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Performance in Business
Sustaining High
Performance in Business
Systems, Resources,
and Stakeholders
Jeffrey S. Harrison
Sustaining High Performance in Business: Systems, Resources,
and Stakeholders
Copyright © Business Expert Press, LLC, 2020.
10 9 8 7 6 5 4 3 2 1
Keywords
strategic management; strategic planning; stakeholder management;
stakeholder theory; systems theory; resource-based theory; resource-based
perspective; business ethics; business strategy; corporate performance;
corporate governance; corporate responsibility; sustainability; competi-
tive advantage; sustainable competitive advantage; strategic control; strat-
egy implementation
Contents
Introduction and Acknowledgments.........................................................ix
Notes
1. J. Collins. 2001. Good to Great: Why Some Companies Make the Leap and
Others Don’t (New York, NY: HarperCollins).
2. B.G. Resnick and T.L. Smunt. 2008. “From Good to Great to…,” Academy
of Management Perspectives 22, no. 4, pp. 6–12.
CHAPTER 1
A Systems Perspective on
Strategic Management
The most successful organizations are able to acquire, develop, and manage
valuable resources and capabilities that provide competitive advantages.
Furthermore, they are capable of managing and satisfying a wide range
of stakeholders. Resources and stakeholders, and the knowledge used to
manage them, combine to make up the firm’s value creation system. Top
managers play a pivotal role in this process, as they help their companies
interpret trends in the external environment, lead in the development of
strategies, and oversee their execution. Strategic management involves the
processes associated with managing the value creation system, including
evaluating the competitive situation of a company, acquiring and manag-
ing resources and stakeholders, and developing and executing strategies.
The ultimate objective, or purpose, of the strategic management pro-
cess is to help a firm create value for stakeholders, including customers,
employees, suppliers, financiers (i.e., shareholders, creditors), and the
communities in which the firm operates. Not long ago a statement like
this would have been severely criticized by strategic management scholars
as being illegal, impractical, or even immoral.1 For several decades the
received wisdom in business schools and among executives was that the
purpose of a corporation is to maximize shareholder returns.2 This logic
extended to boards of directors, arguing that it is the fiduciary duty of
directors to protect the interests of shareholders. Nonetheless, an obses-
sion with shareholder returns carried with it a lot of unintended conse-
quences, as executives made decisions that destroyed long-term value for
their firms and for society. Huge scandals, such as the Enron debacle,
began to shift public opinion against what is called shareholder primacy
and toward a more balanced and responsible approach to management.
2 SUSTAINING HIGH PERFORMANCE IN BUSINESS
Over time, empirical evidence began mounting that addressing the inter-
ests of a broader group of stakeholders is associated with higher, not lower,
economic performance.
Then, in 2019, the Business Roundtable, a group of CEOs from
nearly 200 of the biggest corporations in the United States, released
a signed statement defining the purpose of the corporation as serving
employees, customers, suppliers, shareholders, and communities.3 This
signaled a major victory for stakeholder scholars, although those who
have a vested interest in shareholder primacy undoubtedly will continue
to argue against it.
Given the wide acknowledgment among business leaders that a firm
has a broader purpose than simply maximizing financial returns, firm per-
formance should also be measured more broadly—from multiple stake-
holder perspectives. Table 1.1 contains some examples of performance
measures for each of the five stakeholder groups specifically mentioned by
the Business Roundtable. These measures are assessments of some of the
value firms can provide to stakeholders, including but not limited to types
of economic value. Many of these measures will be considered further in
subsequent chapters in this book.
5
6 SUSTAINING HIGH PERFORMANCE IN BUSINESS
Strategic Thinking
This book will be more helpful if readers examine it from what, for many,
will be a new way of thinking. Given the challenges of a complex and
ever-changing business environment, what is needed is a comprehensive
perspective on the firm that ties together all of the critical components of
its system and fosters innovation. Strategic thinking is a term that is often
used to describe the innovative aspects of strategic management, and it
is perfectly aligned with a systems perspective.4 The following character-
istics are associated with the kind of thinking that is needed to stimulate
innovation and a broad perspective in the strategic planning process.
Notes
1. M. Friedman. 1970. “The Social Responsibility of a Business is to Increase
Its Profits,” New York Times Magazine, September 13, pp. 32-33.
2. L.A. Stout. 2012. The Shareholder Value Myth: How Putting Shareholders
First Harms Investors, Corporations, and the Public (San Francisco, CA:
Berrett-Koehler Publishers, Inc.).
3. J.S. Harrison, R.A. Phillips, and R.E. Freeman. 2019. “On the 2019 Busi-
ness Roundtable ‘Statement on the Purpose of a Corporation,’” Journal of
Management. Doi: 10.1177/0149206319892669.
4. Y. Salamzadeh, V.Z. Bidaki, and T. Vahidi. 2018. “Strategic Thinking and
Organizational Success: Perceptions from Management Graduates and Stu-
dents,” Global Business and Management Research 10, no. 4, pp. 1–19.
A Systems Perspective on Strategic Management 11
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