Health is wealth. Right?
Am I healthy? ….
What is health?
The state of being free from illness or injury. Right? Not anymore.
In 1948 WHO (World Health Organization) defined health as, “… a state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity.”
In 1986 WHO further clarified health as, “A resource for everyday life, not the objective of living. Health is a positive concept emphasizing social and personal resources, as well as physical capacities.”
This means that health is a resource to support an individual’s function in wider society, rather than an end in itself. A healthy lifestyle provides the means to lead a life full of meaning and purpose.
In 2009, researchers published in The Lancet defined health as the ability of a body to adapt to new threats and infirmities.
The best way to maintain health is to preserve it through a healthy lifestyle rather than waiting until sickness or infirmity to address health problems. People use the name wellness to describe this continuous state of enhanced well-being.
The WHO defined wellness as follows :
“Wellness is the optimal state of health of individuals and groups. There are two focal concerns: the realization of the fullest potential of an individual physically, psychologically, socially, spiritually, and economically, and the fulfilment of one’s roles and expectations in the family, community, place of worship, and other settings.”
Now let’s do a quick check…
Is my organization healthy?
We don’t have a problem… Is the organization healthy?
We have our resources (man, machine, material, money…) to manufacture, our products are accepted by the customers, the suppliers are supplying as per our requirements, we are making profits… are we not a healthy organization?
Hmm… Perhaps not any more.
What is an organizational wellness?
If we draw parallel and go by the WHO definition of wellness to evaluate the organizational wellness we have to examine the optimal state of health of individuals (departments) and teams (groups, strategic business unit, company). There are two focal concerns: the realization of the fullest potential of an individual assets (physically), willingness to changes (psychologically), commitment to stake holders (socially), leadership with values (spiritually: conscious thoughts and emotions), and profitability (economically), and employees work life balance (the fulfilment of one’s roles and expectations in the family, community, place of worship, and other settings).
The question is… How do I make my organization healthy?
Evolution of strategic management
In late 500, Sun Tzu authored a book called The Art of War, which contains 13 chapters that focus on military strategies and tactics. According to Sun Tzu, the positioning of an army was important and while doing so one should take into account the physical environment and subjective beliefs of one’s opponents on the field. He emphasized the importance of responding quickly to the environment in order to appropriately meet changing conditions. In a static environment, planning works successfully, but in a dynamic and changing environment plans rarely work .
Strategic management slowly blossomed into a distinct and important discipline over a five-decade period.
During 1950s the organization focus was on budgetary planning & control.
Financial control was through operational and capital budgeting. Investment planning was predominantly through project appraisal, ROI (Return on Investment), DCF (Discounted Cash Flow) and financial planning was the key.
1960s witnessed corporate planning.
The strategy planners focused on preparation of short, medium and long term plans, business forecasting and investment planning models. 1960s also witnessed rise of corporate planning departments.
1970s the focus shifted to corporate strategy, diversification, and portfolio planning matrices. Diversification resulted into multidivisional structure. For growth and market share organizations started pursuing global markets.
Late 70s & early 80s organizations started industry and competitive analysis. Based on the industry analysis strategists determined the choice of industries, markets, and segments and positioning within them. The focus shifted to competitor analysis and PIMS (profit impact of market strategy), market selectivity, industry restructuring and active asset management.
Late 80s & early 90s. The quest moved for competitive advantage. Identification of sources of competitive advantage within the firm. Resource analysis of core competencies. Corporate restructuring and business process reengineering. Re-focusing and outsourcing.
Late 90s & early 2000. This was the era of strategic innovation and the new economy. Achieving competitive advantage through strategic innovation. Competing on knowledge and adopting to the new digital networked economy. Organisational flexibility and speed of response. Knowledge management and organisational learning. Competing for standards. Early mover advantage. The virtual organisation. The knowledge based firm. Alliances and networks. The quest for critical mass.
2000 – 2010. This period was regarded as unpredictable business environment that witnessed recession, sporadic instabilities in financial sector, financial meltdown across the world. Emerging third world economies paved way for new strategies for the corporation. Finding new and unexplored new international markets and outsourcing to cut down growing overheads were the symbol of the strategies. However, success to most of the organizations was short lived and companies resorted to both proactive and reactive strategies to survive and maintain sustained competitive advantage.
Evolution of strategic management
| Period | Focus | Means |
| During 1950s | Budgetary planning & control | Project appraisal, ROI, DCF |
| 1960s | Corporate planning | Business forecasting and investment planning models. |
| 1970s | Diversification, and portfolio planning matrices | Multidivisional structure |
| Late 70s & early 80s. | Analysis of industry and competition | Competitor analysis and PIMS |
| Late 80s & early 90s | Competitive advantage | Corporate restructuring and business process reengineering. |
| Late 90s & early 2000 | Competitive advantage through strategic innovation. | The knowledge based firm. Alliances and networks. The quest for critical mass. |
| 2000 – 2010 | Proactive & reactive strategies to survive & maintain sustained competitive advantage | Explore new international markets and outsourcing to cut down growing overheads |
As the focus moved to competitive advantage and strategic innovation, organizations vision became significant for growth as well as sustainability. So did the role of the chief executive and his vision.
A vision or strategic intent is the desired future state of the organisation. It is an aspiration around which a strategist, perhaps a chief executive, might seek to focus the attention and energies of members of the organisation .
Aaron De Smet (2014) et al. identified nine dimensions of organizational health, along with their thirty seven related management practices. The nine dimensions are Direction, Accountability, Coordination & control, External orientation, Leadership, Innovation & learning, Capabilities, Motivation & Culture and climate.
Direction, one among the nine dimensions, should focus on Shared vision, Strategic clarity, and Employee involvement. Similarly, accountability should focus on Role clarity, Performance contracts, Consequence management, and Personal ownership. The motivation comes from Meaningful values, Inspirational leaders, Career opportunities, Financial incentives, Rewards and recognition.
The authors further noted that, “…. the four clusters we identified from the data reflects a distinct underlying approach to managing, including core beliefs about value creation and what drives organizational success. Each can be described by the specific set of management practices prioritized by companies…” the four clusters identified from the data reflects a distinct organizational approach and can be described by a specific set of management practices are as follows…
1. Leader driven: Career opportunities, Inspirational leaders, Open and trusting, Financial incentives, Risk management
2. Market focused: Customer focus, Competitor insights, Business partnerships, Financial management, Government/community relationships
3. Execution edge: Knowledge sharing, Employee involvement, Creative and entrepreneurial, Bottom-up innovation, Talent development
4. Talent and knowledge core: Rewards and recognition, Talent acquisition, Financial incentives, Career opportunities, Personal ownership
Authors concluded that building organizational health can be a powerful lever for improving the long-term performance of companies. Leaders can’t ignore this lever, given the accelerating pace of change facing most industries.
Companies can achieve organizational health in several ways— authors discussed the four significant ones. Gratifying simplicity masks hidden risks. Organizations need to choose their recipes and ingredients carefully, as the wrong mix may leave a bad taste in the mouths of employees, executives, and investors alike.
The four clusters approach; leader driven, market focused, execution edge and talent and knowledge core are critical for organizational sustainability and growth. The recipe and the ingredients must be chosen carefully. Organizational growth recipe and ingredients have changed over a period of time.
The nine dimensions and the four clusters determine the health of the organization. The way health has been redefined over the years, in order to keep the organization healthy strategists have employed multiple strategies.
We look at these strategies which aim at keeping the organization healthy.
Strategic management
To define, strategic management is the study of such set of managerial decisions and actions that determines the long run performance of a firm.
The major steps in the strategic management process are:
Environmental analysis
Strategy formulation
Strategy implementation
Strategy evaluation and control
Why strategic planning?
Strategic planning is necessary for the organization as it…
Gives a clear vision of internal and external environment of a business firm
Focuses on what is most important and how it is to be managed for success of business.
Understanding of problem, its nature, its threats (challenges), its controls and implications.
Appropriate decisions to implement the strategies evolved to achieve the desirable objectives.
A continuous monitoring and evaluation of the progress through the path to the goals
The strategic planning process
The tasks in strategic planning are…
Clarifying the mission of the corporation: A mission is a general expression of the overall purpose of the organisation, which, ideally, is in line with the values and expectations of major stakeholders and concerned with the scope and boundaries of the organisation. It is sometimes referred to in terms of the apparently simple but challenging question: ‘What business are we in?’
Defining the business: The structure of product, service and information flows and the roles of the participating parties.
Surveying the environment: The PESTEL framework categorises environmental influences into six main types: political, economic, social, technological, environmental and legal.
Internal appraisal of the firm: The resources and competences that an organisation can use to provide value to customers or clients.
Setting the corporate objectives: A general aim in line with the mission. It may well be qualitative in nature. An objective is more likely to be quantified, or at least to be a more precise aim in line with the goal.
Formulating the corporate strategy: Strategy is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.
Monitoring the strategy: Involves monitoring the extent to which the strategy is achieving the objectives and suggesting corrective action
Every organization operates in two types of environment…
Macro environmental factors: The macro environmental factors are demographic, socio-cultural, economic, political, natural, technological, legal and government policies.
Environmental factors specific to business concerned are: The industry in which the firm operates, competition, technology, market/customer, supplier factors and government policies.
We discuss these factors and their impact on the firm later in this book.
Corporate & business strategy
Focus of strategic management shifted from planning process to quest for profit. The fundamental goal of business is to earn a return on its capital that exceed the cost of capital. There are two ways to attain this.
1. The firm may locate in an industry where favourable conditions result in the industry earning a rate of return above the competitive level.
2. The firm may attain a position of advantage vis-a-vis its competitors within an industry, allowing it to earn a return in excess of the industry average.
Corporate strategy defines the scope of the firm in terms of the industries and markets in which it competes. Corporate strategy decisions include,
Investment in diversification
Vertical integration
Acquisition
New ventures
Allocation of resources between the different business of the firm
Divestment.
Business strategy
Business strategy is concerned with how the firm competes within a particular industry or market. This is also referred as competitive strategy.
The question is… How can the firm make money?
This leads to
What business or businesses should we be in?
How should we compete?
Answer to the first question describes “corporate strategy” and the second describes business competitive strategy.
Organizations failing is not surprising. Start-up failing is more common. Established companies too fail, not only to protect market share, but also to sustain. With large number of matrices for decision making, tons of information available. Multiple statistical tests to validate information and judge its utility, yet decision making is getting more complex.
Organizations employ strategies to achieve their objectives. An organization sets objectives based on the environment it operates in, responds to. While deciding the choice of strategy organizations take into account their strengths and weakness and assessment of opportunities and threats. Managers articulate plans and staff execute the plan. Managers keep monitoring execution and try to ensure that the events match with the plan. The control process. For any deviation from the plan corrective measures are employed; these were also probably either plan B or contingencies.
Now that is what probably every organization does. Then why is it that only a few of them succeed and many fail. Why is it that the established organizations also find it difficult to sustain; leave aside growth. It is not that managers working for the organizations did not have understanding of strategy. It is also not true that they employed wrong strategy. What we believe is they probably did not either had their priorities right or ignored a few basic strategy elements.
So apparently everything boils down to Strategy. Strategy has been defined by many authors. We look at some of the definitions of strategy….
Glueck , “Strategy is the unified, comprehensive and integrated plan that relates the strategic advantage of the firm to the challenges of the environment and is designed to ensure that basic objectives of the enterprise are achieved through proper implementation process.”
It lays stress on the following:
a) Unified comprehensive and integrated plan.
b) Strategic advantage is related to challenges of environment.
c) Proper implementation ensures achievement of basic objectives.
Another definition of strategy is given below which also relates strategy to its environment. “Strategy is organization’s pattern of response to its environment over a period of time to achieve its goals and mission.”
Strategy is the direction and scope of an organisation over the long term, which achieves advantage for the organisation through its configuration of resources within a changing environment and to fulfil stakeholder expectations.
This definition of strategy stresses on consequences and characteristics of strategy.
Strategic decisions are likely to be complex in nature. Strategic decisions may also have to be made in situations of uncertainty. Strategic decisions are also likely to demand an integrated approach to managing the organization. They may also have to manage and perhaps change relationships and networks outside the organization, for example with suppliers, distributors and customers.
Strategy is characterized by four important aspects.
• Long term objectives
• Competitive Advantage
• Vector (represents magnitude and direction)
• Synergy
All organizations do take into account the consequences of strategic decisions. Organizations sustainability depends on the strategic decisions made by the top management. However, these decisions are made while responding to current business environment.
The terms frequently used in strategy, at times layman substitutes them for strategy, are defined here.
A Strategy is a unified, comprehensive and integrated plan that relates the strategic advantage of the firm to the challenges of the environment.
A Policy is a guideline for decisions and actions on the part of subordinates and is a general statement of understanding made for the achievement of objectives.
Tactics are the means by which previously determined plans are executed.
Programmes are a single use comprehensive plan laying down the principal steps for accomplishing a specific objective and sets an approximate time limit for each stage.
Procedures are the series of functions or steps performed to accomplish a specific task or undertaking.
Rules are the principle to which an action or a procedure conforms or is intended to conform.
In September 2014 McKinsey Quarterly discussion, moderated by McKinsey Quarterly’s Allen Webb, Professor Michael G. Jacobides (London Business School) said, “Yes, I think we may need new tools or frameworks. When the environment changes profoundly, the maps with which we navigate it may need to shift as well. For instance, from telco to health-care to computers, sector boundaries are changing or dissolving, and new business models are redefining the competitive landscape. So tools such as Michael Porter’s five forces, created for a more stable, more easily definable world, don’t just lose their relevance—they become actively misleading”.
During the same discussions Professor Robert Grant (Bocconi School of Management) said, “I disagree with the notion that the world is changing and that this has somehow made our established strategy tools obsolete. Most changes in the business environment have been in degree rather than kind: the speedier diffusion of technology, the growing intensity of competition as a result of internationalization, increased concern over business’s social and environmental responsibilities. Most of the core concepts and frameworks of strategy have not been devalued by change”.
These observations suggest we need to relook at the frameworks not as how relevant they are today but more with respect to how to use them in decision making.
In this book we suggest “5 Elements of Organisational Excellence”.
Basic Elements as 3 Qs for organizational growth:
Q 1: Quality: Product Quality in terms of quality of inputs, quality of process and quality of output development. With respect to Service quality, exceed the expectations.
Q 2: Quantity: Efficiency and variable cost and fixed cost
Q 3: Quick: Time targets and Eliminate unnecessary activities
These 3Qs are consequence of 3S + 2R
The 3S being
Strategy effectiveness: Strategy effectiveness needs to answer basic questions….
Where are you?
Where do you want to go?
What options do you have?
Choosing the correct option.
Structure staffing:
Functions/Departments
Levels
Recruitment
Job description
Training
Teams
Goals
Rewards
Systems efficiency
Within function
Across the processes
Internal checks & controls
MIS
2 R being
Resources:
The traditional resources
Money
Materials
Machine
Manpower
However, the resources are not restricted to the above four today the organization has to analyse its resources in terms of
Capabilities
Competencies
Available Resources in terms of Physical Resources, Human Resources, Financial Resources, Intellectual capital, Unique Resources, etc.
Relationship
Emotional bank account
Honesty is foundation of trust and trust is foundation of relationship
Many established organizations faced the problem of sustainability. It is not just marketing myopia as described by Theodore Levitt; or inability to understand the environmental factors but values for which the organization stands.
The strategic management process generally practiced by organizations starts with the vision statement, followed by mission the organization has then to the SWOT (in this book we have discussed SWOC, challenge instead of threat) analysis, setting objectives developing strategies to achieve the set objectives, implementation and the review and control.
Interaction of these 5 elements is depicted below
As described in the flowchart above, we suggest that for sustainability, organization should start with values, followed by vision, mission, strategic objectives and actions & KPI’s.
Values: Should answer the question, “What does the organization stand for?” Ethics, principles and beliefs.
Vision: Should describe, “Where are we going?”, “What do we aspire to achieve?” Hopes, ambitions
Mission: What do we do? What do we do it for? Motivation, Purpose
Strategic Objectives: How we are going to progress? Plan, goals, sequencing
Actions & KPIs: What do we have to do? How do we know? Actions, owners, timeframes, resources, outcomes.
Strategic Decision-Making Process
| 1. Organization’s Vision | ||||
| 2. Determining Mission | ||||
| 3. Organizational Values | ||||
| 4. | Strengths | Weaknesses | Opportunities | Challenges |
| Re-determine as necessitated | ||||
| Redefine & Review as necessitated | 5. Specify Objectives | |||
| Reformulate as necessitated | 6. Formulate Strategy | |||
| Rework as necessitated | 7. Implementation of strategy | |||
| Recycle to phases 1,4,5,6 as necessitated | 8. Monitor, Review & Evaluate | |||
The triangle moves from Actions & KPI’s as specific and tangible to Values which are aspirational, and through achievable strategic objectives, mission and vision.
We discuss all these at length with their importance and implications.
References:
[1] https://www.medicalnewstoday.com/articles/150999#what_is_health April 27, 2020[1] https://ebrary.net/3798/management/evolution_strategic_management April 29, 2020[1] Johnson, Gerry; Scholes, Kevan and Whittington, Richard Exploring (2005) Corporate Strategy Text and Cases, Seventh edition, Prentice Hall, Financial Times
[1] Smet, Aaron De; Schaninger, Bill and Smith, Matthew (2014) The hidden value of organizational health—and how to capture it, McKinsey Quarterly, April
[1] Glueck, W.F. and Iavch, L.R. (1984). “Business Ploicy and Strategic Management” Mc graw Hill, New York.
[1] Gerry Johnson and Kevan Scholes (2001). “Exploring Corporate Strategy” Text and Cases, Sixth Edition
[1] Allen Webb, (2014). “What strategists need: A meeting of the minds”. McKinsey Quarterly