Strategic Management and Planning in Non-Profits

Definition for Strategic Management

Strategic management is a management technique depending on human potential as the company’s essential part. It orients production activities to customer requests, responds flexibly, and makes up-to-date changes in the enterprise that face the environment’s challenge. Moreover, it helps to manage competitive positions, enabling the organization to sustain long-term while making their goals. The field of such research is diverse and has been covered in many scientific directions. Much of the literature determines that strategic management, planning, and models are essential for a company’s success. The book of Amason and Ward (2020) reveals the general knowledge, presenting the objects of strategic management: organizations, strategic business units, and functional areas of the organization. The study provided by Durand et al. (2017) concerns the growing diversity of the strategic management domain. The authors focus on the problems directly related to the organization’s general goals and issues associated with any organization element, as long as it is necessary to accomplish the goals, but is currently absent or insufficient. It also concerns questions related to external factors that are out of control.

Concept of Strategic Management

Strategic management problems most often arise as a result of numerous external factors. Therefore, in order not to be mistaken in choosing a strategy, it is essential to determine what economic, political, scientific, technical, social, and other factors influence the organization’s future. With regard to the current trends such as globalization and innovation, the study of Varsani (2018) introduces the modern approaches to the topic of strategic management. The paper criticizes the strategic management’s basis, including the number of strategies, including several interrelated particular businesses, administrational, and labor strategies. It is a pre-planned reaction of an enterprise to a change in the external environment, its line of behavior, chosen to obtain the requested result.

Importance and Benefits of Strategic Management

Strategic management and strategic planning continuously work in conjunction and complement each other. The first one is a complex process aimed at implementing a strategy. At the same time, the latter is an analysis of the current situation and determination of the next step towards the goal. Some literature suggests that strategic management is a powerful administration system and a priority task for the company’s management team (Sołoducho-Pelc, 2017). These days there is new strategic management; for instance, Barbosa et al. (2020) explore new phenomena – Sustainable Strategic Management (GES) and its implication in small businesses. Meanwhile, this model was tested only in a small Brazilian company and cannot serve as a full image of the GES positive effects. A systematic review provided by Rasouli (2020) emphasizes that elaborated policy has a strong influence on strategic decision-making. More importantly, learning its foundations allows a manager to develop the so-called “helicopter view” to see the company in a complex and focal way (Sidiq and Harahap, 2019). A manager who possesses strategic management tools can actively shape the future of the company.

The literature reviewed seems to claim that the benefits of strategic management and informed strategic leadership include a deep level of knowledge of actions and goals, a faster administration response to changes, new opportunities, and adverse developments. The approach adherents argue that it contributes to managers’ ability to have a reasonable justification for specific assessments of alternative options for investing capital and labor resources (Wheelen et al., 2017). According to Wheelen et al. (2017), strategic management assists in unifying the process of making strategic decisions for the organization. It brings a current management position and a leveling of the tendency of passive response and protective measures. However, strategic management cannot be reduced to a system of general rules, procedures, and schemes concerning weaknesses. No concept shows what and how to do when solving particular problems or in certain situations.

Strategic Planning

Strategic planning was widespread in large international corporations until the present day. Meanwhile, the circumstances have been changing, and more medium-sized enterprises are beginning to implement strategic planning. The article of Bagheri (2016) aims to show the importance of planning, which develops a base for management components. Strategic planning is a brunch of strategic management, which is selecting the targets of an organization and policies to meet them. According to Papke-Shields and Boyer-Wright (2017), strategic planning elaborated on the ground for management decision-making processes. The authors’ point (2017) is reiterated from an administrative perspective; the study focuses on applying deliberate planning characteristics to project management (Papke-Shields and Boyer-Wright, 2017). It reveals that a proper adaptive approach is related to appropriate project management means’ usage.

The action of an enterprise, intentions, and control should be addressed to develop deliberate plans. The survey of Wolf and Floyd (2017) includes strategic planning analysis conducted over approximately 30 years. They explain that the study found most of the results depend on the strategic planning models varying from the common ones to novice empirical work on provisional results. “Theory can be used to help motivate such work and to make connections between the context for planning, descriptions of the process, mechanisms of its influence, and the important organizational outcomes and contingencies in these relationships” (Wolf and Floyd, 2017, p.1787). Here, the authors note that deliberate planning arranges to manage the organization’s members. Taking into account the global perspective and other groups of stakeholders, Bryson in his book “Strategic planning for public and nonprofit organizations” (2018) notes that the strategy enables shareholders and the management of companies to determine the direction and pace of business development, as well as outlines global market trends. It is also useful for understanding the reasons for administration and structural modification in the company, its advantage, and what tools it needs for successful development.

Strategic Planning Models

To create the most effective customer-focused strategy, an organization needs to rely on the right models and tools. Several models help to choose the appropriate strategic policy. The first one is a balanced scorecard; it gives an overview of the strategy, covering factors such as mission, vision, core values, and priority areas for its development. The paper of Ali (2019) describes the importance and benefits of a balanced scorecard over 25 years. The data is presented in the form of a map of strategic indicators, reflecting the cause and effect relationships in the organization’s activities.

With such a system, managers can make business more customer-centric. Its creators, Dr. Robert Kaplan and David Norton believe that customer problems fall into four categories: time, quality, cost, productivity, and service. According to Quesado et al. (2018), to get started with the model, a company should formulate its goals concerning these four categories, and then translate them into specific metrics. This is just one of the options – in fact, a balanced scorecard can be used for a wide variety of business aspects, be it marketing, sales, or financial operations.

PESTEL Analysis

The PESTEL analysis can be implemented in terms of a general model for identifying externalities, often associated with government actions that affect competition in the industry. Its name is an acronym for the following six groups of these aspects: political, economic, social, technological, environmental, and legal. PESTEL analysis appeared in the 1990s, and at first, it included only four factors – PEST and then, when two more elements were added, it became PESTEL (Helmold, 2019). Recently, some practitioners have suggested adding one more, seventh, factor to it – ethics, in which case it would become STEEPLE.

The political aspect concerns the taxes imposed by the authorities, legal and regulatory interventions in the market. Economics is the general macroeconomic background, including growth, inflation, interest rates, and exchange rates. Perera (2017) elaborates on his position that social factors incorporate broad social context, including tendencies in population, consumption patterns, and age distribution. The technological part is trends in research and development and innovation that affect products and production, as well as threats from substitute products. According to Perera (2017), environmental issues comprise weather and climate changes, the impact of global warming on the firm’s operations, and customer preferences. The legal aspect is dedicated to legislative trends impacting an enterprise’s decisions, including recruitment, health and safety, consumer protection, financial institution capital adequacy, and management laws.

PESTEL analysis is sometimes used to study the range of opportunities and threats required in the subsequent SWOT analysis. Nevertheless, there is one problem: PESTEL can be an unstructured and slightly loose tool (Perera, 2017). It usually leads to a list of numerous issues, some of which relate to the company, while others touch it only lightly; however, they can be valuable. PESTEL analysis will also help when brainstorming industry issues (Perera, 2017). It is advantageous to use this analysis if the manager is always mindful of its limitations. However, the author reveals the disadvantages of such an analysis model (Perera, 2017). With regard to negative points, this analysis leads to an unstructured, unanalytical, and unranked definition of key industry issues. At worst, the key issues will be hidden in the results.

SWOT Analysis

SWOT analysis is considered to be one of the most effective tools in strategic management. The essence of SWOT analysis is to evaluate the company’s internal and external factors and assess the risks and competitiveness of the product in the industry. Some articles argue that the main task is to conduct a business strategy for the development of an enterprise or facility, ensuring that all the main factors – the driving forces for successful growth – have been taken into account. For instance, the paper of Gürel and Tat (2017) explores SWOT Analysis from a historical, theoretical, time frame perspective. The SWOT analysis method is a universal approach to strategic management. Any product, company, store, factory, country, educational institution, and even a person can become the object of SWOT analysis. Furthermore, companies often conduct a SWOT analysis to evaluate their and competitors’ products as this technique puts in order all data about the environmental circumstances of any enterprise.

Taking into account the advantage of SWOT analysis, it helps a company look at its position, its items, and service in the correct context. Therefore, it is a widespread approach to risk management and decision-making. The enterprise’s SWOT analysis becomes an action plan determining the deadlines, priorities, and the needed resources for an application (Gürel and Tat, 2017). The scientists also explain that it is approved to conduct a SWOT analysis annually, being a portion of strategic planning (Gürel and Tat, 2017). SWOT analysis might be the first point in business analysis in terms of drawing up a marketing plan. The abbreviations are Strengths, Weaknesses, Opportunities, Threats; due to its strengths, sales, profits, and market share are growing. It arranges an advantageous position of the item or service compared to its competitors; consequently, forces must be continuously enhanced and improved.

Production’s weaknesses or shortcomings impede the business’s growth, prevent the product from leading the market, and are not competitive in the trade. Weaknesses are non-competitive factors that need to be changed. These characteristics include both managerial and technological or image parameters that do not allow the company to develop. Opportunities are certain environmental factors that enable an organization to improve its market position. Despite the model’s universality, SWOT analysis has been criticized for various factors. One of them is the biases and subjective opinions of the analytics. One of the studies offers an approach to limit shortcomings due to the proper application of “Importance-Performance Analysis (IPA) to identify SWOT based on customer satisfaction surveys, which produces prioritized SWOT corresponding to the customers’ perception” (Phadermrod et al., 2019, p. 194). Threats also relate to the external environment of the organization. These are factors and trends that can negatively affect the company’s operations.

Competitors Analysis

Competitor analysis in marketing and management assesses the strengths and weaknesses of competitors in the field. It provides a strategic context to identify capabilities and possible adverse outcomes for the company’s action. Porter’s five forces analysis is a methodology for analyzing industry competition and developing business strategy, developed by Michael Porter at Harvard Business School in 1979 (Belton, 2017). Strategy consultants sometimes use Porter’s Five Forces Analysis framework to assess a company’s strategic position in the industry qualitatively. Meanwhile, according to Belton (2017), this technique is only a starting point in the list of tools or techniques that they can use. Competitor analysis opponents consider the cons of such a model (Belton, 2017). As with all generalizing methods, an analysis that does not find exceptions and particulars is considered to be simplistic.

Definition of SMART Goals

SMART technology is a modern approach to setting working goals. Much of the literature claims that the system of setting SMART goals allows at the stage of goal-setting to summarize all available information, establish acceptable terms of work, determine the sufficiency of resources, and provide all participants in the process with clear, precise, specific tasks. SMART is an abbreviation, the interpretation of Specific, Measurable, Achievable, Relevant, Time-bound, each letter means a criterion for the effectiveness of the goals (Reeves and Fuller, 2018). The concept of it means that when setting a goal, the result that a company wants to meet is precisely defined; the rule always applies one goal – one result.

Tracking progress towards a goal is an integral part of keeping the organization motivated. It allows milestones to be set – they can be marked when they are reached, or re-evaluated otherwise. It is best always to include measurable aspects of an intention. According to Reeves and Fuller (2018), SMART goals should be achievable since realistic task performance affects the performer’s motivation. If the goal is not attainable, its probability will tend to 0. The achievability of the target is determined by its own experience, taking into account all available resources and limitations. Constraints can be time resources, investments, labor resources, knowledge and expertise of the executor, access to information and resources, the ability to make decisions, and management levers for the executor of the goal.

Moreover, it is crucial to understand what contribution the solution of a specific task will make to the achievement of the company’s global strategic objectives. Reeves and Fuller (2018), in their article “When SMART goals are not so smart,” reveals the issue of creating the company’s purposes. For instance, in setting a meaningful goal, the following question will help: What benefits will the company bring from solving the task? (Reeves and Fuller, 2018). If, when fulfilling the target as a whole, the company does not receive benefits, such a goal is considered useless and means a waste of the company’s resources. Despite gains, the SMART goal should be limited in time; there used to be a deadline, exceeding which indicates the unsuccessful result. Setting time frames and boundaries for achieving a goal makes the management process controllable. Nevertheless, the time frame should be determined, taking into account the possibility of achieving the target within the established time frame. It is impossible not to notice that with the seeming multidimensionality and vastness of research. Many more properties and mechanisms require additional consideration.

Benefits of Risk Management

Risk management assumes control over what is happening, takes specific actions and measures to reduce the likelihood of adverse outcomes, and reduces the degree of their impact on the organization’s activities. Risk management pays special attention to operational and financial risks. Research has identified two types of threats to date; these are most often taken into account when making decisions, even in organizations that do not have an integrated risk management system. Attention to these risks manifests itself in the constant monitoring of business processes, which ensures control over its implementation, following its goals, and adopting plans (Hopkin, 2018). High-risk situations can have not only negative consequences for the organization and contribute promising opportunities for development and improvement, as well as increasing income. Based on this assessment, the company’s specialists can identify promising scenarios and prepare them, taking into account the degree of risks.

There are several benefits of implementing risk management on the company’s policy. Aven (2016), in his study, determines the positive side of this strategic approach. Firstly, it improves the quality of planning and efficiency of activities. Risk management involves the active collection and analysis of information about the organization and the conditions of its operations, which provides ample opportunities for proactive planning. Assessment of the probability of occurrence of certain events makes it possible to develop options for responding to them for the organization, which will be most beneficial for it (Aven, 2016). The company’s preparedness for any development of events increases its efficiency, the ability to use favorable opportunities, and avoid negative consequences.

Secondly, it saves resources as risk management processes consider the economic feasibility of various business operations and investment opportunities. Simultaneously, the company’s resource availability and the liquidity of assets are considered, making it the potential to boost the efficiency of the resources used and, accordingly, the company’s profit (Aven, 2016). Next, an effectively organized risk management process involves the active participation of all organization employees, contributing to the intensification of interaction between employees, management, and partners of the company. An intense exchange of information allows a company to represent various stakeholders’ reactions to any aspect of its activities.

Moreover, risk management as an organizational function solves the problem of improving the accuracy of the information and analytical data used to make management decisions at various levels and in different functional areas of corporate activity. It also creates a favorable business image because companies with an established risk management process operate more efficiently and generate more trust among partners – investors and lenders, insurance companies, suppliers, and customers. Partners can associate risk management with organizational reliability. It should be noted that some of the provisions expressed here are analytical and do not exclude other points of view. For instance, the article by Wiengarten et al. (2016) researches the benefits of risk management on the example of supply chain integration. Effective risk management testifies to the reliability of an organization in the eyes of its partners. The founders and owners of the organization are also its partners, and the control of risks in the organization they own provides the credibility of management.

Use of Strategic Planning by Nonprofit Organizations

The strategy is one of the most critical components of the management of nonprofit organizations. An in-depth and comprehensive examination of various aspects of the theory and practice of strategic management is contained in the work of Bryson (2018). The book introduces strategic planning tools, the assessment of their effectiveness, and includes examples of application in the nonprofit sector. The author examines models from the real practice of large NPOs, including the unsuccessful experiences of those who ignored elaborating the strategy of individual projects or the entire activity. Bryson’s (2018) point is that the difference between the plan of a nonprofit organization is that the main goal is not profit. It is ambiguous and can change; this adjusts to its continuous search and updating. The goals are often vague and generalized, and therefore not measurable, making it difficult to understand the success of the activity. The performance efficiency cannot be measured in financial parameters; consequently, this forces the company to look for other evaluation criteria.

Future of Strategic Management

Despite the changed realities, planning, including long-term plans, will not disappear as it is impossible to predict crises, even in the short term. A theoretical analysis of the literature contributes to highlighting a promising direction of strategic management implementations. The business cannot exist without planning the goals and results that the company must achieve, the necessary resources that should be involved, and managed correctly. Long-term strategic planning will be reduced in time. Adjustment of long-term plans should be carried out more often, for example, once a year, and annual plans should be adjusted every six months (Ferreira et al., 2018). As a result of the study, the material was obtained, the analysis of which made it possible to conclude that the strategic management tool SWOT analysis is not outdated because it allows managers to assess the company’s position and business objectively. At the same time, a particularly important role is played by a PEST analysis, which considers political and social changes.

Thus, to have constant, stable success in the market, reorienting management is necessary to address issues that guarantee the strength of the enterprise’s position and its survival in any market conditions. From what has been observed, it becomes evident that the developed strategy may be useless in case the company does not create a mechanism for its implementation. The effects of an incorrect forecast for enterprises carrying out uncontested economic activities can be especially tragic. As a rule, the adverse outcomes of planning mistakes are much more severe than in the traditional, forward-looking.

Strategic management extends to the long-term goals and actions of the company. The formulation of a course of action and its proper implementation is the core of control and the sign of appropriate company management. Strategic management allows the company to assess its strengths and weaknesses and focus on strategically important areas. Evaluating the effectiveness of the strategy’s implementation, the organization receives the necessary information about how it corresponds to the environment’s external conditions. It helps to understand the nature of changes and introduces ethical aspects and corporate social responsibility into the strategic process.

Reference List

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Barbosa, M., Castañeda-Ayarza, J. A., and Ferreira, D. H. L. (2020) ‘Sustainable strategic management (GES): sustainability in small business’, Journal of Cleaner Production, 258, p. 120880. Web.

Belton, P. (2017) An analysis of Michael E. Porter’s competitive strategy: techniques for analyzing industries and competitors. London: CRC Press.

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Phadermrod, B., Crowder, R. M., and Wills, G. B. (2019) ‘Importance-performance analysis based SWOT analysis’, International Journal of Information Management, 44, pp. 194-203. Web.

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Wolf, C., and Floyd, S. W. (2017) ‘Strategic planning research: toward a theory-driven agenda’, Journal of Management, 43(6), pp. 1754-1788. Web.

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