An organizational strategy is the sum of the actions a company intends to take to achieve long-term goals. Together, these actions make up a company’s strategic plan. Strategic plans take at least a year to complete, requiring involvement from all company levels. Top management creates the larger organizational strategy, while middle and lower management adopt goals and plans to fulfill the overall strategy step by step. This unified effort to can be likened to a journey. Daily challenges such as road conditions must be overcome to complete sequential legs of the journey, which eventually lead to the ultimate destination.
Mission and Vision
Organizational strategy must arise from a company’s mission, which explains why a company is in business. Every activity in the company should seek to fill this purpose, the mission thus guiding all strategic decisions. A company’s vision describes what the company will have achieved in fulfilling its mission. From the vision follows the long-term goals of an organizational strategy.
Business and Functional Objectives
For a strategy to work, it must be converted into smaller, shorter-term goals and plans. Middle management adopts goals and creates plans to compete in the marketplace. These tactical objectives take less than a year to complete, becoming the building blocks of a successful organizational strategy. At the lower levels of an organization, functional managers concern themselves with the day-to-day operations of the company, their objectives and plans taking days, weeks or months to complete.
Elements important to organizational strategy include resources, scope and the company’s core competency. Because resources are finite, allocating them — people, facilities, equipment and so on — often means diverting them from somewhere else in the organization. Quantifying a strategy’s scope — for instance, becoming No. 1 in North American sales — makes for more focused plans. Finally, competitive advantage refers to what a business is best at — its core competency — along with the sum of what it knows through experience, talent and research.
Organizational strategy falls into categories referred to as grand strategies. Grand strategies include growth, diversification, integration, retrenching and stabilizing. A growth grand strategy refers to high levels of growth achieved, for instance, by adding new locations. Diversification means expanding into new markets or adding dissimilar product lines. Controlling supply or distribution channels instead of relying on outside companies is vertical integration. Companies achieve horizontal integration by adding similar products and services to their lineup, making them more competitive. Retrenching prunes a company back to its core competency. Companies staying the course adopt a stability strategy.
How to Measure Strategies Related to Organizational Change Processes
“Measuring strategies” sounds like a rather strange approach to business transformation and change. Yet, it is necessary because a firm needs to know the precise contribution to its output, as well as general productivity of different approaches to organizational change the firm has adopted. “Strategy” here refers to those methods of organizational change a firm has adopted to become more competitive. Therefore, the concept of “strategy” is no different from the actual functioning of organizational change. It assumes the change itself basically “fits” the overall blueprint for that change.
Detail your variables. Without a clear expression of what you are trying to measure, your model will fail. One of the most important elements of this kind of measurement is making certain your variables actually describe different things with minimum overlap. Variables include output, inputs, time and changes in profits or market share. The models used for this will be different depending on the firm, but the variables used will be basically the same.
Set up and detail your control variables. What you are really interested in is the specific impact each area of firm change has on profits or gross income. It is clear that organizational change will not totally and completely account for all changes in income. There are many other variables that will impact that, from inflation to consumer sentiment to managerial competence. If you want to measure how different approaches of change have impacted the firm, you need to control for everything that is not based on organizational change. That is the nature of a “control variable” in this case.
Operationalize all variables. This is the most important action in this field. “To operationalize” is a social scientific verb meaning to measure that which is almost immeasurable. “Organizational culture under change” is, itself, a variable that must be put into quantitative form. So, too, is “strategies used to change a firm.” These are central variables that do not easily lend themselves to quantitative measures. What you are doing is figuring out how different parts of the organization’s change over time contributes to any changes in profits or gross income. Therefore, you would enter into any regression analysis software the pace of organizational change over time. Controlling for all other variables, such as the increase or decrease in the market in general, will give some indication how each part of the firm’s organizational transformation impacts the “bottom line.”
Run your regression analysis. The only way to measure the specific impact of different strategies is plugging all the data into regression software. This will tell you — as long as your control variables are doing their job — how much each part of the organizational change strategy is contributing to the bottom line.
Analyze your regression results. You are looking for the “p” score. This refers to the probability that a specific variable, by itself, is controlling for any changes in gross income. It will be expressed in a percentage. This gives you an idea how important these different strategies are in any income changes. For example, the firm has seen a spike in its gross income. Management is convinced that recent changes in the organization, such as a redesign of the production floor, can explain most of this recent increase. Your regression analysis — all other things being equal — will be able to give you an accurate estimate of this. If the “p” score for that specific variable — the redesign — is high, this will suggest they are right: The redesign of the production floor is responsible for an increase in gross income.