The Future Of Strategic Planning In Public Domain

SPMS and the Purpose of Design

Discuss about the Future of Strategic Planning in Public Domain.

One of the biggest nightmares of any company, young or old, is the implementation of set strategies. The organization of business strategies is very critical to the performance of business especially to those that have branches abroad. This is what usually determines how well a company can withstand competition from its peers and hence ultimate company success. This is also where strategic performance measurement systems come in handy. These are tools that are used by managers to formulate both financial and non-financial strategies from several different perspectives (Franco-Santos et al. 2007). The systems then combine these strategies to come up with a comprehensive set of measures that can be utilized to enhance the performance of the business. In essence, they create a common ground of understanding among all departments of an organization so that they can operate effectively and in a transparent manner. For a long time, however, there have been a lot of issues surrounding SPM systems. A lot of debate has been on-regarding the implications and advantages of using these measurement systems to enhance business operations. This report aims at giving a detailed insight into some of the issues related to the implementation of SPMSs concerning the evaluation of management performance in multi-national companies, and how they are compensated.

To begin with, it should be known that SPMSs use both financial and non-financial measures. The purpose of these financial measures is to give senior managers short-term feedback on the outcome of their past strategies, which aim at increasing the value of shareholders (Hall 2008). The non-financial measures then come in to correct the setbacks that the financial measures may bring with them. Simply put, these two measures work to keep each other in check. Another characteristic of SPMSs is that they are used to achieve purposes of design. The interplay of different performance measures is used to translate the strategies of the organization into a series of performance indicators (Grigoroudis et al. 2012). These performance indicators are then manipulated to serve many purposes, including providing managers with a learning process that is dynamic and directing the managers to act towards strictly towards achieving strategic objectives.

There are four contexts upon which the purposes of SPMSs can be based and understood. To mention them in passing, they include;

1. Determination of cost
2. Providing information that is useful in planning and control
3. Waste reduction
4. Emphasizing strategic value drivers.

The application of Strategic Performance Measurement can be broken down into four broad objectives. The first one is to align and break down strategic business goals into daily operational goals (Franco-Santos et al. 2012). Secondly, they develop scorecards that are used in giving reports. Thirdly, they zero in on essential metrics and use these to make reports. Finally, they test and validate the decisions of operation and strategy that have been arrived at. The third element is very important because the successful implementation of SPM is dependent mainly on the choice of metrics that business picks. Let us then examine these metrics and their implications.

Choosing SPM Metrics

It is necessary to note here that there is no predetermined list of metrics that cuts across all companies or industries. The choice of metrics adopted by a business is solely dependent on the nature of the business and the external and internal environmental factors affecting the business. This documentation is, in this regard, only a list of a recommendation of best practices that can be used by business to choose the right metrics (Bhagwat and Sharma 2007). But before we do that, just so we are clear, a business metric is like a variable against which a business measures its success or failure. The first step towards determining the best metrics for a business is, therefore, finding out from the stakeholders what variables they think would be most appropriate in measuring the business performance (Wouters and Wilderom 2008). It helps to collect the stakeholders’ opinions and then weighing them against each other as this helps to broaden the scope of decisions that can be made concerning a given aspect of the business.

Secondly, managers should ensure that the metrics brought forth by the stakeholders are in line with the strategic business objectives. Furthermore, the metrics must be ones that can be translated into individual actions in the various business units. Also, in identifying metrics, companies should look at their available resources and current processes and systems and ensure that they are easy to implement and interplay without incurring too much unnecessary costs. Furthermore, the metrics chosen should be comparative; they should be easy to countercheck against all business segments, products, division, and competitors (Beamon and Balcik 2008). In essence, I mean that the process of determining the business performance using SPM should be as economical as possible.

As we all know, metrics, just like any other aspects of business, must be made using some sets of data. And this brings me to the last, but not least, a criterion that can be used to determine such metrics; that companies should begin working on their metrics as soon as the data necessary for them becomes available. Managers should also not forget that metrics are supposed to have the ability to be summed up to a certain extent. This allows the people concerned to be able to manipulate the data for different purposes and roll them up across the enterprise (Taticchi et al. 2010). Lest we forget, the most useful advantage of SPMs is when they are easy to implement and manipulate by everybody in the organization.

Implementation of SPMSs

Managers are advised to try and be as inclusive as possible in the process of metrics development. Studies done in most companies have revealed that employees usually get displeased when they their performance is measured on a set of metrics that they did not participate in developing (Gunasekaran and Kobu 2007). Therefore, especially where matters concerning compensation are at stake, such metrics can be used to build a good reputation and paint a good picture of the organization.

After doing some extensive research on several international business organizations, I was able to come up with a simplified collection of activities that companies can practice to achieve full and effective implementation of SPMSs (Cocca and Alberti 2010). These are conclusions arrived at by business being studied on specific common grounds, and no business id tied down by any obligation or practice whatsoever. The first thing that multi-national businesses should do is break down the enterprise and corporate objectives into business units and functional, day-to-day objectives. This should then be followed by the definition of a Key Performance Indicator library that conforms to the business units as well as the objectives of functional units.

Next, a company should develop a methodology of calculation that is detailed and consistent, including requirements for the collection of functional data and benchmarking for all the identified KPIs (Nudurupati et al. 2011). The information collected whence should then be used to develop a KPI dashboard that takes care of each functional area and business unit.

After doing all the above, the SPM would be well on its way to practical implementation. What should come next is writing reports of monthly operations by use of the KPI library to act as evidence of concept. The reports created in this process can then be used to revise and refine the methodologies of cost and revenue allocation. The result of this is that Profit and Loss Statements will be quickly drawn from multiple different dimensions. The last step to this strategy is the simplest (Searcy 2012). The company should identify requirements for the development or improvement (or both) of infrastructure and technology. This will give the company a path to follow in executing their decisions and managing change effectively, sufficiently, conveniently, and economically.

As I had earlier pointed out, no single company or organization is tied down to abiding by the steps listed in the preceding paragraphs. Those are just the basics. One can choose to add or remove elements as they please, and as per the objectives of their specific business.

Conclusion

The broad benefits of using SPM have been discussed earlier in this report, but for reasons of clarity, I would like to list them down here once more (Bititci et al. 2012).

1. They enhance the development of an organization’s strategy as well as a review of the organization’s other continuing strategies.
2. They provide a platform across which the day-to-day business activities and the business strategy are aligned.
3. They provide the organization with the appropriate tools for the assessment and monitoring of performance against strategic objectives.

The advantages of SPMSs can also be viewed from a different perspective, which is by examining some of the challenges or weaknesses found in the balanced scoreboard applications of most organizations and their KPIs. According to research, the most common flaw is the oversimplification of complex aspects of the business (Grafton et al. 2010). There is also the constant threat of getting unwanted results as a result of making poor designs and measures. Simply put, what you get is not always what you want. Weights and balances are also often wrongly assigned. Operational KPIs are also sometimes very difficult to separate from the strategies of the organizations (Ferreira and Otley 2009). The aspect of cause and effect is also always overlooked.

Other challenges include the setting of short-term targets whose effects are negative and long-term; poor timing; the tendency towards administrative independence (remoteness); underestimating the financial expense of setting up information systems and underestimating the time span required for the accomplishment of managerial activities, among other factors not discussed in this report.

As it turns out, the proper application and implementation of SPMSs mitigate these challenges almost all at once. The weaknesses listed above are usually the grounds on which companies become more competitive than their peers (Arzu Akyuz and Erman Erkan 2010). Staying on top or bottom of the competition ladder solely depends on how fast one can identify their business weaknesses and vulnerabilities and work on them so that the rivals do not take advantage of such weakness. Remember, one man’s meat is another man’s poison; what is a one company’s threat or weakness is another company’s opportunity or strength respectively.

It is equally important that managers are made aware of the possible difficulties associated with the formulation and implementation of SPMSs so that they ready themselves before taking the initiative. Most of the challenges presented are usually inclined towards matters of compensation, accountability and the provision of incentives. When the management comes up with new metrics for a business, they must always do their best to ensure that the stakeholders accept the modified or modified set of metrics (Jusoh and Parnell 2008). This is the most challenging part, and usually requires a considerable amount of time, often running between three to six months. During this time, the stakeholders compare the old metrics versus the new ones and report on their findings. The new metrics can only be implemented when all the executives have ascertained that they are comfortable with the new set of metrics.

Secondly, when the top management has not clearly understood or defined the strategy for themselves, it becomes difficult to communicate the message to the people down the managerial ladder. The result here is that there will be inevitable confusion among the middle and lower management, which may take the strategy for granted (Poister 2010). The result is that the strategy will not be eventually implemented, or it may take a lot of time. As we know, time is always of the essence in any business operation, because there are fluctuating prices and competitors t reckon with.

As earlier stated too, there is the risk of collecting too much data, also known as data drowning. This is why one of the most important steps I pointed out about choosing metrics is the collecting of only the ‘metrics that matter.’ This will just happen if the stakeholders do not shift their focus to data that may be irrelevant to the strategies at hand, although these “irrelevant data” may be affecting the business to significant degrees in other areas.

The best way to deal with this kind of problem is to choose a few metrics at a time and allocate each to a different leader in the organization so that one person is not overworked.

A Performance Measurement System that is accomplished in its application has several distinct characteristics that ought to be looked at. First off, an organization with such kind of system will undoubtedly have very committed and informed leaders, who are imminent on developing and implementing the set strategy (Smith 2009). Furthermore, communication in such an organization is excellent, and the staff is involved in its implementation at all levels.

The problem of misinterpretation of cause and effects as seen before is also solved in a business with a successful Performance Measurement System. They also enjoy the results of being in possession of excellent measures of performance. In fact, if well played, the measures in question will be very limited in number, and the smaller the number of measures at hand, the faster and easier the strategy is to implement. As a consequence, when the measures are few, fairness will also be promoted at all levels, and the reward system will then become meaningful and effective. The ultimate result is that the business will improve in all its aspects.

The increasing diversification of business and the factor that drive them has led to the development of equally diversified strategic performance measurement systems. These contemporary systems have been found to be quite adaptable and complete, notwithstanding the fact that they consider and improve on what is already in existence (Franceschini et al. 2007). Apart from all the advantages of SPMSs as earlier discussed in this document, they also develop meaningful (although stretched) measures which lead to good, achievable targets, and objectives. To cup it all, they even improve the organization’s internal and external communicative environments in equal measure.

Conclusion

With the increasing intensity in business competition all around the globe, it is growing increasingly necessary for businesses, especially big, multi-national organizations, to embrace practices that will ensure that their business stays in the market and withstand the competition presented by the existence of several supplementary products. In spite of the challenges that their implementation presents, SPMSs have proved to be essential tools for making decisions that are crucial to the achievement of business strategies and objectives, and it is high time managers trained themselves on how to apply SPMSs to their advantage.

References

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