Strategic Management Dynamics

Chapter 1 - Performance Through Time

This Chapter explains why the over-riding imperative for Strategy is to help management improve performance over time, an issue just as vital to organizations in the voluntary and public service sectors as to commercial businesses. This exposes three fundamental questions – why performance has followed the path that it has up to today, where that performance will likely go into the future, and how management can act to improve that trajectory sustainably. The Chapter explains the problems with ratio-based objectives and establishes the importance of focusing instead on time-chart pictures of absolute performance measures. Two widespread risks in setting performance objectives are discussed – choosing aims that are either unrealistically ambitious or under-shoot the potential opportunity. Also discussed is the value of applying the same principles to functional performance. Connections are made to established concepts of economic profit and shareholder value.

This Chapter includes connections to the following Strategy concepts: Value-Curve, Value Chain, Generic Strategies, Industry Forces and Vision & Mission.

Key Issues

• Business value reflects future earnings.
• The management imperative: Building performance into the future.
• Non-financial performance measures, especially in public-service and voluntary organisations.
• Appropriate objectives: Achievable, but developing the full opportunity.
• Inappropriate performance measures: ratios, market share, percentage growth rates.
• Multiple and conflicting objectives.
• Choosing appropriate timescales, depending on the issue of concern.
• Functional challenges and choice of objectives.
• Implications for information needs.