Journal of

Management Gaining Competitive

Development
13,5
Advantage through Strategic
Management Development
4
(SMD)
Received February 1994
Revised March 1994 Sam McClelland
College of Business Administration, Georgia State University, Atlanta,
Georgia, USA

Introduction
Global competition has forced many organizations – large and small – to
undergo reorganization and restructuring in an effort not only to compete but,
in many cases, just to survive. Changes in the global marketplace and increased
competition from expanding third-world economies, has forced many
companies to rethink their competitive strategies. Open competition between
organizations to maintain and eventually increase their market share has also
spawned competition to secure and retain talented, competent, experienced and
adaptable managers. As such, Human Resource Management (HRM) has
assumed a more significant degree of importance as organizations attempt
internal alignment of resources and functions[1]. In order to compete globally,
organizations must not only have experienced managers who can recognize and
adapt to changing markets, they must also depend on those same individuals to
identify new and potentially more profitable markets and have the ability to
mobilize internal resources so as to capitalize on any and all growth
opportunities. However, how well prepared are managers and the organizations
who employ them to accept the challenges being presented?

The Effects of Downsizing and Restructuring

Journal of Management
Development, Vol. 13 No. 5, 1994,
pp. 4-13. © MCB University Press,
0262-1711
Success in competition depends on many factors, not the least of which is the
hiring and retention of managers who have not only received a quality formal
education but who also have the capacity to project and share a competitive
vision, who have gained valuable experience “in the field”, and who have a
commitment to continued learning, personal growth, and development. Over
the last decade, however, organizational downsizing has put many experienced
managers, particularly those in middle management positions, out of work.
This has introduced acute shortages in many organizations’ human resource
base[2]. While few argue that downsizing and restructuring as a means of
reducing overhead so as to maintain profitability was – and is still – necessary,
there are many who believe that the long-term negative effects, some of which
are only now beginning to be felt, will inject even greater degrees of instability
into the remaining managerial ranks[3-5].
 The implications associated with this take on a tremendous dimension. With Gaining
organizations facing potential shortfalls in managerial ranks, increasing Competitive
pressure is being applied by corporate boards, investors and others to contain Advantage
costs while increasing profitability. Under the present scenario, “doing more
with less” is certainly applicable.
Within this dimension strategic human resource development (SHRD) has
taken on a more significant degree of importance[6]. Similarly, increasing 5
significance is being placed on the role of management development specialists
to forecast appropriately and strategically project management development
requirements that will most certainly be needed for the organization not only to
gain but to maintain a competitive advantage.

Formulating Competitive Strategy

Competitive strategy formulation is a means by which an organization
develops a course of action so as to attain specific objectives which are
considered mandatory if the organization is successfully to compete in the
marketplace[7]. These strategies must be flexible enough so they can be
adjusted to the reactions of competitors, suppliers, employees, and others both
inside as well as outside of the organization. This inbred flexibility is what
makes the strategy a competitive one in that it permits – indeed, forces – the
organization to become proactive rather than reactive to the uncertainty and
change prevalent in today’s global marketplace.
In its effort to predict and plan for these uncertainties the organization will
naturally seek to define its competitors’ plans and, alternatively, forge a
strategy to offset their effects. This activity and counter-activity exists
whenever two or more organizations compete in similar markets or have similar
goals. Once a strategy has been determined, as a matter of process, the
organization would organize its resources to carry it out. However, it is at this
point that many strategies become obscured – the organization, having invested
considerable time and effort in defining its strategy to market, sell and
distribute its products and/or services, falls short in defining, identifying and
allocating the human resources necessary to insure that the strategy is properly
implemented. The result is a loss of momentum, market position, and ultimately
the organization’s competitive advantage.
Throughout the past decade, human resource and management development
professionals have been advocating the position that management development
should have a more strategic role and be incorporated as an integral part of the
competitive strategy formulation process. Evidence that this position has been
gaining considerable acceptance by many senior executives is clear[8].
However, there is still a great deal of resistance and apathy to it as well. The
prevailing reason for this resistance is that many executives still view
management development as simply training – a cost centre from which little to
no tangible returns are produced[9].
Journal of Strategic Management Development and Competitive Strategy
Management Formulation
Development The basic premiss of Strategic Management Development (SMD) is to ensure
that, as new products/services are anticipated and developed, the organization
13,5 has identified and mobilized competent and knowledgeable managers to
perform the various tasks necessary to implement successfully the strategy in
6 an efficient and timely manner[10].
When viewed as an integral element of the competitive strategy, SMD’s role
is cyclical in process and function. By consistently monitoring organizational
plans SMD identifies which specialized management development activities
will be needed to ensure maximum managerial performance and efficiency. For
example, it may make good business sense to have a smaller number of
competent managers trained to assume a wider variety of tasks and roles which
may be required by a flexible competitive strategy. In this era of downsizing,
cross-functional training and developmental activities throughout various
organizational units would assist in maintaining a competitive posture, even
with limited resources. Individuals responsible for SMD would need to monitor
closely the competitive strategy to ensure that the skills needed to implement it
successfully will be available (or can be readily acquired) on a short-term basis.
This requires that all management development efforts be flexibly in-concert
with the competitive strategy in anticipation that special requirements will
arise. This mirroring, as it were, will require constant feedback and support
between those individuals in the various managerial functions and those
responsible for designing, implementing, and overseeing the SMD process.
SMD signals a departure from the traditional concepts of management
development which are centred on the individual and focused on strengthening
existing competences. As such, the traditional method of developing managers
stresses “maintenance” and “functionality”. As Fulmer and Graham[11] point
out, this approach stresses the process of doing things correctly and largely
ignores whether the things emphasized are the right things to do in the first
place. Further, they argue that such an approach produces shock learning –
learning which takes place under crisis situations which has little or no long-
term value. Alternatively, SMD approximates the values of anticipatory
learning which assumes that as change naturally occurs and crises arise, the
skills necessary to handle such circumstances competently have already been
predicted and learning or training designed to address skills and/or knowledge
deficiencies has been defined and implemented.
Many larger, multi-national organizations have already established, to one
degree or another, a type of competitive SMD strategy. Coca-Cola, GE, Xerox,
IBM, and Northern Telecom, for example, have instituted long-term
management development strategies to enhance their competitive advantage as
part of their efforts to maintain, as well as advance, their positions in the their
respective marketplaces[12]. Yet, as the results of some observations and
studies have suggested, this is not a universally accepted paradigm. Hussey[13]
found that management development and training should be integrated closely
with company objectives and strategies and the initiative to see this is carried Gaining
out should be taken by the chief executive. Additionally, McCall[14] observed Competitive
that in many organizations the importance of having a large and accessible base Advantage
of managerial talent is not apparent until a shortage of it produces crises
situations.

A Survey Case Example 7

As part of an ongoing effort to update the management and executive
development programme curricula, Georgia State University’s Centre for
Executive Education of the College of Business Administration undertakes
periodic surveys to determine management development training requirements.
The results of these surveys form the basis for changes to existing programme
formats or for the design and development of new course curricula.
A survey intended to obtain feedback on middle-management training needs
was conducted and directed at executives of medium and small firms (less than
7,500 employees). In addition to soliciting information on management course
topics, the survey also contained the following questions:
(1) Does your organization have an internal middle-management training
programme?
(2) Does your organization, at any time, use external resources for training
your middle managers?
(3) Does your organization consider management training/development to
be part of its strategic or competitive planning process?
Questions (1) and (2) were included in an attempt to determine the extent of
organizational commitment to management training and development and
whether the organization uses a combination of internal and external resources
to fulfil part of that commitment. Positive responses to both of these questions
would indicate a commitment in terms of resources (time, money, etc.). The
intent of question (3) was to gather feedback on whether the organization
included management development considerations in its strategy formulation
process. A positive response to this question would indicate recognition and
acceptance of the value of SMD.
The survey was sent to 161 firms in the United States representing a cross-
section of industry including manufacturing, financial services (including
insurance and banking), transportation, communication, utilities, health
services, and wholesale/retail trade organizations. Twenty-two (14 per cent)
surveys were returned as undeliverable with 18 (82 per cent) of those classified
by the postal service as not having a forwarding address on file. Of the total
remaining, 74 (53 per cent) were completed by respondents and returned.
Results of the responses to this portion of the survey are shown in Table I.
Responses to the question regarding management development being part of
their organization’s strategic or competitive planning process revealed that 52
(70 per cent) of the 74 respondents answered “No” and 22 (30 per cent) answered
Journal of
Yes No
Management Raw score (%) Raw score (%)
Development
13,5 Does your organization have an internal middle-
management training programme? 37 (50) 37 (50)
8 Does your organization, at any time, use external
resources for training your middle managers? 71 (96) 3 (4)

Table I. Does your organization consider management

Cumulative Results training to be part of its strategic or competitive
of Closed-ended planning process? 22 (30) 52 (70)
Questions

“Yes”. Further cross tabulation of the results showed that organizations

employing 2,500 or more individuals were more apt to respond in the positive,
while those companies employing less than 2,500 responded in the negative.
The results provide indications as to the view of senior executives of small-to-
medium sized organizations regarding the value of management development
in relation to their competitive or strategic planning processes. First, it is
apparent that many small- to medium-sized organizations do not consider the
implications of management development in their strategy formulating
processes. However, when comparing the results of this question to the results
of the other questions posed, half of the respondents indicated they currently
have a middle-management training programme in place while an
overwhelming majority of the sample indicated they use external resources for
training their middle managers. These results complement a previous study
described by Fulmer[15]. Second, the results indicate that many have invested
resources (time and money) in middle management training activities, yet the
majority of the respondents do not consider it relevant to the formulation of
their competitive plans or strategies.
This comparison provides an important insight: while organizations may be
committed, in varying degrees, to management development, they either
disregard or fail to see the significance of integrating it into their strategic
planning processes, they fail to recognize its potential long-term value, and/or
they do not fully understand what is involved in establishing a SMD process
and how it is implemented within the confines and context of organizational
structure.

SMD Design and Implementation

The design and implementation of a successful SMD programme requires not
only a fundamental change in the perception of what management development
is designed to do but also requires a re-thinking and re-examination of the
strategic value and role that management development plays on an
organization-wide level.
 Fundamentally, commitment to the design and maintenance of SMD is Gaining
mandatory throughout all levels and may, in certain organizations, signify a Competitive
major departure from the more traditional view of management development as Advantage
being primarily a training-based endeavour. Senior management must shift
their primary focus from individual to organizational effectiveness by placing
emphasis on the need for managers who can deal with strategic as well as
tactical issues. This requires the undertaking of a complete assessment of 9
management skills, knowledge, experience, and formal educational levels,
particularly in areas dealing with competences or specialities, so that an
inventory of readily-accessible talents – which may be needed to implement the
competitive strategy – can be called upon at relatively short notice. Most of this
type of information can be found via an examination of personnel records. An
in-depth review of the competitive strategy in terms of the skills and experience
needed will be addressed by the mix of talents, skills, knowledge, and
experience available. A composite of requisite skills and so forth can then be
“matched” to the skills inventory previously established to determine levels of
ready availability.
Additionally, the mindset of management and HRD specialists who are
responsible for the design and implementation of management development
training programmes must be changed to focus on the corporate vision and
long-term growth strategies. Particular emphasis must be placed on developing
the capacity for growth, organizational renewal, and continual transformation
and change.
Significantly, SMD requires that management development specialists be
consulted at the conceptual stages of competitive strategy formulation and be
kept intimately informed and involved in the process as it moves forward so
that any changes not previously anticipated which may require additional skill,
knowledge, and/or experience areas can be identified and dealt with on a pro-
active rather than on a reactive basis. Moreover, training, and other types of
skills-building opportunities should be constantly evaluated so as to maintain
resources for additional skill(s) development as they become needed.
A summary of the requirements for SMD design and implementation are:
(1) Gain organizational commitment by involving senior management.
(2) Shift focus from individual to organizational effectiveness.
(3) Develop an inventory of readily-available skills, talents, and knowledge.
(4) Identify internal resources who possess required skills, talents, etc.
(5) Focus on corporate vision and long-term growth emphasizing
organizational capacity, renewal, change, and human resource
realignment.
(6) Involve management development specialists throughout all stages of
strategy formulation.
Journal of Possible Obstacles
Management There are a variety of potential obstacles which must be addressed and
Development overcome if SMD is to be designed, successfully implemented, and produce the
desired results. The extent of the obstacles are not necessarily common to all
13,5 organizations. Some may be more prevalent in one firm and not in another.
Significantly, the culture and political environment which defines how the
10 organization operates and determines, to a great extent, the conduct of its
business, can be a formidable obstacle to SMD. The mindset of management
may be historically linked to the concept of improving individual effectiveness.
Under such conditions, management development activities would most likely
be focused on functionality and maintenance of performance on individual
levels. In other words, on those areas that are the least susceptible to any type
of behavioural intervention which would normally be undertaken so as to
produce significant organizational change. Therefore, all management
development efforts will focus on the individual and not necessarily on the
organization as a whole. For example, individuals who undergo some form of
company-sponsored training, either internally or externally produced, may
return to the job with little opportunity or encouragement to apply what they
have learned. In these organizations a form of cultural adjustment and/or
intervention must be designed to refocus on individual growth as a complement
to organizational growth.
There are also dangers in focusing entirely on organizational growth. If
carried to the extent that the mindset and culture change to adopt the position
that organizational needs always come first and individual needs are secondary,
the organization runs the risk of alienating employees from each other and from
the company as a whole. Rather, the design of SMD should attempt to strike a
reasonable balance by matching organizational needs to the needs of individual
employees. Thus, the balance struck directs attention back to the concept of
individual growth as being fundamental – as well as complementary – to
organizational growth.
Another potential obstacle may be a lack of qualified management
development specialists on the staff who are familiar with strategy formulation
and have the capacity to think in more strategic, albeit abstract, terms.
Traditionally HRD and management development specialists have focused on
details of specific course design, implementation, and evaluation and have not
been faced with the necessity to conceptualize strategic issues. In such cases it
would be wise to seek help in SMD design and implementation from an external
consultant.
Organizations who fail to provide training activities which are designed
around the company’s long-term strategy development and growth pose yet
another obstacle to successful design and implementation of SMD. In these
organizations, management development may be regarded as necessary but the
outcomes or gains from such activities are also seen as being unpredictable.
Under such conditions the approach to management development becomes
haphazard due to the lack of a coherent and logical plan by which skills
enhancement and/or training needs are identified. In these types of Gaining
organizations the challenges of initiating a strategic approach to management Competitive
development are greatest. Such cases will normally require the development of Advantage
courses which are specific and germane to a particular company’s culture,
structure, and competitive strategy. This may require extensive analysis of the
organizational structure, a re-examination of its mission and related goals, and,
at the least, a re-alignment of its human resources across the organizational 11
spectrum.

Summary and Conclusions

Organizational downsizing and restructuring has produced uncertainty and
injected a heightened degree of instability into today’s managerial workforce. In
particular, pressure to contain costs while improving profitability has placed
additional stress on organizational management who are searching for ways to
compete in an increasingly global and uncertain marketplace. Working with
limited resources while trying to anticipate change – which today comes at
almost blinding speed – has placed greater emphasis on the need to formulate
and implement competitive strategies properly.
Research has shown that many organizations do not consider management
development and related issues to be part of their competitive strategy
formulation processes. However, those that do have found it to be of value in
their efforts to gain, as well as maintain, a competitive advantage. In 1990 Coca-
Cola, for example, through initiation of their two-phase Maintaining
Competitive Advantage (MCA) management development programme, found
that by carefully aligning organizational resources to organizational goals, they
were able to provide key managers with the skills and abilities to make
decisions about how they can more effectively manage their operating units in
order to achieve corporate business objectives[16].
Those organizations wishing to adopt SMD and integrate it into their
competitive strategies will find there are many potential obstacles which must
be recognized and dealt with if the design and implementation of SMD is to be
successful and ultimately valuable. However, integrating SMD into their
competitive strategy promotes a broader understanding and acceptance of
change as a normal part of today’s business environment. Such heightened
perception can likewise provide incentive for a closer examination and more
detailed forecast of what skills will be required by implementation of the
competitive strategy along with what will be needed to cope with constantly
changing conditions and markets.
Adopting and integrating SMD will also add a degree of insurance in that the
strategies implemented will be done so with regard not only to the
product/service itself but also place significant emphasis on the importance of
placing the right people in key positions which will ultimately determine
whether the strategy was successfully implemented. Moreover, adopting SMD
as part of a competitive strategy has additional advantages, all of which contain
strategic value.
Journal of First, SMD will highlight the importance of a well-trained, skilled, adaptable,
Management and competent management staff. Second, it takes a proactive approach to
Development change in that it forces the organization to anticipate departures from the
traditional ways of doing business and further, to pay closer attention to the
13,5 skills managers will need as crises or conditions of uncertainty arise. Third, it
promotes open communication, co-ordination, and co-operation between
12 various organizational units which may have, previously, operated somewhat
independently of the others. (An example of this can be found in the American
automotive industry where product design, engineering, and manufacturing
originally operated independently of the others with the final product suffering
in design, quality control and, ultimately, consumer satisfaction and market
share.) Fourth, integrating SMD into the competitive strategy formulation
process will provide the organization – particularly those that have either
undergone or are presently undergoing restructuring and downsizing – with an
effective means of allocating skills development funds on a basis where they
will have the greatest positive impact. Finally, SMD promotes “people-
involvement” across the organizational spectrum early on in the preliminary
product/service planning stages where potential problems can be predicted,
identified, and addressed before growing to become major obstacles or pitfalls
later on.
An organization initiates a competitive strategy to enhance the prediction of
change and become proactive as opposed to the more traditional operational
mode of waiting for and then reacting to change. A well-designed competitive
strategy subscribes to the fact that change will be a constant variable in today’s
global marketplaces and that the success or failure of a particular
product/service depends, to a significant degree, on the skill, knowledge,
talents, experience, and abilities of its human resources. In response to this,
organizations who recognize the value of SMD will initiate activities designed
to foster the personal and professional growth of its employees, which will
likewise foster continued organizational growth and development.
Organizations who move to develop and integrate SMD into their competitive
strategy formulation process will find that they have a greater degree of
flexibility in the allocation and efficient usage of their managerial talents while
becoming effectively proactive to constantly changing market conditions. This
edge can be a decisive factor, not only in determining the success of its products
and/or services, but also in whether the organization identifies and takes
advantage of opportunities for future growth, expansion and, ultimately,
increased profitability.

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