The concept of strategy . Strategy is the approach selected to achieve specified goals in the future. As defined by Chandler (1962: 13) it is: ‘The determination of the long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out those goals.’ The formulation and implementation of corporate strategy is a process for developing a sense of direction, making the best use of resources and ensuring strategic fit.
Strategy has three fundamental characteristics. First, it is forward looking. It is about deciding where you want to go and how you mean to get there. It is concerned with both ends and means. In this sense a strategy is a declaration of intent: ‘This is what we want to do and this is how we intend to do it.’ Strategies define longer-term goals but they also cover how those goals will be attained. They guide purposeful action to deliver the required result. A good strategy is one that works, one that in Abell’s (1993: 1) phrase enables organizations to adapt by ‘mastering the present and pre-empting the future’. As Boxall (1996: 70) explained: ‘Strategy should be understood as a framework of critical ends and means.’
The second characteristic of strategy is the recognition that the organizational capability of a firm (its capacity to function effectively) depends on its resource capability (the quality and quantity of its resources and their potential to deliver results). This is the resource-based view as described later in this chapter.
The third characteristic of strategy is that it aims to achieve strategic fit – the need when developing functional strategies such as HR to achieve congruence between them and the organization’s business strategies within the context of its external and internal environment.
Implementation of strategy
‘Implementation entails converting the strategic plan into action and then into results’ (Thompson and Strickland, 1996: 20). Dreaming up a strategy is fairly easy; getting it to work is hard. Kanter (1984: 305) noted that: ‘Many companies, even very sophisticated ones, are much better at generating impressive plans on paper than they are at getting “ownership” of the plans so that they actually guide operational decisions.’
Critical evaluation of the concept of strategy
The development of corporate strategy is often assumed to be a logical, step-by-step affair, the outcome of which is a formal written statement that provides a definitive guide to the organization’s intentions. Many people still believe and act as if this were the case, but it is a misrepresentation of reality. In practice, the formulation of strategy may not be as rational and linear a process as some writers describe it or as some managers attempt to make it. There are limitations to the totally logical model of management that underpins the concept of strategic human resource management. In the words of Mabey et al (1998: 74): ‘The reality is… that strategies may not always be easy to discern, that the processes of decision-making may be implicit, incremental, negotiated and compromised.’
Sparrow et al (2010: 4) asserted succinctly that: ‘Strategy is not rational and never has been.’ Strategy formulation can best be described as ‘problem solving in unstructured situations’ (Digman, 1990: 53) and strategies will always be formed under conditions of partial ignorance. Quinn (1980: 9) stated that a strategy may simply be ‘a widely held understanding resulting from a stream of decisions’. He believed that strategy formulation takes place by means of ‘logical incrementalism’, ie it evolves in several steps rather than being conceived as a whole. Pettigrew and Whipp (1991: 26) observed that: ‘strategy does not move forward in a direct linear way, nor through easily discernable sequential phases. Quite the reverse; the pattern is much more appropriately seen as continuous, iterative and uncertain.’
Another difficulty is that strategies are often based on the questionable assumption that the future will resemble the past. Some years ago, Heller (1972: 150) had a go at the cult of long-range planning: ‘What goes wrong’ he wrote, ‘is that sensible anticipation gets converted into foolish numbers: and their validity always hinges on large loose assumptions.’ Faulkner and Johnson (1992: 17–18) said of long-term planning that it:
was inclined to take a definitive view of the future, and to extrapolate trend lines for the key business variables in order to arrive at this view. Economic turbulence was insufficiently considered, and the reality that much strategy is formulated and implemented in the act of managing the enterprise was ignored. Precise forecasts ending with derived financials were constructed, the only weakness of which was that the future almost invariably turned out differently.
Strategy formulation is not necessarily a deterministic, rational and continuous process, as was emphasized by Mintzberg (1987). He noted that, rather than being consciously and systematically developed, strategy reorientation happens in what he calls brief ‘quantum loops’. A strategy, according to Mintzberg, can be deliberate – it can realize the intentions of senior management, for example to attack and conquer a new market. But this is not always the case. In theory, he says, strategy is a systematic process: first we think, then we act; we formulate then we implement. But we also ‘act in order to think’. In practice, ‘a realized strategy can emerge in response to an evolving situation’ (ibid: 68) and the strategic planner is often ‘a pattern organizer, a learner if you like, who manages a process in which strategies and visions can emerge as well as be deliberately conceived’ (ibid: 73). This concept of ‘emergent strategy’ conveys the essence of how in practice organizations develop their business and HR strategies.
Boxall and Purcell (2003: 34) suggested that ‘it is better if we understand the strategies of firms as sets of strategic choices some of which may stem from planning exercises and set-piece debates in senior management, and some of which may emerge in a stream of action’. Research conducted by Tyson (1997: 280) confirmed that, realistically, strategy:
- has always been emergent and flexible – it is always ‘about to be’, it never exists at the present time;
- is not only realized by formal statements but also comes about by actions and reactions;
- is a description of a future-oriented action that is always directed towards change;
- is conditioned by the management process itself.