might opt for a career with more viable options
and potentials for growth and development in the long-
term. Thus, not only do NPOs faced with recruitment but
might also be challenged with problem of staff turnover and
commitment. According to Allen and Meyer (1990),
organizational commitment is defined as “…the employee’s
feelings of obligation to stay with the organization: feelings
resulting from the internalization of normative pressures
exerted on an individual prior to entry or following entry.”
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To elaborate further, Allen and Meyer describes three
types of commitment:
(1) Affective commitment: an employee identifies with,
is involved in, and has emotional attachment to the
organization;
(2) Normative commitment: based on a sense of
obligation – an employee feels that they ought to
stay, as things may change, for example; and
(3) Continuous commitment: an employee recognizes
the cost associated with leaving the organization,
and therefore, they feel that they have no choice but
to stay
Strategic management helps to define what and how
the organization can find and retain quality staffs by
ensuring these three types of commitment are achieved
through some relational efforts concocted by strategic
planning.
La Piana (1999) brought a crucial issue in current and
tomorrow’s non-profit organizations. He stated that the non-
profit sector is highly inter-dependent. This is because;
NPOs normally have coalition and work together with NPOs,
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for-profit organizations and government organizations in
conducting their programs. La Piana stated that no no-profit
organization can long survive and succeed in advancing its
mission while living independent of other non-profits and
various other types of organizations. For instance, St. John’s
Ambulance, a non-profit organization works closely with the
health and medical institutions, educational institutions as
well as other similar NPOs such as the Red Cross, JPA3 and
so on to carry out first aid courses for the public.
These organizations gain information, political power,
and personal and professional support from and in concert
with other non-profits as well as other types of
organizations. Thus, close working relationships,
partnerships and even joint ventures between non-profit
organizations are fairly natural occurrence.
Therefore, strategic management must be enforced to
determine what and how these relationships can help to
strengthen the identity, image and reputation of the non-
profit organization.
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2.3 Strategic Management for Competitive Advantages in
NPOs
There are many non-profit organizations which used the
strategic management process in their organizations such
as the Girl Scouts and Boy Scouts, the Red Cross, the
Salvation Army, chambers of commerce, educational
institutions, medical institutions, public Utilities, libraries,
government agencies, and religious organizations.
Killen, Walker and Hunt (2005) explained that “strategy
concepts” are sets of enabling strategies and strategic
initiatives that are coherent and mutually supportive.
Organizations are faced with multitude of solutions, ideas
and suggestions which should be considered. These could
include improvements in the use of existing resources to
innovative new technologies. Strategies are developed by
considering each outcome opportunity and identify the
possible solutions that address the key opportunities.
Strategies are important to NPOs because in most
cases, these organizations function as a monopoly, produce
services that offer little or no measurability of performance,
and are totally dependent on outside financing. These
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organizations should use strategic management as it
provides an excellent vehicle for developing and justifying
requests for needed financial support (Nicolae, 2008).
Although strategic management has been accorded as
critical in determining organizational performance and
continued existence, Moore (1995) cautioned that strategy
should be seen, rather, as laying out the general path but
not as the exact steps by which an organization intends to
create value. Moore explained that strategic management is
a question of interpreting, and continuously reinterpreting,
the possibilities presented by shifting circumstances for
advancing an organization's objectives. This implies that
strategist should think simultaneously about desired
objectives, the best approach for achieving them, and the
resources implied by the chosen approach. It requires a
frame of mind that admits of no boundary between means
and ends.
Elcock (1996) stated that the process of developing
organizational strategy must be iterative. Means are as
likely to determine ends as ends are to determine means
(Lindblom, 1959). Thus, Elcock (1996) explained that
strategic process means toggling back and forth between
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questions about objectives, implementation planning and
resources. An earlier idea about corporate objectives may
have to be revised and changed if there is no feasible
implementation plan that will meet with a sufficient level of
acceptance among the full range of stakeholders, or
because the necessary resources are not available, or both.
Strategic management provides a sense of direction
which is important to steer the organization but Elcock
cautions that this can also stifle creativity, especially if the
strategies enforcement is rigid. Leaders in NPOs must be
aware that this is an uncertain and ambiguous world where
fluidity is more important than rigidity when it comes to
strategy. Elcock mentions a phenomena called ‘marketing
myopia’ resulting from a rigid adherence to planned
strategy. When strategy becomes internalized into a
corporate culture, it can lead to group think can causes the
organization to define itself too narrowly. For example, an
organization initially formed to cater to the needs of
education among rural women might rigidly adhere to such
cause and unable to deviate its course when in actual fact,
addressing the low education level among women might not
solve the big issue of poverty. The organization might have
to address other issues such as providing economic
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empowerment to these women or working collaboratively
with other organizations in order to address multiple issues.
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3.0 Discussion and Recommendations
The presentation of factual information above implies the
importance of strategic management for all organizations
including non-profit organizations. However, it also cautions that
too much of a strategy can lessen the creativity and innovation of
a particular organization. Strategic management is a continuous
process of determining and evaluating the direction of the
organization.
However, in the world of technology, just strategic
management is not applicable. A better approach lies in strategic
quality management which according to Juran and Gryna (1993) is
about the process of establishing long-range quality goals and
defining the approach to meeting these goals. This implies the
merger of corporate strategy and total quality management
wherein incremental quality plans are replaced by bold initiatives
such as cycle-time reduction and business process reengineering.
Thus, it is suggested that strategic quality management
should be implemented by non-profit organizations to ensure that
their corporate mission, vision and goals are based on high quality
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performance. Low and Sze (2005) explained that there are seven
key principles of SQM which are:
(a) Total commitment: it is important that leaders of NPOs
emphasize the need for commitment from all staff
members. Resources in the organization have to be
allocated to cater for commitment development among
staffs (Riggs, 1994). Total commitment should also be
reflected in the organization’s mission statement, goals and
objectives.
(b) Customer-driven service: Riggs (1994) explained that the
essence of “customer driven service” is satisfying clients by
“doing the right thing the first time”. Thus, it is important
that all employees see the customer as the focus of their
activity, regardless on the type of activity. It is also
important that employees solicit feedback from customers
on the organization’s services (Hill and Jones, 1998).
(c) Eliminate rework: NPOs should optimize use of resources
and thus, ensure to simplify, standardize, and get the work
done right the first time (Riggs, 1994).
(d) Teamwork: As with other organizations, teams and not
individuals are the organizational units that are accountable
for performance. Everyone in the organization should share
responsibilities and benefit from “team learning” (Riggs,
1994).
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(e) Training: Even in NPOs, training is imperative as strategic
quality management will fail because however well designed
the service on which it is offered, the organization will not
be able to provide a quality service or product if its
employees are not fully trained to do the job (Stebbing and
Pengelly, 1994). Training can create the framework to help
guide the organization towards quality improvement (Riggs,
1994).
(f) Empowering and respecting people: NPOs have critical
issues with human resources. There is a need to ensure that
requires decisions to be delegated to the lowest level.
Delegating also makes sense when it results in decisions
being made by those who must implement them.
(g) Ongoing process: Strategic quality management is a
continuous process and that it is part of the organization in
the long term (Riggs, 1994).
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4.0 Conclusion
It is concluded that strategic management is important and
critical to any types of organizations. For NPOs, strategic
management is important in both aspects – to determine
operational goals as well as financial goals. Although NPOs are not
profit-oriented, it is equally important that NPOs generate income
to sustain its activity, thus requiring efficient and effective
operational and financial processes in the organization.
This paper has presented a strong argument to support the
notion that strategic management is important to non-profit
organizations. As the world is facing issues from political,
economical and social activities, either locally or globally, non-
profit organizations’ roles as watchdog, collaborator, supporter
and networker have become more pertinent in current and future
situations.
Therefore, NPOs cannot exist merely for the sake of existing.
It has a big responsibility to carry and thus, necessitates the
intervention of strategic management so that these NPOs are able
to perform outstandingly and provide quality services to its
clients.
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