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PERCEPTION OF THE IMPORTANCE OF THE STRATEGIC PLANNING FOR THE EMPLOYEES MOTIVATION

Maja Darabos

Faculty of Economics and Business, University of Zagreb, Croatia [email protected]

ABSTRACT Strategic planning is a very important business activity. It is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. In order to determine the direction of the organization, it is necessary to understand its current position and the possible avenues through which it can pursue a particular course of action. For an organization’s vision and mission to be effective, they must become assimilated into the organization's culture. They should also be assessed internally and externally. The internal assessment should focus on how members inside the organization interpret their mission statement. The external assessment — which includes all of the businesses stakeholders — is valuable since it offers a different perspective. These discrepancies between these two assessments can provide insight into their effectiveness. It seemed very interesting to explore the involvement of employees in the process of strategic planning in retail chains in Croatia and the impact of the level of involvement to their motivation. The aim was to investigate the extent to which employees at different hierarchical levels are involved in the strategic planning process. The results showed that the top management is mostly involved, as expected, that has a negative influence on employee motivation. It is also shown that the impact on employee motivation in retail chains is positive only if management realizes the importance of participation of employees at all levels in the process of defining and creating strategic planning. Keywords: Croatia, Employees, Motivation, Retail chains, Strategic planning 1 INTRODUCTION Strategic planning concerns the firm's objectives and acts as a vehicle through which top management can plan for the future. It also includes the identification of mission and goals, the implementation process towards the achievement of identified goals and objectives and finally, finding solutions or correction actions in strategy evaluation and control process (Hitt, et al., 2000; Pearce and Robinson, 2000). The largest part of definitions includes strategic formulation which identifies the mission and goals, how the implementation takes place and evaluation at the end of the stage of strategic planning process. The definition of strategic planning used in this thesis comprises a process where a firm establishes its objectives, formulates actions designed to achieve objectives, implements the actions and assesses the progress and results. As this definition implies, strategic planning process focuses on the setting of firm objectives and development and implementation of plans designed to achieve them. In order to determine the direction of the organization, it is necessary to understand its current position and the possible avenues through which it can pursue a particular course of action. For an organization’s vision and mission to be effective, they must become assimilated into the organization's culture. They should also be assessed internally and externally. The internal assessment should focus on how members inside the organization interpret their mission

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statement. The external assessment — which includes all of the businesses stakeholders — is valuable since it offers a different perspective. These discrepancies between these two assessments can provide insight into their effectiveness. It seemed very interesting to explore the involvement of employees in the process of strategic planning in retail chains in Croatia and the impact of the level of involvement to their motivation. The aim was to investigate the extent to which employees at different hierarchical levels are involved in the strategic planning process. First, the strategic planning will be defined through all process, then the benefits of successful planning will be explained, after that the results and discussion will be given and finally the conclusion. 2 DEFINING STRATEGIC PLANNING PROCESS Strategic planning process increases the way a firm manages the internal resources, scanning the external environment, position themselves in an industry. This is because small and medium firms are easily affected by the changes of the industry (Covin and Slevin, 1989; Storey, 1994; O'Regan and Ghoabadian, 2006). Strategic planning process in the study is divided into three elements namely efforts in strategic planning, degree of involvement in strategic planning and formality. Strategic planning process include efforts made by managers and a number of essential dimensions for rational decision making including goals, environmental positioning and matching firm's capabilities with opportunities (Kramarczuk, 1987; Stanwick and Pleshko, 1995). The efforts in strategic planning process are shown in Figure 1. The efforts consist of strategy formulation stage; implementation stage, evaluation and control stage are identified in firms’ execution of strategic planning.

Figure 1: Efforts in strategic planning process The strategic planning process addresses a long-term goal and requires the involvement of top management in policy making, reviewing the objectives, goals, allocation of resources, identifying alternative strategies, scanning for environment and evaluation to the whole

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process. Degree of involvement suggests how strongly a person is interested in the firm. Thus, for any given firm, a person can conceivably be strongly attracted, indifferent, or strongly repelled in terms of the range of involvement (Wooldridge and Floyd, 1990). Many authors have highlighted the important role of top management involvement in the strategic planning process (Foo and Grinyer, 1995; Elbanna, 2003; Wooldrigde and Floyd, 1990; Fiegener, 2005; Ketokivi and Castaner, 2004). Although not all research has supported the positive impact of top management involvement in strategic planning (Dyson and Foster, 1982), strong theoretical support suggests that broad involvement by top management in the strategic planning process enhances the organizational outcomes. For instance, Westphal and Frederickson (2001) found that top management has a significant impact on strategic planning. Moreover, some researchers support that top management involvement in strategic planning even though many strong theoretical suggest that broad base involvement by top management in the strategic planning enhances the firm performance (Hrebiniak and Joyce, 1984; Higgins, 1981; Van de Ven, 1980). Similarly, Freeman (1989) reports that top management involvement in strategic planning clearly influence effective planning consequences. Besides, the involvement also enhances psychological planning consequences such as morale, commitment to the firm, commitment to planning and motivation. According to Pugh et al. (1968), formalization is the degree to which the norms of the organization are explicitly defined. He further distinguished between "formalization", referring to whether these norms are written down in manuals and other documents. Formality in strategic planning requires an explicit process (Armstrong, 1982; Mintzberg and Lampel, 1999). The reason of having strategic planning written in detail is to ensure strategic planning process receives commitment from those who are affected by it and to allow an explicit evaluation and clearly specify objectives is part of the formal strategic planning (Armstrong, 1982). 3 BASICS OF EFFECTIVE STRATEGIC PLANNING The benefits of a successful planning process are too important to leave unfulfilled and the benefits include: goals and objectives; decision aid which entails a guide for making really tough decisions in difficult situations, such as which programs to cut, where to invest energy, where to invest capital, or how to adjust to a rapidly changing environment; change management that represents a framework for managing organizational change and building creativity; management board (a springboard for recharging and reforming the board); and finally an inspiration that acts as a tool for generating organization motivation und excitement. There are three organizational qualities required for excellent strategic planning: the objectivity to accurately assess the organization's strengths and weaknesses, the ability and creativity to envision the future, and the discipline to work through the plan with enough detail to provide a road map for staff and board members. Many organizations do not invest enough thought into the preplanning process. Good data should drive the planning process, and it may take a bit of time to gather it. Creativity and intuition are also needed, but a solid base of information is needed. Also, the participants in the planning process are critical. This involves key staff and their diversity in skills. Moreover, an off-site meeting space is excellent for changing the mindset of participants. Timing is everything, so rimes of crisis or times during which key staff members are too busy has to be avoided.

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When the proper groundwork has been laid, the planning process can be straightforward. The need for efficient use of time and the need for adequate discussion and resolution have to be balanced. A review of the mission and vision statements is necessary as a starting point. Maintaining a valid mission and vision for the organization are the reason for planning in the first place. Avoid compromise for the sake of compromise; it often leads to mediocrity, not excellence. The discussion of strengths, weaknesses, opportunities, and threats should cover internal as well as external factors. Every strategic plan has goals and objectives, and the good ones have measurable and specific objectives. The plan must be tied to timeframes. Otherwise, the more difficult items will be put off until it's time to do another strategic plan. What concerns the evaluation of the process, frequent reviews will mark progress, so the areas of concern have to be identified, as well as necessary changes to the plan. A strategic plan is like a budget in that which constantly needs tweaking as organizational environment changes. Management board and staff members should be thinking strategically all the time, because the plan represents a framework for their thinking. 4 THE IMPORTANCE OF THE STRATEGIC PLANNING FOR THE

EMPLOYEES MOTIVATION There are many different ways to define motivation, but in the narrowest sense motivation can be explained as the process of encouraging people to achieve both, the companies and personal goals. These goals are intertwined and often the realization each goal individually, indirectly means the realization of other (Bogdanovic, 2003). Motivation, aims to: improve productivity, efficiency and creativity at work, improve the quality of working life in the organization, strengthen the competitiveness and success of the company etc. (Bahtijarevic- Siber, 1999). Motivational strategies can be classified into material and pecuniary motivation strategies (Buble, 2010). Material motivation strategies can also be divided into direct (wage system) and indirect pecuniary motivations (benefits). Pecuniary compensations with a role to motivate employees are of an increasing importance same as the awareness on the need to introduce them. At the same time companies are taking care of the continuous carrier development of their employees. They generally have a greater effect with highly educated employees. When talking about the importance of motivation for firm performance, we talk about skills and competencies of employees, but not only that, motivation has its direct and indirect impacts, and thus significantly affects the performance of tasks, improving employees work performance, productivity and efficiency. Just as the system of motivation is based on different forms of rewarding and stimulating successful employees for their outstanding work, they must be a worked out system of penalize employees who do not do their work conscientiously and responsibly. A penalizing system, as long as an employee gets an explanation on why he or she is being punished, can sometimes have a positive effect on the worker. Corporate vision can be one of the motivators in a company. Corporate vision is the main motivator and instigator of the entire company and it is very important that is integrated into the company's business. People, who should carry on the vision of the company to its employees, are company managers. The best example is a charismatic leader who in practice

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often begins this process by clearly articulating a vision that promises success, and then sets high expectations and expresses the belief that people can accomplish them. 5 RESULTS AND DISCUSSION The research was conducted among employees of two retail chains by using a questionnaire, in order to determine the difference of motivating employees in domestic and foreign firms and also to investigate the extent to which employees at different hierarchical levels are involved in creating the vision, mission, goals and strategies of the company in which they currently operate. Sample consisted of 50 employees. The familiarity of employees in the existence of the vision of sample in the first company is 84%, while in the second case, it is only 37%. Likewise, the question of whether employees are considered as an important part of the vision of the firm, the first sample shows 78% affirmative answers, while in the latter firm only 20% gave an affirmative answer. When asked whether the vision of the company motivates them, employees of the first company responded positively with 62%, and employees of the second responded with 36%. The questionnaire has shown that employees in the first chain are mostly motivated by money rewards and bonuses (66%) slightly less through praise by superiors and gift packs, and at least through the vision (7%). The situation is similar in the other retail chain; greatest motivators are money and financial incentives (87%), supervisors praise from 11% and 2% of the gift packs. Also, the survey results show that as much as 81% of employees in the first retail chain to be sufficiently motivated to work, while in the second chain for the same question only 59% of employees answered confirmatively. Previous research has shown that workers of the first company have a much greater incentive to work, which is closely linked to their information on the vision and mission of the company, which is being implemented across all branches and levels of management. In this way, workers are informed on company's vision and are thus considered an important part of it, which in psychological terms becomes an immaterial motivator to work. While the other company is seen with insufficient employees awareness of the vision, mission and objectives of the company and do not have nearly no opinion about that. There could be found a group of disinterested workers, which may be a consequence of that, which can eventually affect the financial results. From all results shown, it can be concluded that the impact of vision on the motivation of employees in the companies is positive, but only if the management of the company recognizes this as a good way to motivate with an intangible method, and if it is used periodically toward all employees in order to create mutual concern in completing of work tasks. Vision can have a very powerful impact on employees in a positive way if through vision they feel as a very important link in achieving profit and a qualitative and quantitative progress of the company.

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Chart 1: Current position of respondents in the sample Chart 1 show the current position of the respondents in the enterprise in which they operate. It has shown that 2.9% of respondents perform a top management position, while 14.3% of respondents are in positions of middle management, and the highest percentage, 82.9%, are lower level management. The majority of respondents feel that they have enough knowledge of the vision, mission, goals and strategy (51.4%) and that it takes certain knowledge in order to create the appropriate mission and vision (85.7%). Their companies have clearly defined and documented visions, missions, goals and strategies (80.8%), and in creation of strategy most participates are top managers (92.9%), while 3.6% of them responded that it is also done by middle managers, and lower level management which can be seen from chart 2.

Chart 2: Participants in the process of creating a vision, mission and goals of the companies

from sample

92,9%

3,6%

3,6%

top management

middle management

lowwer level management

3%

14%

83%

top management middle management lowwer level management

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Furthermore, the results show that respondents did not participate in the process of creating a vision, mission, goals and strategy (89.3%) and they view this process as partially an important part (53.6%). According to the respondents the top management has partially devoted enough time developing a vision and mission (46.2%) and has partially tried hard enough to bring them to other employees (51.9%). This vision and mission are partially challenging and motivating (57.7%), they are clear to every employee (42.3%), and related to the system of values (48%). According to most respondents success of the company depends on the vision and mission (48%) and on the observance on the company vision and mission (68%). 6 CONCLUSION A strategic plan is like a budget and it constantly needs tweaking as your organizational environment changes. Frequent reviews will mark progress, identify areas of concern, and highlight necessary changes to the plan. Management board and staff members should be thinking strategically all the time; the plan is a framework for their thinking. There are two distinct dynamics in the planning process, including the content of the plan itself and the emotional climate. Both must be managed to obtain ongoing success. The aim of this paper was to investigate the extent to which employees at different hierarchical levels are involved in the strategic planning process and what influence that has on employee motivation. The results showed that the top management is mostly involved, as expected, and that has a negative influence on employee motivation. It is also shown that the impact on employee motivation in retail chains is positive only if management realizes the importance of participation of employees at all levels in the process of defining and creating strategic planning. Every employee, regardless of which position he works in a company, should participate in the process of defining and creating a mission and vision. This will contribute to a greater employee motivation and increase their desire to work and remain in the company as they will be under the impression that his opinion is valued and affirmed. 7 BIBLIOGRAPHY 1. Aragon Sanchez, A. and Sanchez Marin, G. (2005). Strategic Orientation, Management

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