Strategic Management Strategy Implementation

By Farrukh Idrees

Strategy Implementation
Once managers have decided on a strategy, the emphasis turns to converting it in to actions and good results. Crafting a strategy is a market driven activity while executing a strategy is an operations driven activity, revolving around management of people and processes.

Presentation Sections
Introduction: Strategy Implementation Scope, Strategy Formulation Vs. Strategy Implementation, Policy, Scope of Policy, Details: Link of Strategy Implementation with operations, resource allocation, Organisations Structure, Culture Conclusion: Summary of the session

Introduction
Like strategy crafting, implementing and executing a companys strategy is a job for the entire management team, not just a few senior managers. What does my area have to do to implement its part of the strategic plan, and what should I do to get these things accomplished efficiently and effectively?

Introduction
While an organisations CEO and the heads of major units (business divisions, functional departments, and key operating units) are ultimately responsible for seeing that strategy is executed successfully, the process typically affects every part of the firm, from the biggest operating unit to the smallest frontline work group.

Introduction
In a single word, strategy implementation means change. It is widely agreed that the real works begin after strategy formulation. Management issues considered central to strategy implementation include
matching organisational structure with strategy, linking performance and pay to strategies, creating an organisational climate conductive to change, managing political relationships, creating a strategy supportive culture, adapting production/operation processes, and managing human resources.

 Establishing annual objectives, devising policies, and allocating are central strategy implementation activities common to all organisations.

Why Strategies Fail

Strategies most often fail because they are not executed well. An organisations capacity to execute its strategy depends on its hard infrastructure (system and processes) and soft infrastructure (people, culture and norms)

Why Strategies Fail

Individual managers may have different ideas about what internal changes are needed to execute the strategy. Long standing attitudes, vested interests, inertia, and ingrained organisational practices dont melt away when managers decide on a new strategy and begin efforts to implement it.

Why Strategies Fail

There must be a translation of strategic thoughts in to strategic actions. The translation is much easier if managers and employees of the firm understand the business, feel a part of the company, and through involvement in strategy formulation activities have become committed to helping the organsiaiton succeed. Without understanding and commitment, strategyimplementation efforts face major problems.

Comparison Between Strategy Formulation and Strategy Implementation

Strategy Formulation Vs Strategy Implementation

Strategy Formulation
Strategy formulation is positioning forces before the action Strategy formulation focuses on effectiveness Strategy formulation is primarily an intellectual process Strategy formulation requires good intuitive and analytical skills

Strategy Implementation
Strategy Implementation is positioning forces during the action Strategy Implementation focuses on efficiency Strategy Implementation is primarily an operational process Strategy Implementation requires special motivation and leadership skills

Strategy formulation requires Strategy Implementation requires coordination among few individuals coordination among many individuals

Vs.
Implementing strategies requires such actions as:
Altering sales territories Adding new departments Closing facilities Hiring new employees Changing an organisations pricing strategies

Issues Central to Strategy Implementation

Management issues central to strategy implementation include
establishing annual objectives, devising policies, allocating resources, altering an existing organisational structure, restructuring and reengineering ,

Issues Central to Strategy Implementation

revising rewards and incentive plans, minimizing resistance to change, matching structure with strategy, developing a strategy-supportive culture, adapting production/operations processes, developing an effective human resource function

Organisations Resources
All organizations have atleast four types of resources that can be used to achieve desired objectives:
financial resources, physical resources, human resources, and technological resources.

A number of factors commonly prohibit effective resource allocation, including

an overprotection of resources, too great an emphasis on short turn financial criteria, organistional politics, vague strategy targets, a reluctance to take risks, and a lack of sufficient knowledge.

Policies
Polices facilitate solving recurring problems, and guide the implementation of strategy. On a day to day basis, policies are needed to make a strategy work. Broadly defined, policy refers to specific
guidelines, methods, procedures, rules, forms, and administrative practices established to support and encourage work toward stated goals.

Policy
Examples of polices that support a company strategy, divisional objective, and a departmental objective are as follow: To recruit through employment agencies, college campuses, and or newspapers To promote from with in or hire from outside. To promote on the basis of merit or on the basis of seniority To offer numerous or few employee benefits To allow much, some, or no overtime work. To establish a high or low safety stock of inventory

 To negotiate directly or indirectly with labor union To use one or more suppliers To buy, lease, or rent new production equipment To stress quality control greatly or not To establish many or only a few production standards To discourage smoking at work To operate one, two, or three shifts

Scope of the policy

Policies can apply to all divisions and departments (e.g. We are an equal opportunity employer). Some policies apply to a single department (Employees in this department must take at least one training and development course each year). What ever their scope and form, policies serve as a mechanism for implementing strategies and obtaining objectives. Policies should be stated in writing whenever possible. They represent the means for carrying out strategic direction.

 Hierarchy of annual objectives can be established based on an organisations structure. Objectives should be consistent across hierarchical levels and form a network of supportive aims. Horizontal consistency of objectives is as important as vertical consistency of objectives.

Resource Fits
A companys businesses exhibit resource fit when the various businesses, individually and collectively, add to the companys overall resource strengths and when the companys complement of resources is adequate to support the requirements of its business units.

Resource Allocation
Nothing could be more detrimental to strategic management and to organisational success than for resources to be allocated in ways not consistent with priorities indicated by approved annual objectives.

 The real value of any resource allocation program lies in the resulting accomplishment of a organization's objectives. Effective resource utilization doesnt guarantee successful strategy implementation because programs, personnel, controls, and commitment must breathe life into the resources provded.

Organisational Structure
Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual. Organizational structure affects organizational action in two big ways.
First, it provides the foundation on which standard operating procedures and routines rest. Second, it determines which individuals get to participate in which decision-making processes, and thus to what extent their views shape the organizations actions.

Matching structure with strategy

An organization can be structured in many different ways, depending on their objectives.
1. Structure largely dictates how objectives and policies will be established. 2. Structure dictates how resources will be allocated

Types of Structures
Functional Structures Divisional Structures SBU Structures

Functional Structure
The functional structure groups tasks and activities by business function, such as production/operations, marketing, finance/accounting, research and development, and MIS.

Functional Structure
Advantages: Functional structure promotes specialization of labor, encourages efficiency, minimizes the need for an elaborate control system, and allows rapid decision making. Disadvantages: Some disadvantages of a functional structure are that it forces accountability to the top, minimizes career development opportunities, and is some times characterized by low employee morale, line/staff conflicts.

Divisional Structure
The divisional or decentralized structure is the second most common type. With a divisional structure, functional activities are performed both centrally and in each separate division. This structure can be organized in any of the four ways
By geographic area By product or service By customer By process

 A divisional structure by geographic area is appropriate for organsiations whose strategies need to be tailored to fit the particular needs and characteristics of customers in different geographic areas.

 A divisional structure by product or service is most effective for implementing strategies when specific products or services need special emphasis

SBU Structure
As the number, size, and diversity of divisions in an organisation increase, controlling and evaluating divisional operations become increasingly difficult for strategists. Increases in sales often are not accompanied by similar increases in profitability. The span of control becomes too large at top levels of the firm. E.g. a large organisation composed of 90 divisions.

SBU Structure
The SBU structure groups similar divisions in to strategic business units and delegates authority and responsibility for each unit to a senior executive who reports directly to the CEO. This change in structure can facilitate strategy implementation by improving coordination between similar divisions and channeling accountability to distinct business units.

Disadvantages of SBU Structure: Additional layer of management.

Industry Attractiveness
Market Size and Projected Growth Rate The intensity of competition Emerging Opportunities and Threats The Presence of Cross Industry Strategy Fits Resource Requirements Seasonal and Cyclical Factors Social Political, Regulatory and Environmental Factors Industry Profitability Industry Uncertainty and Business Risk

Relative Market Share Costs relative to competitors costs Ability to match or beat rivals on key product attributes Ability to benefit from strategic fits with sister businesses Ability to exercise bargaining leverage with key suppliers or customers Caliber of alliances and collaborative partnerships with suppliers and/or buyers Brand image and reputation Competitive valuable capabilities Profitability relative to competitors

 Cash Hog is a business whose internal cash flows are inadequate to fully meet its needs for working capital and new capital investment.

 A cash cow is a business what generates cash flows over and above its internal requirements. Thus providing a corporate parent with funds for investing in cash hog businesses, financing new acquisitions, or paying dividends.

Tests for resource fits

Does the business adequately contribute to achieving company wide performance targets Does the company have adequate financial strength to fund its different businesses and still maintain a healthy credit rating

 Does the company have or can it develop the specific resource strengths and competitive capabilities needed to be successful in each of its businesses? Are recently acquired businesses acting to strengthen a companys resource base and competitive capabilities, or are they causing its competitive and managerial resources to be stretched too thinly

Creating a Strategy Supportive Culture

Triangulation (combined use of observation, self administered questionnaires, and personal interviews to determine the nature of a firms culture)

Elements required to Link Culture with Strategy

Formal statement of organisational philosophy, Charter etc. Designing of physical spaces, buildings Deliberate role modeling, teaching, and coaching by leaders Explicit reward and promotion system Stories, legends, myths about key people

Elements for linking culture with strategy

What leaders pay attention to, measure and control How the organisation is designed and structured Organisations system and procedures Criteria used for recruitment and selection, promotion, retirement etc.

 Weak linkages between strategic management and organisational culture can jeopardize performance and success.
When attachments to a culture are servered in an organisations attempt to change direction, employees and managers often experience deep feelings of grief. Managers and employees often struggle to find meaning in a situation.

Restructuring, Reengineering and E engineering

Restructuring: The reduction in size of an organisation in terms of numbers of employees, number of divisions or units, and number of hierarchical levels in the firms orgnaisational structure. This reduction in size is intended to improve both efficiency and effectiveness.
Mostly concerned with shareholders well being rather than employees one.

 Reengineering: It involves reconfiguring or redesigning work, jobs, and processes for the purpose of improving cost, quality, service and speed.

Production Operations Concerns while implementing strategies

Production/operations capabilities, limitations, and policies can significantly enhance or inhibit the attainment of objectives.
70% of total assets
Choice of equipment Quality control Cost control Use of standards

Conclusion
Strategy implementation Key Factors Strategy implementation vs. strategy formulation Policy HRM Production/operations role