The Environment

The Environment

“According to the two most accepted views of strategy, competitive advantages result

either from attractive positions of a company in an industry or from distinctive resources of that

company” (Zahn, 1999, p. 1). While the resource aspect of the Zahn (1999) quote is considered

later in this chapter, the industrial aspect of the quote is an element of the environment that is

discussed in this section. Strategy professionals consider the environment to be “a major source of

uncertainty for strategic decision makers in charge with coping with emerging opportunities and

threats” (Vecchiato, 2012, p. 387). The term environment “includes the social, political, and

economic forces that impinge on the organization” (Lunenburg, 2010, p. 3) and is not adequately

described until it is classified using environmental scanning. Environmental scanning is one tool in

a strategic leader’s toolbox that can be used to gain a strategic understanding of external influences

that allow such leaders to respond in ways that positively affect an organization’s quest for

survival and success (Albright, 2004). It is important to note that environmental scanning is one of

many tools available to strategic leaders “to support decision making within strategic

management” (Spee & Jarzabkowski, 2009, p. 224). Throughout this dissertation, various strategic

tools are introduced and discussed with the aim of putting a spotlight on those tools that have

become practically relevant as confirmed by empirical studies since Stumpf and Mullen (1991)

presented their strategic leadership competency model.

While environmental scanning was widely used before 1991 (Lenz & Engledow, 1986),

the need to include the environment in the augmented Stumpf and Mullen (1991) model emerged

from contemporary thinking that strategizing requires systems thinking (Zahn, 1999) and that uses

environmental scanning and systems thinking as compatible tools. In addition to the use of

environmental scanning by for-profit professionals, such scanning is considered to be a requisite to

the successful management of public and non-profit sectorally-oriented organizations (Morrison,

1992). For example, for some time, educational scholars have recognized that the “successful

management of colleges and universities depends upon the ability of senior leaders to adapt to a

rapidly changing external environment” (Morrison, 1992, p. 86). Morrison (1992) recognized that

environmental scanning is useful in that it enables decision-makers to understand the external

environment of an organization and that such scanning can aid in the planning and decisionmaking


Fahey and Narayanan (1986) identified three environmental levels that can be scanned.

These levels are the task environment, the industry environment, and the macro environment

(Fayhey & Narayanan, 1986). The macro environment is the broadest level, and the environmental

scanning of such an environment contemplates identifying changes in social, technical, economic,

environmental, and political factors that directly or indirectly impact any or all-organizational

categories (Morrison, 1992). At the other extreme, the task environment is institution-specific in

that the task environment relates to a particular college, university, or K-12 institution. As a result,

unique features of an individual institution that are not noteworthy for this report are relevant to

particular institutions’ strategic initiatives. Of particular importance in this chapter are factors that

can impact all education institutions, such as industrial factors.

Industrial versus Sectoral Contexts

In this dissertation, the terms industry and sector are differentiated. The industrial aspect

of the environment was of particular interest in this report due to the numerous distinct education

industrial features that impact strategic educational leaders in ways other strategic leaders do not

encounter. First, the education industry is “near the top of the national political agenda”

(Lunenburg, 2010, p. 3) although its issues and unique education features are best considered along

industrial lines. While scholars and practitioners, on an interchangeable basis, bandy about the

terms industrial, sectoral, and sector, such terms have distinct meanings in this dissertation. The

terms sector and sectoral take on the meaning that is derived from “different ownership types: forprofit,

private nonprofit, and public (government-owned)” (Hansmann, 1996, p. 245). For the

purposes of this report, the term industrial takes on the meaning anticipated by The Malcom

Baldridge National Quality Award (Mendel, 2013), which has adopted the NAICS 2012 industrial

classification system. While the NAICS 2012 classifies the education industry along seven

categories, this dissertation focuses on two of the seven categories, which are Higher Education

and K-12 Education. In considering the distinct features of the education industry, the two levels

(Higher Education and K-12) are considered separately.

Sectoral contexts. When considering K-12 and higher education in the United States, the

sectoral diversity of the industry (Hansmann, 1996) is a distinctive feature. The Stumpf and

Mullen (1991) strategic leadership competencies model did not consider sectors other than the forprofit

sector. Significant sectoral expansion of strategic management practices began with the

enactment of the Government Performance and Results Act of 1993. With this Act, the sectoral

expansion of strategic management processes became a reality, as the federal government

mandated that federal agencies “develop strategic plans and tie them to budgets and performance

measures” (Streib, 2005, p. 45). The 1993 Act was enhanced when President Obama signed the

GPRA Modernization Act of 2010 into law. According to Streib (2005), states followed the lead of

the federal government by issuing mandates similar to the federal strategic management mandates.

In addition to the legal mandates, which result in increased scrutiny of public sector organizations,

the public and the press are calling for a similar increased scrutiny of non-profit sector

organizations (Stone, Bigelow, & Crittenden, 1999). Given the expansion of sectoral interest in

strategic management, the Stump and Mullen (1991) model was augmented to include sectoral

contextual distinctions. This augmentation was particularly necessary in light of the sectoral

diversity of the education industry.

A key education industry uniqueness feature regards the sectoral diversity of both Higher

Education and K-12 institutions (Hansmann, 1996). It is important to understand this uniqueness

because of the significant impact that such uniqueness has on educational leaders regardless of

institutional level. Ultimately, education leaders may assume responsibilities to lead an educational

organization that may be categorized as either a for-profit, a non-profit, or a governmental sector

organization. In order to gain some perspective on the sectoral diversity of the education industry,

it is useful to consider some demographic data on American education. At the higher education

level, “of the 18 million undergraduate students at degree-granting institutions in the United States

in fall 2010, some 76% attended public institutions, 15% attended private nonprofit institutions,

and 10% attended private for-profit institutions” (Education Department, 2012). In 2012, the

education K-12 level consisted of 71% public schools, 4% charter schools, and 25% private

schools (Education Department, 2012). The sectoral situation at the K-12 level is not entirely clear

given that privatizing activities fall into two categories. Only a small number of K-12 schools are

owned by for-profit enterprises. The bulk of for-profit activity in the K-12 level is conducted by

Education Management Organizations that are hired to manage public district schools or charter

schools (Molnar & Garcia, 2007).

The impact of this sectoral diversity on the education industry is significant in that future

leaders may seek employment in a for-profit, non-profit, or public organization and that, in order

for them to be successful in the leadership position, such leaders must understand sectoral

differences and how such differences may impact strategy. As discussed throughout this

dissertation, there are significant strategic sectoral differences in educational organizations when

considering an organizations’ sectoral orientation (for-profit, non-profit, or public). It is important

to note here that research into public and private organizational differences support a model (core

approach) that “emphasizes fundamental differences between public and private organizations”

(Scott & Falcone, 1998, p. 129). A key distinction of the education industry is evident at the

environmental level due to the sectoral distinctiveness features discussed in this section.

Constraints exist with regard to public organizations, which “result in greater oversight, less

autonomy, and reduced authority among public managers, which lead to higher levels of

formalizations, red tape, and bureaucratization” (Scott & Falcone, 1998, p. 129), and which,

consequently, distinguished public sector from private sector enterprises. In addition to these

constraints, the systems thinking approach was used in this dissertation to discuss sectoral outputs

that account for major differences between the for-profit, not-for-profit, and governmental sectors

and that establish why sectoral difference are so meaningfully different. Specific instances of such

features and specific education industrial distinctiveness features are discussed in the pages that


K-12 industrial uniqueness features. At the K-12 level of the education industry, the

autonomy of schools and school districts is constrained severely, and the accountability

requirements are significant and potentially confusing. For example, the accounting standards of

public and private enterprises differ significantly. This creates challenges for all stakeholders in K-

12 education. While some may think that it is not important for leaders to possess such financial

knowledge, other stakeholders believe that lack of such knowledge should be a red flag in the

educational leader hiring process (Witt & Kieffer, 2013). Private institutions adhere to financial

accounting standards issued by the Financial Accounting Standards Board (FASB) while public

institutions and school districts adhere to standards issue by the Government Accounting Standards

Board (GASB) (Cottrell & Baker, 2013). In addition to differences in accounting standards, public

and private institutions are seemingly at polar opposites with consideration to autonomy and

accountability. Private school principals are more likely to think that they have more influence

over their environments than do public school principals (National Center, 1997). An example of

this control regards common core. It is required for public schools but optional for private schools

(Robelen, 2012). “The state board of education controls many of the strategic factors that are

crucial to the operations of the local school board” (Valentine, 1991, p. 21). State governments,

through certification requirements, regulate faculty and administrators (Valentine, 1991), and

“public schools are more likely than private schools to require teacher certification” (National

Center, 2006, p. 1).

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