2. Strategic management and mbo process

MBO – a process through which specific goals are set collaboratively for the organization as a whole and every unit and individual within it; the goals are then used as a basis for planning, managing organizational activities, and rewarding contributions.

Six steps:

1. Develop overall organizational goals

2. Establish specific goals for various departments, subunits and individuals

3. Formulate action plans

4. Implement plans and maintain self-control

5. Review progress periodically

6. Appraise performance

1. Goals are based on the overall mission of the organization and address targets to be achieved by the organization as a whole (increase in market share, ROI). Essentially strategic goals set by top management.

2. Goals are set for various levels of org-n, so that cumulative affect achieved and lead to reaching overall goals. Begins – upper level managers formulate specific objectives, later developed in collaboration with managers at the next level.

3. Once goals are set – need to develop action plans, focused on methods (activities) necessary to reach the particular goals. Action plans – help assess the feasibility of reaching goals, identify problem areas, facilitate search for more efficient and effective ways to achieve objectives.

4. Once goals and plans are set – individuals should be given latitude (svoboda, samostoyatelnost) in carrying out their activities. Self-control is important.

5. To ensure that plans are being implemented as expected and goals are met. Provide good opportunity for checking performance to date, removing obstacles, solving problems, altering action plans.

6. Managers meet with each subordinate (after 1 year) to conduct an appraisal of performance over the cycle. Focuses on the extent goals are met, on shortfalls, reasons for them, and actions to be taken.

Strengths:

Aids coordination of goals and plans

Help clarify priorities and expectations

Facilitate vertical and horizontal communications

Fosters employee motivation

Weaknesses

Tends to falter without strong, continual commitment from top management

Need for considerable training of management

Can be misused as a punitive device

May cause an overemphasis of quantitative goals

Need: adequate support from top mngt; poor goal setting and communication skills among managers who must implement the system.

Strategic management

Strategies: large scale action plans for interacting with the environment inorder to achiev long-term goals.

Strategic management: a process through which managers formulate and implement strategies to optimize strategic goals achievement, given available environmental and internal conditions.

The process:

Identification of current mission and Strategic Goals

Conduct competitive analysis: strengths; weaknesses; opportunities; threats.

Develop specific strategies: corporate, business, functional

Carry out strategic plans

Maintain strategic control

Competitive advantage: a significant edge over the competition in dealing with competitive forces

Competitive analysis:

SWOT analysis: a method of analyzing an organization’s competitive situation that involves assessing organizational strengths (s), weaknesses (w), environmental opportunities (o) and threats (t).

Opportunity, threat – environmental conditions;

Strengths, weaknesses - internal