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Strategic Management Controls

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 Strategic
Management
Controls
John Kyriazoglou

December 2020

1
Contents
1. Book Summary
2. Purpose of Strategic Management Controls
3. Main Types of Strategic Management Controls
4. Corporate Strategic Planning Committee
5. Strategic Plans
5.1. Description of Strategy
5.2. Strategy Types
5.3. Description of the Strategic Management Process
6. How to create a Corporate Strategic Plan
6.1. Strategic Process Methodology
6.2. Corporate Strategic Plan-Example
7. Strategic Resource Plans
7.1. Strategic Budgets
8. Strategy Implementation Action Plans
9. Performance Management Framework
10. Conclusion
11. End Notes
12. Selected References

2
STRATEGIC MANAGEMENT CONTROLS

1. Book Summary
This chapter describes the main Strategic Management Controls,
such as:

❖ Corporate Strategic Planning Committee,

❖ Strategic Plans,
❖ Strategic Budgets,
❖ Strategy Implementation Action Plans, and
❖ Performance Management Framework.

Also examples of (a) a charter of a strategic planning committee,

(b) strategies, mission, vision, and values statements, (c) a
strategic process methodology and a performance measurement
procedure, (d) a corporate strategic plan and a strategy
implementation plan, and (e) strategic performance measures,
are presented.

2. Purpose of Strategic Management Controls

Controls at this level establish, motivate and reward achievement

of general goals and specific objectives of the organization by its

3
management and employees. Also stimulate organizational
learning, growth and development of new ideas and strategies.
Examples are: strategic planning and execution process, corporate
strategic plan, departmental strategic plans (e.g., sales,
production, marketing, IT, etc.), performance management
system, etc.

The purpose of strategic management controls is to provide a set

of strategic controls for the primary, the support and the external
parties’ activities of the organization.

Primary Activities are the activities of the organization that are

directly concerned with the creation, provision and delivery of
products and services to customers in alignment with the overall
corporate strategy. These are also known as core processes.
These primary activities are:

Inbound logistics: All those activities concerned with

receiving, storing and distributing the inputs (e.g., raw
materials, parts, etc.) to the products and services
offered. This includes materials handling, stock control,
transport, etc.
Operations: All those processes that transform the
various inputs into final products and services, such as:
manufacturing of products, provision of services,
assembly, testing, packaging, locating the process,
facilities and plant, etc.
Outbound logistics: All those activities associated with
collecting, storing, and getting finished products and
services to customers or bringing customers to the
service.

4
 Marketing: All those activities to make products and
services and their benefits known to the customers.
Sales: All those activities associated with selling products
and services according to a pricing strategy to the
customers at a fixed location, over the internet, via sales
networks, etc.
Maintenance service: All those activities associated with
maintaining and improving the performance of products
and services after they have been sold, such as:
installation, repairs, training, customer support, etc.
Support Activities are the activities of the organization that help
to improve the economy, efficiency and effectiveness of the
primary activities of the organization in alignment with the overall
corporate strategy. These are:

❖ Infrastructure: All the systems, policies and procedures that

enable and facilitate the primary activities of the
organization, such as: finance, planning, IT, quality control,
security, and general senior management, etc.
❖ Human Resource Management: All those activities
concerned with recruiting, managing, developing, training,
motivating and rewarding the people within an
organization.
❖ Procurement: All those processes and management
activities (e.g. sourcing and negotiating with materials
suppliers) that are used to acquire the various input
resources to the primary activities of the organization.
❖ Technology Development: All the activities and processes
concerned with researching and improving existing
products and services, developing new products and
services, optimizing raw materials and the production

5
 processes, managing information processing and
developing and protecting "knowledge" in an organization.
External Parties’ Activities are the activities of the organization
that are directly involved in managing the relations and
transactions of the organization with its external partners in
alignment with the overall corporate strategy and the primary and
support activities of the organization. These are: Customer
relationships, Distributor relationships, Vendor relationships, Joint
venture projects, and Outsourcing relationships.

All these organizational activities require controls in order to be

executed the most effective way. This is the role of strategic
process controls.

3. Main Types of Strategic Management Controls

The main types of these Strategic Management Controls for all

activities of the organization (primary, support and external
parties) are:

❖ Corporate Strategic Planning Committee,

❖ Strategic Plans,
❖ Strategic Budgets,
❖ Strategy Implementation Action Plans,
❖ Performance Management Framework (Performance
Management Policy, and Balanced Scorecards).

These are described in the next paragraphs.

6
4. Corporate Strategic Planning Committee
Establishing the corporate strategic planning committee (in
general terms) should be done by the board. The actual detail
strategic controls may be developed by this corporate committee
(see membership later in the ‘charter’ section).

The primary purpose of the Corporate Strategic Planning

Committee is to provide guidelines, review, and approve the
strategic business issues (systems, budgets, plans, etc.) of the
Company. An example of a Corporate Strategic Planning
Committee charter is described next.

Corporate Strategic Planning Committee Charter - Example

Main Responsibilities: General guidelines, duties and areas of

responsibility of the Corporate Strategic Planning Committee are
listed below. The Committee shall:

❖ Review all the critical business strategy issues, and submit

recommendations to the Board so that they will be
included in the business strategic planning process and
strategic plans of the organization.
❖ Undertake and carry out the required advance planning
steps in which organizational leaders together with the
strategic planning staff define the planning process,
establish membership, roles, and responsibilities for the
process, clarify expectations for process outputs and
outcomes, and provide the necessary resources to ensure
its success.
❖ Oversee the corporate strategic issues planning process.

7
 ❖ Provide business expertise to all levels of management of
the organization on strategic issues
❖ Ensure that accountability of the organization is improved
in terms of strategic issues.
Membership and Organization: Depending on the organization
size, structure and culture, the Corporate Strategic Issues
Committee shall consist of a member of the board, the Chief
Financial Officer, and one member from each major department
of the organization.

5. Strategic Plans
Strategic plans, to a smaller or larger extent are useful to all
organizations, such as: the small firms, the large national and
multi-national corporations, the religious organizations, the public
sector, the manufacturing sector, the services sector, the
agricultural sector, the public or private utilities, the NGOs (non-
government organizations,) etc.

Strategic plans are the main product of the strategic planning

process. Before we discuss, however, how to craft a strategic plan
we will discuss what strategy means, the types of strategy, how
strategy fits into the strategic management process, and the
objectives of the strategic management control system.

5.1. Description of Strategy

The word ‘strategy’ comes into English from the ancient Greeks
and it meant the art of generalship, of devising and carrying out a
military campaign. Strategy, in more modern terms, is defined by
Andrews1 as the pattern of objectives, purposes or goals, and the

8
major policies and plans for achieving these goals, stated in such a
way as to define what business the company is in or should be
and the kind of company it is or should be.

Johnson and Scholes2 define:

❖ Organizational strategy as the direction and scope of an

organization over the long-term which achieves advantage
for the organization through its configuration of resources
within a challenging environment, to meet the needs of
markets and to fulfill stakeholder expectations.
❖ Corporate strategy as the strategy concerning with the
overall purpose and scope of the organization to meet the
expectations and owners or major stakeholders and add
value to the different parts of the enterprise.
❖ Business unit strategy as the strategy of a strategic business
unit on how to compete successfully in a particular external
market for goods and services.
❖ Operational strategy as the strategy concerned with how to
use the organizational resources, processes, people and
their skills effectively to attain the corporate and business-
level strategic direction.
Strategy, in game theory, is a prescription (model or metaphor)
that tells us what to do as the game unfolds and specifies a
sequence of decisions in any possible situation3. Models and
metaphors enable us to see new connection and are most
important in strategy and innovation4.

To conclude, in practical business terms, strategy is about:

✓ Direction: Where is the organization trying to get to in the

long run?

9
 ✓ Markets: Which markets should the organization compete
in and what kind of activities it should be are involved?
✓ Customers: What are the values, needs and expectations
of the customers of the organization?
✓ Competitive Advantage: How can the organization
perform better than the competition in those markets?
✓ Resources: What resources (skills, assets, finance,
relationships, technical competence, facilities, etc.) are
required in order to be able to compete?
✓ Regulations: What external, regulatory, legal and other
environmental factors affect the organization’s ability to
compete?
✓ Stakeholders: What are the values, needs and
expectations of the stakeholders of the organization?

5.2. Strategy Types

Strategy exists at different levels of an organization, such as:

❖ Corporate Strategy: This strategy is concerned with the

overall purpose and scope of the organization to meet
stakeholder expectations. This is a crucial level since it is
heavily influenced by external parties and acts to guide
strategic decision-making throughout the business.
Corporate strategy goes well beyond giving directions for
any particular business unit or function. It involves
providing guidance and vision for the overall development
of the organization. It deals with industry developments,
whom to cooperate with and whom to compete with.
Finally it gives, usually, more emphasis to overall
innovation.

10
 ❖ Strategic Business Unit (SBU) Strategy: This strategy is
concerned more with how a business competes
successfully in a particular market. It concerns strategic
decisions about choice of products, meeting needs of
customers, gaining advantage over competitors, exploiting
or creating new opportunities etc.
❖ Operational Strategy: This strategy is concerned with how
each part of the business is organized to deliver the
corporate and business-unit level strategic direction.
Operational strategy therefore focuses on issues of
resources, processes, people etc.
The time frame for the various plans is different as Figure FI05.01
shows.

Corporate Plan Period

Corporate Strategic Plan 3-5 years

Business Unit Plan 1-3 years

Budget 1 year

FIGURE FI05.01: Timeframe for corporate plans and tools

5.3. Description of the Strategic Management

Process
Strategic management process is the art, science and craft of
formulating, implementing and evaluating cross-functional

11
decisions that will enable an organization to achieve its long-term
objectives. It is the process of specifying the organization's
mission, vision and objectives, developing policies and plans,
often in terms of projects and programs, which are designed to
achieve these objectives, and then allocating resources to
implement the policies and plans, projects and programs.
Strategic management seeks to coordinate and integrate the
activities of the various functional areas of a business in order to
achieve long-term organizational objectives.

A balanced scorecard is often used to evaluate the overall

performance of the business and its progress towards objectives.
Strategic management is the highest level of managerial activity.
Strategies are typically planned, crafted or guided by the Chief
Executive Officer, approved or authorized by the Board of
directors, and then implemented under the supervision of the
organization's top management team or senior executives.

Strategic Planning is the first part of the management process

according to Anthony5 which has three layers:

❖ Strategic Planning: The process of deciding on the

Organization’s objectives, on changes in these objectives,
on the resources used to attain these objectives, and the
policies to govern their acquisition and use,
❖ Management Control: The process by which managers
ensure that resources are obtained and used efficiently and
effectively in accomplishing the organization objectives,
and
❖ Operational Control: The process of ensuring that specific
tasks are carried out efficiently and effectively.

12
The strategic process, to a smaller or larger extent applies to the
small business firms, the large national companies, the large
multi-national corporations, the professional partnerships, the
charity and religious organizations, the public sector, the
manufacturing sector, the services sector, the agricultural sector,
the privatized utilities, the non-government voluntary
organizations, etc6.

Strategic management control is the process by which managers

monitor the ongoing activities of an organization and its members
to evaluate whether activities are being performed efficiently and
effectively and to take corrective action to improve performance7,
also if they are not.

First, strategic managers choose the organizational strategy and

structure they hope will allow the organization to use its
resources most effectively to create value for its customers.
Second, strategic managers create control systems to monitor and
evaluate whether, in fact, their organization’s strategy and
structure are working as the managers intended, how they could
be improved, and how they should be changed if they are not
working.

Strategic control does not just mean reacting to events after they
have occurred; it also means keeping an organization on track,
anticipating events that might occur, and responding swiftly to
new opportunities that present themselves. Thus strategic control
is not just about monitoring how well an organization and its
members are achieving current goals or about how well the firm is
utilizing its existing resources. It is also about keeping employees

13
motivated, focused on the important problems confronting an
organization now and in the future, and working together to find
solutions that can help an organization perform better over time.

6. How to create a Corporate Strategic Plan

To successfully formulate and implement strategy, a firm must
confront four broad classes of issues8: Boundaries of the firm (size
of the firm, what it should do, what business should be in, etc.),
Market and Competitive Analysis(nature of the markets,
competitive forces, size of the market, etc.), Position and
Dynamics (firms position and basis of competitive advantage,
adjustments required, etc.), and Internal Organization (organizing
the structure and systems of the firm, implementing systems and
controls, etc.).

Formulating the strategy of the organization is the job of the

strategic plan.

In order to create a corporate strategic plan, it is probably better

for organizational managers to use a practical methodology.

Also, a strategy creation software9 may be used to support the

design and implementation of the strategic controls and the
crafting of a strategic plan for the specific organization.

One typical methodology for the crafting of a corporate strategic

plan is presented in summary form in figure FI05.02 and in detail
next.

14
6.1. Strategic Process Methodology
STEP DESCRIPTION

ONE Preparing for Strategy

TWO Articulating Mission and Vision

THREE Assessing the Situation

FOUR Developing Strategies, Goals, and

Objectives

FIVE Completing the Written Plan

SIX Strategy implementation

SEVEN Strategy evaluation

FIGURE FI05.02: Steps of a Strategic Process Methodology

Step 1: Preparing for Strategy

To get ready for strategic planning, an organization must first

assess if it is ready. While a number of issues must be addressed
in assessing readiness, the determination essentially comes down
to whether an organization's leaders are truly committed to the

15
effort, and whether they are able to devote the necessary
attention to the "large picture".

Also the formulation of strategy requires, given the current socio-

economic environment10 rational decisions regarding the future of
the organization, corporate experience and learning, personal
experience, interpersonal intelligence11, intrapersonal
intelligence12 and learning, quick and effective responses to the
requirements, needs and expectations of the complex world,
taking into consideration the cultural conditions and factors both
within the organization and within society, and assessing the
environmental, legal, economic and regulatory frameworks which
impact the organization.

An organization that determines, therefore, that it is indeed ready

to begin strategic planning, must perform six tasks to pave the
way for an organized process. These tasks are:

Task 1: Identify specific issues or choices that the planning

process should address.

Task 2: Clarify roles (‘who’ does ‘what’ in the process).

Task 3: Create a Planning Committee.

Task 4: Develop an organizational profile.

Task 5: Identify the information that must be collected to help

make sound decisions,

16
Task 6: Carry out a strategic cultural readiness check (using a
checklist, such as the one noted in paragraph 5.9.1., in this
chapter), and

Task 7: Get enough knowledge and expertise on using one or

more of the following strategic tools, such as: SWOT, PEST, Value
Chain Analysis, etc.

The product developed at the end of the Step 1 is a Work Plan.

Step 2: Articulating Mission, Vision and Values

A mission statement is like an introductory paragraph: it lets the

reader know where the writer is going, and it also shows that the
writer knows where he or she is going. Likewise, a mission
statement must communicate the essence of an organization to
the reader. An organization's ability to articulate its mission
indicates its focus and purposefulness. A mission statement
typically describes an organization in terms of its:

Purpose - why the organization exists, and what it seeks to

accomplish
Business - the main method or activity through which the
organization tries it fulfill this purpose
Values - the principles or beliefs that guide an organization's
members as they pursue the organization's purpose
Whereas the mission statement summarizes the what, how, and
why of an organization's work, a vision statement presents an
image of what success will look like. The values statement
provides the guiding principles to enable both the mission and the
vision to be realized. Are these principles may be: promote client

17
independence, expand cultural proficiency, collaborate with
others, ensure our own competence, act as one organization, etc..

An example of the mission, vision, and values statements of an

airline company (XYZ Corporation13) are shown in Figure FI05.03.

XYZ Air-Line Corporation

Vision: The vision of XYZ Corporation is to ensure that we are

the customer’s first choice in air-travel around the world.

Mission: The mission of XYZ Corporation is to be the best and

most successful company in the airline business. Also to build
the world’s best global alliance in air travel, co-operating with
similar corporate entities, with a presence in all major world
markets.

Values: XYZ Corporation will provide services to the public to

the highest quality, with honesty, fairness and integrity, and
with value for money for all customers.

Figure FI05.03: Example of Vision, Mission and Values of XYZ

Corporation

Other examples of mission statements are: (1) Walt Disney: To

make people happy. (2) 3M: To solve unsolved problems

18
innovatively. (3) Wal-Mart: To give ordinary folk the chance to buy
the same things as rich people.

Step 3: Assessing the Situation

Once an organization has committed to why it exists and what it

does, it must take a clear-eyed look at its current situation.
Remember, that part of strategic planning, thinking, and
management is an awareness of resources and an eye to the
future environment, so that an organization can successfully
respond to changes in the environment. Assessing the situation
can be done by the use of methods, such as: SWOT, PEST, etc.

Situation assessment, therefore, means:

❖ obtaining current information about the organization's

strengths, weaknesses, opportunities, threats via the SWOT
Analysis
❖ assessing the environmental influences on the specific
business via the PEST Analysis, and
❖ assessing performance - information that will highlight the
critical issues that the organization faces and that its
strategic plan must address.
These could include a variety of primary concerns, such as funding
issues, new program opportunities, changing regulations or
changing needs in the client population, and so on. The point is to
choose the most important issues to address. The Planning
Committee should agree on no more than five to ten critical
issues around which to organize the strategic plan.

19
The products of Step 3 include: a file of quality information that
can be used to make decisions, and a list of critical issues which
demand a response from the organization.

Step 4: Developing Strategies, Goals, Objectives and Budgets

Once an organization's mission has been affirmed and its critical

issues identified, it is time to figure out what to do about them:
the broad approaches to be taken (strategies), and the general
and specific results to be sought (the goals and objectives). The
inspiring words contained in mission, vision and value statements
represent very little unless they are accompanied by strategy,
objectives, measures, targets and initiatives.

There are many approaches to strategy formulation, such as:

SWOT analysis, portfolio analysis, scenario planning and a set of
ten schools of thought on how to craft strategies (design school,
planning school, positioning school, entrepreneurial school,
cognitive school, learning school, power school, cultural school,
environmental school, and configuration school).

Goals are typically timeless and less specific. Objectives are more
specific and for a given time period. Also, all these must be
funded via a budget. Strategies, goals, and objectives14 may come
from individual inspiration, group discussion, formal decision-
making techniques, and so on - but the bottom line is that, in the
end, the leadership agrees on how to address the critical issues.

The product of Step Four is (a) an outline of the organization's

strategic directions, the general strategies, long-range goals, and

20
specific objectives of its response to critical issues, and (b) a
budget.

Examples of general strategies are: Increase market share,

improve customer satisfaction, improve profitability, increase
sales, create better products and services, etc.

An example of two specific strategies for an Air-line company (XYZ

Corporation) is described in Figure FI05.04.

XYZ AIR-LINE CORPORATION – EXAMPLES OF STRATEGIES

Overall corporate strategy: Our overall corporate strategy is

to maintain and improve our position in the airline industry, to
provide the most consistent service and of the highest quality
to our customers, to improve the crucial elements of our
services by re-structuring, re-organizing, and co-operating with
other external entities while maintaining our quality, and to
reduce our costs in providing our services and improve our
profitability by a variety of means, such as: marketing, IT
systems, Web services, franchising, etc.

Operational Service Strategy: The service strategy of XYZ

Corporation begins by selecting the performance priorities by
which the company will provide services to its customers.
These priorities include treat the customer in a friendly, polite
and helpful way, deliver our services in a quick and convenient
way, price the offered services in a competitive manner,

21
 provide a variety of service-delivery mechanisms to suit
customer needs and expectations, provide our services at the
highest quality and at the minimum cost, both for the
customer and the company, have skilled and knowledgeable
management and staff to serve the customers, and provide
feedback mechanisms for collecting and reviewing customer
complaints and suggestions.

Figure FI05.04: Examples of strategies for an air-line company

Examples of general goals are: Increase market share, improve

customer satisfaction, improve profitability, increase sales, create
better products and services, etc.

Examples of specific objectives are: Increase customer base by

5% in each year for the next 5 years, decrease of production costs
by 10% in the next two years, increase revenues by 20% in the
next two years, etc.

The BSC model links strategy, objectives, measures, targets and

initiatives in a very efficient way. According to Kaplan and Norton
(BSC Thinkers) the BSC implementation process should start with
strategy, which objectives will be derived. Objectives will lead to
measures. Measures will lead to targets, and these will lead to the
required initiatives. An example of how this is accomplished
follows.

Assuming that the strategy for a bank (ABC Bank) might be:

1. Grow revenue by adding and retaining high-value

customers

22
 2. Maximize reliability

3. Implement cost effective marketing programs

4. Develop superior service capability

5. Attract and retain key staff

6. Continue leadership in superior products and services

development

7. Manage attrition.

The way the BSC model links strategy, objectives, measures,

targets and initiatives, for the first strategic statement of ABC
Bank, is described in Figure FI05.05.

Strategic statement of ABC Bank: Grow revenue by adding and retaining

high-value customers.

Strategic Performance Year N Year N+1 Initiatives

Objectives Measures (Baseline) (Target)

Revenue by
Grow product/service $100,000 $300,000 Advertisin
revenue Campaign
Number of
active
100,000 400,000
customers

Number of total
Add and 250,000 300,000 Customer

23
 retain high- customers 100,000 200,000 Contact
value Program
customers Number of
incremental
customers

FIGURE FI05.05.:

Linking strategy, objectives, measures and initiatives with BSC

Step 5: Completing the Written Plan

The mission, vision and values have been articulated, the critical
issues identified, and the goals and strategies agreed upon. This
step essentially involves putting all that down on paper. Usually
one member of the Planning Committee, the executive director,
or even a planning consultant will draft a final planning document
and submit it for review to all key decision makers (usually the
board and senior staff). This is also the time to consult with senior
staff to determine whether the document can be translated into
operating plans (the subsequent detailed action plans for
accomplishing the goals proposed by the strategic plan) and to
ensure that the plan answers key questions about priorities and
directions in sufficient detail to serve as a guide.

Revisions should not be dragged out for months, but action

should be taken to answer any important questions that are
raised at this step.

24
Examples of corporate strategic plans are: business strategy,
organizational strategy, operational strategy, technological
strategy, performance strategy, information technology strategy,
risk management strategy, financial strategy, sales strategy,
product marketing strategy, services marketing strategy, research
and development strategy, etc.

An example of such a corporate strategic plan in presented in

paragraph 5.3. 6

The corporate strategic plan (also often known as business plan)

may be complemented, especially for large organizations, with
the strategic business unit (SBU) plan, and with functional or
support (IT, Sales, Marketing, Production, etc.) plans. All of these
may be linked and put into an integrated whole by the BSC
Framework15.

A general example is presented in Figure FI05.06.

Description Product Balanced Scorecard

(BSC) Type

Overall Corporate Corporate Corporate BSC

Strategy Strategic Plan
(overall strategic
(overall strategic objectives and
priorities, objectives measures per
targets and measures) perspective)

Strategic Business Unit SBU Long SBU BSCs

25
per product or line of Range Plan (consistent with
business along the model corporate strategy)
of Primary Activities

(Inbound Logistics,
Operations, Marketing,
Sales, Maintenance
Service)

Support Activities Support Unit Functional BSCs

Plan
(Finance, IT, Human (consistent with
Resource Management, corporate strategy
etc.) and SBU plan)

External Parties External External Parties

Parties Plan BSCs
(Customer Relationships,
Vendor Relationships, (e.g., Customer
etc.) Scorecard, Vendor
Scorecard, etc.)

FIGURE FI05.06: Aligning and Linking Corporate Strategy with

BSC

Step 6: Strategy implementation

Most companies and organizations know their businesses, and the

strategies required for success. However many corporations

26
struggle to translate the theory into action plans that will enable
the strategy to be successfully implemented and sustained16. It is
therefore necessary to have a disciplined methodology and
management attitude to implement strategy. Such a methodology
is offered in paragraph 5.6. (strategy implementation action
plans).

Step 7: Strategy evaluation

Measuring the effectiveness of the organizational strategy is

extremely important. This can be accomplished by a SWOT
analysis and by reviewing the actual results as per the
performance measures defined in the BSC model and by following
the procedure described next.

Performance Measurement Procedure

The performance measurement procedure contains the following

steps:

Step 1: Decide on key performance criteria (e.g. net profit, return

on investment, bash flow, goods or services sold, throughput
(note: the rate at which money is generate by goods and services
sold), inventory (note: all the money spent to turn inventory into
throughput), customer satisfaction, etc.).

Step 2: Agree the required performance for the next time period
(e.g., next year, next two years, etc.).

Step 3: Forecast the likely performance given the agreed strategy

and current performance levels.

27
Step 4: Monitor the performance measures.

Step 5: Establish the gap between the forecast and achieved

performance levels.

Step 6: Review and evaluate performance results.

Step 7: Review, evaluate and improve current strategy.

6. How to create a Corporate Strategic Plan

6.1. Strategic Process Methodology
6.2. Corporate Strategic Plan-Example
7. Strategic Resource Plans
8.. Strategic Budgets
9. Strategy Implementation Action Plans
10. Performance Management Framework
11. Conclusion
12. End Notes
13. Selected References

6.2. Corporate Strategic Plan-Example

Contents of the Corporate Strategic Plan

❖ Executive summary (sales, profits and business expansion

projections, mission17, vision18, and values19 statements,
critical success factors for the accomplishment of the plan)
❖ Product / service idea
❖ Goals, strategies and specific objectives: Make sure your
objectives are concrete and measurable. Be specific, such
as achieving a given level of sales or profits, a percentage of
gross margin, a growth rate, or a market share. Don't use
generalities like "being the best" or "growing rapidly."
❖ Break-even Analysis: Estimate when the business will
actually begin to make money. The data presented are:

28
 break-even point based on fixed costs, variable costs per
unit of sales, and revenue per unit of sales.
❖ Market Analysis: Data and analysis regarding the size of the
potential market and whether it can sufficiently support
the business.
❖ Action Plans (objectives, responsibilities and time
elements): Action plans specify how the strategic goals and
strategies will be carried out. Action plans often include
various objectives to be reached while achieving each goal,
who is responsible for achieving each objective and by
when.
❖ Management team
❖ Risks
❖ Financing (projected balance sheet, projected cash flows,
projected profit and loss)
❖ Appendix A: Description of Strategic Planning Process Used
❖ Appendix B: Strategic Analysis Data (External Analysis:
PEST, TRENDS, etc.)
❖ Appendix C: Strategic Analysis Data (Internal Analysis:
SWOT)
❖ Appendix D: Goals for Board Committees and Chief
Executive Officer
❖ Appendix E: Staffing Plans
❖ Appendix F: Operating Budgets
❖ Appendix G: Financial Reports (Budgets, Statements, Etc.)
❖ Appendix H: Communicating the Plan
❖ Appendix I: Procedure for Monitoring and Evaluation of
Plan

29
7. Strategic Resource Plans
The management of the organization should craft strategic
resource plans with all the necessary and critical resources
(human, systems, materials, funds, facilities, equipment, etc.)
required for all critical functions of the organization. This plan
should be reviewed annually and should remain current on a
continuing basis.

8. Strategic Budgets
These are budgets to implements the strategy of the organization,
such as: strategic initiatives budget, operational budget and BSC
implementation budget.

Strategic Initiatives Budget: Budgets are a tool that promotes

decision-making on a basis of a top-down approach and is used to
assess financial performance at all levels of an organization. But
budgets also play a crucial role in the strategic management
process. Especially when initiatives must be undertaken to
improve corporate performance for a given set of strategic
objectives. These strategic initiatives must be funded and
evaluated through the formulation and execution of a strategic
initiatives budget.

Operational Budget for strategy execution: The operational

budget consists of a forecast of the expected revenues from sales
of goods and services offered and the expenses expected to be
incurred, for the provision of these goods and services to
customers. This budget is also linked to the overall strategy of the
organization as the expected performance of the organization is

30
accomplished via the infrastructure, operations, maintenance and
enhancement activities and with the resources funded by the
operational budget of the organization.

BSC Implementation Budget: The implementation of the BSC for

the specific organization comes with a definite financial price tag.
The budget for building and implementing the BSC should be
formulated taking into consideration the following issues:
Personnel time, Training and communication, Consulting, BSC
software, and Off-site expenses.

9. Strategy Implementation Action Plans

As was described in step 6 of the strategic process methodology a
strategy that has been crafted is of no value unless it is also
implemented. Implementing any strategy requires a methodology
and a management attitude. Such a methodology is made up of
the seven actions described next.

❖ Action 1: Set up an Organizational Structure. Establishing

an organization and its constituent parts to implement the
strategy as needed (if one does not exist), or re-structure
the organization (if the structure is not deemed
appropriate). Also establishing a chain of command or
some alternative structure (such as cross functional teams),
and having a highly-motivated leadership and workforce
❖ Action 2: Allocate Resources. Allocating sufficient
resources (financial, personnel, time, technology support)
and managing them,
❖ Action 3: Fund Strategy. Organizations successful at
implementation are aware of their need to fund their
intended strategies on a continuous basis. This is

31
 accomplished by linking strategy to the annual budget
process.
❖ Action 4: Establish and Execute Action Plans: Action
planning means assigning responsibility of specific tasks or
processes to specific individuals or groups on the basis of
an action plan with chronological lists of action steps,
assignment of responsibilities to individuals, due dates,
estimation of the resources required, progress reporting,
etc. ,
❖ Action 5: Linking and Aligning Strategy. Many
organizations successfully develop action plans, consider
organizational structure, take a close look at their human
resource needs, fund their strategies through their annual
budget, and develop a plan to monitor and control their
strategies and tactics. And yet they still fail to successfully
implement those strategies. The reason, most often, is they
lack aligning and linking. Aligning and linking is simply the
tying together of all the activities (e.g., primary, support,
etc.) to make sure that all of the organizational resources
are focusing on achieving the same results20.
❖ Action 6: Establish the Performance Management Process.
This includes formulating and setting up the performance
measurement system (e.g., BSC), entering the performance
data and carrying out the required performance analyses,
and setting up a corporate award system. A good
performance system must communicate strategy, must
measure performance in real time, must offer an
integrated performance project management capability,
and must acknowledge and enable emotional contracting
with all staff, which is so vital for linking individual
commitment and activity to the attainment of
organizational plans and goals21.

32
 ❖ Action 7: Managing the Implementation Process.
Implementing strategy also involves managing the process.
This includes rolling out the plan to the whole organization,
reviewing strategy in monthly meetings, monitoring results,
comparing to benchmarks and best practices, evaluating
the efficacy and efficiency of the process, controlling for
variances, and making adjustments to the process as
necessary. When implementing specific programs, this
involves acquiring the requisite resources, developing the
process, training, process testing, documentation, and
integration with (and/or conversion from) legacy processes.
Also the use of a change management methodology might
be required. In order for a policy to work, there must be a
level of consistency from every person in an organization,
including from the management and the board. This is
what needs to occur on both the tactical level of
management as well as the strategic level.

10. Performance Management Framework

The performance management framework is made up of the
following elements:

❖ Performance Management Policy,

❖ The Performance Measurement Model. Performance
measurement can be achieved by one of several models,
such as: BSC, EFQM, etc. These two models22, being the
most popular and effective,
❖ The Strategic Performance Measures (see next paragraph),
and
❖ The Corporate Governance Information System.

33
11. Conclusion

Although a sense of direction is important, it can, at turbulent and

volatile periods, also stifle creativity, especially if it is rigidly
enforced. In an uncertain and ambiguous world, fluidity can be
more important than a finely tuned strategic compass. When a
strategy becomes internalized into a corporate culture, without
review and evaluation, it can lead to ineffectiveness.

At the end of the day, what matters for the purposes of strategic
management is having a clear view – based on the best available
evidence and on defensible assumptions – of what it seems
possible to accomplish within the constraints of a given set of
circumstances. As the situation changes, some opportunities for
pursuing objectives will disappear and others arise. Some
implementation approaches will become impossible, while others,
previously impossible or unimagined, will become viable.

Strategic management is a question of interpreting, and

continuously reinterpreting, the possibilities presented by shifting
circumstances for advancing an organization's objectives. Doing
so requires strategists to think simultaneously about desired
objectives, the best approach for achieving them, and the
resources implied by the chosen approach. It requires a frame of
mind that admits of no boundary between means and ends.

The main Strategic Management Controls (Corporate Strategic

Planning Committee, Strategic Plans, Strategic Budgets, Strategy
Implementation Action Plans, and Performance Management

34
Framework), probably provide a basic set for the strategic
process, upon which the management of an organization can built
and improve, to suit their own specific purposes.

12. End Notes

1. See Andrews, Kenneth (1971): The Concept of Corporate

Strategy. Homewood, IL: Irwin.

2: See Johnson, Gerry and Kevan Scholes (1999): Exploring

Corporate Strategy. Prentice-Hall.

3. For more on strategic issues for games, models, etc., see:

Holland, John H. (1998): Emergence-From Chaos to Order. Perseus
Books, pp. 38-40. A model is a tentative ideational structure used
as testing device. Models include such things as recipes, maps,
symbols, numbers, games, paintings and even metaphors
(activators of a train of associations,connections, complicated
interactions and interpretations).

4. See also: Black, M. (1962): Models and metaphors. Ithaca, N.Y.:

Cornell University Press.)

5. See Robert N. Anthony (1965): Planning and Control Systems,

Harvard Univ. Press, USA.

6. For more information, see: Mintzberg, H. et al (editors) (1998):

The strategy process. Concepts, contexts and cases. Prentice-Hall.

35
7. According to Igor Ansoff strategic management has three parts:
strategic planning, the skills to convert plans into reality, and
managing internal resistance to change. See Ansoff, Igor (1965):
Corporate Strategy. McGraw-Hill.

8. See pages 6-8, and chapters 1-14. Besanko, D. et al (2000):

Economics of strategy. John Wiley and Sons.

9. An indicative catalogue of strategy creation software is:

Business Systems Planning (BSP), PROplanner, PeopleSoft,
Information Engineering (IE), Information Quality Analysis,
Business Information Analysis and Integration Technique,
Business Strategy Software, Business Insight, PARAGON Value
Performance, Dialog Strategy Balanced Scorecard Solution, etc.

10. For more information, see: Kay, John (1993): Foundations for
Corporate Success. How business strategies add value. Oxford
University Press.

11. Interpersonal intelligence is the ability to understand other

people, what motivates them, how they work, and how to work
cooperatively with them.

12. Intrapersonal intelligence is the ability to turn inward, to form

an accurate and verifiable concept of oneself and to be able to
use that concept to operate effectively in life.

13. These statements were obtained from the material contained

in the annual reports of a very large airline company. The name of
the company is not publicized for privacy reasons.

36
14. The SMART Model (acronym for Specific, Measurable,
Achievable, Relevant and Timed objectives), may be used for
objectives setting.

15. For more information on linking the organizational strategy

with the BSC, see: Kaplan, Robert S. and David P. Norton (2001):
The strategy-focused organization. Harvard Business School.

16. A Fortune Magazine study suggested that 70% of 10 CEOs who

fail do so not because of bad strategy, but because of bad
execution. (Source: Why CEOs Fail - R Charan & G Colvin, Fortune
Magazine, 21 June 1999.) In another study of 200 companies in
the Times 1000, 80% of directors said they had the right strategies
but only 14% thought they were implementing them well, no
doubt linked to the finding that despite 97% of directors having a
'strategic vision', only 33% reported achieving 'significant strategic
success'. (Source: Why do only one third of UK companies achieve
strategic success?. Cobbold & G Lawrie, 2GC Ltd., May 2001.)

17. Mission Statement. Use the mission statement to define your

business concept. A company mission statement should define
underlying goals (such as making a profit) and objectives in broad
strategic terms, including what market is served and what
benefits are offered.

18. Vision Statement. The vision statement is an inspirational,

compelling answer to the question: What do you hope for your
organization and customers? Ideally, it should be written in a
compelling, inspirational fashion. Post your vision statement
throughout your organization.

37
19. Values Statement. The values statement depicts the priorities
in how the organization carries out activities with stakeholders.
The board and chief executive should regularly reference the
values statement to provide guidance to the nature of how the
organization should operate.

20. Strategies require linking and alignment both vertically and

horizontally. Vertical linkages and alignments establish
coordination and support between corporate, divisional and
departmental plans. For example, a divisional strategy calling for
development of a new product should be driven by a corporate
objective for growth, and on a knowledge of available resources
from the corporate as well as the R&D department. Horizontal
linking and alignment (across departments, across regional
offices, across manufacturing plants or divisions) require
coordination and cooperation to get the organizational units in
harmony. For example, a strategy calling for introduction of a new
product requires the combined efforts of coordination and
cooperation among – the R&D, the marketing, and the
manufacturing departments).

21. Emotional contracting (also referred to as 'the psychological

contract') is the crucial and powerful link between the
organizational performance intent, and the motivations, values
and aspirations of the people. This emotional contracting element
is sometimes overlooked by organizations, and that is the reason
that may explain why the people have failed to do what the
organization expected and asked them to do.

38
22. Other Models are Total Quality Management (TQM),
Benchmarking, SEM: Strategic Enterprise Management, Six Sigma:
Performance Measurement Framework, The Performance Prism,
and The Activity Based Costing Method.

13. Selected References

Bourgeois, L. & Brodwin, D. (1984): "Strategic implementation:
five approaches to an elusive phenomenon", Strategic
Management Journal , 5: 241-264.

Connor, P. E. and Lake, L. (1988): Managing Organisational

Change, New York, Prager.

Corfield, K. (1984): "Translating Planning into Action", Long Range

Planning, Vol. 17, No. 5: 23-24.

Dunsire, A. (1978): Implementation in a Bureaucracy, Oxford,

Martin Robertson & Co. Ltd.

Galbraith, J. and Kazanjian, R. (1986): Strategy Implementation:

Structure, Systems and Process (Second Edition) St. Paul, Minn.
West Publishing Company.

Galbraith, J. R. and Nathanson, D. A. (1978): Strategy

Implementation: The Role of Structure and Process. St. Paul,
Minn. West Publishing Company.

Gross, N., Giacquinta, J. and Bernstein, M. (1971): Implementing

Organizational Innovations, New York, Basic Books.

Giles, W. D. (1991): "Making Strategy Work", Long Range

Planning, Vol. 24, No. 5: 75-91.

39
Gupta A., and Govindarajan, V.,: (1983) Business Unit Strategy,
Managerial Characteristics and Business Unit Effectiveness at
Strategy Implementation" Academy of Management Review
Volume 27:25:41

Henderson, B. D. and Zakon, A. J. (1980):" Corporate Growth

Strategy: How to Develop and Implement It" in Albert, K. J. ed.
Handbook of Business Problem Solving, New York, McGraw-Hill
Inc.: 1.3-1.19.

Hrebeniak, L. G. (1990): "Implementing Strategy", Chief Executive,

Issue 57, April:74-7.

Hussey, D. E. (1985): "Implementing Corporate Strategy: Using

Management Education & Training:, Long Range Planning, Vol. 18,
No. 5 (Oct): 28-37.

King, W. R. (1980): "Implementing Strategic Plans through

Strategic Program Evaluation", Omega,, Vol. 8, No. 20: 173-81.

Mintzberg, Henry et al (1998): Strategy safari. New York: The Free

Press)

Mumford, E. and Pettigrew, A. (1975): Implementing Strategic

Decisions, London, Longman .

Pressman, J. and Wildavsky, A. B. (1973): Implementation: How

Great Expectations in Washington are Dashed in Oakland, etc. ,
Berkeley, Calif., University of California Press.

Pressman, J. and Wildavsky, A. (1979): Implementation, Berkely,

Calif., University of California Press.

40
Roash, C. H. and Ball, B. C. (1980):"Controlling the Implementation
of Strategy", Managerial Planning , Vol. 29: 3-12.

Roy, S. (1991): "From Paper to Practice: Implementing the

Corporate Strategic Plan" Business Quarterly, Vol. 55, Issue 3
(Winter): 119-124.

Skivington, J. E. & Daft, R. L. (1991): 'A Study of Organizational

'Framework' and 'Process' Modalities for the Implementation of
Business-Level Strategic Decisions", Journal of Management
Studies, Vol. 28, No. 1: 45-68.

Stonich, P. J. ed. (1982): Implementing Strategy: Making Strategy

Happen, Cambridge, Mass., Ballinger.

Van Meter, D. S. and Van Horn, C. E. (1978): "The Policy

Implementation Process: A Conceptual Framework,"
Administration and Society, Vol. 6, No. 4 (Feb.): 445-88.

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