“When you’re dying of thirst, it’s too late to think about digging a well,” is a Japanese proverb that reiterates the importance of strategic management.
In every major move in life, careful and strategic planning helps you execute tasks in the most efficient way possible. When you’re planning on moving to a new place, you think about the location and strategise how to pack efficiently. When you’re shopping during Easter weekend, you make a checklist of what you want to buy so you can go in and out of the store quickly enough and avoid the throngs of people. When you’re hosting a party, you make sure you have enough food you’re your guests and for those who may turn up unexpectedly.
These scenarios show that planning and strategising are a part of nearly everything you do and the decisions you make. Of course, spontaneity also has its merits in the personal realm. But when we speak of the world of business, planning is at the core of everything. Planning is so essential in every organisation that it has its own industry-specific term: strategic management.
Strategic Management: What is it and who is it for?
Financial education resource site Investopedia defines strategic management as “the management of an organisation's resources to achieve its goals and objectives.” This means clearly defining your business’ goals, understanding your competition, analysing the operations of the business, forming strategies from these pieces of information, and ensuring that these strategies are rolled out effectively.
In simpler terms, strategic management is the ongoing process of planning and analysing every aspect that is necessary for an organisation to meet its goal.
Of course, every business has its unique goals and unique strategies to achieve them. That is why strategic management is divided into many different styles or frameworks. Below, we’ll discuss four of the most commonly used ones and whether a specific type of strategic management framework works better than another for your organisation.
1. Key Performance Indicators (KPIs)
Key performance indicators are metric or quantifiable values that give you an accurate idea of how well your organisation is performing and of your progress towards your goals and objectives. When used in strategic management, KPIs are directly linked to the achievement of each objective.
Let’s say you’ve outlined your company’s objectives and the strategies you will perform to achieve them. To meet each marker that will eventually lead to reaching your goal, you first need to translate them into smaller objectives. Then, these objectives need to be monitored to see if you’re on track.
This is where KPIs come in. They provide you with concrete metrics to measure and see which smaller objectives have been reached. When the KPI scores don’t measure up to where you need your organisation to be, you will be able to analyse why and create better, more effective strategies.
When establishing your organisation's KPIs, keep in mind the following characteristics:
- They should provide you with evidence of progress towards achieving your goal
- They should measure what’s needed to help inform you for better decision making
- They should gauge the degree of change in your organisation's performance over time
2. Objectives and Key Results (OKRs)
What do Google, Spotify, and Twitter have in common? Apart from being three of the most successful companies in the digital age, they, along with several other Silicon Valley companies, use OKRs as their strategic management framework.
This framework has propelled the success of companies by making them clearly define the following:
- Objectives - What you want your organisation to achieve
- Key Results - How you’ll measure your progress toward your achievements
The difference of OKRs from other planning methods is how often they’re evaluated. Usually, OKRs are set, tracked, and re-evaluated quarterly. This way, there is alignment and engagement between you and your company’s goals. Then, you’ll know which direction you’ll need to go to and what you need to do to get there.
The OKR framework works because it’s agile. The shorter goal cycles mean organisations can better adapt and respond to changes.
So, what makes for good OKRs? First, remember that your objectives do not need to encompass everything the company needs to accomplish. Instead, prioritise the most important things your business needs to achieve. Then, assign three to five key results for each objective.
For example, one of your objectives is to improve your brand’s social media engagement. To reach this objective, you’ll establish key results such as improve your site’s average weekly visits to X number using SEOReseller packages, reach X number of followers on your Facebook page, and receive X number of social shares on your blog posts.
By establishing your objectives and key results, your priorities will be clear to the team and they can focus on performing their tasks to achieve each key result, which in turn helps achieve the objective.
3. Balanced Scorecard
The Balanced Scorecard Institute states that organisations use this strategic management framework to do the following:
- Communicate what they are trying to accomplish
- Align the day-to-day work that everyone is doing with strategy
- Prioritise projects, products, and services
- Measure and monitor progress towards strategic targets
Created by business theorist David Norton and accounting academic Robert Kaplan, the Balanced Scorecard framework relies on leading and lagging indicators. These are the drivers and outcomes of your organisation's objectives, to tell you whether or not you’re achieving said objectives.
Using this framework, you can easily describe and measure your strategies and track the actions you make to improve results.
4. 4 Disciplines of Execution
Developed by Stephen R. Covey and Chris McChesney, this strategic management framework highlights four principles that, when combined, help your organisation execute business strategies. But what are these four disciplines of execution (4DX) in the first place? They cover:
According to this framework, organisations often get lost on their way to achieving their goals amidst the whirlwind of activities, different priorities, and to-do lists that make up their everyday processes on the job. The 4DX aims to guide businesses through these things so they can focus on achieving their goals.
The first principle is focus, which means setting WIGs or Wildly Important Goals. Using an earlier example, let’s say one of your company’s WIGs is to increase your brand’s social media engagement.
Once you’ve established that goal and focus on it, it’s time to leverage it. This means acting on lead and lag measures. An example of lag measure is the percentage of increase in engagement you’ll get. Once you measure this, you can’t influence it anymore. Meanwhile, lead measures are the activities you took to influence your lag measures. This means using the programs from SEOReseller, constantly posting on your social channels, and keeping on with other things you did to increase your social media engagement.
With your goals and measures in place, you now need to keep score. You can do this by tracking a couple of lead and lag measures for each of your WIGs. This is where engagement comes in. Teams perform depending on what their scorecards say. They either try to keep the lead if they see they’re winning or work harder to keep up if they’re losing.
Finally, you need to account for the past and plan for your organisation's future. This can be achieved by meeting with your team and talking about your WIGs. Here, you will be able to review your past commitments and agree on the next steps toward achieving your goals.
Use the Right Strategic Management Software
Changes in the business environment and the way your organisation operates mean that you need to constantly assess your strategies to reach your business goals.
These strategic management frameworks help you take stock of your progress and analyse the effectiveness of your strategies. As long as you use the one that works best for the nature of your business, it won’t be difficult to succeed in meeting your objectives.
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