Top Management: Changing Roles - Essay Example

Top Management-Changing Roles Introduction: Undoubtedly strategy is one of the most significant concepts to emerge in the of management studies in the recent past. Its applicability, relevance, potential and viability have been put to severe tests. It has emerged as a critical input to organizational success and has come in handy as a tool to deal with the uncertainties that organizations face. It has helped to reduce ambiguity and provide a solid foundation as a theory to conduct business a convenient way to structure the many variables that operate in the organizational context and to understand their interrelationship. Business policy is rooted in the practice of management and has passed through different phases before taking its shape in the present form of strategic management. As Michael Porter (1972) opines that core of general management is strategy which he elaborates as: "-------developing and communicating the company's unique position, making trade offs, and forging fit among activities". Strategic position is based on customers' needs, customers' accessibility or the variety of a company's products and services. The definitions of strategy, varied in nature, depth and coverage, offer us a glimpse of the complexity involved in understanding this daunting, yet interesting and challenging concept. For many companies and most of the time, a single strategy is not only inadequate but also inappropriate. The need is for multiple strategies at different levels. Segregated units, known as profit centers for strategic business units (SBU). A complementary concept to the SBU, valid for the external environment of a company, is a strategic business area (SBA). There are various levels such as organizational and strategic levels. Corporate level strategy is overreaching plan of action covering the various function performed by different SBU'S. Apart from these levels, occasionally companies plan at some other levels and often set strategies at a level higher than the corporate level. These are called societal strategies. Corporate and Business level strategies derive their rationale from the societal strategy. Societal strategies are manifest in the form of vision and mission statement, while functional and operational strategies take the shape of functional and operational implementation, respectively. Role of top management: Now to implement strategies at various levels various level managers have to do the conscious decision-making. Decision-making is the most important function of any manager. Strategic decision making is the prominent task of the top management. The difference lies in the levels at which they operate. While decision-making pertains to all managerial functions, strategic decision making largely relates to the responsibilities of the Top management. Strategic tasks are by their very nature complex and varied. Decision-making in performing strategic tasks is, therefore, an extremely difficult, complicated and at times, intriguing and enigmatic process. In the process of strategic management the basic thrust of strategic decision-making is to make a choice regarding the courses of action to adopt. The fundamental strategic decision relates to the choice of a mission. With regard to objective setting, the top management is faced with alternatives regarding the different yardstick to measure performance. Finally, at the level of choosing a strategy, the top management chooses from among a number of strategic alternatives in order to adopt one specific course of action, which would make the company achieve its objectives and realize its mission. Apart from the fundamental decisional choice, as pointed above, there are numerous occasions when the top management has to make important strategic decisions. Environmental threats and opportunities are abundant; that the top management focuses its attention only a few of those. Likewise, there are many company strengths and weaknesses; the top management considers only a limited member at any given time. With regard to resource allocation, the management faces a strategic choice from among a number of alternatives it could allocate resources to. As strategic decision making is a complex process, it is difficult to perform. It is incomprehensible so it cannot be analyzed and explained easily. Decision-makers are unable to describe the exact manner in which strategic decisions are made. Like the working mind strategic decision making is fathomless. While connecting on the nature of strategic decision making Henry Mintzberg (1950) says that "the key managerial processes are enormously complex and mysterious, drawing on the vaguest of information and using the least articulated mental processes". These processes seem to be more relational and holistic than ordered and sequential and more indicative than intellective. There are hosts of person-related factor that play a role in decision making. Stakeholder participation in management decision-making has been viewed as a general solution for managing stakeholder interests, not just those of employees (Freeman, 1984, 1999). There are a number of reasons why participation should enhance the alignment of employee interests with those of top management, and many of these have been elaborated in research on job satisfaction and organizational commitment. Attributes like age, knowledge, intelligence, risk taking ability and creativity are generally supposed to play a positive role in strategic decision making. A cognitive style which enables a person to assimilate a lot of information, interrelated complex variables and develop an integrated view of the situation is specifically helpful in strategic decision-making. Owing to person related factors, there are individual differences among decision makers. An organization, as it possesses special characteristics, operates in unique environment. Decision makers who understand organizations characteristics are in advantage position to undertake strategic decision making. First, employees are likely to be more satisfied and to feel that top management is responding to their needs if work is designed to allow greater discretion and intrinsic rewards (Hackman & Oldham, 1980). Second, the fact of participating in operational decisions is likely to increase employees' sense of felt responsibility, which is an antecedent to organizational commitment (Mowday, Porter, and Steers, 1982). Third, to the extent that top management portrays participatory strategies as central to firm competitiveness, employees may feel that their role is more significant to the survival of the organization, and this may lead to higher perceptions of job security. In addition, if participatory strategies are associated with better performance, then employment security may be a real outcome. Top management, to the extent that they enjoy a workforce that supports management's strategic initiatives; customers, to the extent that participation leads to better product quality; and shareholders, to the extent that participatory strategies improve firm competitiveness. Changing roles: Compared to employees working under traditional hierarchies, all of those who participated in the team strategy had higher approval ratings of top management; but supervisors and managers of self managed teams were more likely than workers to disapprove of the team strategy. A reasonable interpretation of these findings is that those managerial employees who were more committed or risk-taking to begin with, was more willing to participate in teams and more willing to support top management -- even when their own self-interests were undermined. This might suggest that top management is able to use the self-managed team strategy to increase the role of non-managerial employees as stakeholders in the organization without adversely affecting the support of managerial employees. The diffusion of teams depended upon the voluntary cooperation of supervisors and managers; however, top management's strategic initiative to improve performance never grew beyond five percent of the core workforce. Arguably, top management's failure to consider the interests of supervisors and middle managers as stakeholders was an important contributing factor in limiting the spread of what was an effective strategy from an objective performance standpoint. Top management could not count on its managerial workforce to implement a strategic initiative. While a minority of supervisors and managers were willing to put aside their own self-interests and participate in top management's team-based initiatives, the majority were not. Despite the fact that teams, where they existed, produced positive performance results, top management could not get its managerial workforce to broadly implement the strategy. Individuals such as CEO or entrepreneurs play the most important role as strategic decision makers. But as organizations became bigger and more complex and face increasingly turbulent environment, individuals come together in groups for the purpose of strategic decision making. These strategists are individuals on groups who are primarily involved in the formulation, implementation and evaluation of strategy. In a limited sense, all managers are strategists. There are persons outside the organization who are also involved in various aspects of strategic management. Now the top management and the chief executive officer (CEO) is the most important group which is responsible for all aspects of strategic management, from the formulation to the evaluation of strategic CEO of the organization play the most crucial role in determining whether an organization is successful or not. Peters and waterman (1984) say that "associated with almost every excellent company was a strong leader (or two) who seemed to have had a lot to do with making the company excellent in the first place". CEO performs the strategic tasks actions which are necessary to provide a direction to the organization so that it achieves its purpose. He/She plays a pivotal role in setting the mission of the organization, deciding the objectives and goals, formulating and implementing the strategy and in general seeing to it that the organization does not deviate from its predetermined path designed to move it from the position it is into where it wants to be. Now the top level management team with CEO, consists of managers are at the highest level of managerial hierarchy. Starting from the chief executive officer to the level of functional or profit center heads, these managers are involved in various aspects of strategic management. Some of the members of the top management act as directors on the board usually on a rotational basis. All of them serve on different top level committee's setup by the board to look after matters of strategic advantage and other policy issues. Executive committees formed to deal with new projects. When assigned specific responsibilities, top managers look after modernizations, technology up gradation and expansion plan implementation and new product development. On the whole, top management performs a variety of roles by assisting the board and the chief executive in the formulations implementation and evaluation of strategy. Organizationally, they come together in the form of different types of committees, task forces, work groups, think tank management teams and so forth to play a very important role in strategic management. Each top-level manager will have a mental model or perception of the strategic concepts and their interrelationships that his/her firm uses in an attempt to manage its environment. For example, each manager will have a mental model of the role that various elements (such as innovation, costs, or service) play in the firm's overall strategy. Research could involve the influence of power differentials within the top management team on strategic consensus. It is entirely possible that the power distribution among top management team (TMT) members might have a strong effect on strategic consensus, group processes within the team, or both. That is, would broad empowerment of the TMT enhance or diminish TMT consensus Nowadays, factors external as well as internal are changing the whole dynamics of strategic management and even strategies adopted by the organizations. As the perceptions about the Top management suggests that they are the persons /team behind to implement corporate level strategies. Corporate level strategies are basically about the choice of direction that a firm adopts in order to achieve its objectives. Now the businesses are becoming complex in nature and could be defined along three dimensions i.e. customer groups, customer functions and alternative technologies (Abell, 1980). Corporate level strategies are basically about decision related to allocating resources among the different businesses of a firm, transferring resources from one set of businesses to others, and managing and nurturing a portfolio of businesses in such a way that the overall corporate objectives are achieved. This situation creates strategic alternatives, which revolve around the question, whether to continue or change the business the enterprise is currently in or improve the efficiency and effectiveness with which the firm achieves its corporate objectives in its chosen business sector. According to Glueck (1984), there are four grand strategic alternatives; Stability, expansion, retrenchment and any combination of these the three strategic alternatives are termed as grand strategies and top management have the sole to be part of decision-making process to adopt various strategy/strategies. The stability grand strategy is adopted by an organization when it attempts at an incremental improvement of its functional performance by marginally changing one or more of its businesses in terms of their respective customer groups, customer functions and alternative technologies-either singly or collectively. In this condition top management teams are ,more involved in these strategies to sustainable growth, top management have the job in hand that they should aim at stability to improve their performance and will be able to face a volatile environment and highly competitive market. In these conditions, top management has to adopt, more functional or operational role rather than strategic roles. In case of expansion strategies where organization aims at high growth by substantially broadening the scope of one or more of its businesses in terms of their respective customer groups, customer functions and alternative technologies-singly or jointly in order to improve its overall performance. Expansion strategies have a profound impact on a company's internal configuration causing extensive changer in almost all aspects of internal functioning. As compared to stability, expansion strategies are more risky. Most of the time Top teams face difficulties where strategic decisions involve high risk and information is inadequate, inaccurate. Informational diversity provides a team with a wider pool of information, experience and exposure to external boundaries, networks, and environmental conditions from which to sense market change and to position the firm strategy. So looking at the nature of strategies we certainly fund out that in most of the organizations expansion strategies has been decided by board of directors and CEO. Though some top management members are part of board of directors but in general, in companies' expansion decisions making process, top management members are not directly involved. As the design of an organization suggests, top management team has to be involved in implement expansion strategies rather than deciding it. The third strategy i.e. retrenchment is followed when an organization aims at a contraction of its activities through substantial reduction or eliminating of the one of or more of its businesses, in terms of their respective customer groups, customer functions or alternative technologies either singly or jointly in order to improve its over all performance. Retrenchment involves a total or partial withdrawal from either a customer group, customer function or the use of alternative technologies in one or more of firms businesses. In this manner, retrenchment attempts to turn the fat and results in a slimmer organization bereft of unprofitable customer groups, customer functions or alternative technologies. In this situation, decision making has to be done at the top level i.e. at the board of directors and chief executive level rather than top management level. After taking the decisions of retrenchment top management team has to look after the implementation of retrenchment strategies adopted by board of directors and chief executive of an organization. In general from the design lens it has been perceived that top management has to decide the all three grand strategies of stability expansion or retrenchment or combination of any of the three but in practical situations basically top management became more or less the implementing and consultation seeking step rather than actual decision-makers. In recent times where external environment of business is changing so fast, stability strategies are generally not been adopted. Environmental conditions become more inhospitable, the pause/proceed-with caution strategy is a deliberate and conscious attempt to adjourn major strategic changes to a more opportunities or when the firm is ready to move on the rapid strides again. This pause/proceed strategies has been decided by the chief executives rather than the top management as a whole. Basically chief executives are more powered to take strategic decisions in an organizational settings rather than top management team. Top management team generally plays a consultative role to chief executives in organizational settings; we generally perceive that top management team is the one who can take the strategic decisions. But in general, it is not true. Similarly during the expansion strategies when firms decide to expand they could adopt five types of expansion strategies, which are expansion through concentration, expansion through integration, expansion through diversification, expansion through cooperation and expansion through international. In all the above five expansion strategies, board of directors and chief executive of the organizations have the sweeping power and authority to take strategic decisions. In taking these strategic decisions, top management only plays the role of consultations and implementations rather than control of strategic decisions and directions, in recent years, the role of CEO as a role leader comes out clearly. Most of the successful organizations are known for strategic control of their chief executive officers. Retrenchment strategies are also done either internally or externally. For internal retrenchment to take place, emphasis is laid on improving internal efficiency. This usually takes the form of an operating turnaround strategy. In contrast, a strategic turnaround is more serious form of external retrenchment and leads to divestment or liquidation. There are three ways in which turnarounds can be handled. The existing chief executive and management team handles the entire turnaround strategy with the advisory support of a specialist external consultant. The use of this method can only be successful if the chief executive has a reasonable amount of credibility left with the banks of turnaround management under the existing team is rarely attempted. In another situation, the existing team withdraws temporarily and an executive consultant or turnaroundd specialist is employed to do the job, the last method involves the replacement of existing teams, specially the CEO or merging the sick organization with the healthy one. Generally, in turnaround strategies, the new CEO quickly assess his authority by issuing orders and directives for change, centralizes functions, fires employees and closes down plants and division. The strategic control of the organization generally is in the hands of CEO rather than top management. In general divestment strategies has to be decided by the CEO rather than top management teams. Conclusion: So it has been evident that at corporate strategy level, where the direction of the organization has to be decided and also the control of the organization has to be seen, the top management team has fewer roles to play and CEO of the organization always takes the lead in strategic control and deciding the direction of the firm. In way to take decisions which are strategic in nature and decide the control and direction of the company, generally CEO adopts democratic or participative style of management. This style of management generally perceived as top management have the role of strategic control of the organization but actually it is not. In general, for the top management teams organizational designs suggest and provide more active strategic role and control for organizations but it's a fallacy in practical. References: 1. Porter, M.E., "What is Strategy", Harvard business review, (1972) 6: 61-78. 2. Mintzberg, H. "The brain: planning left, managing right," Harvard business review, (1950) 4. 3. Peters and Waterman, "A view from the top-five chairman speaks", Gentleman, May 1984, pp. 105-110. 4. Abell, D.F. Defining the business- the starting point of strategic planning, NJ: Englewood cliffs, Prentice-Hall, 1980, p 17. 5. Glueck, W.F. and Jauch, L.R. Business policy and strategic management, 4th edn. New york: Mc Graw-Hill, 1984, p.209. 6. Freeman, R.E. Strategic management: A stakeholder approach. Boston: Pitman. 1984. 7. Freeman, R.E. Response: Divergent stakeholder theory. Academy of Management Review, 1999.24 (2):233-236. 8. Hackman, J. R., & Oldham, G. R. Work redesign. Reading, MA: Addison-Wesley Publishing Company. 1980. 9. Mowday, R. T., Steers, R. M., and Porter, L. W. Employee-organization linkages: the psychology of commitment, absenteeism, and turnover. New York: Academic Press, 1982. Read More