This chapter highlights the role of executives in strategic management, the four core elements of strategic management, and organizational and management good practices that should be followed to achieve the administration’s strategic goals.
The Role of the Executive Team in Strategic Management
Senior management have a crucial role in managing the administration’s progress toward achieving its strategic goals. The high-level direction must come from the leader of the organization, with the strong support of other senior leaders. The strategic management process (setting objectives, developing and implementing a plan, evaluating the results, and adjusting the plan if needed) is a major change process; it may be seen as a threat by some and may generate resistance, which needs to be addressed by the leadership. Senior leaders are responsible for ensuring that the staff, community, and stakeholders are prepared for the changes and reforms. Specific roles for the head of the tax administration and the second level of management are set out in Table 4.1.
Strategic Management Roles
Strategic Management Roles
| Head of the tax administration (commissioner, director general, commissioner general) |
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| Second-level executives (deputy commissioner, deputy director general, deputy commissioner general) |
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Strategic Management Roles
| Head of the tax administration (commissioner, director general, commissioner general) |
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| Second-level executives (deputy commissioner, deputy director general, deputy commissioner general) |
|
Strategic Management Framework
The strategic management framework is composed of the organizational and management practices that should be in place to achieve the administration’s goals. These practices bring the strategic plan to fruition through implementation. The framework ensures the alignment of the administration’s structure, business processes, culture, HR, and IT.
The framework consists of four elements:
1. Organizational support. A dedicated unit should be established to manage the development and implementation of the strategy.
2. A strong governance framework should be in place, focusing on how decisions are made in relation to the development and implementation of the strategic plan.
3. Active change management. To provide the necessary processes and actions to ensure staff, community, and stakeholders are prepared for the changes and reform as outlined in the strategic plan.
4. Effective communication. Internal and external communication is required to build consensus and allow opportunities for staff and stakeholder input to the strategic plan.
Organizational Support
Developing and implementing a strategic plan demands full-time attention. Staff cannot be expected to complete their day-to-day job responsibilities and develop and implement the strategic plan at the same time. For this reason, a dedicated organizational unit should be established.
Best results have been achieved when the administration establishes and fully staffs a separate organizational unit whose responsibility is to manage the development and implementation of the strategic plan. This headquarters-based unit is often called the Office of Strategic Management (OSM). In smaller administrations, the role of the OSM may be incorporated in the Planning, Program Design, and Reform department.
To recognize the important role that this unit would play, the OSM should report directly to the head of the tax administration but work horizontally with colleagues to help facilitate and monitor implementation of individual operational plans. An example of an organization chart with an OSM as a separate organizational unit is set out in Figure 4.1.
An OSM in the Hierarchy of a Tax Administration
An OSM in the Hierarchy of a Tax Administration
An OSM in the Hierarchy of a Tax Administration
Staffing for the OSM will depend on the administration’s size and expertise in undertaking strategic management. Key activities of the OSM unit include the following:
Assessment
Undertake environmental analysis.
Analyze past operational results.
Review and document institutional and compliance risks.
Evaluate strategic plans of peer tax administrations.
Incorporate feedback from capability development agencies (donors).
Provide recommendations for the senior management team based on the above analyses.
Design
Organize and host regular meetings during strategic plan development for management to discuss mission/vision/core values and strategic themes/objectives.
With the agreed mission/vision/core values and strategic objectives, organize and host meetings with the senior management team to identify the proposed activities to support the strategic objectives and develop KPIs for each activity.
Prepare documentation to present to the Strategic Management Committee (SMC) for review and approval.
Once the activities are approved, document a formal strategic plan.
Incorporate comments from senior management.
Present the strategic plan to the SMC for formal approval. The SMC should also decide whether the plan will be published externally.
Transitioning from strategy to action
Develop a timebound implementation plan.
Develop an internal/external communication plan, and deliver according to established timelines.
Develop the processes and procedures to implement the activities in the strategic plan in coordination with operational areas.
Liaise with operational areas and IT to identify systems changes that may be required.
Monitoring and linking to other plans
Set up a monitoring program and processes to evaluate progress in achieving established targets.
Identify, monitor, and report on risks to implementation.
Set up regular meetings with the SMC to report on implementation progress.
Ensure the activities identified in the strategic plan are incorporated in the annual business plans with targets established.
Evaluate progress on objectives, and begin an environmental scan prior to the next annual planning cycle.
Existing staff who have demonstrated strategic-level capabilities are typically assigned to the OSM unit. Depending on the size of the administration, it may not be feasible to establish a separate organizational unit to carry out the functions expected from the OSM. This is a decision that each administration makes based on their circumstances. The key elements to consider include the following:
Full-time staff dedicated to this work is critical. In small organizations, it might be one or two people, while in large administrations, perhaps five or six. The unit should be relative in size to other areas in the administration, with the size taking account of the activities to be managed.
The management of the strategic plan implementation and updates is a year-round process and requires adequate monitoring along with periodic reporting to the SMC. This allows management to react if one area of the implementation is offtrack. An “early warning system,” deployed and enforced through regular SMC meetings, will ensure timely responses.
Governance Framework
A tax administration must have sustainable governance processes in place that clearly sets out authority and accountability to ensure sound decision-making. The head of the administration must establish, and communicate, principles and guidelines related to decision-making, and specify what types of decisions can be made by each level of management (delegation of authority) and which decisions are reserved for the head of the administration.
Strategic Management Committee
An SMC is recommended to ensure that the administration’s strategy and operations are aligned. This committee acts as the vehicle that the head of the administration uses to discuss and make decisions on the strategic plan and to guide management of its implementation. The SMC reports to the head of the administration. Its members should include the director of the OSM as well as the directors of Planning, Program Design and Reform, Regional and District Operations, and the Support Functions (see Figure 4.2).
The SMC in the Hierarchy of a Tax Administration
The SMC in the Hierarchy of a Tax Administration
The SMC in the Hierarchy of a Tax Administration
Notice that the SMC is in a different type of box, which means that it is not a structural unit of the organization but rather a special-purpose decision-making body related to strategic management.
The SMC should meet regularly—possibly weekly during the phase in which the strategy is being developed and monthly during the rest of the year as the strategy is being monitored. The OSM is responsible for developing the agendas for the SMC and providing secretariat functions for the meetings, including scheduling, developing the agenda, recording decisions, and monitoring action items resulting from the SMC meetings.
Change Management
Change management is an element of strategic management that is often overlooked or underemphasized, to the detriment of the organization, and is often identified as the number one contributor to the reform agenda success.
The focus of change management is to help staff impacted by the reforms to adapt to the changes rather than risk alienating them with unexplained shifts. It is about the processes, activities, and sustained commitment of leadership to prepare staff, citizens, and stakeholders for the changes that will be delivered through strategic management.
It is imperative for senior leaders in the administration to take a leading role in managing change. They must ensure that the organization understands the vision for the future as outlined in the strategic plan and why it is important that the organization move in this direction. If staff feel they are part of the vision, they will help the organization achieve its objectives. Lack of information, poor communication, and staff making assumptions about the objectives in the absence of direct communication can present real challenges for the successful implementation of the strategic plan.
Key elements of change management that leaders will need to consider include the following:
Change starts at the top. An organization’s leaders must be the visionaries, champions, and role models for change.
Change is inherently unsettling for people; therefore, change management should be considered at the early stages of the strategic management process.
Leaders and managers throughout the organization should be expected to actively consider the impact of change and support and communicate the benefits of change to their peers and staff.
It is people who make change happen—nothing moves forward without engaged and motivated staff. To effectively achieve buy-in or ownership, staff and stakeholders need to be engaged, understand the reasons for change, and help develop the solutions.
Even if the change is nonnegotiable, cooperation and collaboration to achieve the change is more likely if staff are involved and kept informed.
Communication
Communication is a key part of managing change and requires a deliberate approach by management. The earlier a leader engages staff in communicating change as part of the broader strategic plan, the earlier staff will come on board and help implement the change. Early communication also allows employees to provide input and offer suggestions on how best to implement the change. Allowing this feedback process and incorporating suggestions into the plan will increase staff ownership of the vision.
Resistance to change is most often the result of uncertainty. Staff will often react negatively if they do not understand the change, why it is needed, how it will affect them personally, and the timeframe for change. If this occurs, productivity will suffer. It is important to get information to staff quickly when changes are on the horizon to allow management to address concerns and reduce the level of fear and resistance.
There will be staff who do not agree with the change, regardless of how well it is explained and how it may benefit the administration. The key is to continue communicating in different ways. Over time most will accept the change even if they do not become advocates or champions of the change.
It is not only tax administration staff that need to be engaged. Stakeholders within the organization that the tax administration reports to, and other government agencies, will need to be advised of the strategy and, in some cases, be part of the strategic planning process. Stakeholders within the community, such as businesses, tax professionals, taxpayers, civil society, and media, will also need to be engaged.
Different stakeholders have different communication needs. Generally, stakeholders can be classified into three categories:
Those who are partners in the reform: includes stakeholders who are responsible for implementing some part of the reform agenda, for example, staff
Those with whom the government needs to consult: includes stakeholders who may have information necessary to support the reform plan, but they themselves are not implementing the changes, for example, Chambers of Commerce and industry associations
Those who need to be informed of the changes: includes taxpayers
The different categories will help decide what type of messaging is best for each group. The level of detail will typically be high for partners in the reform process to facilitate their input on the impacts of the strategy and advice on implementation. For stakeholders who only need to be informed, the details will typically be directed toward impacts and what taxpayers need to do to conform to the changes. The messaging for taxpayers could involve specific messaging for each type of change.
It is also necessary to consider the delivery method and medium/channel of the messaging. Delivery methods include in-person or electronic, and the medium could include workshops, conferences, or written material. A template is provided in Appendix 2, which sets out a format that could be used to document the communication strategy.
To optimize the level of engagement with staff and other stakeholders:
Leaders must communicate in person to staff. This shows commitment and increases the level of importance that participants place on the message—if the leader takes the time to personally deliver the message, it will be taken more seriously.
All levels of management have a role to play in communicating the changes to staff. While the head of the administration will communicate the vision and high-level details of the strategy, management at each level below the head of the administration will provide increasingly more specific information that is important to their staff. At the first level of supervision, the manager will communicate what impact the change has on each staff person’s job. Many administrations recognize that staff view their direct supervisor as the best person to communicate changes as they are a trusted colleague.
Multiple channels should be used to communicate the change message to accommodate visual and auditory preferences. Where possible, using both is best as it serves to reinforce messages.
It is critical to provide the opportunity for stakeholders to have input. People impacted by the changes want to feel heard. Taking the time to listen to concerns and suggestions increases the buy-in by stakeholders.
Repeat change messages often. Telling stakeholders once what the changes are going to be is insufficient. As the reform progresses, more details should be shared, and further opportunities allowed for questions and comments.
Obtain feedback. This is important to ensure messaging has been clear and to help develop additional/future communication.
Considerations and Mistakes to Avoid
Key considerations and mistakes to avoid in undertaking the strategic management process follow:
Understanding resource adequacy: The scope and pace of strategic shifts in direction need to be matched with adequate resources to implement the reform program. Strategic plans may require changes in legislation, regulations, procedures, and staff capabilities, and these require time and effort to accomplish. If there are insufficient staff that can be assigned to this work, a business case for additional resources may be needed, or the pace of reform may need to be scaled back.
Keeping a positive mindset: A good rule of thumb is to recognize small wins, reward the people involved, and reinforce positive results.
Confusing a plan with management: The strategic plan is not the end goal. Having a strategic plan is only the beginning—implementation brings the strategy to fruition. Recognize that implementation can be challenging, but the benefits are worthwhile. Eventually the strategic management process will become embedded into routine tax administration processes.
Ignoring culture: The culture of the organization must facilitate engagement and transparency; otherwise, implementing the strategy will be difficult. Receiving timely feedback is crucial. It is important to ensure that the plan has been discussed with staff and time taken to address any perceived cultural conflicts that may affect implementation.
Overcomplicating strategy: For administrations developing their first strategic plan, do not strive for perfection. Choose two or three strategic objectives, and use the experience to learn. This will serve you well for the second strategic plan, which can build on this success. The key is to start.
Paying attention to people: Never underestimate the importance of staff in strategic change. The leader must be the catalyst of change, but it is the people of the organization who need to embrace the vision and turn it into reality.
Having too many measures: Choose one or two measures per objective that are actionable and realistic. Think about measures that will indicate whether the objective has been reached. Keep in mind that “what gets measured, gets done.” An imprecise measure may be successful; however, it may not achieve the expected outcome.
Fearing failure: Good project performance measures will identify areas that are falling short of the objective, and plans can be adjusted accordingly. The failure is to not monitor and adjust the strategy when necessary.
Having honest assessments: Leaders must solicit honest assessments even if they are not positive. This is not a reason to feel discouraged, rather it is how to determine what change is needed. It is vitally important to create an environment in which staff see measurement as a mechanism for improvement and not for blame.
Underestimating the importance of communication: The leaders of the tax administration should communicate personally with staff and communicate regularly. In addition to messages from the head of the administration, cascading messaging by all levels of management will build consensus and commitment to the change program.
Failing to share: Leaders who keep discussions of strategy to themselves miss the opportunity for cross-functional dialogue that brings ideas, insights, and feedback that may otherwise not be heard. Successful organizations welcome unusual opinions and inputs instead of disregarding them.
Ensuring long-term engagement for success: Structural reforms require that tax administrations in developing countries and their partners (development partners and local government) engage for the long term. Building stronger tax systems with effective tax administrations should be understood as an investment that will take several years.
