STRATEGY

IMPLEMENTATION:
Management and
Operation Issues

The Nature of Strateg

Implementation

prehensive Strategic-Management Mode

Strategy formulation and implementation

can be contrasted in the following ways:
STRATEGY
FORMULATION
1. Is positioning forces
before the action.
2. 2. focuses on
effectiveness
3. primarily an
intellectual process.
4. requires good
intuitive and
analytical skills.
5. requires
coordination among
a few individuals.

STRATEGY
IMPLEMENTATION
1. managing forces
during the action.
2. focuses on
efficiency
3. primarily an
operational process.
4. requires special
motivation and
leadership skills.
5. requires
coordination among
many individuals.

 IMPLEMENTING STRATEGIES requires:

Altering sales territories
Adding new departments
Closing facilities
Hiring new employees
Changing organizations pricing
strategy
Developing financial budgets
Developing new employee benefits
Establishing cost-control
procedures

Changing advertising strategies

Building new facilities
Training new employees
Transferring managers among
divisions
Building a better management
information system
**These activities varies greatly
between manufacturing, service
and governmental organizations.

Management Issues
Annual Objectives
Policies
Resources

Management
Issues

Organizational Structure
Restructuring
Rewards/Incentives

Ch 7-7

Copyright 2009 Pearson

Education, Inc.
Publishing as Prentice Hall

Management Issues (contd)

Resistance to Change
Natural Environment
Supportive Culture

Management
Issues

Production/Operations
Human Resources

Ch 7-8

Copyright 2009 Pearson

Education, Inc.
Publishing as Prentice Hall

 Managers and employees

Should participate early and directly in
strategy implementation decisions
Their role in SI should build upon prior
involvement in strategy-formulation
activities
Top-down flow of communication is
essential for developing bottom-up
support
Every employee should be able to
benchmark her or his efforts against

Annual Objectives

 Establishing annual
objectives
Decentralized activity that directly
involves all managers in an
organization
Active participation in establishing
annual objective can lead to
acceptance and commitment

 Annual Objectives are essential for

strategy implementation because they:
- Represent the basis for allocating
resources
- Primary mechanism for evaluating
managers
- Major instrument for monitoring progress
toward achieving long-term objectives
- Establish organizational, divisional and
departmental priorities

 Purpose of Annual Objectives

Serve as guidelines for action,
directing and channeling efforts and
activities of organization members
Provide a source of legitimacy in an
enterprise by justifying activities to
stakeholders
Serve as standards of performance
Serve as important source of
employee motivation and
identification

 Give incentives for managers and

employees to perform
Provide basis for organizational
design

**measurable, consistent, reasonable,

challenging, clear, communicated
throughout the organization

 Annual Objectives Should

State
Quantity
Quality
Cost
Time
Be Verifiable

Policies

 Policy
- Refers to specific guidelines,
methods, procedures, rules, forms
and administrative practices
established to support and
encourage word toward stated goals
- Instruments for strategy
implementation
- Set boundaries, constraints and
limits on the kinds of administrative
actions that can be taken to reward
and sanction behavior

 Policy
Provide a basis for management
control, allow coordination across
organizational units and reduce the
amount of time managers spend in
making decisions
Promote delegation of decision making
Should be stated in writing whenever
possible

 Sample issues that require

management policy:
To offer extensive or limited management
development workshops and seminars
To centralize or decentralize employeetraining activities
To recruit through employment agencies,
college campuses and/or newspapers
To promote from within or to hire from the
outside

Sample issues that require

management policy Cont
To promote on the basis of merit or on the
basis of seniority
To tie executive compensation to longterm and/or annual objectives
To offer numerous or few employee
benefits
To negotiate directly or indirectly with
labor unions
To delegate authority for large
expenditures or to centrally retain this
authority

Sample issues that require

management policy cont
To allow much, some or no over time work
To establish a high-or-low-safety stock of
inventory
To use one or more suppliers
To buy, lease, or rent new production
equipment
To greatly or somewhat stress quality
control
To establish many or only a few
production standards

Sample issues that require

management policy .. Cont..
To operate one, two or three shifts
To discourage using insider
information for personal gain
To discourage sexual harassment
To discourage smoking at work
To discourage insider trading
To discourage moonlighting

Resource Allocation

 Resource allocation is a central

management activity that allows for
strategy execution.
In organizations that do not use a
strategic-management approach to
decision making, resource allocation is
often based on political or personal
factors.
Strategic management enables resources
to be allocated according to priorities
established by annual objectives.

Four Types of
Resources
1.Financial resources

2.Physical resources
3.Human resources
4.Technological resources

 Factors that prohibit effective

resource allocation
Over protection of resources
Too great emphasis on short-run
financial criteria
Organizational politics
Vague strategy targets
Reluctance to take risks
Lack of sufficient knowledge

Managing Conflict

 Resource-Specific Conflict
- Interdependency of objectives
and competition for limited
resources often leads to conflict.
- Conflict can be defined as a
disagreement between two or
more parties on one or more
issues.

Approaches for Managing and

Resolving Conflict
Avoidance includes such actions as ignoring
the problem in hopes that the conflict will
resolve itself or physically separating the
conflicting individuals (or groups).
Defusion can include playing down
differences between conflicting parties while
emphasis similarities and common interests,
compromising so that there is neither a clear
winner nor loser, resorting to majority rule,
appealing to a higher authority, or redesigning
present positions.

 Confrontation is exemplified by
exchanging members of
conflicting parties so that each
can gain an appreciation of the
others point of view, or holding
a meeting at which conflicting
parties present their views and
work through their differences.

Management Issues
Managing Conflict
Conflict not always bad
No conflict may signal apathy
Can energize opposing groups to
action
May help managers identify
problems
Copyright 2009 Pearson Education, Inc.
Publishing as Prentice Hall

Ch 7-31

Matching Structure
with Strategy

Changes in strategy often require changes

in the way an organization is structured for
two major reasons.
-First, structure largely dictates how
objectives and policies will be
established.
**For example, objectives and policies
established
under
a
geographic
organizational structure are couched in
geographic terms. Objectives and policies
are stated largely in terms of products in
an organization whose structure is based
on product groups. The structural formula
for developing objectives and policies can
significantly impact all other strategy-

-The second major reason why

changes in strategy often require

changes in structure is that
structure dictates how resources
will be allocated.
**Changes in strategy lead to
changes in organizational structure.
Structure should be designed to
facilitate the strategic pursuit of a
firm and, therefore, follow strategy.

 Small firms tend to be functionally

structured(centralized)
Medium-sized tend to be divisionally
structured(decentralized)
Large firms tend to use a strategic
business unit(SBU) or matrix
structure

The Functional Structure

Groups tasks and activities by
business function such as
production/operations, marketing,
finance/accounting, research and
development and management
information systems
Simple and inexpensive
Promotes specialization of labor,
encourages efficient use of
managerial and technical talent,
minimizes the need for an elaborate

The Functional Structure

DISADVANTAGES
Forces accountability to the top
Minimizes career development
opportunities
Characterized by low employee
morale
Line/staff conflicts
Poor delegation of authority
Inadequate planning for products
and markets

The Divisional Structure

Second most common type used by
US businesses
Generally becomes necessary to
motivate employees, control
operations and compete successfully
in diverse locations
Can be organized in one of four
ways: by geographic area, by
product or service, by customer or by
process

The Divisional Structure

ADVANTAGES
Ability is clear
Employees can see clearly the results
of their good or bad performance
Employee morale is generally higher
Creates career development
opportunities for managers
Allow local control of situations
Leads to a competitive climate w/in
organization

The Divisional Structure

ADVANTAGES
Allows business and products to be
added easily
LIMITATIONS
-Costly for a number of reasons
-It may be difficult to maintain
consistent, companywide practices

The SBU Structure

Groups similar divisions into strategic
business units and delegates authority
and responsibility for each unit to a
senior executive who reports directly to
the executive officer
DISADVANTAGES
Requires an additional layer of
management which increases salary
Role of group vice president is often
ambiguous

The SBU Structure

ADVANTAGES
Improved coordination and
accountability
Makes the tasks of planning and
control by the corporate office more
manageable

The Matrix Structure

Most complex of all designs because it
depends upon 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 extensive and effective

The Matrix Structure

ADVANTAGES
Project objectives are clear
Many channels of communication
Workers can see visible results of their
work
Shutting down of a project can be
done easily
Facilitates the use of specialized
personnel, equipment and facilities

Dos and Donts in

Developing Organization
Chart.
Reserve the title CEO for the top
executive of the firm
dont use the title president for the top
persons; use it for the division top
managers
Dont use title president for functional
business executives (use chief, vice
president, manager or officer)
Dont recommend a dual title (such as
CEO and President)

Dos and Donts in

Developing O.C.

Below the CEO, it is best to have

COO(chief operating officer)
Draw in you functional business
executives on the same level as COO
Avoid having a particular person
reporting to more than one person
above in the chain of command
Dont have functional positions report to
the COO(these positions should report
to CEO)

Restructuring, Reengineeri
And E-Engineeri

Restructuring
A.k.a. downsizing, rightsizing or
delayering
Involves reducing size of the firm in
terms of number of employees, number
of divisions or units and number of
hierarchical levels in the firms
organizational structure
Primary benefit is cost-reduction
Can rescue the firm from global
competition and demise
Concerned with eliminating or

Restructuring
The downside of restructuring can
be reduced employee commitment,
creativity and innovation
Another downside is that many
people today do not aspire to
become managers
Characterized by strategic
decisions

Reengineering
Concerned more with employee and
customer well-being than shareholder
well-being
A.k.a. process management, process
innovation or process design
Involves reconfiguring or redesigning
work, jobs and processes for the
purpose of improving cost, quality,
service and speed
Focus is changing the way work is
actually carried out

Reengineering
Characterized by many tactical
decisions
Cornerstones are decentralization,
reciprocal interdependence and
information sharing
Benefit is that it offers employees the
opportunity to see more clearly how
their particular jobs affect the final
product or service being marketed by
the firm
However, reengineering can also raise

Linking Performance and

Pay to Strategies

 Profit sharing is a widely used form of

incentive compensation.
Gain sharing requires employees or
departments to establish performance
targets; if actual results exceed
objectives, all members get bonuses.
Criteria such as sales, profit, production
efficiency, quality, and safety could also
serve as bases for an effective bonus
system.

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?

Managing Resistance
To Change

Resistance to Change
Can be considered the single greatest
threa to successful strategy
implementation
It may take on such forms as sabotaging
production machines, absenteeism, filing
unfounded grievances, and an
unwillingness to cooperate.
There are three commonly used strategies
for implementing change:
-Force change strategy
-Educative change strategy

Managing the
Natural Environmen

 All business functions are affected by

natural environment considerations or by
striving to make a profit
Earth itself has become a stakeholder for
all business firms
Firms should formulate and implement
strategies from an environmental
perspective
Firm could include environmental
representative on the board of directors

Creating a StrategySupportive Culture

 Strategists should strive to preserve,

emphasize and build upon aspects of
an existing culture that support
proposed new strategies
New strategies are often marketdriven and dictated by competitive
forces

Jack Duncan

Triangulation
Effective, multi-method technique for
studying and altering a firms culture
Includes combined use of obtrusive
observation, self-administered
questionnaires and personal interviews to
determine the nature of a firms culture
Reveals changes that need to be made a
firms culture to benefit strategy

Schein
Elements that are most useful in linking
culture to strategy:
Formal statements of organizational
philosophy, charters, creeds,
materials used for recruitment and
selection and socialization
Designing of physical spaces, facades
and buildings
Deliberate role modeling, teaching
and coaching by leaders
Explicit reward and status system,
promotion criteria

Schein
Stories, legends, myths and parables
about key people and events
What leaders pay attention to measure
and control
Leader reactions to critical incidents and
organizational crises
How the organization is designed and
structured
Organizational systems and procedures
Criteria used for recruitment, selection,
promotion, leveling off, retirement and

Production/Operations Concerns
When Implementing Strategie

Production/Operations Concerns

Production/operations capabilities,
limitations, and policies can
significantly enhance or inhibit
attainment of objectives.
Production processes typically
constitute more than 70% of firms
total assets

Examples on adjustment of
Production/Operations
Decisions

Plant size
Inventory/Inventory control
Quality control
Cost control
Technological innovation

Factors to be considered
before
locating production
facilities
Availability of major resources
Prevailing wage rates in the area
Transportation costs related to
shipping and receiving
Location of major markets
Political risks in the area
Availability of trainable employees

Type of
Organization

Strategy being
implemented

Production
System
Adjustments

Hospital

Adding cancer center

(prod. Dev.)

Pur. Specialized
equipment and add
specialized people

Bank

Adding 10 new branches Perform site location

(mar. dev.)
analysis

Beer brewery

Purchasing barley farm

operation(backward
integ.)

Revise the inventory

control system

Steel manufacturer

Acquiring fast-food
chain (unrelated
diversification)

Improve the quality

control system

Computer
company

Purchasing retail
distribution chain
(forward integ.)

Alter the shipping,

packaging and
transportation systems

Human Resource Concern

When Implementin
Strategie

Responsibilities of human
resource manager

Assessing staffing needs and

costs
Developing staffing plan-how to
motivate employees and
managers during a time when
layoffs are common and
workloads are high

Human Resource problems

that arise when businesses
implement strategies:

Disruption of social and

political structures
Failure to match individuals
aptitudes\abilities with
implementation tasks
Inadequate top management
support for implementation
activities

Employee Stock Ownership Plans

(ESOPs):

1. An ESOP is a tax-qualified,
defined-contribution,
employee benefit plan
whereby employees
purchase stock of the
company through borrowed
money or cash contributions.
2. ESOPs reduce worker
alienation\estrangement,
stimulate productivity, and

Balancing Work Life and

Home Life

Work/family
strategies
have
become
so
popular
among
companies that the strategies now
represent a competitive advantage
for those firms that offer such
benefits as elder care assistance,
flexible scheduling, job sharing,
and so on.
Human resource managers need to
foster more effective balancing of
professional and private lives

Benefits of a Diverse
Workforce

Improves corporate culture

Improves employee morale
Leads to higher retention of
employees
Leads to easier recruitment of new
ee
Decreases complaints and litigation
Increases creativity
Decreases interpersonal conflict
between ee

Benefits of a Diverse
Workforce

Enables the org. to move into

emerging markets
Improves client relations
Increases productivity
Improves the bottom line
Maximizes brand identity
Reduces training costs

End