With the rise of vigorous competition and an indication by the government of Ethiopia to open up the financial sector of the country to foreign actors in the near future; the need to utilize every possible tool to improve the performance of organizations has never been more crucial. The study analyzes the effect of strategic management, which can serve as a tool to address the above-mentioned challenges, on organizational performance of private commercial banks in Ethiopia. To achieve the objective of the study, a quantitative research approach was used where both primary and secondary data have been utilized. To obtain the primary data, a structured questionnaire was distributed to employees working at different positions in four private commercial banks. These banks were selected using systematic sampling method from a list of sixteen banks classified into four strata based on their level of performance. So, a combination of systematic sampling and stratified sampling methods were used in the study. The data that was collected was subjected to correlation and regression analysis using SPSS version 25. The result of the study indicated that the elements of strategic management (strategy formulation, strategy implementation and strategy evaluation/ control) are positively correlated with each other and have a largely significant positive influence on organizational performance. Based on these findings, the study recommends that private commercial banks in Ethiopia need to adopt Strategic Business Unit structure so as to delegate authority and responsibility to SBU managers giving top-level management a chance to focus on corporate and long-term issues, introduce continuous environmental analysis which can serve as a basis for taking proactive measures in anticipation of the future, apply collective management to make sure that all employees have a say in developing strategies in a way that enhances their organizational commitment which in turn improves productivity and overall organizational performance.