STRATEGIC MANAGEMENT PRACTICES IN THE LOCAL AUTHORITIES IN MALAYSIA: FACTORS ASSOCIATED WITH THEADOPTION OF STRATEGIC MANAGEMENT PRACTICES IN THELOCAL AUTHORITES IN MALAYSIA 2 1. INTRODUCTION Strategic management has been touted as one of the effective management tools in strengthening organization performance through effective decision making and systematic strategic formulation and implementation. Although strategic management was more prevalent in the private sector since the concept was first developed, the interest of using strategic management in the public sector has increased over the last decade (Smith, 1994).
Since 1980? s there have been a series of reforms taking shape in the public sector, resulting from increased awareness on the importance of quality in the public sector. According to Osborne and Gaebler (1992), that strategic management appeared to be part of a package management innovations design to „reinvent? or „modernize? the public sector. Strategic management was found to be an effective management tool in transforming a bureaucratic public sector to a more responsive and innovative administration.
Local Authority in Malaysia (LA) is a government at local level in the Malaysian Three-tier, Administrative System. It is responsible in providing urban services as well as implementing economic, social, physical and urban development within its gazetted administrative boundary. The role of LAs as the catalyst of economic development as well as political and social stability is undoubtedly critical given its status, as the government at the third level with certain autonomy power measured to enhance the increasing demands from the communities for a more customer-oriented and higher standard of urban services.
It is this context that the study intends to investigate to what extent strategic management is being adopted and practiced by the LAs in Malaysia and to determine factors associated to LAs in adopting a strategic management framework as suggested by the western literature. 2. PROBLEM STATEMENTS 3 While strategic management is widely practiced by firms and other profit oriented organizations in this country, its adoption by public sector particularly in government agencies at operational level is less understood. Strategic planning in Malaysia is still insubstantial and unknown in the ense that there is an absence of documented proof of its practice (Mohamad , 1988). This study is undertaken to fill this knowledge gap. It is imperative to study on how strategic management is being adopted by government agencies as a tool of enhancing performance their performance. LAs are chosen as the setting because of their significant role as the third tier government in Malaysia. Not only LAs are important in the provision of urban services to the taxpayers, they are also critical as a catalyst in economic growth and well-being for the country. 3. RESEARCH QUESTIONS ) What is the extent of adoption of strategic management practices among the LAs in terms of: i) ii) iii) iv) v) Completeness of systems; Established direction and mission; Depth of analysis; Implementation task and skills; and Control and feedback mechanism b) What are the contributing and impeding factors in the LAs in successfully adopting the strategic management practices; c) How do factors such as leadership traits, organization culture and organization structure have impact in the degree of adoption strategic management by the LAs. 4. RESEARCH OBJECTIVES 4
The main objective of the study is to examine the adoption of strategic management practices in the Local Authorities in Malaysia. In so doing, the study will seek: a) to investigate the extent to which strategic management is adopted by the LAs, in line with the strategic management framework that suite its environment; b) to ascertain factors that contribute and impede the smooth adoption of strategic management in the LAs; c) to see how factors such as leadership traits, organization culture and organization structure have impact in adopting strategic management in the LAs; and ) to highlight any other finding that are of interest and contribute towards the subject of strategic management in government agencies. 5. SIGNIFICANCE OF THE STUDY Finding of the research will add to the knowledge and understanding of the subject of strategic management and its application by the LAs. This study should be significant in the sense that it will: a) Allow the identification of the concept and framework of strategic management that takes into account the nature of work and environment of the LAs; ) Support and enrich theory and model of strategic management in public organizations that have similarities in their nature of service with the LAs; c) Generate greater awareness among public organizations on the importance of having a proper and practical strategic management framework as a vehicle to organizational effectiveness; 5 d) Provide useful knowledge on factors that might have impact and contribute to the successful adoption of strategic management in public organizations. 6. SCOPE OF THE STUDY
The study will take all the organization of LAs in Peninsular Malaysia as the setting. Organization of the LAs will confine only to the office of the LAs, being secretariat or the administrative arms of the LAs. 7. THEORETICAL FRAMEWORK OF THE STUDY The objective of the study is basically two-pronged. Firstly s to examine the extent of adoption of strategic management practices in the LAs and secondly is to see how factors such as leadership traits, organization culture do and organization structure have impact in the adoption of strategic management that suite the environment of the LAs.
Gathering of data on the extent of strategic management adoption in the LAs will be based on models of strategic planning by notable strategic management gurus such as Steiner (1979) and Glueck (1982). Amongst the dimension to be investigated are: vi) vii) viii) ix) x) Completeness of systems; Establish direction and mission; Depth of analysis; Implementation task and skills; and Control and feedback mechanism The theoretical framework of the study is depicted by the diagram below: 6 Factors Associated With the Extent of Strategic Management Adoption in the Local Authorities in Malaysia Leadership Traits Organization Culture
Size Extent of Adoption of Strategic Management Framework Organization Structure Income INDEPENDENT VARIABLES MODERATING VARIABLES DEPENDENT VARIABLES 8. DEFINITION OF VARIABLES The dimensions of each independent variable are have been identified as follows: a. Leadership Traits Degree of ability It refers to ability to organize, supervise and dealing with issues. This variable is adopted from Jameson and Soule (1991); Degree of Visionary It refers to ability to redefine the purpose of organization and embody new purposes into structure and systems; ability to design long-term plan and ability to forecast incoming issues.
This variable is adopted from Bryson J. M (1988); Locus of Control Locus of Control refers the extent to which individuals believe that they can control events affecting them. Individuals who have a high internal locus of control or referred to as „internals? , believe that the event in their lives are primarily the result of their own behaviour and actions. Individuals who have a high external locus of control or referred to as „external? , on the other hand believe that the events in their lives and organizations are 7 primarily determined by chance, fate or other people. This variable is adopted from Julian Rotter (1966) and Burger J.
M. (1986). b. Organization Culture Level of Team work. Refers to desirability of the personnel to work in a group accomplishing a given task or assignment. Level of Commitment, Refers to willingness among the personnel to complete the task at their level best and having sense of pride for achieving organizational task. c. Organization Structure Degree of Authority. Refers to clarity of line authority from top management to the lowest level; clarity of duties, responsibilities and authorities of each role in the organization and degree to which authority is delegated. Degree of structural flexibility in terms of adopting changes.
Adopted from Fayol? s fundamental management functions. – Extent of Coordination. Refers to level of interdependence in work situations. How programs and tasks are coordinated and what are the tools or mechanisms used to coordinate. Adopted from Fayol? s fundamental management functions. – Level of Communication Refers to the existence of a strictly upward, downward and multidimensional communication as oppose to a little two-way communication. Also refers to level of participation of personnel in organization communication. Adopted from Likerts? Model of Organization Design. d.
Dimensions of Dependent Variable The dimensions the dependent variable i. e. the extent of adoption of strategic management by the Las will comprise of completeness of systems; established 8 direction and mission; depth of analysis; implementation task and skills; and Control and feedback mechanism. The determination of those dimensions were based on Certo and Peter (1990). These dimensions has been adopted with some modification from earlier working of Steiner (1979), Van Gigch (1978) and Glueck (1982). 9. RESEARCH METHODOLOGY Research Population The population of this study is all Local Authorities (Las) in Malaysia.
Currently there 143 LAs nationwide with the break down of 97 in Peninsular Malaysia and 46 in Sabah and Sarawak. Nevertheless, this study will only take all Las in Peninsular Malaysia as the setting. This is to ensure uniformity and homogeneity as all Las in Peninsular Malaysia are created and governed by the same law, i. e. Act 171 as opposed to LAs in Sabah and Sarawak which are established and administered by their own state? s ordinance. All the 97 LAs in Peninsular Malaysia come within three principal categories, namely City Councils, Municipal Councils and District Councils.
Table II shows the distribution of local authorities according to various states in Peninsular Malaysia. Table II: Peninsular Malaysia: Local Authorities by States, 2004 No. of Local Authorities State Johore Kedah Kelantan Malacca N. Sembilan Pahang City Council 1 1 Municipal Council 4 2 1 District Council 9 8 11 1 5 9 Total 14 11 12 3 8 11 1 1 3 2 9 Perak Perlis Penang Selangor Terengganu Fed. Teritory Total 1 3 1 2 11 15 1 2 1 7 1 4 6 12 7 1 1* 6 27 64 97 * Kuala Lumpur City Hall Source: Ministry of Housing and Local Government. Unit of Analysis Unit of analysis is organization i. e. the Local Authorities in Malaysia.
Data Gathering A perception survey will be conducted to measure variables using structured questionnaire. Questionnaire will be sent to all LAs via post. Measurement will use Likert Scale. In addition, interviews will also be conducted at selected LAs to solicit views from selected respondent? s especially top management in the LAs. Other data will be gathered from records at Public Complains Bureau (BPA), departments? files, records and other documents. Secondary data will be obtained from relevant Parliament Acts, relevant research and seminar papers, annual reports, statistical abstract, magazines, newspapers and journals. 0. LITERATURE REVIEW Strategic Management – An overview Strategic management is defined as a systematic process for managing the organization and its future direction in relation to its environment in a way that will assure continuous success as well as secure from surprises (Ansoff 1984, Berry 1995). Strategic management encompasses the process of determining organization? s mission and goals; managing strategy formulation; strategy implementation; and strategy control. 10
Strategic management can be viewed as a series of steps covering the tasks of analyzing the opportunities and threats that exist in the external environment; analyzing the organization? s strengths and weaknesses within the internal environment; identifying agency stakeholders; establishing organization? s mission and goals; formulating strategies by matching the organization? s strengths and weaknesses with the environment? s opportunities and threats; implementing the strategies; and finally engaging in strategy control activities to measure the implementation progress and ensure achievement of the stated goals.
Ansoff (1984), clarifies that the first step in the evolution of strategic management is known as strategic formulation, it began in 1950? s when firms started to invent a systematic approach in deciding on how and where the firms will do its future business. The progress of which managers jointly formulate the strategy was known as strategic planning. The term strategic management was subsequently introduced to include environmental assessment and strategy implementation.
Thus, strategic management is defined as being where strategic planning is coupled with strategy implementation. Steiner (1979) and Barry (1986), argue that strategic planning and management, regardless of why public and not profit organization engage in it, can help an organization achieve the clarify future direction; think strategically and develop effective strategies; establish priorities; deal effectively with rapid changingCircumstances; build teamwork and expertise; and solve major organizational problems; and improve organizational performance.
Chart I: Generic Model of Strategic Management 11 ENVIRONMENTAL OPPORTUNITIES ENVIRONMENTAL OPPORTUNITIES AND THREATS AND THREATS Macroenvironment Macroenvironment Industry Industry Environment Environment ORGANIZATIONAL DIRECTION ORGANIZATIONAL DIRECTION Mission and Goals Mission and Goals
STRATEGY FORMULATION STRATEGY FORMULATION Corporate Strategy Corporate Strategy Formulation Formulation Business Strategy Business Strategy Formulation Formulation Functional Strategy Functional Strategy Formulation Formulation STRATEGY IMPLEMENTATION STRATEGY IMPLEMENTATION Organization Structure Organization Structure Leadership Leadership Power Power Organizational Culture Organizational Culture STRATEGY CONTROL STRATEGY CONTROL Performance Performance Local Authority in Malaysia As the study will focus on strengthening the local Authorities, a general overview on the Local Authority in Malaysia is essential to form a context of the study.
Beginning with the creation of Committee of Assessors in Penang in 1801, the administration of LA was subsequently governed by Sanitary Board Enactment in 1907, before it was grouped into two major classifications namely Town Board Enactment in 1945. The administration of LAs falls under the jurisdiction of the State Governments. In its capacity as a local government, LAs, perform a wide range of functions. LAs are the provider of various urban services; the authorized parties in the formulation of local and structural plan; catalyst for social and economic development; caretaker of urban environment rotection and cleanliness; and tax and revenue collectors. Apart from Act 171 mentioned above, there are two more prominent laws that form the power of LAs, namely the Town and Planning Act 1976 and the Street Drainage and Building Act 1974. In performing their multifaceted functions, the LAs derive their revenues from various sources, including taxes, rents and license fees, profit from trade, services and undertakings, income 12 from property assessment and revenue from federal and state governments (Ahmad Kamaruddin, 1999)
The issue on weaknesses of the LAs have been discussed time and again by many interested and effected parties. The Chief Secretary to the Government, in his opening speech at the Annual Working Meeting or Senior Officials of Local Government Authorities in 1998, reiterated on the importance of LAs to improve their service to the people through a strong communication and feedback system; effective enforcement; high integrity and transparency; prudent financial management system; enhancing people participation in their programs; and continuous efforts in inculcating quality culture in their organizations.
Further to that, Dr. Mohd. Zin Mohamed in his paper, called for a re-examination of the LAs in various areas including the organizational structure; the scheme of services; the competency building program; and the new dimension of managing LAs in the current changing environment. This study is undertaken to fulfil those expectations, in line with government? s policy to bring quality to the lower levels of the administration, under the spirit of “Excellent Work Culture Movement”. Creating strong and excellent LAs will benefit many parties including the taxpayers; stakeholders; and the country as a whole.
The roles of LAs in the revitalization of the current economic slow down is highly critical. As the authority in approving various permits and licenses for many types of trades and business, as well as the authorized agency in issuing the Certificate of Fitness (CF) to all residential, commercial and industrial buildings before they can be occupied and operationalized, one could understand how an effective LAs could contribute to the well-being of the country. As a frontline organizations dealing with the public at grass-root level, the performance of LAs cannot but reflect the image and credibility of the entire government.
Strategic Management in States and Local Governments 13 The importance of strategic planning and management practice as an effective tool in strengthening the performance in the states and local governments has become a subject of interest in many developed countries since the last fifteen years. In the US, concerted efforts have been undertaken to empower states and local governments aimed at enhancing the capacity of these authorities. Much of such efforts were sparked by the idea of strategic management and organizational transformation inspired by Osborne and Gaebler in their Reinventing Government (1992).
Wechsler conducted a survey in 548 state agencies in the United States in 1995 to assess their experience in strategic planning and implementation. The survey discovered that a majority of the agencies (60%) currently use strategic planning and management in their organizations. It was also found that leadership in the individual agency is the main factor (88%) for state agencies to initiate strategic planning in their organization, while almost all respondents chose „desire to set program and policy direction? as the most important objective of strategic planning and management.
It was also agreed almost unanimously that „clarification of direction and goals? is the most important outcome that strategic management help achieve in their agency. In the United Kingdom, a survey by Flynn, Talbot and Colin (1996) of over 600 UK public service senior managers in 1994 identified the element of competition as a main driving force for local governments to revisit their existing service delivery system. It was discovered that competition generates the need for a new strategic thinking, strategy formulation and implementation.
However, it was also revealed that the undertaking of strategic planning in most local governments is normally by state governments. 14 Strategic Management Implementation Model The Harvard Policy Model and the Stakeholder Management Model are two common approaches to strategic management in the public sector (Bryson 1989). The Harvard Policy model was developed as part of the business policy courses taught at Harvard Business School since the 1920? s. In the Harvard policy, strategists assess organizational strengths and weaknesses, identify opportunities and threats, and seek to coalign the organization with its environment.
Orgranization are rejoined to build on strengths, overcome weaknesses, exploit opportunities, and block threats (Nutt & Backoff, 1992). Stakeholder approach to strategic planning are concerned with identifying individual and organization actors who have an interest or in the focal organization and it strategic program. This model placed important role on the leadership of an organization to maintain good relationship with the stakeholder who have influence in agency? s direction and its capacity for realizing its strategy.
Factors that influence the successful implementation of strategic management from internal organization point of view relate quite closely with the generic organization development model suggested by management experts such as Mc Kinsey, de Bono, Ishikawa – to mention a few. Summary of factors contributing to organization? s excellence under generic organization development model is tabulated in the table below. 15 Variables Explanation Sources Leadership Leadership is the main driver of organization’s change.
Leadership will lead the direction, influence and motivate the behavior of personnel to channel their efforts into the desired direction. Identification of the right attitudes and behavior of the people is essential towards achieving strategy and objectives. Ability to perform and operate effectively rely heavily on superior work systems and process Kroll (1992), Howe and Kaufman, (1979), Ansoff, (1965, 1984), Bryson (1989) Kroll, (1992), Hamel & Prahalad (1994) Culture/ Behavior Systems/ Process Kroll (1992), Howe and Kaufman, (1979), Ansoff, (1965) Kroll, (1992) Ansoff (1965)Bryson (1989)
Organization Structure An organization structure (OS) must be aligned to put the strategy into effect. OS will cover responsibility and authority; job definition and description; and line of command. Human resource is the ultimate resource. Thus a strong organization must be supported by an effective HR Management. Technology is key in coping with dynamic competitive situation Human Resource Architecture Technology Architecture Hamel & Prahalad (1994) Bryson (1989) Ansoff (1984), Hamel & Prahalad (1994) 16 11.
ORGANIZATION OF THE STUDY The organization of the study is planned as shown below: PART I: Chapter 1: RESEARCH BACKGROUND AND METHODOLOGY Introduction, Objective and Scope of the Study ? ? ? PART II: Chapter 2: Problem Statements Research Focus Objective, Scope and Significance of the Study LITERATURE REVIEW Local Government in Malaysia ? ? ? ? ? Chapter 3: History of the Local Authority (LA) in Malaysia LA in the Malaysian Three-tier System of Government Laws and Regulations Governing the LAs Roles and Functions of LAs Issues Confronting LAs
A General Overview of Strategic Management ? ? ? ? Chapter 4: Concept and Definition of Strategic Management Historical and Evolution of Strategic Management Schools of Thought in Strategic Management Strategic Management Model and Dimensions Research Methodology ? ? ? ? Research Design The Population The Survey and Interview Techniques Data Analysis 17 PART III ANALYSIS AND FINDINGS AND CONCLUSION 12. CONCLUSION This proposal is the first step of an endeavour to embark on a comprehensive study on strategic management adoption in the LAs in Malaysia.
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