STRATEGIC BARRIERS TO SUSTAINABLE DEVELOPMENT OF THE ECONOMIES, FIRMS AND PROJECTS (EFP) IN CONDITIONS OF GLOBAL ECONOMIC CRISIS THREAT

Автор(ы): Доктор экономических наук, профессор Санкт-Петербургского государственного университета Маленков Ю.А.

Опубликовано: "Euro-Mediterranean Economic and Finance Review. The Review of Remereg", 2010, Vol.5, N2.
http://yu800.110mb.com/

Internal strategic barriers to management of sustainable development (ISB)

Internal strategic barriers (ISB) are formed in the company due to defects of management styles and thinking stereotypes, management methods, organizational culture, stepping down of innovative potential and some others.

ISBarrier - a habit of conscious avoiding considering threat of global crisis and its impact upon them.

It is necessary for management to deal with the possibility of the next wave of the global crisis, preparation for which is better to start in each EFP as soon as possible. But today a typical answer to the question: "How do you prepare your firm against the new wave of global crisis?" is: "We will wait and see". As a result companies meet crises passively and become their victims. Disbelief of management of the companies in their ability to protect them from crises is one of the main internal barriers. It combines with a typical and too widely spread habit of managerial hoping for better. Over optimism is much more easy to use than to work out strategies against hard situations.

ISBarrier of EFP - leadership focusing on current tasks instead of strategies

There is a whole branch of science Crisis management which mainly deals with crisis situations. But often it is too late. Working out future strategies against crisis under different scenarios of environment is necessary for management because it greatly increases chances of EFP success and even survival. But look at the existing strategic plans and strategies - 99% of them do not have them and leadership does not want "to lose precious time and spend money" on them. The last crisis has shown the result – mass bankruptcies. And it was not the final crisis, neither was it the biggest. Those are yet to come and business and management will be caught unprepared, as usual.

ISBarrier - bureaucracy

It is one of the most important and most difficult barriers on a way to sustainability on every level of EFP. It is also the most typical one.

J. Welch, one of the most successful former top managers of GE of our times, said that in order to win you must always "destroy bureaucracy" [15]. Many years have passed since M. Weber put this term in use hoping that it means order, discipline, objectiveness, honesty, justice. But today what we know about bureaucracy means vise versa in every respect. All the human experience proves that the presence of bureaucracy always means inability to solve any problem on any level.

The main components of bureaucracy are nomenclature, autocracy, social irresponsibility. The purposes of bureaucracy are corruption, shadow revenues, hunting for power, covering all faults and mistakes, getting rid of more gifted colleagues.

Results of bureaucracy are apathy and degradation of intelligence, sharp acceleration of degradation and disintegration, cutting off every progressive initiative in the bud. Without getting rid of bureaucracy it is impossible to overcome any other barrier. So many examples prove it that it becomes an axiom of management.

ISBarrier - wrong methods of management

Because of the same poor results of almost all managerial attempts to resist global and many local crises by managers with different frames of mind and of different countries it is suitable to pose a question: if results of different managers are the same, poor, are they not explained by application of wrong methods? From the ancient times it was known that if commander loses a battle after a battle there is something wrong with his methods.

That is why it is necessary to reconsider of some basic methods of management. Moreover it is clear today that some of them have led and will lead the world economy and national economies, as well as many a firm and a project to the crises worsening with every day.

Some methods among them stand apart because they are universally accepted and rarely, if any, revised. And they push every EFP to disaster. Let's consider method of evaluating results of strategic investments based on discounting calculations, the so- called Net Present Value (NPV) and Internal Rate of Return (LRR). What they do is to make EFP management to unreasonable overestimate the importance of short time results in comparison with the long range ones. As a result a vast majority of very efficient and profitable strategic projects and actions are crossed out because they cannot generate future NPV that falls down with every year and cannot cover investments. These methods are also used in developing countries, and result is always the same – economical desert with enormous investments vainly put in the wrong directions.

The wrongness of that destructive approach and the necessity of changing it for a new methodology of Full Economical Results Evaluation were scientifically proved in 2002. It was also stated that:"Discounting methods, have caused mass outflow of investments from real (strategic) sectors to short-term investment operations, and have led to growing stratification of the countries on poor and rich, have worsened economical position of developing countries. The use of these methods inevitably conducts to deeper crises that have shown all financial markets of the world without an exception…. Many systems of business - planning also are constructed on these principles…. discounting methods errors of business planning also was one of the main reasons of a disorientation investors and owners of investment projects" [16].

The experience shows drastic worsening and poor quality of strategic planning: "The statistics on performance of projects testifies:

• Only 16 % of projects keep within terms;
• On the average 188 % of projects the budget is exceeded;
• On the average on 222 % terms are exceeded;
• The purposes and the maintenance only 61 % of projects remain invariable;
• Annually 74 % of projects in the field of IT come to an end with failures". (A source: Standish Group).

These figures reflect acute crisis in the EFP development, because on every level project management is a major factor of their economical success.

Not only methods of calculations lead to wrong directions. There is a problem with strategic process on the whole.

The second basic managerial method, that too has also to be revised, is a typical model of the strategic process in EFP. The whole model is so well - known and common that its crucial defects stand out only when it is too late to correct.

Let's take as a sample a small part of the strategic process. Typically it starts with setting the main strategic goal (mission, etc.) and after it management has to conduct an analysis of external and internal environment separately, e.g. [17]. In many others manuals this approach is repeated in the same essence. But the application of this approach in practice leads to the disastrous results. To begin with, one cannot set principal strategic goal prior to the process of analyzing external and internal environment. Because only after that analysis it is clear what goals one should choose. It's like a horse and a cart. What to put first? The answer is obvious – a horse, that is analyzing external and internal environment. This approach also leads to autocracy when the principal goal is being set from above by some very important manager or owner without analyzing environment. And after it appear discrepancies of every kind. Because opinion from the Top level often differs from views of lower personnel. And once the goal is set, it must be reached. But as proves the hard experience in majority of EFP organizations it is never reached.

Secondly, when one separates analysis of external and internal environment, e.g. with two dept., or two teams than it is impossible to make a uniform and a whole picture of it. The indicators, tendencies, structures will fall apart, and all you have left is kind of chaotic puzzle, which is never solved.

There are quite a number of other defects in that very important model which must be taken into account.

ISBarrier – not training personnel for work under global crisis conditions

Today numerous systems of professional education deal mainly with local crises of the EFP, and do not train beforehand to build strategic actions in conditions of global crisis. As a result personnel typically meet a crisis wave being practically not ready and react passively or by social protests.

Too many managers, as shows the analysis of their actions in the crisis simulation models, simply do not know what to do, start acting chaotically, making many professional mistakes, which under ordinary conditions they would never do. Global crisis involves also global stress and for many people it becomes unendurable, they simply break under it. That's why it is necessary to train personnel to actions in conditions of the most severe crises, to prepare themselves for switching to work in radically changed environment to work out individual and group strategies and patterns of behavior. It is necessary to use resources of the universities, because they possess knowledge and methods which usually lack in organizations.

If it is not done systematically, than even the best strategy is impossible to use. Sun Tsi, the ancient Chinese commander and strategist, put an accent on training people good and thoroughly, because without it a victory turns into illusion.

Of course there are some other internal barriers but those above form a net of absolute priority for management which tries to reach sustainability and getting past them greatly increases viability of EFP and chances for success.

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