Although most small business owners have heard the phrase "strategic management", they have little idea what it actually means.

So what's the deal? Is strategic management worthwhile or is it all just hot air?

Without a doubt, strategic management is one of the most overused and misunderstood catchphrases in business. However, if used effectively it can have a positive impact on your bottom line and significantly improve your company's growth potential.

As its name suggests, strategic management is all about formulating strategies and the key to making it work for your business is to focus your strategizing efforts in the right areas and then manage the organization to achieve the defined strategies.

Short-Term Strategies

All the planning and strategizing in the world won't help your business if you don't have a plan of action for the short-term. Short-term strategies describe your company's activities in the here and now, and typically don't look beyond a 12-month timeframe.

In fact, some businesses do their short-term strategic planning on a quarterly basis, particularly if their industry is a highly volatile one. Since the timeframe is relatively short, short-term strategic management tends to be highly detailed and specific.

Communicate short-term strategy goals to employees and then manage employees in a way that holds them accountable for achieving strategic goals.

Long-Term Strategies

Short-term strategizing is essential, but alone it is simply not enough to help you meet your goals in business. To realize your long-term goals, you also need to develop long-term strategies, i.e. strategies covering a time span of one to five years.

Even though long-term strategies are less detailed than short-term strategies, they provide a road map that will guide you in your quest to achieve your goals and create a set of parameters that informs your short-term strategic management process.

It's worth noting that the most effective strategic management efforts employ both long-term and short-term strategies working in tandem with one another.

When managing employees, ask them how the work they are doing is contributing to long-term strategic goals and give them the leeway to modify their actions in ways that better achieve long-term strategic goals.

Functional Strategies

From time to time, you may also find it helpful to employ functional strategic management processes. These processes develop strategies that guide specific functions within your business, e.g. marketing, hiring, IT, etc.

As with short-term strategic management, functional strategic management can afford to be highly detailed because it addresses a very specific set of goals, typically over a short-time period.

However, it's also important to remember that the functional strategies you devise for your business need to line up with your short-term and long-term strategic management processes. If your functional strategies are at odds with the company's other strategies then you really haven't accomplished anything.

Strategic management does have limitations. One of the most frequently stated criticisms of strategic management is that it is often employed in an overly rigid manner, restricting the ability of businesses to react to changes in the marketplace.

If you decide to implement strategic management in your small business, remain aware that the strategies you devise are only intended to guide your activities and can be adapted to respond to market conditions.

To manage strategically, work closely with your employees to educate them on strategy options and decisions. Whenever you get the chance, emphasize how strategic thinking can help the organization.