Inputs, the Black Box, and Outputs

With the completion of the discussion of the environment and sectoral contexts, the

discussion of the sectoral enterprise as graphically depicted in Figure 3 can move forward to

consider the sectoral strategic inputs by figuratively opening the black box (the graphic depiction

of the Sectoral Enterprise) and by considering sectoral outcomes. Before proceeding with these

topics, sectorally-oriented definitions of strategic management must be considered to pave the way

for the discussion. Given the multi-sectoral approach utilized in this dissertation to consider

strategic leadership competencies, which include understanding the strategic management

processes (Stumpf & Mullen 1991), definitions of strategic management were sought out in the

literature from strategic management scholars from each of the three sectors. A definition from a

textbook utilized in strategic management courses designed for future business leaders (Geiger,

2010) is as follows: “Strategic management is a set of managerial decisions and actions that

determines the long-run performance of a corporation. It includes environmental scanning (both

external and internal), strategy formulation (strategic or long-range planning), strategy

implementation, and evaluation and control. Strategic management incorporates such topics as

strategic planning, environmental scanning, and industry analysis” (Wheelen & Hunger, 2010, p.

5). The above definition is structured to match the elements of a model of strategic management

that was utilized in an author’s textbook. While this definition was useful for identifying such

process elements, it does not give appropriate deference to strategic leaders, the enterprises that

they lead, or the specific expected outcomes of their leadership.

Another more sectorally-specific definition of strategic management is as follows:

“Strategic management deals with the major intended and emergent initiatives taken by general

managers on behalf of owners, involving utilization of resources to enhance the performance of

firms in their respective environments” (Nag, Hambrick, & Chen, 2007, p. 944). The above forprofit

industry-oriented definition of strategic management clearly focuses on the expectations of

investors, which is a concept that is foreign to those contemplating the governmental and nonprofit

sectors. In a text written by a not-for profit sector author, the author wrote that strategic

management “denotes the whole processes of innovation, strategic analysis, formulation, and

implementation, emphasizes the continuous nature of the process, and makes it much more likely

that any strategies which are decided on will actually be implemented” (Courtney, 2002, p. 8).

According to another author in the public sector community, strategic management in the public

sector is defined as “the appropriate and reasonable integration of strategic planning and

implementation across an organization (or other entity) in an ongoing way to enhance the

fulfillment of its mission, meeting of mandates, continuous learning, and sustained creation of

public value” (Bryson, 2011, p. 25).

In considering each sectorally-oriented definition, there are certain commonalities,

notwithstanding significant sectoral differences. First, each definition anticipates that strategic

management is more than strategic planning. This aspect of the definition is discussed in detail in

section two of this report. In order to work as an effective definition, strategic management should

consider the “who,” “what,” “when,” “where,” “why,” and “how” terms as they relate to strategy.

Some key terms must be defined for this discussion to continue. Strategy is “a central integrated,

externally oriented concept of how the business will achieve its objectives” (Hambrick &

Fredrickson, 2005, p. 50). The “what” of strategy is its content. The “content of strategy describes

attractive destinations, but without explaining how to get there” (Chakravarthy & White, 2002, p.

183). Strategy content refers to strategic “content of decisions regarding goals, scope and/or

competitive strategies of corporations or of one or more of their business units” (Fahey &

Christensen, 1986, p. 168). Strategy process refers to “how strategies are formed, implemented and

changed” (Chakravarthy & White, 2002, p. 182). In the second section of this chapter, the “when”

and “how” of strategy are considered. In the pages that follow, strategy is considered by reference

to “who,” “what,” “where,” and “why.”

Systems Outputs and the “Why” of Strategy

Sectoral outcomes are those sectorally-specific outcomes that for-profit, not-for profit, and

public organizations, respectively, are expected to realize as a result of the successful deployment

of sectoral strategic leadership and management. It is important to note here that the objective of

strategic management and strategic leadership (Stumpf & Mullen, 1991) is “to influence others to

voluntarily make day-to-day decisions that enhance the long-term viability of the organization

while at the same time maintaining the short-term financial stability” (Rowe, 2001, pp. 81-82).

This concept is sectorally neutral and does not stipulate specific sectorally-oriented outcome

expectations, so further clarification is required. In the for-profit sector, the objectives of strategic

leadership and strategic management are “strategic competitiveness and above-average returns”

(Ireland & Hitt, 2005, p. 63). This expectation of above-average returns is unique to for-profit

sectoral enterprises in that returns must be considered from two perspectives: the owners’ and the

enterprises’. While some scholars place significance on revenue maximization at nonprofit

organizations, such maximization attempts are not comparable with the powerful profit motive that

exists for for-profit executives and stakeholders, notwithstanding that some scholars take an

opposing view (Calkins & Wight, 2008).

Concepts such as competitive advantage and financial value, from an owner’s perspective,

are foreign to leaders and other stakeholders of public and not-for profit enterprises, as there are no

owners of such enterprises who are expecting financial returns that inure personally to them.

Strategic decisions in public organizations are very different from in those of private organizations

(Nutt, 2005). “In public organizations, the strategic decision maker must appreciate the desires and

expectations in the delivery of service from service recipients and the tax-paying public” (Nutt,

2005, p. 294). Some scholars contemplate these outcomes to be a myriad of potential outcomes,

including “more efficient operations, higher levels of productivity, improved service quality, more

cost-effective programs, and increased customer satisfaction, in addition to more effective

programs in terms of alleviating problems or improving conditions in clientele groups, target

communities, or entire populations” (Poister, Pitts, & Edwards, 2010, p. 528). This list of

outcomes is too wieldy. As a result, both the not-for profit community and the public

administration community have begun to accept a proxy term and concept for financial value. The

term is public value. In Creating Public Value: Strategic Management in Government, Moore

(1995), a prominent scholar in the field of public management, contemplated the concept of

“public value” for scholarly and practical purposes. While a comprehensive discussion of public

value is beyond the scope of this manuscript, it is important to note that while the concept of

“public value” as applied in the public sector as a proxy for the for-profit sector’s term “financial

value” it is also being adopted by scholars and practitioners who are concerned with organizations

that operate in the not-for profit sector (Mendel, 2013).

System Inputs and Opening the Black Box

With the definition of sectoral strategic management placing a focus on sectoral outcomes

and strategic leadership theory being concerned with the “leadership of” the entire enterprise and

not focused on “leadership in” (the focus of supervisory theories) the enterprise (Boal &

Hooijberg, 2001 p.516), the concept of enterprise (the black box in Figure 3) must be defined and

the black box must be opened. In defining an enterprise for the purposes of this dissertation, three

enterprise dimensions must be considered and the “where” and “what” of strategy must be

contemplated. For the purposes of this dissertation, the three dimensions that define the enterprise

are the accountability, the hierarchical, and the expanse dimensions, which complete the threedimensional

box depicted in Figure 3. For the purposes of this dissertation, the box is meant to be

opened to consider the internal aspects of the enterprise.

First, the accountability dimension is considered. In determining the sectoral enterprise in

the for-profit and not-for profit sectors, the enterprise can be identified by reference to the financial

statements for the enterprise. Generally Accepted Accounting Principles (GAAP) stipulate the

rules that must be followed when determining the enterprise for financial reporting purposes. As

for the determination of the enterprise in the public sector, reference can also be made to the

financial statements of the enterprise. The Governmental Accounting Standards Board (GASB)

stipulates the rules for determining the reporting entity for purposes of financial reporting. These

same standards can be referenced to determine the sectoral strategic enterprise for strategic

management purposes. While this financial accounting topic is beyond the scope of this literature

review, strategic leaders must understand sectorally-oriented financial accounting because such

accounting is considered a tool of strategic leaders (Stumpf & Mullen, 1991). While the abovementioned

accounting principles can be used to identify the entire enterprise that is considered to

be the reporting entity, the remaining dimensions can be contemplated by opening the black box

and considering the expanse, hierarchical dimensions, and strategic alignment that is considered

necessary for an enterprise to achieve its expected sectoral outcomes. Strategic alignment (the

alignment dimension) is discussed in second section of this dissertation as one of nine sectoral

strategy processes. In this dissertation, hierarchy in organizations can be considered both

structurally and cognitively. The cognitive angle is discussed in section two by reference to

stratified systems theory. Organizational hierarchy is discussed from two perspectives. One

perspective is considered by reference to the resource-based theory, which is used to contemplate,

among other things, “who” are considered the strategic leaders within a sectoral enterprise. The

second perspective is discussed by reference to the strategy levels that should be considered when

developing and implementing a strategy.

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