The Role of Long-Term Thinking in the Process of Organizational Management - Example

Management Assignment 2 Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission Abstract The concept of management has a long historical orientation with practices in this field undergoing diverse dynamics both in the classical and in the contemporary period. Despite these dynamics, it is imperative to be cognizant of the fact that within the overall concept of management, the rudimentary tenet of administration can be identified. This is founded on the background that the decision making process, formulation and implementation of plans and the eventual monitoring and evaluation require ideal administrative practices on a day-to-day basis. The practice of organizational management can broadly be perceived to being inclined on either short or long-term objectives. Nonetheless, more emphasis is put in the latter category based on the fact that most of the organizations in the contemporary era formulate long-term plans which are supposed to be executed in phases, with various inputs and resource personnel identified. In addition, the performance indicators are adhered to which are ideal yard stick for measuring the progress towards the set long-term goals and objectives. Nonetheless, the advent of the global economic slump in 2008 exposed the tendency of most institutions being limited to short horizons in their reaction to ever changing environments. In this regard, this paper is a profound effort to explore this trend which poses detrimental impacts on these firms. Keywords: Organizational management/administration, short and long-term horizons We tend to think of the task of managing as one defined by carefully considered, long-term thinking. If the global financial crisis taught us anything, it is that more often than not organizations operate with very short horizons, reacting to an ever-changing environment The choice of an ideal strategy in the organizational management is integral in determining the level of success that will emanate from a particular undertaking. This is more fundamental when a firm is confronted by the challenge of surmounting an evident crisis or market dynamics that are threatening the viability of the business which calls for organizational transformation. This fact is supported by Owner (1993, p.1) who determined that spending ample time in the process of planning for organizational transformation is vital in integrating quality into the daily work of an organization which entails both short and long-term strategies. Despite this paramount role played by carefully considered, long-term thinking in the process of organizational management, majority of the institutions have tended to focus on more shorter horizons in their strategies which has culminated into diabolical impacts to the feasibility of these corporations, a phenomenon which was made manifest after the 2008 global recession. It is imperative to focus on long-term thinking in the management process of a company aimed at the attainment of competitive advantage by any institution as well as maintaining of a favorable niche in the market. Carefully considered, long-term thinking in management Long-term thinking has for a long time been considered to be the most ideal approach in the efforts to ensure sustainability of any organization or governmental policy. Whitaker (1967, p.6) noted that the day-to-day decision making process by the governments, not excluding those of private institutions and individuals tend to be more focused on formulating and implementing the most applicable response to pressures, the opportunities, needs and provocations of the moment. In this regard, a longer view is a fundamental prerequisite for any good management practices. Against this background, Boyle, O’Donnell and O’Riordan (2001, p.15) determined that the difficulties which are associated with longer-term thinking mostly in issues related to policy making are not new in the contemporary world. In the historical perspective, there are diverse instances where long-term view has played a paramount role in evading eminent crisis and downfalls by many governments and organizations. Nonetheless, this analysis will be limited in the organizational set-up. Long-term thinking has often been associated with planning whereby in this context, Daft (1999, p.2) determined that long-term planning entails an effective and coordinated mobilization process of applicable data in regard to the institution, its economic realities both in the past, present and in the future, and its eventual organization aimed at attaining the specific set goals and objectives. Processes from long-term thinking in management Long-term thinking in the management process cannot be perceived as a static process but rather as entailing gradual and continued undertaking in the development and execution of the carefully considered policies and strategies. Scribner (2000, p.3) identified five rudimentary facets that are integral in the successful utility of long-term thinking in the undertaking of any particular firm that is focused on long-term strategic management. Goal-setting This is the primary process in thinking about long-term undertaking of any institution. It is key in the articulation of the organizational vision, identification of what is to be achieved, definition of both the short and long-term objectives which are eventually linked to what the organization aspires to do. This entails the formulation of a clarity endowed mission statement that is easily understood by the stakeholders and the staff. This process requires a holistic approach whereby all the relevant departments are engaged in goal setting stage in order to arrive at a comprehensive strategy that encompasses the interests and ambitions of all the departments. This is chief in attaining a high level of cooperation and coordination during the execution process which has a direct influence on the eventual success of the proposed long-term plan. Analysis Scribner (2000, p.3) cited that this stage is imperative in assisting the firm in the collection and putting into consideration of the relevant information geared towards comprehensive understanding of the situation at hand. In this prospect, both the internal and the external environment of the institution are assessed aimed at identifying the opportunities, the strengths, weaknesses and threats confronting the firm. This is what has come to be generally referred to as SWOT analysis. This fact is supported by Crosby (1991, p.10) who determined that this analysis ought to focus on the skills and resources of the firm. In addition, other elements of the internal organization include the organizational culture and climate, financial and human capital among others. In regard to external orientations, the geo-political, socio-economic, market dynamics and technological changes are bound to influence the direction and mold the objectives and policies in the organization. This process is usually paramount in the long-term thinking about the future of the firm as opposed to short-term focus and any anomalies in this process can have detrimental impacts on the attainment of the long-term goals and objectives in the organization. Strategy development Long-term thinking in this stage is put into utility whereby the decisions are directed towards reflection, prioritization and determination of alternatives. Scribner (2000, p.3) cited that in this stage, the results of the analysis are reviewed which is succeeded by identification of the responsibilities mandated to each resource person and stakeholders which are prioritized in terms of magnitude and urgency. The results are utilized in the development of alternative approaches which are formulated aimed at addressing the strategic issues in the firm. A synergy of inputs from all the departments and stakeholders is required in this process. Strategy implementation Scribner (2000, p.3) determined that long-term thinking is necessary at this stage aimed at assembling all the necessary tools for the execution process. Tools in terms of financial and human capital, required technological foundation and the necessary networks are sought in order to ensure unhalted implementation process. Fairholm (2009, p.7) inferred that whatever the view of strategic thinking, the aspects of strategy implementation have for a long time been considered as the responsibilities of the leadership echelon. In this regard, quality organizational leadership body is required at this stage in the sense that it is key in instilling motivation and commitment of the employees to the long-term goals as well as shaping the direction of the whole implementation process. Strategy monitoring This requires long-term thinking into the most ideal M&E mechanisms to aid in assessing the progress of the implementation process. It also assesses whether the environmental dynamics pose a necessity for the alteration of the strategy. This is chief in the reacting to these changes and anticipating any future changes. This stage of long-term thinking also feeds back to the initial stages in the immediate situation and also to the goal setting process in the long-term (Scribner 2000, p.3). The preceding process shows the imperative role played by long-term thinking in the success of the firm. However, it is worth noting that some short-term thinking are incorporated in the long-term perceptions whereby short and medium term plans are executed in the long-term plans aimed at arriving at urgent remedies to a temporary situation. The following conceptual framework portrays the above processes that are inherent in long-term thinking. Figure 1.0: The process of long-term thinking/planning in a firm. Source: Scribner, S., 2000 (3). Barriers to long-term thinking It has been pointed out that there are some inherent obstacles that impeded the development of long-term thinking in a firm which pose diabolical impacts on the viability of long-term plans in a firm. Most of these impediments were manifest among majority of the firms prior and during the economic slump in 2008 and ideal strategic approaches ought to be implemented aimed at surmounting them.Boyle, O’Donnell and O’Riordan (2001, p.4) identified the following as some of the constraints that impact on the adoption of long-term policy thinking in an organization. Congestion and fragmentation in the system: - This means that a lot of time by the officials in singular departments is spent dealing with routine matters in regard to short-term programs and thus the entire relevance of the long-term objectives is lost. Moreover, the divisions between the various departments culminate in a situation whereby longer-term thinking on cross-cutting issues is abandoned in the sense that there is a general perception that it is no one’s responsibility. Data deficiencies: - In most situations, there is often a phenomenon whereby relevant data is absent which is principle in informing long-term thinking process. This situation can be two-fold. Firstly, there can be data in the firm but the staffs lack the time and the motivation to pull the data together or secondly, there can be absolutely no data to be put into utility by the employees in the development of long-term plans. Limited skills capital: - There is usually a generic concern that there is deficiency in terms of knowledgein diverse institutions which are fundamental in informing long-term thinking and also the skills and competencies to aid in the development of long-term policy options. This creates a robust challenge to the development of a long-term thinking in many institutions. Poor linkage of longer-term and short-term priorities: -As previously mentioned, most long-term plans are integrated with both short and medium term plans. Nonetheless, majority of the organizations tend to be preoccupied in achieving the overcoming short-term challenges and eventually forget the relevance of the long-term picture. The continuation of this organizational culture means that the firm will be incapacitated with long-term thinking capacity which will affect the trend towards the development of long-term plans. Coordination and prioritization of R&D:- While most companies have embraced the culture of research and development in their operations, there is usually a tendency towards inclining the researches in solving short-term crisis, for instance seeking alternative power sources which will greatly cut down the cost of production in the firms but fail to incorporate the long-term thinking in regard to the overall effects on climate change. 2008 global financial recession; the paradox of short-term thinking Jickling (2008, p.1) noted that there is no specific definition of ‘financial crisis’ but a general perspective is that interferences in the financial market heighten to the magnitude of a crisis when the flow of credit to businesses and households is constrained and the real economy of goods and services is unfavorably affected. When this phenomenon spills over to the world spectrum, then this can be viewed as a global financial crisis. In the contemporary world, there is widespread consensus that the current global financial crisis might be perceived as the worst since the great depression (Stiglitz, 2009, 5). Nier and Merrouche (2010, p.4) determined that this crisis instigated as the U.S. ‘subprime’ crisis in the summer, 2007 and later proliferated to several other advanced economies through a sequence of direct exposure to subprime assets, the desiccation of the wholesale financial market and the gradual loss of confidence in several asset classes. There have been divergent views on whether this crisis can be attributed to short-term thinking on the side of the banks, the brokerage firms, the credit rating agencies, the insurance firms and the consumers. Nonetheless, it is apparent that there was general deficiency of long-term thinking in regard to some aspects that has been blamed for instigating the economic recession. This fact is supported by Lees and Malone (2011, p.1) who determined that short-term thinking by both the companies and their investors is widely perceived as the key lapse behind the global financial crisis. This is apparent in most discourses in the contemporary epoch whereby businesses have been opined to undertake a massive paradigm shift to longer-term outlook. In addition, they have to act in a manner which is socially responsible if at all their respective problems- and problems in the wider globe are to be solved. There are diverse channels that have been identified by various scholars through which the monetary policy might have prompted the advent of the global financial crisis through contributing to the build-up of financial imbalances. This is best epitomized by Adrian and Shin (2008, p.4) who determined that loose monetary policy in terms of low short term rates may have been key in the minimization of the cost of intermediaries’ wholesale funding which had an overall impact of the build-up of leverage by those intermediaries. On the other hand, Borio and Zhu (2008, p.6) determined that these short-term loans might have generally prompted the banks to take and higher risks including liquidity and credit risks. Lastly, Taylor (2007, p.6) inferred that the loose monetary policy in terms of low short-term rate might have elevated the supply of and demand for credit (mortgages) which had an overall effect of causing the assets which in this case are the houses price to heighten. This reveals the impacts of thinking on short horizons as a response to an ever changing environment. This creates not only inconsistencies in solving the short-term looming crisis but also makes the shareholders to deviate from the long-term policies. This is exemplified by the fact that the issue of house ownership in the U.S has been a historically dynamic issue capturing the attention of policy adjudication in political realms during elections as well as molding the ideological differences. Nonetheless, the preference of the governance echelon to make outrageous efforts to promote house ownership through advocating for subprime mortgages can be perceived some sought of short-term planning and risk assessment which culminated in extreme borrowing capacity. On the other hand, the credit rating agencies were endowed with short-term thinking and risk assessment procedure whereby there is a probability that the credit rating agencies may have offered advice to their clients on how to structure their securities aimed at receiving superior rating. On the other hand, the large sum of monies that were offered to the credit raters for offering their in-demand services were difficult for them to turn away despite some inherent doubts that they might have had in regard to the underlying quality of the security. This was against the prevalent perceptions that if they failed do the credit rating because of these doubts, other credit rating firms would be willing to do it (Nanto 2009, p.34). These inconsistencies resulted in diverse detrimental effects on the credit rating process culminating in the award of massive loans to borrowers with extremely weak securities as well as intensive unethical practices in the credit rating firms which not only compromised the credit rating process but also led to accumulation of immense defaults in payments. This short-term thinking in terms of monetary gains posed diabolical impacts in compromising the lending process which was pivotal to the acceleration of the financial slump and eventual spread to other parts of the world. Promoting long-term thinking; towards effective organizational management From the above discourse, it is apparent that long-term thinking plays a major role in elevating the level of positive management practices in diverse firms. There are some imperative interventions which can be implemented aimed at promoting long-term policy thinking among various firms regardless of the nature or undertakings of specific firms. Some of the most fundamental interventions are identified by Boyle, O’Donnell and O’Riordan (2001, p.7) as outlined below. Firstly, firms ought to conduct effective foresight exercises. This entails putting networks into effective utility aimed at the creation of probable future phenomena. This will increase the chances of coming up with applicable policy options in the future. This is key when the market is confronted by massive dynamics and uncertainties due to various factors like diversification of consumer demands and consumer polarization. This is fundamental in promoting long-term thinking in any firm. Secondly, different institutions ought to ensure the adequate supply of long-term policy thinkers through enhancing the capabilities and competences of the human capital. This will be key in promoting visionary personnel who are endowed with extensive potential for long-term thinking and are committed to the achievement of the long-term plans of the organization. This can be achieved through extensive training of personnel, ideal HRM practices among others. Thirdly, organizations in the contemporary times ought to develop time and space for long-term thinking which can be cultivated through addressing process and structural issues in the firm. This can be enhanced through molding appropriate rapport between the diverse departments in the organization which will in turn promote coordination and collaboration in the process of setting long-term policy objectives. Lastly, organizations ought to establish commonly agreed agenda aiming at long-term, cross-cutting and strategic R&D. This will not only mold the demand for long-term policy thinking but will also serve as a motivating and inspiring factor to the diverse long-term policy thinking in the firms. All these interventions are strategic and can find applicability in cross-cutting sectors and organizations, for instance Multi-National Corporations (MNCs), Small and Medium Enterprises (SMEs) and even the governmental departments or ministries. Conclusion The above discourse has revealed the imperative role which is played by long-term thinking in the process of organizational management. This is founded on the fact that short-term thinking in the management process is endowed with diverse demerits and it has for long been associated with the advent and spread of the global financial slump in 2008. This is a great lesson to different organization which ought to embrace various long-term thinking practices in their policy making process in their efforts to attain and sustain a competitive advantage in the market. References Adrian, T. & Hyun SS, 2008, Financial Intermediaries, Financial Stability and Monetary Policy, Federal Reserve Bank of Kansas City, Kansas. Borio, C. &Zhu, H, 2008, Capital Regulation, risk-taking: a missing link in the transmission mechanism?BIS Working Paper, No 268. Boyle, R., O, O’Donnell &O’Riordan, J., 2001, Promoting Longer-Term Policy Thinking, Committee for Public Management Research, Dublin. 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