Owner-Managers and the Practice of Strategic Management

Adrian Woods, Paul Joyce – Owner-Managers and the Practice of Strategic Management
International Small Business Journal, Vol. 21 (2), pp. 181-194

Summary
Based on Mintzberg’s organizational studies of entrepreneurship (1979), where he argues that small business owners use personal and arbitrary forms of control to conduct their business rather than strategic management (anti-planning theory), Woods and Joyce researched whether Mintzberg’s theory still holds true, or whether small businesses have adopted both the language and practice of strategic analysis and planning.

Assumptions:
Planning in general is positively linked to growth.
Managers who use strategic planning will achieve optimal development regarding their ventures.
The knowledge of strategic tools suggested by theories and theoretical frameworks will lead managers to value the results of applying these tools.
The access to this knowledge is possible through business school programs, management consultants, business books etc.
Managers may use the tool to make judgments and apply these judgments to decision making processes.
Decision making processes lead to feedback loops.
The use of tools can lead to better management strategies.
The benefits may result in improved business performance.

Research:
Five hundred and thirteen small business firms were selected at random and interviewed by asking among other questions, if the interviewees had heard about/were familiar with strategic tools, such as cost benefit analysis, scenario planning, SWOT analysis etc.

Results:
Owner-managers do not have as much access to strategic tools as other managers, and as a result do not use as many.
If owner-managers had access to these tools, they would value them and use them as much as other managers.
If tools are used, the strategic planning will improve.
Business performance will improve.
By using the tools, the more critical the users become of their ability in the specific area the tools apply to.
The knowledge about tools increases, as well as the richness of the strategic language being used and the quality of their plans.
If the application of tools available lead to beneficial results (outcomes), the tools will be used. If they are considered not useful, the tools will not be used.

Evaluation
Peters and Waterman in their revolutionary book “In Search of Excellence” (1982) describe the typical entrepreneur in a similar way as Mintzberg did in his study only three years earlier: Intuition and gut-feeling in combination with the right business sense and sufficient self-confidence (self-efficacy) will lead to successful small business ventures, if the market and the consumers will adapt and accept a new and/or innovative product/service. Woods and Joyce are taking this theory a step further, by acknowledging that times have changed, and that more access to above management tools are possible. The overall result is that small businesses are led in a much more professional way than some 20 plus years ago, but that tools are only used if they make perfect sense. There will always be owner-managers who do not appreciate management tools for whatever reason. Nevertheless, the trend seems to be that these individuals are smart enough to at least hire managers who already had access and possess applicable knowledge, and who are able to help run a small business through strategic planning and with the help of strategic analysis. The business world has changed significantly during the last two decades. Therefore Mintzberg’s study, conducted in 1979, became a still valuable but also a rather antiquated research these days. Frederick Taylor’s assumption based on observation and personal experience about scientific management a century ago cannot hold ground to Vroom’s Time-Driven Decision Tree (1998) these days, but one should not neglect Taylor and his revolutionary ideas either. The same goes for Mintzberg.