Home > Articles

Strategic Management

This chapter is from the book

Organizations: Structure, Design, and Partnership

As we’ve reiterated numerous times, in order to be effective in our profession, we have to be businesspeople—not just HR professionals. Our profession is our craft, our skill. We need to be prepared to knowledgeably practice that craft within the organizations we support. In order to do so, one of the many things we need to understand is how organizations are structured.

As we begin to take a look at how organizations are functionally organized, let’s go back and revisit Henri Fayol. Fayol identified six functional groups within organizations, and suggested that all organizational activities can fit into one of those six functional areas:

  • Technical activities
  • Commercial activities: sales and marketing
  • Financial activities
  • Security activities
  • Accounting activities
  • Managerial activities

Despite the ongoing validity of Fayol’s theories, a few things have changed since Fayol’s time. One is the role of human resources in the organization, which at first glance is not well- reflected in these six areas. Another is information technology, non-existent in the early twentieth century when Fayol set forth his ideas. Something that can be said to hold true for both of these areas is that while each is its own independent function, each also supports and reinforces the efforts of every other area. This is important, in and of itself, since it reinforces the idea that Fayol’s areas—while illustrative—are not necessarily as clearly dichotomized as they were when Fayol originally set forth his ideas.

What HR Professionals Need to Know About the Organizations They Support

As HR professionals, there is specific business-related information we should know about the various structural elements of organizations. While any of these items could conceivably be on the PHR exam, discussing them goes beyond the scope of (and the page allocation for) this book. What we will do, then, is to set forth the concepts that are important for you to know and encourage you (in the strongest possible terms) to seek out, familiarize yourself with, learn, and (when appropriate) memorize facts, information, and formulas relating to the following:

  • Technical activities/operations:
    • Capacity
    • Standards
    • Scheduling
    • Inventory
    • Control
  • Commercial Activities—Sales and Marketing
    • The 4 Ps:
    • Product
    • Place
    • Price
    • Promotion
  • Finance and Accounting Activities
    • Budgeting:
      • Incremental budgeting
      • Formula budgeting
      • Zero-based budgeting
      • Activity based budgeting
    • Assets
    • Liability
    • Equity
    • Accounts payable
    • Accounts receivable
    • Balance sheet
    • Income statement
    • Gross profit margin
    • Statement of cash flows
    • Financial ratios:
      • Business activity ratios
      • Profitability ratios
      • Debt ratios
      • Liquidity
      • Current ratio
    • Acid test

Balanced Scorecard

In the early 1990s, a new approach to strategic management was developed by Dr. Robert Kaplan and Dr. David Norton. Called the "balanced scorecard," this new approach sought increased clarity and specificity by offering a clear and unequivocal prescription of what companies should measure in order to appropriately balance financial measures of success against non-financial measures of success.

In addition to being a measurement system, the balanced scorecard is also a management system. It turns strategic planning into a hands-on, reality driven, highly effective tool. It is important to note, however, that in creating and describing the balanced scorecard, Kaplan and Norton do not denounce the value of traditional financial measures. They do, however, share their premise that financial measures by themselves are not enough. Other perspectives must be incorporated in order to obtain a more accurate assessment of organizational performance.

The balanced scorecard embodies the following four perspectives:

  • Learning and Growth Perspective: This perspective looks at employee training, as well as attitudes toward individual and corporate growth. It emphasizes the criticality of the knowledge worker, of people as the organization’s primary resource, and of the need for employees to continually grow and learn so as to be able to perform in a manner that will truly support the attainment of organizational goals.
  • Business Process Perspective: This perspective scrutinizes key internal business processes so as to measure and ascertain how well those processes generate business results (such as products and services) that meet customer expectations. The business process perspective ascertains performance levels through specific measures that are unique to each particular organization.
  • The Customer Perspective: This perspective focuses on the criticality of customer focus and customer satisfaction—for every business and organization. Dissatisfied customers will eventually look to others who will meet their needs and expectations (often without ever sharing their reasons for doing so), which, if the numbers are large enough, can ultimately lead to organizational decline.
  • The Financial Perspective: The financial perspective is the most traditional of Kaplan’s and Norton’s four perspectives. As previously indicated, financial considerations cannot be overlooked—they simply have to be supplemented with other meaningful organizational measures.

Organizational Life Cycle

It’s particularly important for HR professionals to be familiar with organizational life cycles, since each phase will warrant different interventions. These phases or stages roughly approximate the phases of life experienced by humans—thereby further bolstering the perspective of the organization as a living, breathing entity.

The four stages of the lifecycle—though referred to slightly differently by different experts—are as follows:

  • Stage 1: Introduction (or "birth"). Excitement and energy are high and cash flow may be low. Struggling start-ups often find themselves searching for solid footing—financially as well operationally. The core group of highly talented employees may focus fixedly on the founder as a source of direction, wisdom, and inspiration.

  • In the introduction phase, employees may find themselves paid above market rates as a reflection of the founder's desire to "lure" them on board. Alternatively, if money is in short supply, employees in the introduction phase may earn less cash compensation, and have those diminished earnings offset by other non-cash rewards (equity, intrinsic rewards, and so on).

    Depending upon the organization, HR may or may not have a presence in this phase of the organizational life cycle.

  • Stage 2: Development (or "growth").The organization grows in so many ways during the development phase—market share, facilities, equipment, revenues, and the number of employees are all likely to expand, to varying degrees. Along with that growth, the organization is likely to experience some "growing pains."

  • Though it may be a challenging process for some organizations—one that might meet with resistance—it is important that policies and procedures are formalized, as a way of fostering equity, compliance, and consistency.

  • Stage 3: Maturity. The growing pains have passed, and the culture is well established. In fact, it's important to ensure that certain elements of the culture do not become a bit too well-established. If this were to happen, an "entitlement mentality" could begin to emerge relative to pay, benefits, and/or other terms and conditions of employment. The organizational structure could evolve in a somewhat rigid manner, and resistance to OD and change initiatives could be high.

  • As is the case with us humans, organizations must resist the onset of inertia during these years of maturity lest they begin to atrophy. In concert with senior leadership, HR must play a key role in ensuring that this doesn't happen.

  • Stage 4: Decline. If that inertia does set in, and if the atrophy does begin, decline is likely not far behind. There are many examples of the demise of long-standing organizations—retailers, in particular—"anchors" in our local and national communities that just weren't able to "keep up with these changing times." This can happen for any number of reasons such as salaries that are beyond what the organization can truly afford to pay, inflexible management, disengaged workers...the list goes on and on. In the wake of such decline, downsizing is likely to occur—either in pockets or across the organization as a whole.

Organizational Structure

Organizational structure refers to the various ways in which organizations can be designed to attain maximum levels of effectiveness and efficiency.

Pearson IT Certification Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from Pearson IT Certification and its family of brands. I can unsubscribe at any time.


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about Pearson IT Certification products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information

To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.


Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites; develop new products and services; conduct educational research; and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.


If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information

Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.


This site is not directed to children under the age of 13.


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information

If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.


Users can always make an informed choice as to whether they should proceed with certain services offered by Adobe Press. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.pearsonitcertification.com/u.aspx.

Sale of Personal Information

Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents

California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure

Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact

Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice

We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020