Management

Benefits of Strategic Management

In today’s VUCA and BANI (Brittle, Anxious, Non-Linear, and Incomprehensible) environments, strategic management has emerged as a critical skill and function for organizations striving for long-term success.

Founded on the five management functions (and the five Ms of management), strategic management hinges on a systematic approach to planning, decision-making, resource allocation, and the ability of every team and business to navigate challenges and capitalize on opportunities focused on their core vision. 

All of these are critical to sustaining the growth of any organization. 

In this guide, we will explore the key benefits of strategic management and my own takeaway as CEO of three companies: an SEO agency, a coffee shop franchising company, and a corporate training company.

The benefits of strategic management are broadly categorized into financial and non-financial, both of which are indispensable for sustaining a company’s success. 

1. Financial Benefits of Strategic Management

A. Improved Profitability and Revenue Growth

One of the primary financial benefits of strategic management is its positive impact on profitability. Companies with well-defined strategic plans are better equipped to identify and capitalize on revenue-generating opportunities.

Directors and managers ensure that they pinpoint necessary opportunities (becoming purposeful and opportunistic) as part of their directing in management. This proactive approach to market trends and consumer demands leads to consistent revenue growth, mainly when proper execution occurs. 

One study published in the Strategic Management Journal found that companies engaged in strategic planning experienced a 12% higher profitability than those that didn’t. 

Strategic management helps businesses set financial goals, monitor performance, and execute against those goals while implementing corrective measures, if necessary, when deviations occur—all these ensure sustained profitability. 

Apple Inc. has consistently used strategic management to innovate and enter new markets, now driving higher profitability year over year. They maintained high net income growth from $48 billion in 2018 to over $55 billion in 2020.

B. Efficient Resource Allocation

Strategic management allows organizations to optimize resources by identifying the most profitable ventures and prioritizing investments accordingly. In leadership training, we teach that we must utilize and maximize five resources daily. Failure to do so will result in disorder and inefficiency.

These five resources include:

• Treasure (Money)
• Attention
• Energy
• Time 
• Talent

Efficient resource allocation helps minimize waste and ensures that capital, human talent, and all allocated resources toward initiatives can achieve the highest potential for returns. 

According to a report by McKinsey & Company, firms that implemented strategic management practices achieved a 25% increase in resource productivity, leading to significant cost savings and improved financial performance.

It is through leaders starting to see things from a top-down perspective —we call this “big-picture thinking” or “strategic thinking”—that the team must focus on, whether it is a high-return project or daily task. Companies must avoid unnecessary expenditures to free up resources for other critical business areas. 

Procter & Gamble (P&G) strategically focuses on high-growth categories like beauty and personal care, allowing it to allocate resources more effectively. It has focused on a market where it knows it can, which has resulted in improving its operating margins and steady financial growth, as reported in its annual financial statements.

C. Enhanced Risk Management

Strategic management involves identifying potential risks and developing plans to mitigate them. This proactive approach helps businesses avoid costly financial setbacks and ensures that they can withstand market fluctuations. According to a PwC survey, 73% of CEOs actively engaged in strategic risk management reported fewer financial losses than those who did not.

Risk management constitutes solid training for mid-line managers and directors. It is a critical skill in today’s rapidly changing market, as each organization and individual faces different types of risks in leading their teams. 

For instance, we managed to take calculated risks when we opened our coffee shop in Bulacan and our franchise in Lower Bicutan. Given the product-market fit, we saw every pattern and readability in operations to ensure it would catch a good market share once we launched our products. 

Another example is companies like Zoom, which, with strategic risk management plans in place, were able to quickly adapt to the surge in demand for virtual communication tools. As a result, Zoom’s revenue increased by over 300% in 2020, demonstrating how strategic planning can lead to significant financial gains even during uncertain times.

D. Improved Financial Planning and Budgeting

Strategic management enables businesses to create more accurate financial projections and budgets by aligning them with long-term goals. This alignment ensures that economic resources are allocated to support strategic objectives, leading to better financial outcomes.

A recent study by Deloitte revealed that organizations with strategic management frameworks experienced a 15% increase in financial planning accuracy, leading to more efficient budgeting and cost control. 

Financial planning is directly related to strategic goals. Businesses can avoid overspending by focusing on critical projects that require significant available funds. 

2. Non-Financial Benefits

Beyond monetary gains, strategic management offers a plethora of non-financial advantages that any leader can overlook without thinking. These benefits contribute to the organization’s overall success, sustainability, and competitiveness. 

A. Clear Organizational Direction and Vision

Having a clear sense of direction and vision is part of the directing stage of the PLOC framework in management, which determines the destination of any organization. Strengthening strategic management initiatives ensures that all stakeholders understand the organization’s goals and the action steps needed to achieve them.

According to research conducted by Bain & Company, 90% of high-performing organizations attribute their success to having a clear strategic vision that guides their specific actions and decisions. This sense of purpose assists them in aligning efforts and ensures that every department and employee works toward the same goals. 

For instance, Tesla, Inc. has a clear vision to “accelerate the world’s transition to sustainable energy.” This strategic focus enables them to develop more products and marketing strategies while inspiring employees and stakeholders to contribute to the same vision within the electric vehicle market. 

We covered how to create vision statements in our Visioneering module in our team training and management training programs. 

B. Improved Decision-Making

Strategic management provides a structured framework for decision-making by analyzing internal and external factors that impact the business. This systematic approach ensures that decisions are made based on data, market trends, organizational changes, and capabilities, reducing the risks of costly mistakes. 

A study conducted by Harvard Business Review found that organizations with strategic management processes are 60% more likely to make decisions that lead to positive outcomes. Different strategic management initiatives, such as data analytics, scenario planning, and forecasting, can further result in informed and effective choices.

Johnson & Johnson, a global leader in healthcare, employs strategic management to make informed decisions regarding product development and market expansion. They use data-driven insights to launch new products that align with market demands. 

C. Adaptability and Resilience

Without adaptability, you can’t contribute to your organization's success. Strategic management equips organizations with the tools to anticipate changes and respond to any market disruption so they can adjust their strategies accordingly. 

A report by the Boston Consulting Group found that organizations with robust strategic management practices are 50% more likely to adapt to market changes, ensuring long-term sustainability. 

Netflix is a prime example of adaptability through strategic management. Initially a DVD rental service, Netflix anticipated the shift toward digital streaming and strategically pivoted its business model. This adaptability approach has positioned Netflix as a market leader in the streaming industry, with over 200 million subscribers worldwide. 

D. Enhanced Employee Engagement and Motivation

Involving employees in the strategic planning process fosters a sense of ownership and commitment, leading to increased engagement and productivity. Employees who understand their role in achieving the organization's goals are more likely to be motivated and perform at their best.

A Gallup study found that organizations with high employee engagement experience 21% higher productivity and 22% greater profitability than those with low engagement. Strategic management helps create a culture where employees feel valued and connected to the company's mission, which in turn drives better performance.

Example: Google employs strategic management practices that encourage employee involvement in decision-making, leading to high levels of engagement and innovation. This approach has contributed to Google’s reputation as one of the best places to work while driving its success as a global tech giant.

E. Strengthened Organizational Culture and Values

Strategic management helps to establish a strong organizational culture by aligning the company’s values, beliefs, and behaviors with its strategic objectives. A strong culture fosters unity, collaboration, and a shared sense of purpose, vital for achieving long-term success.

Research from the Journal of Organizational Behavior indicates that companies with a well-defined culture aligned with their strategy outperform their competitors by up to 30%. 

One of the best examples is Southwest Airlines' strategic management approach, which emphasizes employee empowerment and customer service. This culture has led to high employee satisfaction, low turnover rates, and a loyal customer base, making it one of the most profitable airlines in the industry.

Incorporating strategic management is not just an option but necessary for organizations aiming to thrive in today's dynamic and competitive business landscape.

by Venchito Tampon

POLC Framework in Management: Planning, Organizing, Leading, Controlling

POLC framework is a long-held effective management framework that has evolved over time. Companies, especially those in the L&D department, practice it to develop their current and succeeding leaders.

While it’s been popular for decades in the talent development industry, many beginning trainers, speakers, consultants, and company leaders still struggle to grasp its true importance. 

Today, we’ll examine the fundamentals of the POLC framework and how you and your leaders can apply them to effectively lead your team to the next level of growth and significance. 

Let’s get started. 

POLC As A Framework 

POLC stands for Planning, Organizing, Leading, and Controlling, and it is often attributed to the work of Henri Fayol, a French mining engineer and management theorist who is widely recognized for his contributions to modern management theories. 

Henri laid the groundwork for the classical management theory, presenting 14 management principles (including the 5Ms of management) and introducing the four primary functions of management—we now know them as POLC. 

Let’s dive into each of these management functions.

Planning: Setting Clear Objectives 

Planning is the cornerstone of the POLC framework. In the initial phase, team leaders set clear objectives, develop strategies, and allocate resources to achieve individual and organizational goals.

One best practice when planning is having a good grasp of your organization’s MVV (Mission, Vision, and Values). Without these three organizational core elements, any leader would have difficulty aligning and adjusting their plans to impact the organization’s objectives. 

Actionable Tips To Apply Planning as Managers:

• Consider planning as part of the manager’s job. Most do not include it as their weekly tasks, given it’s not explicitly included in their job roles and responsibilities. By letting it become part of your duties, you’ll manage processes and lead your team more effectively than before.
• Schedule plans in your calendar. As scheduled, you plan with your team (or whoever must be included in the planning sessions).
• If you’re at the top of management, revisit your mission and values and ensure you align the plans of your business units and departments to pursue your mission. 
• Involve key stakeholders to ensure plans are comprehensive. 

Planning should always be considered. The better you plan as a manager, the more you’ll be ahead of your competitors and become more relevant to the industry and community you’re engaging with. 

Organizing: Executing Plans Effectively 

Once plans are set, the next step is organizing and structuring resources as needed to execute them effectively. 

Now, organizing involves assigning key roles and responsibilities, prioritizing major tasks from minor tasks, delegating authority, and coordinating all efforts across teams or departments you’re involved with. 

Execution isn’t easy and may require abilities to manage tasks effectively. 

Actionable Tips To Apply Organizing as Managers:

• Create a well-structured environment as supervisors, where staff members know what is expected of them.
• Foster collaboration in your culture to get feedback from people so you can improve specific processes and systems. 
• Streamline processes and remove inefficiencies that only consume time and waste resources.
• Revisit your plans when things go wrong and your actions don’t align with what you want to accomplish as a team.
• Break down any big projects into meaningful, small tasks. Let small wins build momentum, inspire your team to improve, and accomplish more significant goals and objectives. 
• Practice decision-making skills to become a great leader. In most situations, be ready to make major decisions on tasks and projects. 
• Use project management tools to help organize resources, workflow, and team initiatives. By seeing it from a tool, you’ll be able to track every phase of your project. 

Leading: Inspiring and Motivating 

Leading is the heart of the POLC framework and one of the five functions of management, which involves inspiring and influencing teams to achieve extraordinary results. 

Given that management requires people to work on processes, it is essential for managers to learn how to handle people to the best of their abilities. 

Over a decade of entrepreneurial experience handling teams and being a consultant and trainer for many local companies in the Philippines, I’ve had the privilege of learning (and still developing) lists of actionable tips for anyone to improve as a leaders. Here are some tips you can adapt to your style: 

• Build your credibility as a leader. Staff members want to follow someone who talks their talk. If you’re doing what you’re already telling or instructing them to do, you need a few words to get them into action. Otherwise, your example won’t easily inspire staff if your character doesn’t speak of your promises.
• Invest in your personal leadership by discovering your own leadership training objectives. The key is to aspire to be better leaders every day. As the world is changing so fast, so does the new generation of workforce we’re currently leading. 
• Develop business acumen as leaders. Know the industry trends and changes and perhaps predict what's to come based on historical data and observation. You’ll become better managers if you can teach your team to adapt to the ever-changing needs of the market and the industry. 
• Do not let your ego consume you; you need feedback from peers, superiors, and associates. This will increase your self-awareness of areas where you need to improve more—knowledge, skills, and attitude (core elements of competence). 
• Improve emotional intelligence. As you manage your emotions, you’ll be more sensitive to the feelings of other people, which creates a warm and inclusive work environment for your teams. 
• Be founded on your values. Demonstrate the values and behaviors you expect from others. 

Controlling: Monitoring and Adjusting 

The fourth pillar of the POlC framework is controlling. This is where monitoring and evaluating performance management comes in. 

You’ll have better chances of achieving your goals by making necessary adjustments.

Effective control isn’t about the people you lead but about the work itself, as you need to identify potential issues or deviations from the plan early on. 

Here are a couple of tactics you can apply as leaders in the controlling phase of management:

• Establish clear performance metrics - this is where you’ll measure performance as you achieve your goals. 
• Implement corrective actions when necessary if you see any changes or are behind-the-scenes in projects.
• Keep a close eye on key performance indicators and regularly communicate them with your team. 
• Use immediate feedback instead of waiting for the annual feedback so you can help your associates or staff members perform better at work by addressing their latest concerns and challenges. 
• Utilize resources efficiently by continuously monitoring performance. The goal isn’t just to save resources, but to maximize them so you can achieve your goals. 

Mastering POLC Framework Never Ends

Mastering the POLC framework is a continuous journey for leaders. The business landscape has changed, so leaders must constantly adapt and refine their approach to meet the changing demands of our time.

Embrace these four pillars of the POLC framework as one of your functions as managers to achieve your goals through performance management and inspire people through better collaboration and healthy work culture. 

by Venchito Tampon