Corporate governance has become a buzzword in recent times, as the businesses are now paying more focus on balancing profitability with sustainability. It is quite a difficult concept to explain, although easy to define, which says, it is the act of balancing the interests of an organization’s shareholders, management, customers, suppliers, financiers, government and the community.
There are two schools of thought, namely prescriptive approach and descriptive approach, which the strategic management can be divided upon. The prescriptive one focusses on how to develop strategies while the descriptive one focusses on how to put them into force. While an organization’s higher management is responsible for its strategy, the strategies are themselves dependent on the actions and ideas considering the lower-level managers and employees. Acknowledging this fact, leaders focus on learning from past strategies and examining the environment at large. Thus, effective strategic management is a blend of inward and outward perspective.
Let us consider a simple example to understand this concept:
An IT company wishes to employ new members and set up a career growth path for the new and existing employees for a tenure of 5 years. The idea is to market the company in the best way possible amongst the competitors, with a goal of attracting and employing talented workforce. In this case, strategic management means that the company has enough and attractive projects in its kitty and is ready to pay the workforce. This also involves investment in marketing, sales, infrastructure and retention strategies. The leadership then assesses the goals on a periodic basis for a tenure of 5 years. Thus, the focus is to put not only on profitability but also on sustainability keeping in mind the interests of all the stakeholders.
The organizations, which are not flexible enough usually fail to succeed in such scenarios and end up creating a barrier between the prescriptive and the descriptive thoughts. Therefore, for profitability and sustenance, the idea is to be more flexible and aware of the changing business scenarios. Writing few lines is certainly not enough to explain this complex and ever-changing notion, because it is to be thought of empathetically at all levels.