The Hierarchical Approach to Strategy Formulation - Assignment Example

In the view of Doran (1996), the main container of this asset is the human resource or more precisely, the human capital of the organization. Thus, retaining the human capital with an organization and maintaining its efficiency is equally important. In this context, the issue of context management becomes highly significant. According to Mondy (2007), besides retaining the employees, it is also essential that the employees must be able to utilize knowledge assets possessed by him to achieve the organization's strategic objectives.

It is the general belief that when the strategic objectives are developed and the vision is clear, the approach of using the organizational hierarchy to develop and translate those strategies into action works well and results in optimum performance. In order to understand this phenomenon, we need to understand the basic concepts one by one. First of all, let's look at the concept of strategy formulation. (Ceriello and Freeman 1998) Every business has a common goal, which is to earn a profit.

In order to achieve this goal, the organizations analyze their environment and in the context of their environment, determine their own strengths, weakness, opportunities, and threats. Based on this analysis, they formulate their own strategy. Usually, the process of strategy formulation is hierarchical in nature.  (Jackson and Mathis 2007) The hierarchical approach to the strategy formulation is not the panacea, having a cure for all the diseases. Rather, there are certain conditions when this activity of hierarchical translation is fruitful, while at other points it is not.

(Fisher, Scheonfeldt and Shaw 1987) The hierarchical approach is more successful when the management has a clear vision of the direction, that where does it want to go. In such a case when the top management, says the CEO makes some strategic objective. (Duncan and Dutton 1987). If the external environment of the organization is almost static, and the CEO is well aware of the external environment, in such case taking a direct decision by the CEO and then transcendence of that decision down the hierarchy may result in higher performance.

It is so because of the fact that it is assumed in such a case, the environment is quite known t everyone in the organization. So what needs to be done is to tell them the strategy and they would be able to do it successfully. This all results in successful work performance. (Doran 1996) Awad and Cascio (1981) explain that this is the reason why it has been a common established belief that.in the condition where the environment is known, the performance of effectiveness of the organization to achieve those goals increase manifolds.

On these bases, it is asserted that performance tends to improve when everybody in the organization knows where it is going, as the hierarchical strategy formulation model works better. (Ceriello and Freeman 1998)However, the world is now changing. The environment for businesses is no more static. The world is moving too fast, so does the environment for the business.