All businesses have corporate competencies and resources that distinguish them from their competitors. These competencies and resources are usually identified in terms of a company’s strengths and weaknesses. Deciding upon what a company should do can only be achieved after assessing the strengths and weaknesses to determine what the company can do. Strengths support windows of opportunities, whereas weaknesses create limitations. What a company can do is based upon the quality of its resources.
Strengths and weaknesses can be identified at all levels of management. Senior management may have a clearer picture of the overall company’s position in relation to the external environment, whereas middle management may have a better grasp of the internal strengths and weaknesses. Unfortunately, most managers do not think in terms of strengths and weaknesses and, as a result, they worry more about what they should do than about what they can do.
Although all organizations have strengths and weaknesses, no organization is equally strong in all areas. Procter & Gamble, Budweiser, Coke, and Pepsi are all known for their advertising and marketing. Computer firms are known for technical strengths, whereas General Electric has long been regarded as the training ground for manufacturing executives. Large firms have vast resources with strong technical competency, but they often react slowly when change is needed. Small firms can react quickly but have limited strengths. Any organization’s strengths and weaknesses can change over time and must, therefore, be closely monitored.
Strengths and weaknesses are internal measurements of what a company can do and assessment of them must be based upon the quality of the company’s resources. Consider the situation shown in Figure below. Even a company with a world-class methodology in project management will not be able to close the performance gap in Figure below until the proper internal or subcontracted resources are available. Methodologies, no matter how good, are executed by use of resources.
Project management methodologies do not guarantee success. They simply increase the chances for success provided that (1) the project objective is realistic and (2) the proper resources are available along with the skills needed to achieve the objective.
In basic project management courses, the strengths and weaknesses of a firm are usually described in the terms of its tangible resources. The most common classification for tangible resources is:
Another representation of resources is shown in Figure below. Unfortunately, these crude types of classification do not readily lend themselves to an accurate determination of internal strengths and weaknesses for project management. A more useful classification would be human resources, nonhuman resources, organizational resources, and financial resources.
Human resources are the knowledge, skills, capabilities, and talent of the firm’s employees. This includes the board of directors, managers at all levels, and employees as a whole. The board of directors provides the company with considerable experience, political astuteness, and connections, and possibly sources of borrowing power. The board of directors is primarily responsible for selecting the CEO and representing the best interest of the diverse stakeholders as a whole. Top management is responsible for developing the strategic mission and making sure that the strategic mission satisfies the shareholders. All too often, CEOs have singular strengths in only one area of business, such as marketing, finance, technology, or production.
The biggest asset of senior management is its decision-making ability, especially during project planning. Unfortunately, all too often senior management will delegate planning (and the accompanying decision-making process) to staff personnel. This may result in no effective project planning process within the organization and may lead to continuous replanning efforts.
Another important role of senior management is to define clearly its own managerial values and the firm’s social responsibility. A change in senior management could result in an overnight change in the organization’s managerial values and its definition of its social responsibility. This could require an immediate update of the firm’s project management methodology.
Lower and middle management are responsible for developing and maintaining the “core” technical competencies of the firm. Every organization maintains a distinct collection of human resources. Middle management must develop some type of cohesive organization such that synergistic effects will follow. It is the synergistic effect that produces the core competencies that lead to sustained competitive advantages and a high probability of successful project execution.
Nonhuman resources are physical resources that distinguish one organization from another. Boeing and IBM both have sustained competitive advantages but have different physical resources. Physical resources include plant and equipment, distribution networks, proximity of supplies, availability of a raw material, land, and labor.
Companies with superior nonhuman resources may not have a sustained competitive advantage without also having superior human resources. Likewise, a company with strong human resources may not be able to take advantage of windows of opportunity unless it also has strong physical resources. An Ohiobased company had a 30-year history of sustained competitive advantage on R&D projects that were won through competitive bidding. As times changed however, senior management saw that the potential for megaprofits now lay in production. Unfortunately, in order to acquire the resources needed for physical production, the organization diluted some of its technical resources. The firm learned a hard lesson in that the management of human resources is not the same as the management of nonhuman resources. The firm also had to reformulate its project management methodology to account for manufacturing operations.
Firms that endeavor to develop superior manufacturing are faced with two critical issues. First, how reliable are the suppliers? Do the suppliers maintain quality standards? Are the suppliers cost effective? The second concern, and perhaps the more serious of the two, is the ability to cut costs quickly and efficiently to remain competitive. This usually leads to some form of vertical integration.
Organizational resources are the glue that holds all of the other resources together. Organizational resources include the organizational structure, the project office, the formal (and sometimes informal) reporting structure, the planning system, the scheduling system, the control system, and the supporting policies and procedures. Decentralization can create havoc in large firms where each strategic business unit (SBU), functional unit, and operating division can have its own policies, procedures, rules, and guidelines. Multiple project management methodologies can cause serious problems if resources are shared between SBUs.
Financial resources are the firm’s borrowing capability, credit lines, credit rating, ability to generate cash, and relationship with investment bankers. Companies with quality credit ratings can borrow money at a lower rate than companies with nonquality ratings. Companies must maintain a proper balance between equity and credit markets when raising funds. A firm with strong, continuous cash flow may be able to fund growth projects out of cash flow rather than through borrowing.
This is the usual financial-growth strategy for a small firm.
Human, physical, organizational, and financial resources are regarded as tangible resources. There are also intangible resources that include the organizational culture, reputation, brand name, patents, trademarks, know-how, and relationships with customers and suppliers. Intangible resources do not have the visibility that tangible resources possess, but they can lead to a sustained competitive advantage.
When companies develop a “brand name,” it is nurtured through advertising and marketing and is often accompanied by a slogan. Project management methodologies can include paragraphs on how to protect the corporate image or brand name.
Social responsibility is also an intangible asset, although some consider it both intangible and tangible. Social responsibility is the expectation that the public perceives that a firm will make decisions that are in the best interest of the public as a whole. Social responsibility can include a broad range of topics from environmental protection to consumer safeguards to consumer honesty and employing the disadvantaged. An image of social responsibility can convert a potential disaster into an advantage. Johnson & Johnson, for example, earned high marks for social responsibility in the way it handled the two Tylenol tragedies in the 1980s. Nestlé, on the other hand, earned low marks for its role in the infant-formula controversy.
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