nature of strategy implementation

Chapter 7Implementing Strategies: Management & Operations Issues

Strategic Management: Concepts & Cases11th EditionFred David

Copyright 2005 Prentice Hall

Chapter OutlineThe Nature of Strategy ImplementationAnnual ObjectivesPolicies


Chapter Outline (contd)Resource AllocationManaging ConflictMatching Structure with Strategy


Chapter Outline (contd)Restructuring, Reengineering & E-EngineeringLinking Performance & Pay to StrategiesManaging Resistance to Change


Chapter Outline (contd)Managing the Natural EnvironmentCreating a Strategy-Supportive CultureProduction/Operations Concerns When Implementing Strategies


Chapter Outline (contd)Human Resource Concerns When Implementing Strategies


Pretend that every single person you meet has a sign around his or her neck that says, Make me feel important Mary Kay Ash, CEO of Mary Kay, Inc.Implementing Strategies


-- Successful strategy formulation does not guarantee successful strategy implementationThe Nature of Strategy Implementation


Formulation positions forces before the action

Implementation manages forces during the actionNature of Strategy ImplementationFormulation vs. Implementation


Formulation focuses on effectiveness

Implementation focuses on efficiencyNature of Strategy ImplementationFormulation vs. Implementation


Formulation is primarily an intellectual process

Implementation is primarily an operational processNature of Strategy ImplementationFormulation vs. Implementation


Formulation requires good intuitive & analytical skills

Implementation requires special motivational & leadership skills

Nature of Strategy ImplementationFormulation vs. Implementation


Formulation requires coordination among a few individuals

Implementation requires coordination among many individuals

Nature of Strategy ImplementationFormulation vs. Implementation


Varies among different types & sizes of organizationsNature of Strategy ImplementationStrategy Implementation


Altering sales territoriesAdding new departmentsClosing facilitiesHiring new employeesCost-control proceduresModifying advertising strategiesBuilding new facilitiesNature of Strategy ImplementationImplementation Activities


Shift in responsibility

Nature of Strategy ImplementationManagement PerspectivesDivision or Functional ManagersStrategists


Management IssuesManagementIssuesResourcesOrganizational structureRestructuringRewards/IncentivesAnnual ObjectivesPolicies


Management Issues (contd)ManagementIssuesSupportive CultureProduction/OperationsHuman ResourcesResistance to ChangeNatural Environment


Management IssuesAnnual Objectives ---- Decentralized activity-- Directly involve all managers in the organization


Management IssuesPurpose of Annual Objectives --Basis for resource allocationMechanism for management evaluationMetric for gauging progress on long-term objectivesEstablish priorities (organizational, division, & departmental)


Management IssuesConsistency of Annual Objectives --Across hierarchical levelsHorizontally consistentVertically consistent


Management IssuesRequirements of Annual Objectives MeasurableConsistentReasonableChallengingClearUnderstoodTimely


Management IssuesAnnual Objectives Should StateQuantityQualityCostTimeBe Verifiable


Management IssuesPolicies ---- Facilitate the solving or recurring problems & guide implementation of strategy


Management IssuesPolicies Establish --BoundariesConstraintsLimits


Management IssuesResource Allocation-- Central management activity that allows for the execution of strategy


Management IssuesFinancial resourcesPhysical resourcesHuman resourcesTechnological resources4 Types of Resources


Management IssuesManaging Conflict-- Disagreement between two more parties on one or more issues


Management IssuesConflict not always badNo conflict may signal apathyCan energize opposing groups to actionMay help managers identify problemsManaging Conflict


Management IssuesAvoidanceDiffusionConfrontationConflict Management & Resolution


Management IssuesMatching Structure w/ Strategy-- Changes in strategy = Changes in structure


Management IssuesStructure dictates how objectives & policies will be establishedStructure dictates how resources will be allocatedStructure & Strategy


New administrativeproblems emergeNew strategyIs formulatedOrganizationalperformance declinesOrganizational performanceimprovesNew organizationalstructure is establishedChandlers Strategy-Structure Relationship


Management IssuesFunctional StructureDivisional StructureStrategic Business Unit Structure (SBU)Matrix StructureBasic Forms of Structure


Functional StructureMost widely usedSimple and least expensiveGroups activities by business functionDisadvantagesForces accountability to the topMinimizes career development opportunitiesCharacterized by low employee morale, line/staff conflict, poor delegation of authority, inadequate planning for products and marketsOften leads to short-term and narrow thinking


Divisional StructureSecond most common type of structureCan be organized by:Geographic areaProduct or serviceCustomer Process


Divisional StructureAdvantagesClear accountabilityHigher employee moraleCreates career development opportunities for managersAllows local control of situationsLeads to a competitive climate within an organizationAllows new businesses and products to be added easily


Divisional StructureDisadvantagesCan be costly to set upEach division requires functional specialistsDuplication of staff services, facilities, and personnelManagers must be well qualifiedRequires an elaborate, headquarters-driven control systemCompetition between divisions may become so intense that it is dysfunctional


Appropriateness of Divisional StructureGeographic area Organizations whose strategies need to be tailored to fit the needs and characteristics of customers in different geographic areasProduct or Service When specific products or services need special emphasisProcess When each process (division) is responsible for generating revenues and profits


The Strategic Business Unit (SBU)In multidivisional organizations, an SBU structure can greatly facilitate strategy-implementation efforts.Advantages of improved coordination and accountabilityDisadvantagesRequires an additional layer of managementRole of the group vice president is often ambiguous


The Matrix StructureMost complex of all designs requires both vertical and horizontal flows of authority and communicationDisadvantagesCan result in higher overheadDual lines of budget authorityDual sources of reward and punishmentShared authorityDual reporting channelsNeed for an extensive and effective communication system


The Matrix StructureAdvantagesProject objectives are clearMany channels of communicationWorkers can see visible results of their workShutting down a project can be accomplished relatively easilyFacilitates the use of specialized personnel, equipment, and facilities


Dos and Donts in Developing Organizational ChartsDosReserve the title CEO for the top executiveUse the title chief or VP or manager for functional business executivesDirectly below the CEO it is best to have a COO and other chief officersDontsUse the title president for the top executiveUse the title president for functional business executives


Management IssuesRestructuring-- Reducing the size of the firm # of employees, divisions and/or units, # of hierarchical levels


Management IssuesRestructuringDownsizingRightsizingDelayering


Management IssuesReengineering-- Reconfiguring or redesigning work, jobs, & processes to improve cost, quality, service, & speed


Management IssuesReengineeringProcess managementProcess innovationProcess redesign


Management IssuesLinking Pay/Performance to Strategies-- Pay for performance systems


Management IssuesLinking Pay/Performance to StrategiesDual bonus systemsProfit sharing systemsGain sharing systems


Tests for Performance-Pay PlansDoes the plan capture attention?Do employees understand the plan?Is the plan improving communication?Does the plan pay out when it should?Is the company or unit performing better?

Management IssuesResistance to Change-- Single greatest threat to successful strategy implementation


Management IssuesResistance to Change-- Raises anxiety; fear concerningEconomic lossInconvenienceUncertaintyBreak in status-quo


Management IssuesChange StrategiesForce Change StrategyEducative Change StrategyRational or Self-Interest Change Strategy


Management IssuesNatural Environment-- Wide appreciation for firms that mend rather than harm the environment


Management IssuesNatural Environment Environmental StrategiesDevelop/acquire green businessesDivesting environmental-damaging businessLow-cost producer through waste minimization & energy conservation


Management IssuesStrategy-Supportive Culture-- Preserve, emphasize, & build upon aspects of existing culture that support new strategies


Management Issues

Formal statements of philosophy, charters, etc. used for recruitment and selection, socializationDesigning of physical spaces, facades, buildingsDeliberate role modeling, teaching and coachingExplicit reward and status system, promotion criteriaStories, legends, myths about key people and events

Elements linking culture to strategy:

Management Issues

What leaders pay attention to, measure and controlLeader reactions to critical incidents and crisesHow the organization is designed and structuredOrganizational systems and proceduresCriteria used for recruitment, selection, promotion, retirement

Elements linking culture to strategy:

Management IssuesProduction/Operations Concerns-- Production processes typically constitute more than 70% of firms total assets


Management IssuesProduction/Operations DecisionsPlant sizeInventory/Inventory controlQuality controlCost controlTechnological innovation


Management IssuesHuman Resource Concerns-- HR manager position has strategic responsibility & has changed dramatically as companies continue to reorganize, outsource, etc.


Management IssuesHuman Resource Strategic ResponsibilitiesAssessing staffing needs/costsDeveloping performance incentivesESOPsChild-care policiesWork-life balance issues


Diversity IssuesWomen CEOs in U.S. 2005 (examples)


Benefits of a Diverse WorkforceImproves corporate cultureImproves employee moraleLeads to a higher retention of employeesLeads to easier recruitment of employeesDecreases complaints and litigationIncreases creativityDecreases interpersonal conflict


Benefits of a Diverse WorkforceEnables the organization to move into emerging marketsImproves client relationsIncreases productivityImproves the bottom lineMaximizes brand identityReduces training costs


Key Terms & ConceptsFor Review (Chapter 7)Annual ObjectivesConflictAvoidanceConfrontationBenchmarkingCultureBonus SystemDefusion


Key Terms & ConceptsFor Review (Chapter 7)DelayeringEducative Change StrategyDe-centralized StructureEmployee Stock Ownership Plans (ESOPs)Divisional StructureEstablishing Annual ObjectivesDownsizingForce Change Strategy


Key Terms & ConceptsFor Review (Chapter 7)Functional StructureJust in Time (JIT)Gain SharingMatrix StructureGlass CeilingPolicyHorizontal Consistency of ObjectivesProfit Sharing


Key Terms & ConceptsFor Review (Chapter 7)Rational Change StrategyRestructuringReengineeringRightsizingResistance to ChangeSelf-Interest Change StrategyResource AllocationStrategic Business Unit (SBU)


Key Terms & ConceptsFor Review (Chapter 7)Vertical Consistency of ObjectivesTriangulation


nature of strategy implementation

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