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Home arrow Management arrow Strategic Management in the 21st Century. Corporate Strategy

Responsibilities of the 21st-Century Organization

Successful organizations in the current business environment will continue to encounter a set of unique challenges that will require the integration of several objectives. To stay in business, the organization must of course generate an acceptable level of profit and return on investment. However, the unique circumstances under which they operate may subject them to additional pressures, for example, those tied to corporate and social responsibility. Hence, they may have objectives that are seemingly in conflict with each other. If the overall corporate strategy integrates these various objectives, and, based on this, an appropriate quality management policy is formulated, it will create a unified road map for the company. The role of top management will be to create this unified mission and strategic plan, and achieve their acceptance by all entities in the organization. We now discuss some of the unique responsibilities of the modern organization.

Creation of an Appropriate Organization Culture

The organizational culture is the heart and soul of the company. It represents the values of the corporation and should convey to all stakeholders the behavior patterns expected. Although it may not be feasible to display this in a written form, it is still a representation of the management style, and implicitly conveys to employees the environment that prevails within the organization. In some sense, it also represents the unwritten policies of the company—how information is transmitted back and forth within the various layers of management, and how input from employees is valued.

The organizational culture represents an excellent avenue using which senior management can create a bond with employees. Making employees feel that they are an integral part of the organization improves morale and motivation. Promotion of a spirit of teamwork and of the importance of cross-functional teams for problem solving is an important outcome of the culture. In today's organizations in which tasks are spread across multiple locations and among vendors with different specialties, feasible solutions may require the coordination of several units, both inside and outside the organization. The development of a culture that embraces the concept of an extended system incorporating vendors and suppliers as part of the organizational team, will promote the creation and adoption of new strategies for problem solving. As described previously, information flow and exchange has to be managed in a dynamic and global manner. An organizational framework that adopts this reality will be an ingredient for success.

Acceptance of Corporate Responsibilities

The acceptance of as well as accountability for certain corporate responsibilities are realities for organizations today. One often debated responsibility relates to financial issues. After the debacle of organizations such as Enron and WorldCom during the period 2000-2002, the Sarbanes-Oxley Act was enacted by the U.S. federal government.9 Although the act itself requires that the chief executive officer approve and accept responsibility for financial statements, organizations need to look beyond merely formal signature authority. Operational policies that impact quality management goals and objectives should be formulated and implemented so that various units within the organization are aware of which elements contribute positively to profitability and which do not. Such transparency will promote a comprehensive approach to identifying where effectiveness or efficiency needs to be improved. Hence, it becomes an organization-wide responsibility to achieve goals and objectives, and when they are not achieved, divisive finger-pointing or the taking of short cuts is avoided. In a sense, the prevailing organizational culture should promote such cohesiveness.

Another dimension of corporate responsibility deals with the professional development of employees and associates. If the organization values its employees, it should support their growth and development. Employees' motivation is influenced by the manner in which they are treated by the company. Particularly during difficult financial times, if employees believe that the organization is genuinely concerned about their well-being, it will improve morale and performance. Organizations can provide training programs not only to improve employees' existing knowledge and skills, but also to provide job enrichment or diversification. Moreover, a participative environment in which management and employees work together for the common good can have a positive effect.

Corporations also have a responsibility to the local communities in which they operate. The local community is part of the extended system of the organization, and employees are part of the local community. If the educational and cultural needs of employees and their family members are satisfied, the workforce will be inspired and motivated. Helping to create and maintain a good school system for the children of employees as well as the community at large is one way by which an organization can fulfill their responsibility. Providing adequate recreational facilities is another. Within the organization, providing daycare, medical, or fitness facilities for employees, or enabling employees to work from home where feasible, are additional options. In general, offering benefits that reflect quality-of-life issues can remove significant burdens for employees. Employees often consider these benefits quite attractive relative to financial compensation.

Social Responsibility with Respect to Resource Consumption

With population growth across the globe, demand for products and services continue to grow. In addition, economic growth has fuelled an expansion of the middle class in many countries, further increasing demand for products and related services. This has in turn had a impact on demand for natural resources, the supply of which is in many cases limited. Demand for energy is of particular concern. Energy can be produced from fossil fuels, extracted fuels such as those required for nuclear energy, or through sustainable sources such as solar power, wind power, tidal power, or hydropower. With the limited availability of fossil fuels, the creation of which takes many years, it becomes the responsibility of organizations to limit their consumption to the extent feasible. If cost were the only criterion used in selecting an energy resource, fossil fuels would typically be chosen. However, socially responsible organizations that consider the long-term impact on society as a whole may opt instead for sustainable energy sources. These organizations may include the well-being of mankind in their vision, and may choose a path that is not necessarily the most cost efficient in the short run.

Effectively Managing Supply and Demand Side

Companies must effectively manage both the supply and demand of products and services, rather than focus on one dimension alone. Consider first the supply side. With the increased and varied needs of customers, an organization's core capabilities may not enable it to satisfy all customer needs. In such cases, the company may elect to outsource some production that is outside its core capabilities. Selecting the right vendor, treating the vendor as part of the organization's extended process, and thus having to understand and possibly influence the vendor's quality policy become relevant issues. Following the sale of the product, the provision of service may also be part of customer requirements. In this case, an organization may choose to outsource the service function to a vendor with the requisite expertise. By engaging third parties, a company may be able to effectively meet both the product and service needs of the customer within the constraints of its own resource capabilities. Such arrangements may also create an advantage over competitors who may not have the expertise to satisfy all customer needs. Consider, for example, major banks and financial institutions, such as Bank of America, that offer credit cards to their customers. Such institutions may outsource the processing of credit card purchases, preparation of monthly statements, and follow-up on customer inquiries to organization such as Total Systems Services, Inc. Total Systems Services, for example, offers a full line of credit card support services, which include processing card applications, producing and mailing cards, authorizing certain credit related services, providing customer service support, as well as offering merchant support services. Thus, Bank of America can ensure that service needs are met even though they themselves may not have the required expertise.

Diversification is another approach to managing the supply side. Research and development activities may identify product markets related to those that a company already serves that the company could venture into with reasonable infusion of resources. Although a cost/benefit analyses should always be performed for such new ventures, expanding into new markets offers a possible means to balancing swings in product demand. A company that is well diversified is in a better position to manage overall profitability when there is a drop in demand for one product than a company that is not. For example, consider a company that makes both electric and gas generators. If demand for gas generators were to drop due to an increase in gas prices, the company's profitability position might not suffer if the company were able to respond to demand for other types of generators for which demand may increase.

Another option is an acquisition/merger. If the company being considered for acquisition is in the same industry, the acquisition may lead to an increase in capacity for the acquiring organization. The acquired company may also have the capability to offer distinct product features, an expertise that the acquiring company may not have. Acquisition may thus offer the ability to meet increased product demand or product variety in an efficient manner.

On the demand side, managing the needs and expectations of the customer is the major concern. The importance of meeting the dynamic needs of the customer on a real-time basis was described earlier in the chapter. Here, we address means of managing the demand side. Several parameters related to demand are under the control of an organization, for example, price, and the availability and scope of warranties and service contracts. Price will be influenced by several factors, one of which is the unit cost of production. If some aspects of production are outsourced, effective management of processes through the extended system will provide a means for cost control. In order to be competitive, price will also be influenced by the prices of competitors' products. Differences in quality may make it possible for the company to set a higher price relative to that of competitors. As part of satisfying the overall needs of the customer, a warranty and/or service contract may also be included in the product/ service bundle offered. An assessment of opportunities and threats relative to competitors will provide insight into selecting parameters of these offerings. The importance of a competitive offering of price, warranty, and service contract should not be overlooked as this can influence overall market share.

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