ATEGISTS AND THEIR ROLE IN STRATEGIC MANAGEMENT

TOP MANAGEMENT CONSTITUENTS1. BOARD OF DIRECTORS2. SUB – COMMITTEE3. CHIEF EXECUTIVE OFFICER4. TASK RESPONSIBILITIES AND5. SKILLS OF TOP MANAGEMENTThere are nine Strategists (TOP MANAGEMENT), who, as individuals or in groups are concerned with and play a role in strategic management their role in strategic management is explained below:-

(1) Role of Board of DirectorsThe ultimate legal authority of an organisation vests in the board of directors. The owners of the organisation – shareholders, controlling agencies, government, financial institutions, holding company or the parent company-elect and appoint the directors on the board. The board is responsible to them for the governance of the organisation. As directors, the members of the board, are responsible for providing guidance and establishing the directives according to which the managers of the organisation can operate. The board exercises its authority according to the memorandum of association and articles of association of the company. Legally, they have to conform to the various provisions of the Companies Act, 1956. Apart from the legal framework, the board acts according to the policies, rules, procedures and conventions of the organisation.

The role of the board in strategic management is to guide the senior management in setting and accomplishing objectives, reviewing and evaluating organizational performance and appointing senior executives. However, there is no clarity regarding the exact role that the board should play in managing the affairs of the organisation. Much depends on the relative strength, in terms of power, held by the board and the chief executive. Where there is a high level of clarity regarding their respective rules, the relationship between the board and the chief executive is cordial and the functioning of the board is smooth. Where such clarity is less, problems occur.

As the board of directors operates as the representatives of stockholders so the board has also following major responsibilities:

1. To establish and update the company mission.2. To elect the company’s top officers, the formost of whom is the CEO.3. To establish the compensation level of the top officers, including their salaries and bonuses.4. To determine the amount and timing of the dividends paid to stockholders.5. To set broad company policy on such matters as labour – management relations, product or service lines of business and employee benefit packages.6. To set company objectives and to authorize managers to implement the long-term strategies that the top officers and the board have found agreeable.7. To mandate company compliance with legal and ethical dictates.

(2) Role of Chief Executives

The chief executive (CE) is the most important strategist who is responsible for all aspects of strategic management from formulation to evaluation of strategy. The CE is variously designated as managing director, executive director, president or general manager in business organizations. As the chief strategist, the CE plays a major role in strategic decision-making.The functioning of the board critically depends on its relationship with the chief executive. Where there are differences of opinion between the respective perspectives of the role of the board and the chief executive, disagreements arise. The CE of an organisation plays the most crucial role in determining whether an organisation is successful or not.

The role of the CE in strategic management is the most important among the roles played by different strategists. He is the person who is chiefly responsible for the execution of functions which are of strategic importance to the organisation. In other words, a CE performs the strategic tasks; actions which are necessary to provide a direction to the organisation so that it achieves its purpose. He plays a pivotal role in setting the mission of the organisation, deciding the objectives and goals, formulating and implementing the strategy and, in general, seeing to it that the organisation does not deviate from its predetermined path designed to move it from the position it is in to where it wants to be.

The role modeling approaches attempt to describe the CE in terms of the different roles that they play in organisations. For instance, a CE may be considered as:Chief architect of organizational purpose, strategist or planner;Organisation leader, organizer or organisation builder; Chief administrator, implementer or coordinator; andCommunicator of organizational purpose, motivator, personal leader or mentor.

(3) Role of enterprisesAccording to Drucker, “the entrepreneur always searches for change, responds to it and exploits it as an opportunity”. The entrepreneur has been usually considered as the person who starts a new business, is a venture capitalist, has a high level of achievement-motivation, and is naturally endowed with qualities of enthusiasm, idealism, sense of purpose, and independence of thought and action. However, not all these qualities are present in all entrepreneurs; nor are these found uniformly. An entrepreneur may also demonstrate these qualities in different measures at different stages of life. Contrary to the generally accepted view of entrepreneurship, entrepreneurs are not only to be found in small businesses or new ventures. They are also present in established and large businesses, in service institutions and also in the bureaucracy and government.

Entrepreneurs play a proactive role in strategic management. As initiators, they provide a sense of direction to the organisation, set objectives and formulate strategies to achieve them. They are the major implementers of strategies and also their evaluators. The strategic management process adopted by entrepreneurs is, generally, not based on a formal system and, usually, they play all the strategic roles simultaneously. Strategic decision-making is quick and the entrepreneurs generate a sense of purpose among their subordinates.

(4) Role of Senior ManagerThe senior (or top) management consists of managers at the highest level of the managerial

hierarchy. Starting from the chief executive to the level of functional or profit centre heads, these managers are involved in various aspects of strategic management. Some of the members of the senior management act as directors on the board usually on a rotational basis. All of them serve on different top-level committees set up by the board to look after matters of strategic importance and other policy issues. Executive, committees, consisting of senior managers, are responsible for implementing strategies and plans, and for a periodic evaluation of performance. Ad hoc committee formed to deal with new projects has senior managers as project - 45 -managers. When assigned specific responsibilities, senior managers look after modernization, technology upgradation, diversification and expansion, plan implementation, and new product development. On the whole, senior managers perform a variety of roles by assisting the board and the chief executive in the formulation, implementation and evaluation of strategy.

(5) Role of SBU-level Executive.The rationale for organizing structure according to the strategic business units (SBUs) is to manage a diversified company as a portfolio of businesses; each business having a clearly defined product-market segment and a unique strategy. The role that the SBU-level executives play is, therefore, important in strategic management. SBU-level executives, also known as either profit-centre heads or divisional heads, are considered as chief executives of a defined business unit for the purpose of strategic management. In practice, however, the concept of SBU is adapted to suit traditions, shared facilities and distribution channels, and manpower constraints.

With regard to strategic management, the SBU-level strategy formulation and implementation are the primary responsibilities of the SBU-level executives. Many public and private sector companies have adopted the SBU concept in some or the other form.(6) Role of Corporate Planning StaffThe corporate planning staff play a supporting role in strategic management. They assist the management in all aspects of strategy formulation, implementation and evaluation. Besides these, they are responsible for the preparation and communication of strategic plans, and for conducting special studies and research pertaining to strategic management. The corporate planning department is not responsible for strategic management and, usually, does not initiate the process on its own. By providing administrative support, it fulfills its functions of assisting the introduction, working and maintenance of the strategic management system.How corporate planning works at voltasThe basic function of the corporate planning cell (CPC) at Voltas Ltd. is to disseminate the concept of corporate planning and make planning a way of life in the company. The main objective of the CPC is to convert the existing budgeting system into a corporate planning system which deals with strategic issues. The CPC supports the corporate planning process by assisting the top management in the formulation of corporate plans and integrating the divisional plans with the corporate plan. Based on the company’s long-range plan, divisional strategic plans are made annually. The strategies for each division are explicitly stated by the CPC and communicated to the senior managers. After this, the CPC staff acts as a catalyst in the implementation process by helping the senior managers implement the plan. Evaluation is done quarterly by the corporate executive committee consisting of the president and six vice

presidents in different functional areas. The staff at CPC is mainly drawn from within and they possess a few years’ line experience in different functional areas in the company.(7) Role of ConsultantsMany organizations which do not have a corporate planning department owing to reasons of small size, infrequent requirements, financial constraints, etc. take the help of external consultants in strategic management. These consultants may be individuals, academicians or consultancy companies specializing in strategic management activities. According to Management Consultants Association of India, management consultancy is “a professional service performed by specially trained and experienced person to advise and assist managers and administrators to improve their performance and effectiveness and that of their organisation”. Among the many functions that management consultants perform, corporate strategy and planning is one of the important services offered. The main advantages in hiring consultants are getting an unbiased and objective opinion from a knowledgeable outsider, cost-effectiveness and using specialists skills.(8) Role of Middle- level ManagersThe major functions of middle-level managers relate to operational matters and, therefore, they rarely play an active role in strategic management. They may, at best, be involved as ‘sounding boards’ for departmental plans, as implementers of decisions taken above, followers of policy guidelines and passive receivers of communication regarding strategic plans. Basically involved in the implementation of functional strategies, the middle-level managers are rarely employed for other purposes in strategic management.The importance of middle management cadres lies in the fact that they form the catchments areas for developing future strategists for the organisation.(9) Role of Executive AssistantThe emergence of executive assistants in the managerial hierarchy is relatively a recent phenomenon. An executive assistant is a person who assists the chief executive in the performance of his duties in various ways. These ways could be to assist the chief executive in data collection and analysis, suggesting alternatives where decisions are required, preparing briefs of various proposals, projects and reports, help in public relations and liaison functions, coordinating activities with the internal staff and outsiders and acting as filters for information coming from different sources. The executive assistants assist the chief executive, they help to optimise their time utilisation. The requirements for an executive assistant, in terms of skills and attitudes, include a generalist orientation, a few years’ line experience, exposure to different functional areas, excellent written and oral communication ability, and a pleasing personality. The qualification required is, generally, an MBA or CA. The position of executive assistant offers a unique advantage to young managers as nowhere else can he or she gain a comprehensive view of the organisation which can help in career planning and development and rapid advancement to the senior levels of management.

For Inspiration Academy-By- Jaimangal Singh,Asst. Prof. @ VIMT, Bulandshahr.(MBA- Finance & Marketing)

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The Role of the Board of Directors

File C5-71Written September, 2009

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The board of directors, including the general manager or CEO (chief executive officer), has very defined roles and responsibilities within the business organization. Essentially it is the role of the board of directors to hire the CEO or general manager of the business and assess the overall direction and strategy of the business. The CEO or general manager is responsible for hiring all of the other employees and overseeing the day-to-day operation of the business. Problems usually arise when these guidelines are not followed. Conflict occurs when the directors begin to meddle in the day-to-day operation of the business. Conversely, management is not responsible for the overall policy decisions of the business.

The board of directors selects officers for the board.  The major office is the president or chair of the board. Next there is a vice-president of vice-chair who serves in the absence of the president. These positions are filled by board members. Next you usually have a secretary and treasurer or combined secretary/treasurer. These positions focus on very specific activities and may be filled by electing someone who is serving on the board of directors or appointing someone who is not a member of the board of directors. The selection process is often based on who is willing and who is the most qualified, although seniority may come into play. Each board may have their own ways of handling those issues.

The seven points below outline the major responsibilities of the board of directors.

1)  Recruit, supervise, retain, evaluate and compensate the manager. Recruiting, supervising, retaining, evaluating and compensating the CEO or general manager are probably the most important functions of the board of directors. Value-added business boards need to aggressively search for the best possible candidate for this position.  Actively searching within your industry can lead to the identification of very capable people. Don’t fall into the trap of hiring someone to manage the business because he/she is out of work and needs a job. Another major error of value-added businesses is under-compensating the manager. Managerial compensation can provide a good financial payoff in terms of attracting top candidates who will bring financial success to the value-added business.

2)  Provide direction for the organization. The board has a strategic function in providing the vision, mission and goals of the organization. These are often determined in combination with the CEO or general manager of the business.

3)  Establish a policy based governance system. The board has the responsibility of developing a governance system for the business. The articles of governance provide a framework but the board develops a series of policies. This refers to the board as a group and focuses on defining the rules of the group and how it will function. In a sense, it’s no different than a club. The rules that the board establishes for the company should be policy based. In other words, the board

develops policies to guide it own actions and the actions of the manager. The policies should be broad and not rigidly defined as to allow the board and manager leeway in achieving the goals of the business. 

4)  Govern the organization and the relationship with the CEO. Another responsibility of the board is to develop a governance system. The governance system involves how the board interacts with the general manager or CEO. Periodically the board interacts with the CEO during meetings of the board of directors. Typically that is done with a monthly board meeting, although some boards have switched to meetings three to four times a year, or maybe eight times a year. In the interim between these meetings, the board is kept informed through phone conferences or postal mail.

5)  Fiduciary duty to protect the organization’s assets and member’s investment. The board has a fiduciary responsibility to represent and protect the member’s/investor’s interest in the company. So the board has to make sure the assets of the company are kept in good order. This includes the company’s plant, equipment and facilities, including the human capital (people who work for the company.)

6)  Monitor and control function. The board of directors has a monitoring and control function.  The board is in charge of the auditing process and hires the auditor. It is in charge of making sure the audit is done in a timely manner each year.

Governance Models

A board of directors is a collection of individuals trying to operate as a group. Functioning as a group is something many people are not comfortable with. So each board evolves with its own culture. Each culture is dictated by the backgrounds of the individuals on the board. However, there are several governance models of how a board of directors can function. Examining and choosing the right model is important because it will impact the success of the value-added business.

Below are four governance models. The board of directors must decide which model is best for them. 

1)  Manager Focus – With this model, the manager dominates the board. We can all think of situations where we have had one dominant individual in a group. In this case the board functions are an advisory board and reacts to the views of the manager. It is essentially a “rubber stamp” for the CEO. This model often emerges when you have a charismatic CEO who is very dominant and proactive in running the organization. In most cases this is not a good model for a value-added business. 

2)  Proactive Board – This model is of a proactive board that speaks as one voice. It speaks as one voice for the board and often has a proactive manager that also speaks with one combined voice for the organization. This is a good model because the manager and the board are on the same page and speak with a single voice. This model is proactive in taking advantage of emerging opportunities and is especially valuable for entrepreneurial businesses. 

3)  Geographic Representation – This model focuses on the members/investors whom the board member represents. With this model, the board member feels that he/she has been elected to the board to represent individuals in a geographic location or special interest group. To better understand this model, think of an individual running for a political office and then representing the interests of the individuals located in that geography. This is often found in large boards, typically of 24 to 50 individuals. With a large group like this there is a temptation for the directors to represent the interests of the members/investors in their geographic area or special interest group rather than the best interests of the company. This is not a model that works well for most value-added businesses.

4)  Community Representation – In this situation the board member is representing the community rather than the organization. An example of this is a school board where an individual is elected to represent certain interests within the community.

These four models are ways in which the board and its organization function. Often you have directors who have previously been on boards where they have been chosen to represent a certain group or have been a rubber stamp for the manager. So it is natural for a director to think that this is how all boards function. But it is a good practice for boards to actively investigate and discuss the models presented above and choose the right one for their situation. This is usually a model where the directors are all active and present a single voice of what is best for the organization. What is best for the organization will usually also be good for the various members/investors and the stakeholders in the community.

Related AgDM Files:

Introduction to Governance -- C5-70 Recruiting, Selecting and Developing Board Members and Managers -- C5-72 Board of Director Evaluations -- C5-73 Business Strategy and the Board of Directors -- C5-74 Governance Issues Unique to Start-up Businesses -- C5-75 Board of Director Educational Needs -- C5-76

Mike Boland, director, The Food Industry Center, University of Minnesota. 612-625-3013, boland@umn.eduDon Hofstrand, retired extension value added agriculture specialist, agdm@iastate.edu

Ag Decision Maker, Department of Economics University Extension, Iowa State University, agdm@iastate.edu, 641-732-5574

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