A HOLISTIC APPROACH TO STRATEGIC MANAGEMENT
By Arnie Witchel
Copyright 2003: Witchel & Associates
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†This paper defines an approach to strategic management from a holistic perspective. An examination of the factors that affect the perspective of holistic management as strategy, including the management of internal and external relationships and systems is explored. The manner in which the two sets of relationships affect each other, as well as the need to develop the organization to adapt and grow in its relationship to the internal and external environment, and a method of approaching strategy from a holistic viewpoint is offered.
†††††† Organizations are systems that utilize structural interrelationships to influence environmental variables such as population, resources, ideas and knowledge (Senge, 1990). Structural relationships are not formal, organized entities similar to an organizational chart, but rather the variables that influence behavior over time (Senge, 1990). Systems structure includes the hierarchy of processes and flows as well as the relationships and perceptions the organization carries. As such, organizations have the power to change the structure of the relationship and their approach to these variables as conditions warrant. This is a holistic and organizational development approach to strategic management. It differs from the classic definition of strategic management as "the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company's objectives" (Pearce & Robinson, 1991, p. 3) in that it recognizes that company objectives are achieved through interrelationships with variables. By the very term relationship, strategic management becomes dynamic. This approach recognizes that organizations act on their environment and that the environment influences the actions of the organization; it views the organization as a whole, recognizing the dynamic relationship between the internal and external environments that an organization balances.
†††††† Holistic management allows managers to build upon strengths by extending and integrating business and behavioral skills (Wilson, 1994). The holistic approach to management begins with the recognition that organizations do not develop sequentially and that management responses to organizational challenges generally do not succeed when problems are approached sequentially (Powers, 1996). Holistic management strives to produce strategies to deal with the chaotic processes in the workplace; this means taking a diagnostic approach to internal and external challenges that include such diverse areas as technology, motivation, research and development, competition, manufacturing, marketing, personnel planning, control systems and systems logistics (Wilson, 1994). In order to produce these strategies in concrete, actionable plans, organizations plan interventions to develop the organization in order to increase the health and effectiveness of the organization (Hodge, Anthony & Gales, 1996). A vital component of the organizationís success in this endeavor is the process audit, which establishes the linking of the various systems and their relationships (Wilson, 1994).
†††††† An organization that decides and acts on plans to achieve objectives does not do so in a sterile environment. Its success largely depends on the knowledge and quality of the relationships it maintains with the external environment (systems) and its own internal environment (systems). To maintain the quality of relationships implies that the organization's management truthfully assess the state of the relationships with the external and internal environments, constantly monitor the dynamics that affect the relationship, and adjust to maintain or improve those relationships over time in order to achieve the organizational goals. This demands constant environmental scanning to recognize trends that affect the workplace. Those trends include the changing face of the workforce, the technological environment, the legal environment and the economic environment (Buhler, 1997).
†††††† The holistic approach to management begins with a diagnostic approach that allows interventions to be planned (Wilson, 1994). The diagnosis is done to facilitate conscious decisions about the organizationís development, future course and future needs. ďHolistic means actively organizing to motivate, to identify opportunities, to meet challenges or change positively by promoting relationships and through the generation of real communication of shared information whilst keeping the focus sharp upon customer careĒ (Wilson, 1994). The quality of the organizational structure as interrelationships influences behavior and how people make decisions to achieve goals (Senge, 1990). These decisions affect both the internal and external systems with which the organization interacts and how the internal and external systems intersect. The quality of the decisions the organization makes that manage and influence the relationships with the internal and external environment are affected by the vantage point from which the organization makes its decisions and the thinking skills it uses to make a decision (Richmond, 1994). To make the best decisions, the organization needs a bi-focal vantage point where it can see the forest and the trees, while the thinking skills are affected by what the organization perceives and the meaning it makes of it (Richmond, 1994).
Internal Systems and Relationships
††††††††††† Organizations are a system made up of subsets of systems, much like biological entities. It is not possible for the entire system to exist without the subsystems; for example, it is impossible for the entire body to exist without the digestive system, the digestive system without the nervous system and so on. All parts of the organization are interdependent and all have a stake in each other's success. "If they do not satisfy the requirements and preferences of their internal and external customers, they prevent those customers from being successful" (Freedman, 1995, p. 8). That is, they affect the quality of the relationship with their own internal systems as well as with the external systems which the organization encounters in the environment.
Human resources, both management and employees, are key components that the internal subsystems have in common. When they function in harmony, productivity increases, turnover and conflict decrease. To accomplish this harmony, managers need the skills to lead, to give feedback, to manage the relationships that make up the internal systems. This means that managers need to assess the internal strengths and weaknesses within the organization and take corrective actions in order to manage the internal relationships. This goes beyond the technical functions of management and the constraints of reporting vertically through an organizational hierarchy (Freedman, 1995). The organizationís developmental needs should be consciously acknowledged and plans to meet those needs should be an important focus for managers.
†††††† To succeed in this task, management must move beyond the two dimensional thinking of processes and become adept at assessing and managing the breadth and depth of situational change, both internally and externally (Marshak, 1995). The criteria for success depends less on structure, sequential plans, rules and certainty in the workplace than on adaptability, simultaneous assessment and movement, concentration on values, the quality of interaction with employees, managing interdependent relationships, and flexibility in management style (Marshak, 1995).
†††††† The manager's role is to act as a stable force and as a change agent in the system, adapting to the changing needs of the internal system, which is made up of individual employees who function alone or in work teams. This dual role means making the correct diagnosis of the state of the internal work system and taking action to manage the relationship with the work force, dependent on the stage of competency and willingness that the employee and work teams possess (Blanchard, 1995). The manager accomplishes this through leadership, or behavior used to influence the behavior of others as they perceive it (Blanchard, 1995).
†††††† As with any system, it is not enough to simply maintain the present state. Systems that do not improve gradually decline in the environment and die. This concept of improvement takes two forms when management considers the internal organizational system. One consideration is productivity. The other consideration is the development of the individuals that exist in the system.
†††††† Productivity can be considered the measurement of inputs and outputs of an organization (Pearce & Robinson, 1991). As such it is quantitative in nature and tends to highlight areas such as financial goals, number of products shipped, amount of increase for stakeholders. Managers must be concerned with the factors that limit productivity or keep it from growing. To increase the amount of productivity from individuals or teams takes concentration on improving task performance and processes through offering help and suggestions for improvement, expanding work challenges and being aware of the team members' state of health (Moosbruker, 1995). It also includes developing skills and competencies to improve the productivity of the workforce. Managers must not only examine the way in which the company is competing, but also the basis on which they are competing; this includes assessment of internal strengths and weaknesses in skills and competencies that may affect systemic growth (Aaker, 1989).† These core competencies and skills can provide a sustained competitive advantage (Aaker, 1989). Companies do not compete on costs alone, and that is not the sole measure of productivity. In fact, the literature regarding strategic management basically has had two thrusts. The first is the content view of strategy, which concentrates on economics and marketing, the external factors related to productivity; the second concentrates on process theory or managing change (Trott, 1998). Both are dependent on the continuous improvement of the abilities within the workforce to improve productivity and gain competitive advantages. The organization scans internally to improve its knowledge base and competency to secure a competitive advantage. The paradox is that in order to scan the external environment and evaluate competitive technological or information competencies, the organization must already possess corresponding competencies in technology or information (Trott, 1998).† This emphasizes the importance of improving the individual employee.
†††††† Recruiting, selecting, retaining and developing employees with core competencies, abilities and knowledge is a challenge in an economy nearing full employment. The nature of the workforce is increasingly more diverse, as is the nature of the consumer base as organizations continue toward true global expansion. The composition of the workforce includes diversity in gender, race, education, age, and physical abilities (Buhler, 1997).† The workforce is growing at the slowest rate since the 1930s, and the Euro-American male is quickly becoming the minority in the workplace (Baker, 1995). In terms of distinct cultures in the United States workforce, the Asian American segment of the workforce is growing at the fastest rate (Taira, 1995), while the Hispanic population has grown 53 percent from 1980 to 1990 (Torres, 1995). The nature of the workforce change demands changes in the way the organization approaches such seemingly simple items as gender related work issues, such as the working woman. Not only should management take into account the differing cultural and gender perceptions and styles (Hahn & Litwin, 1995), but allowances for differences of quality of life and individual values should be upheld and respected (Ferguson, 1995). Differing voices worry that cultural diversity programs are just another form of affirmative action that assault merit standards and may sacrifice product quality in the name of social equality (DíSouza, 1996). However, the realities are that the content and context of the workforce is changing. As the workforce shrinks and becomes more diverse, the inability to manage the diversity in the workplace can seriously hinder an organizationís competitiveness (Baker, 1995). The danger lies in unconsciously hiring and promoting only employees that fit into the image the company has of itself (Josefowitz, 1995). The danger is compounded by the fact that with global expansion, the image the company has of itself may not be the same image the consumer has or needs. The image may not represent or be consistent with a culturally diverse consumer base. To prevent this danger, organizations must actively engage in activities that increase awareness, knowledge and skills in managing the diverse workforce, including increasing cultural self-awareness, improving understanding of cultural differences and learning about other cultures (Baker, 1995). Activities that are proactive as organizational development interventions include mentoring, improving cultural relationships, and building the skills of the entire culturally diverse workforce (Wasserman, Miller & Johnson, 1995). In order to attain that goal, as well as continued productivity, the needs of the company, the individual, and the manager must come together to develop the individual's career (Farren & Young, 1995). Managers use career discussions to aid the employee in assessing the choice of field, skills and competencies, values and interests and how these align with the organizational goals (Farren & Young, 1995).†
†††††† In order to develop the whole person as a human resource, it is not enough to only concentrate on the skills and competencies the organization desires. A commitment to the needs of the individual must be matched with the needs of the organization and the manager. The employee must be developed in terms of spiritual, mental, emotional and physical resources (Scott & Hughes, 1995). When managers concentrate on developing all of the resources the employee has to offer, employees are "empowered to take risks, act as entrepreneurs and visionaries, and develop supportive, cooperative relationships with coworkers, customers, and clients" (Scott & Hughes, 1995, p. 159).†
†††††† Just as any system needs a form of control to monitor goal achievement, internal organizational systems utilize performance appraisals to modify or correct behavior that undermine its ability to increase productivity. The role of the manager in assessing goals and performance is critical to this role in developing and improving the individual and organizational productivity. By determining what is needed and what is the desired state, the holistic manager is able to provide feedback on behavioral performance, not personal characteristics. The manager concentrates on the ineffective behaviors that hamper goal achievement and paths of development to improve the behavioral performance to achieve those goals (Porter, 1995).
External Systems and Relationships
†††††† Just as organizational structure affects its internal systems, it also affects the organization's approach to external systems in the environment. In fact, the internal systems influence the approach and quality of decisions regarding the relationships with external systems and vice-versa. Realizing this fact means redesigning the ways in which decisions are made, taking into account at least five dimensions: customer selection, value capture (how the company gets rewarded for the value it creates), strategic control, scope (choosing products and offerings to remain relevant) and organizational systems (Wise, 1999). All but the last of these involve critical decisions about the management of the relationships affecting external systems. In many ways the last dimension (organizational systems) is designed as a result of the decisions the organization makes concerning the external systems. This is a much more sophisticated approach than defining opportunities and threats in a static environment. Rather, this approach looks at the opportunities and threats that exist with variables in the external environment and assesses our relationship with those variables. It also recognizes that trends in the external environment are less predicated on events, but more by the way relationships vary, develop or decay over time (Senge, 1990). The events may be markers, but the sequence causality that affect relationships with the external environment evolve over time and may not be as immediate as first thought. Holistic managementís approach is to retain value as a whole without modifying processes or product in piecemeal fashion (Wilson, 1994). It plans to improve the relationships through interventions that are designed to develop the organizationís ability to meet the challenges of the environment.
†††††† Choosing the customers with which the organization works (and understanding who those customers will be) are critical components of a holistic approach to strategic management. Often, the inroads aren't clear. In a rapidly changing environment, traditional forecasting techniques, which tend to be linear, cannot predict who the most desirable customers are, nor which will hold the most potential. Managers must learn to work toward a plausible future state of events that offer flexibility through development of scenarios (Linneman & Klein, 1985). Developing scenarios allow managers to develop flexible strategies that assess risk in an unpredictable future (Linneman & Klein, 1985). These are all critical components in choosing who the organization wants its customers to be. These genuine business opportunities can only be capitalized on by increasing the quality of information and breadth of information, by examining existing products on the market and determining to what extent they meet the current customer need and to what extent they can be improved (Trott, 1998).†
†††††† Scenarios also help determine the value capture possibilities that exist for the organization. Scenarios, because they offer multiple possibilities and contingencies (Linneman & Klein, 1985), allow decision makers to move from the line of thought that revolves only around product sales and service fees to more progressive considerations, including finances, ancillary products, and licensing (Wise, 1999).† Just as internal systems affect each other, the definition of who the organization wants its customer to be can affect the value capture strategies. Coca-Cola moved from considering its customers as consumers of soft drinks to consumers of liquids. This shift affected the value chain and how the company defined opportunities to capture value through vending, syrup sales and bottlers (Wise, 1999).
†††††† Organizations must practice strategic control to maintain and increase revenues. This becomes critical in the increasingly fast paced external environment in which most firms operate. Part of the control comes from controlling the value chain or the industry standard (Wise, 1999). When that is no longer possible, successful companies learn to practice principles such as strategic judo, which concentrates on turning the dominant players' strengths against them through rapid movement, flexibility and leverage (Yoffie & Cusumano, 1999). This strategy is particularly useful when trying to avoid a match between behemoths. The principles concentrate on targeting markets that competitors ignore (customer selection), maintaining flexibility when attached by a superior force, and exploiting leverage by using the weight of opponents against themselves (Yoffie & Cusumano, 1999). In all of these considerations, the end is not the flexibility, movement or speed in themselves, but the maintenance of strategic control. The focal point is the controlled management of change that include the dimensions of cost (including reducing waste and slim overheads), quality and timeliness (Wilson, 1994).
†††††† Scope defines the activities and services the organization offers and the activities that the organization engages in to offer those services. Some might define this as niche width (Usher, 1999). Again, the various external systems work together and influence each other. Customer selection, value capture and strategic control may all help define the niche or scope in which the organization operates. These factors together will work to determine the niche that the organization fills to remain customer relevant, maintain control of the value chain and practice strategic control (Wise, 1999).
†††††† The concept of approaching external systems as relationships and structures, and approaching it from the mental model of customer selection, value capture, strategic control, and scope is similar to seeking leverage in the relationship among the systems and our own organizational structure. Leverage is "seeing where actions and changes in structures can lead to significant, enduring improvements" (Senge, 1990, p. 114). Often the best results do not come from wholesale changes in approach, but from well-focused actions (Senge, 1990). This requires a shift from seeing just one or two areas to changing the view so that management can leverage the relationships by seeing the forest and the trees, organizing complexity into meaningful information that managers can act upon (Richmond, 1994). The effort is not to simplify the relationships among systems, but to be able to see through the complexity to illuminate opportunities and causes of problems (Senge, 1990). The organization needs to formulate its structured systems in order to ensure that they are fully focused (Wilson, 1994).† Just as internal systems have feedback (performance appraisals), so too the external systems have feedback that reinforce how the organization is approaching the issues of customer, value, control and scope through goal achievement or lack of progress toward goals. This feedback not only assesses our efforts at goal attainment, but also offers feedback on our attempts to leverage our relationship with the external systems and our attempts to develop the organization.
Relationships between External and Internal Systems
†††††† The number of variables affecting the internal systems and external systems are staggering. The complexities become even more staggering when their intersection is considered. The external systems affect management's decisions regarding the organization's internal systems and structure. The internal systems and structure affect the organization's market opportunities and leverage that can be gained† in the relationship with the external environment. In fact, the internal systems and mental models that the system generates can affect even the quality of decisions that we make toward the management of relationships with the external environment. The two are interdependent and can not be considered separately from each other. They are closely entertwined in achieving overall organizational success.
††††† This approach to holistic management demands that the manager abandon linear approaches to managing the internal and external environments. Successful strategic management does not depend solely on a skill based approach, but more on the approach itself to understanding the complexities of the relationships with the internal and external systems. It requires a corporate vision that takes into account every area of the organization (Powers, 1996). The approach is an understanding of best practices in terms of products, processes and key indicators that includes information pertaining to product, supplier, customer, employee, and competition (Wilson, 1994). This means acquiring, analyzing and evaluating information in order to develop the organization to meet the challenges it faces both internally and externally. With this information, planned organizational development interventions can be introduced to facilitate organizational processes and relationships through consultation and training (Hodge, Anthony & Gales, 1996). Schermerhorn, Hunt, and Osborne (1997) offer a model that leads to the diagnostic foundations of the interactions between the external and internal environment. At the organizational level are concerns for strategy, technology, structure, culture and systems that interact between organizational effectiveness and the external environment. At the group level are concern about tasks, membership, norms, cohesiveness and processes that interact between the organizational group effectiveness and the organizational environment. At the individual level are concerns for tasks, goals, needs, abilities and relationships that interact between individual effectiveness and the workgroup environment. Understanding how to identify assets and skills that attract customers and that our customers desire, selecting those assets and skills to support a strategy that offers advantages over competitors, and building programs that enhance assets and skills, the manager acknowledges the interface between the two environments and how they affect each other (Aaker, 1989). In a like manner, when the organization structures itself and develops competencies internally to improve customer selection, focus on capturing value opportunities, maintain strategic control and a solid niche, management acknowledges the relationship that the external environment has on internal structure. This recognizes that market driven issues serve as the basis for determining the required internal capabilities and structure (Wise, 1999).
†††††† Senge (1990) calls for four disciplines aside from the fifth discipline, systems thinking: personal mastery, team learning, shared vision and mental models. All of these require the organization to develop itself and continue to grow. Wise (1999) confirms that creating a common understanding (shared vision) fosters a broad acceptance of the resulting strategy. Personal mastery includes recognizing those skills and competencies that are important to the organization's clients and which increase the movement toward organizational goals to maintain a sustained competitive advantage (Aaker, 1989). This also acknowledges that to truly practice the discipline of personal mastery means development of the whole person, not just their skills. Concentration has to move from considerations based solely on the work environment to developing the physical, emotional, mental and spiritual capabilities of employees (Scott & Hughes, 1995). Managers who concentrate on high performance teams recognize that there is an internal tension that arises from efficient manufacturing and marketing of the product and developing innovative behavior that thinks beyond the current processes (Trott, 1998). Careful management of this tension leads to team learning, whereby teams practice open discussion, take initiative, challenge each other and provide feedback to improve performance (Moosbruker, 1995). The mental models are how we approach our internal and external environment and our relationship with the variables regarding that environment. They determine how management makes sense of the world and its interpretation of what it senses (Senge, 1990). It is this shift in the mental model from the static description of strategic management as decisions and actions regarding a company's goals to a concept of managing relationships with the organization's environment that allows it to move to the next level of strategic management.† It requires a systems and relationships approach that recognizes what is needed to achieve high standards of performance, setting performance indicators and measuring them against best practices in a continually evolving framework (Wilson, 1994). Holistic management of the total organization focuses on developing the organization's competencies to relate to its external environment and adapting the organization's internal structures to the relationship that exists with external structures to improve leverage in the relationship.
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