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WHAT IS
STRATEGIC
MANAGEMENT?
Is strategic
planning
Islamic, or is it
bidah (an
innovation)?
CHAPTER
You are the best of peoples, evolved for mankind, enjoining what is right, forbidding what is wrong, and believing in Allah. If only the People of the Book had faith, it were best for them: among them are some who have faith, but most of them are perverted transgressors. (Qur'an, 3:110)
You know your Islamic organization needs to develop a clear strat- egy. You know there is no clear direction in what your mosque or Islamic institution does. You have suggested that your organization rethink what it is doing. Others ask if strategic planning is Islamic at all, or if it is bidah (an innovation)? As you ponder over this question, you recall some facts.
Even before the Qurâan was revealed, 1 we find Biblical support for strategic planning. 2 Moses ( as ),^3 a consummate strategist who led the nation of Israel out of Egypt, grappled with his role as leader. His father-in-law Jethro (Shu`ayb) understood his plight and taught him strategic human resource planning, namely, how to manage his work by delegating parts of it according to a well-established hierarchy. In the Bible, each of Israelâs twelve tribes had separate areas in the camp, their own leaders, and specific responsibilities. Each tribe dealt with the day-to-day issues, while Moses focused on getting them to their overall goal. Prophet David was a superb strategic thinker who understood strat- egy even while still a youth. For example, he did not attack Goliathâs strengths but was inspired by Allah to attack his weakness. Prophet Joseph also used strategy very effectively. In Surah Yusuf , he planned a scenario that would shame his brothers into repentance. By placing a drinking cup in one of his brothersâ saddlebag and accusing them of theft, he prompted them to admit their real crime and deal with their past mis- deed. Finally, as pointed out by Altalib,^4 Prophet Noah reacted in a proac- tive strategic manner by building the ark before the flood, selecting pairs of animals, and working collaboratively with the believers. This strategic awareness shown by the prophets is but a reflection of the planning of the Supreme Strategist, the One whose Message they were spreading. Repeatedly, the Qurâan reminds us that Allah is the best planner. For example, Allah talks about His planning (Qurâan, 86:15) or the signs of His Perfect Plan. For example, He refers to the careful crafting of the natural environment as one of His signs:
Strategic Planning in the Bible, the Qurâan, and the Sirah
the trench as a defensive technique at Khandaq are vivid testimonies of the Prophetâs appreciation of planning and stratagems.
The Shariah clearly describes the efficient and effective conduct of Islamic for-profit and not-for-profit organizations as being encom- passed within the concept of _ihsan_ (excellence). When Islamic organizations seek to incorporate Islamic values in their _modus operandi_ , they resort to the Shariahâs guidelines. However, the Shariah does not enunciate operationally how an organization is to achieve sustainable competitive advantage in a highly turbulent, hypercompetitive environment. Rosly draws a distinction between _shari_ and tabi principles in business strategy. 6 Overall, the strategic conduct of any Islamic business can be seg- mented into two areas: _shari_ and tabi . As Rosly indicates, "The Tabi principles (i.e., the rational and empirical â an aspect of dunya [the world]) relate to the mundane where man applies reason and experience to run his daily business, while the Shari principles (i.e., Allah's command) convey the Divine rules that man must observe [while] doing the same. Both shall remain inseparable. The rational and empirical are driven by the spiritual values of the Qurâan."^7 Since the _shari_ principles are derived from the Qurâan and the Sunnah, they are common in all aspects of business transactions: Islamic banking, treatment of employees, conduct of partnerships, and so on. These principles originating from Allah separate the halal (lawful) from the haram (forbidden) and are intended to foster justice (_adalah_ ) in business transactions. When those engaged in business behave according to the Shariahâs principles, they are fulfilling the akhirahâs (Hereafter) requirements of the Islamic worldview. While the Shariahâs principles describe how Islamic transactions are to be conducted in a just and equitable manner, other dimensions of market activity need not depend on explicit divine guidance. This is the _tabi_ (natural) aspect of market activities that defines efficiency and, therefore, performance. It is nature's way. Tabi ` values, which are uni- versal, can be used by all people, irrespective of faith and belief. For example, a company can increase output by reducing per unit costs. In economics and in manufacturing, this process is known to achieve economies of scale. To increase sales, a business should first conduct market research. To manage a complex multi-billion dollar project, it
_Shari_** **and** **_Tabi_** ** Principles of Strategic Planning
Tabi` principles
relate to the
mundane
where man
applies
reason and
experience to
run his daily
business
whereas shar`i
principles
convey the
Divine rules
that man must
observe
simultaneously.
should use such project management techniques as PERT (Program Evaluation Review Technique). The tabi aspect of a business cannot be ignored, even when it runs under an Islamic label, for both Muslims and non-Muslims are expected to obey it. Its use is not so much about faith ( _iman_ ) as it is about efficiency and competence â although ethics ( _akhlaq_ ) always apply to Muslimsâ conduct. Thus, when mapping out a strategy, one notices that the Shariah does not describe the strategic management process and its associated tech- niques, and that Shariah scholars are not trained to be strategy experts. They can only help business people keep the _halal_ distinct from the _haram_ based on Qur'anic injunctions. Consider the case of Islamic financial planning: After screening for _halal_ and _haram_ investment instruments and areas, the _tabi_ aspects become dominant process criteria in terms of the price-earnings ratio, return on investment, earnings per share, and other financial performance measures. Similarly, as an Islamic organization seeks to develop and imple- ment its strategy using tabi principles, it must always make sure that it observes _shari_ principles. As Rosly stresses, 8 knowledge derived from non-divine sources (i.e., human) cannot be downgraded as ungodly, for the _aql_ (reason) is also divine in nature. Humanity can discover Allah by thinking about and contemplating His Signs. The aql is a powerful instrument to explain the nature and, therefore, the greatness of Allah. However, if it is deprived of divine guidance, it becomes short-sighted and unable to produce credible tabi ` principles for humanityâs enjoyment.
Strategic management deals with the organizationâs behavior within its external market, and its internal roles, processes, structure, and decisions in order to enable the organization to function at its peak within that external environment. 9 Strategic management asks three basic questions: Where are we going? Where could we be going? How do we get there? 10 Strategic management involves both strategy formulation and strat- egy implementation. The two primary phases of strategy formulation are commonly referred to as strategic planning and tactical or opera- tional planning. Formulating either a strategic or an operational plan is relatively easy, given that anyone can sit down and come up with a wonderful list of resolutions or goals. But implementing a plan is much
Key Concepts in Strategic Management
Strategic
management
asks three
basic quetions:
Where are we
going? Where
could we be
going? How do
we get there?
Why Strategic Management?
Strategic management is important because, if properly planned, exe- cuted, and monitored, it facilitates the move toward excellence in the run- ning of an organization. In particular, strategic management:
- Enhances the organization's ability to be proactive, anticipate problems, and stay focused on both the future and the present.
- Allows decisions to be based on the best alternatives, since they stem from the groupâs consensus ( shura ). Therefore, it encour- ages the best possible judgment based on what is frequently very little information.
- Improves the participantsâ understanding and motivations, since they are following a clear and consistent vision.
- Instills unity and internal consistency among all decisions and actions.
- Provides a cognitive frame of reference to guide decision makers, even if the situation on the ground makes the plan obsolete.
- Facilitates strategy implementation and decreases resistance to change. This advantage is similar to what is derived from the con- sultative dimension of Theory Z (Japanese management). Japanese managers discovered that when they involve personnel in the decisions that affect them and include their insights and sug- gestions, implementation is smoother and faster. Similarly, involv- ing personnel during the strategy formulation stage facilitates strategy implementation.
- Helps to channel resources to the critical areas, according to your strategic planâs long-term priorities, and to areas where you will see the most effective results.
- Incorporates strategic thinking into your organizationâs way of doing things, and provides a template for determining which aspects of the external environment matter the most.
- Integrates a proactive and disciplined stance into the organization, and
- Takes into account the long-term consequences of current decisions. In our quest to serve Allah, one of strategic managementâs most important goals is to attain excellence. Shaddad ibn Aws relates, in Sahih
The concept of
ihsan demands
that Muslims
achieve excel-
lence in every
halal endeavor
they engage in.
Muslim (hadith no. 4810), that Prophet Muhammad taught: "God has ordained excellence in everything [âŚ]."^15 In this regard, the Qurâan emphasizes that oneâs reward should be commensurate with oneâs effort (Qurâan 3:136, 99:7, and 48:19). This rule applies to the immediate reward in this life as well as the deferred reward in the Hereafter. Oneâs work is rewarded not only by other people, but also by Allah (Qurâan, 50:30). This idea of ihsan correlates with the concept of a sustainable competitive advantage (SCA). In the corporate world, achieving SCA means that a firm occupies an industry position that leads to superior performance over 10 or more years.^16 SCA is not easy to achieve. Many Islamic institutions have short bursts of excellent performance, but then dwindle to mediocrity and barely linger on before vanishing. SCA is achieved by outliers, those few that take time to be strategically aware and pursue excellence in a determined and relentless manner. Two excellent examples of such organizations are the Council of American Islamic Relations (CAIR: www.cair-net.org) and Indian Muslim Relief and Charities (IMRC: www.imrc.ws). When the performance of Islamic insti- tutions is examined over several years, it tends to regress toward the mean. According to Hawawini, Subramanian, and Verdin,^17 only a small minority of firms achieves a sustainable competitive advantage. Amazingly, these excellent companies are rarely the ones seeking the public limelight, and their leaders try to avoid being put on a pedestal.^18 Similarly, although the Islamic Society of North America (ISNA: www.isna.net) and the Muslim Studentsâ Association of the USA and Canada (MSA: www.msanational.org) have in the past achieved great success by the Grace of Allah, the organizations that have recently excelled in North America are relatively small and new: CAIR and IMRC. Explanations for the inability of once-leading Islamic organizations and businesses to achieve excellence or SCA are many and obvious. These reasons include:
- A lack of attention to and understanding of strategic manage- ment,
- An overly narrow understanding and application of the Qurâan and the Prophetâs sirah (e.g., should Muslims living in a non- Muslim country become involved in politics and other issues?)
- Structural and cultural inertia,
- Structure of the niche or domain (being more monopolistic or oligopolistic),
One of
the major
drawbacks
of Islamic
organizations
is an emphasis
on the good
old boyâs
network, or
on â asabiyyah.
permeates the entire strategic management process, for work is consid- ered part of a Muslimâs ` ibadah (worship). The eight tasks of strategic management include the strategy formula- tion phase (viz., conducting a SWOT analysis, developing a vision and a mission, listing oneâs goals or strategic priorities, developing long-term objectives and strategies, formulating shorter-term objectives or targets, and assessing resource needs) and the strategy implementation phase (viz., matching the organization structure, culture, and leadership to the strategic and operational plans, and, finally, evaluation and adjustment). Typically, these eight tasks are sequential. However, they can be revis- ited if they need to be re-calibrated. Hence, the strategic management process is an evolutionary, not a linear, process that never stops. The end product of the strategic planning phase is an integrative yet flexible plan. This, then, is where the strategy implementation phase starts.
Figure 1
The Strategic Management Process for an Islamic Organization
The strategic
management
process is an
evolutionary
and dynamic
process that
never stops
once it is
initiated.
Vision Statement
Mission Statement
Goals
Strategies
Objectives
Performance Measure Input
Output
Outcome
An idealized expression of what the organi- zation seeks to become in the future; a view of an organizationâs future direction.
A statement reflecting what the organization seeks to do for a specific group of cus- tomers, and how distinctive its contribution will be.
The strategic issues/priority areas where the organization intends to focus its attention and resources. Goals need to be clearly linked to the mission statement.
Strategies explain how we are going to get from where we are now to where we envision ourselves to be in the future. Strategies are crafted at different managerial levels: organi- zational or corporate level strategies, divi- sional (strategic business units) strategies, functional strategies, and operating strate- gies. Each level of strategy has different concerns. Objectives are tied to specific goals and repre- sent a managerial commitment to producing specified results in a specified time frame. They spell out how much of what kind of per- formance by when. There may be multiple objectives for each goal. A measurement of efficiency, economy, or effectiveness linked to a specific objective. Labor hours, resources, equipment, or sup- plies â in short, whatever it takes to produce of a product or service. Units of products (including services) of an activity. The resulting effect (impact) of an outputâs use/application.
Each task listed in the strategic management model will be analyzed in its own chapter. Now, I present a glossary^21 of key strategic management terms:
Glossary of Key Strategy Terms
- Demanding unattainable results from subordinates or followers. When decision-makers set up goals that are too optimistic or that require resources that implementers lack or have no control over, it is likely that these results are simply unrealistic. Demanding that results be achieved no matter what can lead to discouragement, rebellion, or even learned helplessness. An Islamic Sunday school is unlikely to succeed if it has only one teacher, 75 students (of varying ages and levels of preparation), and no support staff.
- Being unable to adapt to rapidly changing environments. Leaders of Islamic organizations often assume that their strategic plan is immutable, and so are reluctant to adjust it. This absolutist approach to strategic management is a serious miscalculation, because external stakeholders will often counter the organizationâs strategic plan. Unless some flexibility is built into the plan, very little will be accomplished. Internal stakeholders may also resist change and engage in delaying tactics, such as stonewalling changes until the overly vocal or active leader or board member can be voted out of office. Several decades ago, the U.S. State Department fell victim to this problem when career diplomats simply waited out the political appointee who was their temporary boss and did not imple- ment any of his changes.
- Drowning in data. One can get so enamored with data gathering that he or she may forget that the emphasis is on getting work done in an organized framework as outlined by a strategic plan. As a result, one Islamic organization that I know of gathered so much data that it rarely had enough time to distill it into any usable information. Moreover, its leaders did not have the statistical expertise to analyze the data adequately.
- The fallacy of prediction. The external environment cannot be predicted. In Islam, only Allah knows the future with certainty, and "prediction" is, at best, an inexact art. Quite a few organizations believe that they have more insight into the course of future events than they actually have. As a result, they are often sur- prised when only very little of what they "predicted" actually happens. As Muslims, we do what the Prophet suggested: Tie our camel and trust in Allah. Strategic planning is simply tying our camel, and the rest is tawakkul (putting our trust in Allah). 23 I will discuss this concept of tawakkul in a later chapter.
Strategic
planning is
simply âtying
our camelâ,
and putting our
trust in Allah
( tawakkul ).
