Strategic Management and Employee Performance

Abstract

Strategic management is a widely studied concept that is considered to be helpful in improving firm performance. In particular, research reveals a clear connection between strategic management and employee performance, as well as strategic management and financial performance. The present synthesis paper seeks to describe and explain the relationship between strategic management and firm performance by reviewing previous research on the topic.

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First, the essay provides a definition of strategic management and explores the fundamental concepts involved, including strategy and the Five Ps. Next, the work investigates the link between strategic management and employee performance using notions such as collective organizational engagement, leadership, and strategic use of human resources. The third section of the work offers a review of the effect of strategic management on financial performance. In particular, the work connects financial performance with entrepreneurial orientation, using a few examples of famous companies that used this tool for increasing financial performance.

Lastly, the paper provides recommendations for leaders seeking to apply strategic management concepts in their work, providing a guide to ensuring a positive influence of the tool. The main finding of the paper is that strategic management contributes to firm performance through a variety of channels and should thus be used by companies to achieve maximum success. The Conclusion section of the paper also specifies a possible direction for future research.

Introduction

Strategic management is an important tool that can help companies to achieve success. Using strategic management, managers can direct the company’s actions in accordance with external circumstances, thus making the company more competitive in the long-term. Strategic management encompasses a variety of activities, from marketing to production, and therefore requires a genuinely comprehensive approach in order to succeed. Research on strategic management shows that the tool can contribute to financial and employee performance and is suitable for various companies, regarding their type, size, and target market. The paper will seek to explain the core concepts of strategic management, as well as to discuss its impact on firm performance.

Key Concepts and Definitions

Strategic management is a rather broad concept that includes a range of activities. According to the definition provided by Walker (2013), the term “strategic management” refers to “an area of academic inquiry and organizational practice that examines the relationships between strategic aims, processes, and content, typically using a contingency framework, which posits that successful organizations adapt to their environment in the pursuit of higher performance” (p. 675). Therefore, undertaking actions to improve performance is the critical goal of strategic managers.

In order to achieve this effect, it is important to develop a successful strategy. Ketchen and Short (2011) explain that it is best to understand strategy in terms of five separate concepts, or the Five Ps, including plan, ploy, pattern, position, and perspective. The five concepts concern the firm’s internal and external actions. For instance, a plan refers to a set of steps needing to be fulfilled to improve performance, whereas a pattern reflects the firm’s consistency in following the plan (Ketchen & Short, 2011).

Position, perspective, and ploy, on the other hand, are about the company’s competitive environment: the firm’s position relative to competitors, the managers’ perspective on the competitive landscape, and ploys used by a company to outrun its main competitors (Ketchen & Short, 2011). Viewing strategy in terms of these concepts allows one to grasp the full extent of strategic management and highlights the complexity of processes required to improve performance.

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Strategic Management and Employee Performance

Strategic management can have a significant positive effect on employee performance, which contributes to the company’s success. This is achieved through three different paths. First of all, a substantial part of strategic management is setting goals for the organization and devising a plan for achieving these goals (Ketchen & Short, 2011). This process motivates employees to work on attaining shared objectives and ensures that the duties of each employee contribute to reaching organizational goals. As shown by Barrick, Thurgood, Smith, and Courtright (2015), by implementing a clear strategy, managers create collective organizational engagement, which has a substantial effect on the performance of employees.

Another path by which strategic management contributes to employee performance is forming a strategic partnership with human resources. Calibrating HR functions to suit the company’s strategy allows managers to improve workforce characteristics, including employee motivation, skill mix, and career progression within the company (Delery & Roumpi, 2017). Finally, strategic management provides strong leadership that also impacts employee performance. Leadership is an essential component of strategic management, which requires company leaders to offer a vision, support, and direction for the employees (Lafley & Martin, 2013). A successful leadership style, in turn, can contribute to job satisfaction and enhance workforce characteristics, thus improving employee performance.

Strategic Management and Financial Performance

Strategic management also affects firm performance by increasing its profits, thus adding to financial performance. The relationship between strategic management and the financial performance of a company is rather simple. As noted above, the primary goal of implementing a strategy is to achieve a more significant market share, resulting in higher profits (Lafley & Martin, 2013). Therefore, a successful strategy provides a clear plan of actions that are required to improve financial performance.

The three central concepts of strategy that contribute to financial performance are plan, ploy, and pattern. Plans are used by organizations to obtain direction and guidance, thus allowing companies to navigate their competitive environment successfully. Ploy, on the other hand, can be used to influence a company’s competitive landscape by manipulating key competitors and earning a larger market share. Lastly, the pattern helps companies to stay on track when it comes to achieving the set objectives. For example, a pattern might include developing new products regularly or performing continuous market research to improve customer satisfaction with services.

Entrepreneurial orientation is also a significant component of strategic management that positively affects financial performance. Entrepreneurial orientation refers to characteristics of the company that allow it to stay competitive and achieve high-performance outcomes. The five main components of entrepreneurial orientation are autonomy, competitive aggressiveness, innovativeness, proactiveness, and risk-taking (Ketchen & Short, 2011).

Each of these characteristics can impact financial performance. For instance, Apple is famous for its innovativeness, which allows the company to earn high profits and retain its position as the market leader. Competitive aggressiveness, on the other hand, can be observed in the case of Uber, a company that used a bold approach to defeating competitors, such as offering monetary bonuses to drivers switching to Uber and sabotaging competition using phantom calls (Matherne & O’Toole, 2017). Proactiveness and risk-taking are also crucial to companies as they can result in finding a new market niche or assist in performing a significant organizational change.

Recommendations

Overall, the effect of strategic management on employee and financial performance is profound. However, to achieve this effect, companies need to take an appropriate approach to strategic management. Sabourin (2015) describes five drivers of performance that are crucial to the success of a strategy. The author states that it is vital for managers to ensure employees’ commitment to the company’s strategic objectives (Sabourin, 2015).

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This can be achieved by using various human resource management techniques, such as providing bonuses and incentives for performance and offering training opportunities to enhance the skill mix. Secondly, leaders should seek to translate objectives into specific projects and take the initiative in strategy implementation (Sabourin, 2015). Providing workers with opportunities to work on projects contributing directly to the company’s strategy can aid in achieving higher performance outcomes.

The third recommendation for leaders is to clarify and align objectives with the company’s goals (Sabourin, 2015). While many managers perceive this process to be one of the initial steps in strategy formulation, it should be performed regularly for maximum results. By reviewing the competitive environment and market conditions frequently, managers can help their companies to respond to any changes in the market and be more proactive.

Finally, Sabourin (2015) highlights the importance of immediate action. Depending on the type of company and the market in which it operates, strategy implementation can cause unexpected situations, requiring leaders to act quickly and efficiently. Being prepared for emergencies is thus an essential tool that can help strategic managers to achieve maximum effect on performance.

Conclusion

Strategic management provides an opportunity for leaders to generate a clear vision for the company and devise a plan for attaining it. However, what makes strategic management even more valuable is its impact on firm performance. Strategic management is capable of improving workforce characteristics, thus enhancing the outcomes of employees’ work. Moreover, it can positively influence financial performance through successful strategy implementation and entrepreneurial orientation. The paper offers an overview of strategic management in the context of improving firm performance. Nevertheless, the exploration of the tool here is limited by the size of the paper and its reliance on secondary research. Future investigation of strategic management and firm performance could look at organizational factors that can reduce or improve the effects described in the present work.

How I Applied Course Content in the Paper

The course was mainly focused on strategic management and its application in various organizations. When applied to the topic of the paper, the knowledge gained from the course allowed me to fulfill the goals of my research and to offer insight into the relationship between strategic management and firm performance. The present section will explain how the materials and concepts reviewed in the course allowed me to produce a personal perspective on strategic management in organizations.

My exploration of the topic began with reviewing the required course materials. The books studied during the course contain a lot of information about strategic management and its use in contemporary companies, whereas the case study showed an example of how Uber applied some of the concepts covered in the course to become a leader in its field. To provide a foundation for my research, I turned to Ketchen and Short (2011) for the explanation of strategy and its core components.

The book provides a clear overview of various notions that are relevant to strategic management, as well as real-life examples of companies using the tools or characteristics discussed. The structure of my work allowed me to review all of the key components of strategic management. For instance, I found that Larley and Martin (2013) provide a useful perspective on strategic management by reflecting on the leader’s role in strategy development and implementation. This part of the book was particularly relevant to the discussion of employee performance.

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The discussion of entrepreneurial orientation and its impact on financial performance was largely built on the knowledge obtained through the course. In particular, I believe that Ketchen and Short (2011) provided an excellent explanation of this concept and the essential characteristics of the companies that apply it. By supplying their discussion with real-life cases, the authors also prompted me to think of other companies that exemplified entrepreneurial orientation and its core principles. In particular, I decided to review the case of Uber studied earlier in the course to provide an example of competitive aggressiveness.

However, it is possible to say that the case could also be used to represent all aspects of entrepreneurial orientation, including autonomy, innovativeness, risk-taking, and proactiveness. In fact, the case provided a framework for discussing entrepreneurial orientation in relation to financial performance, as Uber was able to use this tool to become a distinct global leader in its field.

As a whole, the course was beneficial for me, as it offered multiple opportunities to apply theoretical concepts to practice. While writing the synthesis paper, I found that many of the notions reviewed in the work are also applicable to my work in the mortgage field. For example, the discussion of the importance of external influences and market conditions in designing a strategy is relevant to my area of work, which is affected by competition, legal regulations, and shifts in customer characteristics. Overall, the course content has helped me in producing the synthesis paper and showed me how to apply the knowledge gained throughout the MBA course to my future work.

References

Barrick, M. R., Thurgood, G. R., Smith, T. A., & Courtright, S. H. (2015). Collective organizational engagement: Linking motivational antecedents, strategic implementation, and firm performance. Academy of Management journal, 58(1), 111-135.

Delery, J. E., & Roumpi, D. (2017). Strategic human resource management, human capital and competitive advantage: Is the field going in circles? Human Resource Management Journal, 27(1), 1-21.

Ketchen, D., & Short, J. (2011). Mastering strategic management. Boston, MA: Flat World Knowledge Publishers.

Lafley, A.G., & Martin, R. (2013). Playing to win: How strategy really works. Watertown, MA: Harvard Business Review Press.

Matherne, B. P., & O’Toole, J. (2017). Uber: Aggressive management for growth. The CASE Journal, 13(4), 561-586.

Sabourin, V. (2015). Strategy execution: Five drivers of performance. Journal of Strategy and Management, 8(2), 127-138.

Walker, R. M. (2013). Strategic management and performance in public organizations: Findings from the Miles and Snow framework. Public Administration Review, 73(5), 675-685.

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