The Dilemma of Meeting Needs for Commitment and Legitimacy, Essay Example

Abstract

This paper examines the arguments that present themselves in the pressures for legitimacy and commitment affecting a planning process. It considers the ambiguity that arises from multiple sources and lack of direct control over these resources. The resultant analysis addresses the importance of the need to demonstrate formal management practices in order to require contract legitimacy over suppliers. From this a new planning strategy framework is offered for consideration of use.

Introduction

Many business organizations do not implement formal planning procedures. This often results in more rigid and inflexible processes and procedures. This practice in turn negates proper strategic planning and strategic thinking in the Executive decision making process. Fluctuating demands by key stakeholders have inserted a lack of direct control over resources and introduced a level of ambiguity over processes.  The concept of ambiguity effects on planning has not been well defined, with specific emphasis on commitment and legitimacy. The emphasis on the use of resources in planning is important because it adds both commitment and legitimacy to the strategy used for resource acquisition in planning.

The distinction between legitimacy and commitment is that legitimacy is derived from that of external groups and institutions.  Individuals must view themselves as accepted participants in an organisation, if they are to accept the organisation and thus legitimise that organization.  The concept of commitment functions at the individual level.  The problem for Management is to meet the challenges of both concepts. Legitimacy acquisition requires goal and objective setting and therefore a formal planning framework in order to accomplish same.

Non Profit and Entrepreneurial firms have been identified as organizational types that fall into the ambiguity category. i.e. those with pressures and conflicts over commitment and legitimacy.  Planning in these organization was found to be of an infrequent nature and not embracing more traditional measures of performance. This paper examines the arguments of the ambiguous contexts  over non profit organisations and entrepreneurial firms and how these pressure influence planning.

Concepts of Ambiguity

It is considered that Non Profit organizations and those entrepreneurial firms have a great deal in common.  In this aspect they occupy the space between the Public Sector and those large for profit corporations.  As such these firms face lass managerial constraints.  There are however certain constraints and these include large diversity of stakeholders, non market forces, lack of market information in order to make key business decisions.  Both the non profits and entrepreneurs share three main components of ambiguity relevant to planning:

1. The influence of multiple constituents
2. lack of direct control over resource flow
3. of small size    (Melissa Middleton Stone, 1996)

Multiple conflicting constituencies impact both non profits and entrepreneurial firms. Organizational boundaries in these types of firms are often transparent and easy to penetrate. This makes them more vulnerable to external funding providers and the internal staff tend to focus loyalty and allegiance to these types of external source.  In addition entrepreneurial firms deal with a wide variety of stakeholders that they need to satisfy.

Non Profit Organizations play a very important role in modern day society.  They are involved with the implementation of programs and policies that improve the living conditions of the more vulnerable and weaker members of our society.  They act as a “watchdog”  on our communities and individual members of society. Funding to support these organizations comes from a multiple of sources, including the Government.  This means that there are a wide and diversified stakeholder interest group.  As governments start to cut back and limit funding on these institutions, the importance of effective planning becomes paramount to their survival. Equally the smaller entrepreneurial firms depend upon resources for their survival. These firms suffer from lack of appropriate policies and procedures to locate suppliers and customers. As such they are reliant upon their social networks and business contacts inn order to meet business expectations.

Does size matter ? This is another question that needs to be considered in light of both non profits and entrepreneurial firms.  Most of these are small and this does provide a benefit in that they are less structurally complicated as compared to much larger organizations. This means that they are less formal by nature but are more centrally controlled.  This often means that they are reliant upon a single person for research, planning and expertise.  This is often the CEO of the firm. This means that the beliefs and directions of such organizations often reflect that of a single person.

Growth is another key factor for these organizations. The concept of how they perceive the environment in which they operate will become a determining factor in how they will facilitate or allow growth. Both groups acquire resources by reliance upon social networking. . In order to grow they need to engage a wider external circle that may include potential investors, bankers, funding agencies and regulatory bodies etc.  This in turn widens the stakeholder involvement and creates the forum for managing multiple stakeholder interests. This in turn leads to a lack of resource control and increased problems associating with gaining commitment.

Importance of Planning

The fact that formal planning has not been widely adopted in the non profit and entrepreneurial business sector has accounted for a wide degree of business failure.  Recent studies have illustrated that under 50% of business samples had little formal processes that extended beyond basic accounting procedures.  With those that failed to plan the business environment was perceived as irregular, haphazard and clumsy.  Effective strategic planning is considered of vital importance to non profits. Without proper planning procedures in place the organization will quickly become non viable.  The strategic plan provides the vision to the organization, the business plan outlines the goals and objectives and how these will be delivered. The operation plan demonstrates how well these services have been articulated and how the finding will be allocated in order to provide these services.

Those organisation with proper structured planning procedures in place are generally much more successful in winning grants. Planning can take upon itself many forms but is normally associated with successful grant / funding applications. Government agencies will often provide preferential treatment to those organisations that can demonstrate sound business planning than those who do not have such documentation in place. Those organisation that include fund raising as an important part of their business will need to clearly understand and articulate the mission of the business.  This is best expressed in planning terms and a hierarchical expression of Mission, Goals and Objectives.