Wednesday, November 2, 2011

The use of strategy outside of corporations: Federal Reserve's strategy

Often strategy is considered something only relevant to business leaders of large corporations. Yet when considering strategic planning in government agencies typically we tend to stereotype this process is stereotyped as long, drawn out, and ineffective. How often do we read news clippings about the local school authority creating a 5 year strategic plan, only to have major changes in leadership before any of the strategy is implemented? Or often we think of governments wasting effort and money to invest in creating a strategy that will just go one the shelf, never to actually be used. Are these stereotypes correct and are there instances where the federal government has used the strategic planning processes to improve efficiency and effectiveness? If the end goal is not value added or creating a competitive advantage then can the strategic planning processes be as useful to governments as for-profit corporations?

In The Real Value of Strategic Planning by Sarah Kaplan & Eric Beinhocker, states that “the goal of formal strategic planning is the make sure that key decision makers have a solid understanding of the businesses, share a common fact base, and agree on important assumptions (pg 72)” Today I read an article about the Federal Reserve’s decision to keep short-term interest rates close to zero and to keep the same policies in place without introducing any new stimulus measures. Initially, I didn’t think of this as strategy but when I sit back and think about I realize that the Federal Reserve is making major strategic decisions and there has to be some solid agreements on assumptions, the facts, and the market by all decision makers in this process. As stated in The Real Value of Strategic Planning, this is the goal of having a strategic plan. Just like CEOs, the FOMC board of the Federal Reserve has meetings throughout the year to review strategies and require great preparation prior to the meeting. The most recent FOMC meeting just took place. Many analysts were expecting the introduction of new strategy, such as the proposal to buy mortgage-backed securities or shifting additional money from short-term to long-term securities. When I started to do more research I realized there are multiple strategic plans for various offices and separate Federal Reserve banks such as the Government Performance Act Strategic Planning Document and the Community Reinvestment Act Strategic Plan.

Although it is easy to just assume that strategic plans are just implemented in for-profit organizations, one of my goals this semester it to parallel the use of strategy in businesses to successful uses in governments, bureaucracies, and non-profits. I want to get a great understanding of how organizations outside of the private sector can utilize strategy effectively and when business foundations and approaches cannot be transferable to non-profit or government agencies.


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