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Article Review:

The Impact Of Executive Directors’ Service Contracts


On Strategic Plan

Summary

This article was taken from Business Strategy Series, Volume 12, Issue No.

1/2011 page 12-18. It was written by Martin Dandira, a lecturer at Chinhoyi

University of Technology, Chinhoyi, Zimbabwe.

The focus of the article is about the continuity of strategic plan designed by

organizations. It discusses regarding the employment of executive directors’ by

contracts and its impact on strategic plan of organizations. Generally, the

employment last three to five years, but strategic plans normally run from five to

ten by years. Higher positions are on a contract basis, contracts are often shorter

than the strategic plans, and sometimes contracts are not renewed. The new

executive director who takes over the strategic plan might condemn the previous

executive director and formulate its own strategic plan, in which performance will

be measured. This causes confusion within the organization.

The author then defines the definition of strategic plan. The author quoted from

David, F. that a strategic plan is a document that outlines the overall direction of

the organisation, and it is the responsibility of strategists to guide the overall


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direction of the organisation. In addition, the strategists are the individuals most

responsible for the success or failure of the organisation. Strategy is defined as a

long-term plan of action designed to achieve a particular goal. Strategy is what

top management does that is important to the organization; David goes on further

to say that the strategic management process refers to strategy formulation,

strategy implementation and strategy evaluation.

The author then proceeded to discuss regarding the contractual employment of

executive directors. In practice, the service contract of an executive director

should not exceed three years without shareholder approval. In general practice,

it does not take into account the length of the strategic plan which the executive

director will have crafted.

The article then gives guidelines for effective strategic plans. Executive directors

are crucial for the success of organisations, and therefore it is vital for the board

to appoint or recommend for the appointment of visionaries. These are

executives who have visions and dream beyond everybody in the organisation

and are driven by results. Most executives do not share their vision with other

organisational members. The vision should cascade from top management to the

lowest employee in the organisation. There are two types of executives. First,

those who are not in touch with the visions of their organization. The other group

is those who know about the vision of their organisation but are unwilling to share

it with the rest of the organisation. There is need for boards of directors to match

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the lengths of the strategic plans of organisations with the length of executives’

contracts.

Most executives interviewed by the author pointed out that their positions last for

a fixed period of time. There are situations where organizations have collapsed

because of executives who have looted literally everything from the organization.

Most executives personalise organisational issues such as assets, information,

etc. In Southern Africa, research has shown that people with experience from

other industries are appointed to run organisations in industries in which they

lack experience.

Next, the author have discussed regarding the leadership where he explained

about servant leadership. Servant leader is a new mindset of leadership that is

very important in the continuity of strategic plans in organizations. When a leader

becomes a servant of the people and of the company vision, he puts the interests

of the organization first, allowing the flow of information, which helps the

organization to survive even if he leaves the organization at short notice.

The author noted that it is high time that we redefined or adjusted our

understanding of what leadership is. Leaders cannot be expected to know it all or

to do it all. They cannot take credit for the dramatic success or blame for all

failure. This mentality of the leadership should be replaced with an understanding

of the importance of a leader and their role in the team. In this case the writer

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quotes Collins and Porras that the leaders are at the top of their trade as far as

the leadership development is concerned. Leaders are people who are humble

and women who understand their contribution to the team. The result of this is an

efficient and effective organisation where employees become responsible and

top management are responsive to them.

The board of directors should facilitate the development of a corporate culture

that facilitates continuity. The current situation needs global leaders who accept

failure and quit, leaving others to take over when they fail to serve the interests of

the organisation: leaders who are not narrow minded, who do not concentrate on

their contracts and accumulation of wealth before the end of the contract; a new

class of leaders who lack the collectivism mentality.

Critical Reaction

This article went in sequential order and was easy to follow. I managed to

understand clearly as it used easy English and that was one of the reasons why I

chose this article. The other reason was the subject is very close to me as I

worked at Public Service Department previously and was involve in processing

the application for the employment of contracts. I also chose this article because

it is related to my thesis proposal which is about leadership. So, I can better

understand the subject of my thesis.

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The article began with a clear defined problem of the employment contracts and

the impact on the strategic plan. From that problem, it went on to give definition

of strategic plan and guidelines for effective strategic plans. Lastly, the author

discussed regarding the leadership aspect which was very important in the

continuity of strategic plans in organizations. This information was easy to

understand and was very applicable. In conclusion, the article was presented

very well as it supported what it said.

Application To Strategic Management Concept

The Importance Of Strategic Planning

Strategic planning is a major asset and it plays an important role in strategic

management. It is an overview or framework for a manager to undertake the

management of the organization. This design also helps a manager to make

judgements and decisions related to the direction of an organization.

With strategic planning, managers will be able to establish a clear and

comprehensive concept for an organization. This process will help managers to

access the strength of internal and external forces in dealing with organizational

challenges. With these plans, goals and objectives of the organization would be

clearer and easier for managers to make decisions to achieve those goals.

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If strategic planning is not implemented in an organization, then the effect is that

managers will face problems in determining the objectives and setting goals to be

achieved by the organization. When an organization has no direction and goals

to be achieved, then the operation that exists in these organizations do not follow

the expected basis. It will cause a failure in managing an organization. This

failure will lead to a decline of productivity of an organization and lead the

organization fails to compete with other organizations.

With strategic planning manager will be able to handle unexpected problems if

the environment changes. This is because strategic planning has helped

managers to make early preparations to tackle the problem. Managers will make

decisions based on the current situation for the future. For example, if the

situation of the organization in a relatively slow, the manager can set the

organizational goals based on past experience is relevant. However, this

situation cannot be expected to change precisely because it happened so fast

according to the era of advanced technology. Therefore managers should be

more creative in plan strategies to overcome these changes.

The Strategists

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The article emphasized on the importance of the leader in the organization which

are consist of the top management level. They can be called strategists. They

are important because they are responsible for the success and failure of an

organization (Textbook: page 42). Strategists help an organization gather,

analyse and organise information. In this case, leaders in the organization are

very important. They should have clear vision for the organization and share it

with the rest of the employees.

Leadership

Effective leadership and strategic planning skills are keys to success for any

manager. Leaders must communicate the strategic plan to the rest of the

organization. Each individual must have at least a basic understanding of the

plan and most importantly, know how they support the plan's mission and goals.

The plans might as well not exist as the leaders have failed in their responsibility

to make sure their subordinates know why they are important to the overall

mission. Often they don't even know the mission. How do leaders expect their

subordinates to implement a plan they aren't familiar with? How will leaders excel

if they don't completely understand the plan? Leadership can happen with or

without a plan, but great leadership requires a plan.

Conclusion

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Organisations need boards of directors who function effectively, helping top

management with advice and moral support. There is a need for corporate

boards to be revitalised and reformed so that they function effectively for the

continuation of strategic plans in organisations. There is need for boards to

appoint executives on merit, and succession planning should be a critical

success factor for every organisation. The service contract of executive directors

needs a major revamp versus the length of the strategic plan. There should be a

synchronisation of the length of the strategic plan and the executive’s contract of

employment, and efforts should be made to make sure that executives go

through the strategic plans that they contributed to the formation of for the

purposes of continuity and smooth running of the organisation. If not, then an

environment where everyone is part of the strategic plan should be created,

where the strategic plan continues after the executive has left and the document

becomes company property, not personal property like it currently is in most

organisations.