Strategic management module 6 part 1

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Module 6Implementing Strategies: Management & Operations Issues

Module Outline

The Nature of Strategy Implementation

Annual Objectives

Policies

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Module Outline (cont’d)

Resource Allocation

Managing Conflict

Matching Structure with Strategy


Restructuring, Reengineering & E-Engineering

Managing Resistance to Change

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Creating a Strategy-Supportive Culture

Production/Operations Concerns When

Implementing Strategies


Human Resource Concerns When

Implementing Strategies

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-- Successful strategy formulation does not guarantee successful strategy implementation

The Nature of Strategy Implementation

� Formulation positions forces before the action

� Implementation manages forces during the action

Nature of Strategy Implementation

Formulation vs. Implementation

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� Formulation focuses on effectiveness

� Implementation focuses on efficiency



� Formulation is primarily an intellectual process

� Implementation is primarily an operational process



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� Formulation requires good intuitive & analytical skills

� Implementation requires special motivational & leadership skills



� Formulation requires coordination among a few individuals

� Implementation requires coordination among many individuals



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� Varies among different types & sizes of organizations


Strategy Implementation

� Altering sales territories

� Adding new departments

� Closing facilities

� Hiring new employees

� Cost-control procedures

� Modifying advertising strategies

� Building new facilities


Implementation Activities

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� Shift in responsibility


Management Perspectives

Division or FunctionalManagers

Strategists

Management Issues

ManagementIssues

Resources

Organizational structure

Restructuring

Rewards/Incentives

Annual Objectives

Policies

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Management Issues (cont’d)

ManagementIssues

Supportive Culture

Production/Operations

Human Resources

Resistance to Change

Natural Environment

Management Issues

Annual Objectives --

-- Decentralized activity

-- Directly involve all managers in the organization

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Management Issues

Purpose of Annual Objectives --

�Basis for resource allocation

�Mechanism for management evaluation

�Metric for gauging progress on long-term

objectives

�Establish priorities (organizational, division,

& departmental)

Management Issues

Consistency of Annual Objectives --

�Across hierarchical levels

�Horizontally consistent

�Vertically consistent

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Management Issues

Requirements of Annual Objectives

�Measurable

�Consistent

�Reasonable

�Challenging

�Clear

�Understood

�Timely

Management Issues

Annual Objectives Should State

�Quantity

�Quality

�Cost

�Time

�Be Verifiable

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Management Issues

ManagementIssues

Resources


Restructuring

Rewards/Incentives

Annual Objectives

Policies

Management Issues

Policies --

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

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Management Issues

Policies Establish --

�Boundaries

�Constraints

�Limits

Management Issues

ManagementIssues

Resources


Restructuring

Rewards/Incentives

Annual Objectives

Policies

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Management Issues

Resource Allocation

-- Central management activity that allows for the execution of strategy

Management Issues

1. Financial resources

2. Physical resources

3. Human resources

4. Technological resources

4 Types of Resources

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Management Issues

Managing Conflict

-- Disagreement between two more parties on one or more issues

Management Issues

� Conflict not always “bad”

� No conflict may signal apathy

� Can energize opposing groups to

action

� May help managers identify problems

Managing Conflict

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Management Issues

� Avoidance

� Diffusion

� Confrontation

Conflict Management & Resolution

Management Issues

ManagementIssues

Resources


Restructuring

Rewards/Incentives

Annual Objectives

Policies

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Management Issues

Matching Structure w/ Strategy

-- Changes in strategy = Changes in structure

Management Issues

� Structure dictates how objectives &

policies will be established

� Structure dictates how resources will

be allocated

Structure & Strategy

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New administrativeproblems emerge

New strategyIs formulated

Organizationalperformance

declines

Organizational performance

improves

New organizationalstructure is established

Chandler’s Strategy-Structure Relationship

Management Issues

� Functional Structure

� Divisional Structure

� Strategic Business Unit Structure (SBU)

� Matrix Structure

Basic Forms of Structure

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Functional Structure

� Most widely used� Simple and least expensive

� Groups activities by business function

� Disadvantages� Forces accountability to the top

� Minimizes career development opportunities

� Characterized by low employee morale, line/staff conflict, poor delegation of authority, inadequate planning for products and markets

� Often leads to short-term and narrow thinking

Divisional Structure

� Second most common type of structure

� Can be organized by:

� Geographic area

� Product or service

� Customer

� Process

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� Advantages� Clear accountability

� Higher employee morale

� Creates career development opportunities for managers

� Allows local control of situations

� Leads to a competitive climate within an organization

� Allows new businesses and products to be added easily


� Disadvantages� Can be costly to set up

� Each division requires functional specialists

� Duplication of staff services, facilities, and personnel

� Managers must be well qualified

� Requires an elaborate, headquarters-driven control system

� Competition between divisions may become so intense that it is dysfunctional

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Appropriateness of Divisional Structure

� Geographic area – Organizations whose strategies need to be tailored to fit the needs and characteristics of customers in different geographic areas

� Product or Service – When specific products or services need special emphasis

� Process – 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 accountability

� Disadvantages

� Requires an additional layer of management

� Role of the group vice president is often

ambiguous

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The Matrix Structure

� Most complex of all designs – requires both vertical and horizontal flows of authority and communication

� Disadvantages� Can result in higher overhead

� Dual lines of budget authority

� Dual sources of reward and punishment

� Shared authority

� Dual reporting channels

� Need for an extensive and effective communication system

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The Matrix Structure

� Advantages

� Project objectives are clear

� Many channels of communication

� Workers can see visible results of their work

� Shutting down a project can be accomplished

relatively easily

� Facilitates the use of specialized personnel,

equipment, and facilities

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Do’s and Don’ts in Developing Organizational Charts

� Do’s

� Reserve the title CEO for the top executive

� Use the title “chief” or “VP” or “manager” for functional business executives

� Directly below the CEO it is best to have a COO and other “chief’ officers

� Don’ts

� Use the title president for the top executive

� Use the title president for functional business executives

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Management Issues

ManagementIssues

Resources


Restructuring

Rewards/Incentives

Annual Objectives

Policies

Management Issues

Restructuring

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

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Management Issues

Restructuring

�Downsizing

�Rightsizing

�Delayering

Management Issues

Reengineering

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

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Management Issues

Reengineering

�Process management

�Process innovation

�Process redesign

Management Issues

ManagementIssues

Resources


Restructuring

Rewards/Incentives

Annual Objectives

Policies

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Management Issues

Linking Pay/Performance to Strategies

-- Pay for performance systems

Management Issues

Linking Pay/Performance to Strategies

�Dual bonus systems

�Profit sharing systems

�Gain sharing systems

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Tests for Performance-Pay Plans

Does 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?

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ManagementIssues

Supportive Culture


Human Resources


Natural Environment

Management Issues


-- Single greatest threat to successful strategy implementation

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Management Issues


-- Raises anxiety; fear concerning

�Economic loss

�Inconvenience

�Uncertainty

�Break in status-quo

Management Issues

Change Strategies

�Force Change Strategy

�Educative Change Strategy

�Rational or Self-Interest Change Strategy

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ManagementIssues

Supportive Culture


Human Resources


Natural Environment

Management Issues

Natural Environment

-- Wide appreciation for firms that “mend” rather than “harm” the environment

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Management Issues

Natural Environment – Environmental

Strategies

�Develop/acquire “green” businesses

�Divesting environmental-damaging

business

�Low-cost producer through waste

minimization & energy conservation


ManagementIssues

Supportive Culture


Human Resources


Natural Environment

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Management Issues

Strategy-Supportive Culture

-- Preserve, emphasize, & build upon aspects of existing culture that support new strategies

• Formal statements of philosophy, charters, etc. used for recruitment and selection, socialization

• Designing of physical spaces, facades, buildings

• Deliberate role modeling, teaching and coaching

• Explicit reward and status system, promotion criteria

• Stories, legends, myths about key people and events

Management Issues

Elements linking culture to strategy:

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• What leaders pay attention to, measure and control

• Leader reactions to critical incidents and crises

• How the organization is designed and structured

• Organizational systems and procedures

• Criteria used for recruitment, selection, promotion, retirement

Management Issues

Elements linking culture to strategy:


ManagementIssues

Supportive Culture


Human Resources


Natural Environment

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Management Issues

Production/Operations Concerns

-- Production processes typically constitute more than 70% of firm’s total assets

Management Issues

Production/Operations Decisions

�Plant size

�Inventory/Inventory control

�Quality control

�Cost control

�Technological innovation

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ManagementIssues

Supportive Culture


Human Resources


Natural Environment

Management Issues

Human Resource Concerns

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

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Management Issues

Human Resource Strategic Responsibilities

�Assessing staffing needs/costs

�Developing performance incentives

�ESOP’s

�Child-care policies

�Work-life balance issues

Diversity Issues

CEO Company Age

Meg Whitman eBay 49

Andrea Jung Avon Products 47

Anne Mulcahy Xerox 52

Marjorie Magner Citigroup 56

Betsy Holden Kraft Foods 49

Ann Moore AOL Time Warner 57

Women CEO’s in U.S. 2005 (examples)

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Benefits of a Diverse Workforce

� Improves corporate culture

� Improves employee morale

� Leads to a higher retention of employees

� Leads to easier recruitment of employees

� Decreases complaints and litigation

� Increases creativity

� Decreases interpersonal conflict

Benefits of a Diverse Workforce

� Enables the organization to move into emerging markets

� Improves client relations

� Increases productivity

� Improves the bottom line

� Maximizes brand identity

� Reduces training costs

Strategic management module 6 part 1

Education

Transcript of Strategic management module 6 part 1