Current Problems

Lack of Integration Between Strategic and Operational Levels of Enterprise Management

The basic problem that strategic management needs to solve involves timely recognition of opportunities and risks, while ensuring the company's long-term potential for success by means of decisions on capital investments and allocation of resources. The ultimate aim is to achieve a lasting increase in the value of the company. The goals of operational planning and Performance Measurement, on the other hand, are focused on shorter time periods. Their purpose, within the bounds of the corporate strategy, is to ensure profitability and liquidity of the firm within a fiscal year or shorter periods of time. The two areas are necessarily closely related. Operational planning concretizes the plans made in strategic management. On the other side of the coin, operational Performance Measurements provide impulses for the corporate strategy. The combination of the operational and strategic levels of management is what makes it possible to weigh short and medium term decisions against long-term goals.

According to an American study, the lack of integration between enterprise strategies and operational business processes manifests itself in actual practice above all in the following problems (Norton 1996):

1. Strategy is not operationalized. Only 40% of middle management and 5% of other employees understand the strategy of the company. The corporate strategy is not broken down into its elements.

2. Only 50% of top management and 20% of middle management have a bonus system that is directly linked to the medium to long-term strategic goals.

3. 85% of management teams spend less than one hour per month on strategy discussions.

4. 60% of resources of the company do not relate directly to the strategy.

5. The focus on financial figures is too one-sided as well as oriented toward the past, and too much stress is placed on reactive measures.