The Strategic Decision Makers

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    The Strategic Decision Makers

    The strategic management process requires competent individuals to ensure its success.Therefore, to understand strategic management, we must know where strategic decisions

    are made in organizations.

    Inputs to strategic decisions can be generated in a number of ways. Overall, topmanagement, board of directors, and planning stafftend to be those positions thathave the most significant involvement and influence in the strategic management process

    of organizations. The failure of an organization to achieve its objectives can often be

    traced to a breakdown at the level of the board or top management. However, the final

    responsibility rests with top management. Some of the strategic managementresponsibilities are outlined in

    Top Management

    The term "top management" refers to a relatively small group of people include

    president, chief executive officer, vice president, and executive vice president. Becausethe insights of these executives play such a critical role, a number of writers have stressed

    the importance of matching the characteristics of these executives with the firm's

    strategies.

    The strategic management process of today tends to be dominated by the chief executive

    officer (CEO). For example,Kenneth R. Andrews described the chief executive's role as

    "Chief Executive as Architect of Purpose."

    George Steinersummarized the role of the CEO in strategic management as follows:

    1. The CEO must understand that strategic management is his responsibility. Parts ofthis task, but certainly not all of it, can be delegated.

    2. The CEO is responsible for establishing a climate in the organization that is

    congenial to strategic management.3. The CEO is responsible for ensuring that the design of the process is appropriate

    to the unique characteristics of the company.

    4. The CEO is responsible for determining whether there should be a corporate

    planner. If so, the CEO generally should appoint the planner (or planners) and seethat the office is located as close to that of the CEO as practical.

    5. The CEO must get involved in doing planning.6. The CEO should have face-to-face meetings with executives for making plans and

    should ensure that there is a proper evaluation of the plans and feedback to those

    making them.

    7. The CEO is responsible for reporting the results of the strategic managementprocess to the board of directors.

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    The chief executive officer (CEO) is responsible for the final decisions, but its decisions

    is the culmination of the ideas, information, and analyses of others.

    Other Managers And Staff Members

    In many organizations, the job of strategic management canbecome so overwhelming, that the chief executive mustassign individuals, usually calledplanning staff personnel, tohelp with the tasks. Recent theory and studies suggest thatmiddle-level managers attempt to influence business strategyand often initiate strategic proposals. Board Of Directors

    The business which exists in corporate form has a board of directors, elected by

    stockholders and given ultimate authority and responsibility. Boards typically elect a

    chairperson who is responsible for overseeing board business, and they form standingcommittees which meet regularly to conduct their business. A strategy committee is a

    board committee that works with CEO to develop strategic management process.

    It is common practice for organizations to have boards of directors consisting of both

    outsiders and insiders. One approach used to reconcile the differing roles of outsidedirectors and inside strategic decision makers is agency theory.

    Agency theory defines as a nexus of contractual relationships among various

    stakeholders, including shareholders, managers, employees, and customers, each

    motivated by self-interest. In this view, a firm exists to exploit the potential advantages of

    cooperative behavior among stakeholders, and strengthening the link between thecompany and its environments.

    Board of directors it plays an important role in the strategic management process. A

    strategy committee commonly audits various components of an organization's strategicmanagement process in order to make it more effective and efficient. For example, the

    board can demand reexamination of the company's mission, its long-term goals, its

    corporate strategy, and its approach to the competition.

    To quoteKenneth Andrews, "A responsible and effective board should require of its

    management a unique and durable corporate strategy, review it periodically for its

    validity, use its as the reference point for all other board decisions,""

    The boards guides the affairs of corporation and protects stockholder interests.

    A growing literature suggests that boards can make a difference in the way the firms ismanaged.

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    Each of the four cells in the matrix can be labelled according to type: caretaker, statutory,

    proactive, and participative boards.

    Variations in these qualities affect company performance in different ways:

    1. The caretaker board is characterized by a low level of power in both the boardand in the CEO. This type of board does not contribute significantly to effective

    company performance.

    2. The statutory board differs from the caretaker board in that a powerful CEO isthe central figure in organization decision making. The CEO does not consider the

    board as a true partner in shaping the strategic posture of the company.

    3. The proactive board commands powers that surpass those of its CEO. These

    boards are a true instrument of corporate governance.4. The participative board is characterized by discussion, debate, and

    disagreement. Leadership is shared among management, board members, and

    outside directors, who constitute a majority. In this case, negotiation and

    compromise are essential for effective governance.

    Recently, the role of the directors has been growing in importance because of

    increasingly vocals stockholders.

    In essence, the board functions as the brain and soul of the organization and as theguardian of shareholders interests, its pervasive influence in many aspects of

    organizational life is believed to enrich the firm.

    Strategic decisions are evaluated by the board of directors, but are the responsibility of

    top management, supported by corporate planning staffs, that perform analyses and

    manage the planning processes.

    Board Of Directors

    The business which exists in corporate form has a board of directors, elected by

    stockholders and given ultimate authority and responsibility. Boards typically elect achairperson who is responsible for overseeing board business, and they form standing

    committees which meet regularly to conduct their business. A strategy committee is a

    board committee that works with CEO to develop strategic management process.

    It is common practice for organizations to have boards of directors consisting of bothoutsiders and insiders. One approach used to reconcile the differing roles of outside

    directors and inside strategic decision makers is agency theory.

    Agency theory defines as a nexus of contractual relationships among variousstakeholders, including shareholders, managers, employees, and customers, each

    motivated by self-interest. In this view, a firm exists to exploit the potential advantages of

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    cooperative behavior among stakeholders, and strengthening the link between the

    company and its environments.

    Board of directors it plays an important role in the strategic management process. Astrategy committee commonly audits various components of an organization's strategic

    management process in order to make it more effective and efficient. For example, theboard can demand reexamination of the company's mission, its long-term goals, its

    corporate strategy, and its approach to the competition.

    To quoteKenneth Andrews, "A responsible and effective board should require of its

    management a unique and durable corporate strategy, review it periodically for itsvalidity, use its as the reference point for all other board decisions,""

    The boards guides the affairs of corporation and protects stockholder interests.

    A growing literature suggests that boards can make a difference in the way the firms is

    managed.

    Each of the four cells in the matrix can be labelled according to type: caretaker, statutory,

    proactive, and participative boards.

    Variations in these qualities affect company performance in different ways:

    1. The caretaker board is characterized by a low level of power in both the boardand in the CEO. This type of board does not contribute significantly to effective

    company performance.

    2. The statutory board differs from the caretaker board in that a powerful CEO is

    the central figure in organization decision making. The CEO does not consider theboard as a true partner in shaping the strategic posture of the company.

    3. The proactive board commands powers that surpass those of its CEO. Theseboards are a true instrument of corporate governance.

    4. The participative board is characterized by discussion, debate, and

    disagreement. Leadership is shared among management, board members, and

    outside directors, who constitute a majority. In this case, negotiation andcompromise are essential for effective governance.

    Recently, the role of the directors has been growing in importance because of

    increasingly vocals stockholders.

    In essence, the board functions as the brain and soul of the organization and as theguardian of shareholders interests, its pervasive influence in many aspects of

    organizational life is believed to enrich the firm.

    Strategic decisions are evaluated by the board of directors, but are the responsibility of

    top management, supported by corporate planning staffs, that perform analyses andmanage the planning processes.

  • 8/8/2019 The Strategic Decision Makers

    5/5