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Chapter 7Implementing Strategies: Management & Operations Issues
Strategic Management: Concepts & Cases10th EditionFred David PowerPoint Slides byAnthony F. ChelteWestern New England College
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Chapter OutlineThe Nature of Strategy ImplementationAnnual ObjectivesPolicies
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Chapter Outline (contd)Resource AllocationManaging ConflictMatching Structure with Strategy
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Chapter Outline (contd)Restructuring, Reengineering & E-EngineeringLinking Performance & Pay to StrategiesManaging Resistance to Change
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Chapter Outline (contd)Managing the Natural EnvironmentCreating a Strategy-Supportive CultureProduction/Operations Concerns When Implementing Strategies
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Chapter Outline (contd)Human Resource Concerns When Implementing Strategies
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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
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-- Successful strategy formulation does not guarantee successful strategy implementationThe Nature of Strategy Implementation
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Formulation positions forces before the action
Implementation manages forces during the actionNature of Strategy ImplementationFormulation vs. Implementation
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Formulation focuses on effectiveness
Implementation focuses on efficiencyNature of Strategy ImplementationFormulation vs. Implementation
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Formulation primarily an intellectual process
Implementation primarily an operational processNature of Strategy ImplementationFormulation vs. Implementation
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Formulation requires good intuitive & analytical skills
Implementation requires special motivational & leadership skills
Nature of Strategy ImplementationFormulation vs. Implementation
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Formulation requires coordination among a few individuals
Implementation requires coordination among many individuals
Nature of Strategy ImplementationFormulation vs. Implementation
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Varies among different types & sizes of organizationsNature of Strategy ImplementationStrategy Implementation
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Altering sales territoriesAdding new departmentsClosing facilitiesHiring new employeesCost-control proceduresModifying advertising strategiesBuilding new facilitiesNature of Strategy ImplementationImplementation Activities
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Shift in responsibility
Nature of Strategy ImplementationManagement PerspectivesDivision or Functional ManagersStrategists
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Management IssuesManagementIssuesResourcesOrganizational structureRestructuringRewards/IncentivesAnnual ObjectivesPolicies
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Management Issues (contd)ManagementIssuesSupportive CultureProduction/OperationsHuman ResourcesResistance to ChangeNatural Environment
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Management IssuesAnnual Objectives ---- Decentralized activity-- Directly involve all managers in the organization
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Management IssuesPurpose of Annual Objectives --Basis for resource allocationMechanism for management evaluationMetric for gauging progress on long-term objectivesEstablish priorities (organizational, division, & departmental)
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Management IssuesConsistency of Annual Objectives --Across hierarchical levelsHorizontally consistentVertically consistent
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Management IssuesRequirements of Annual Objectives MeasurableConsistentReasonableChallengingClearUnderstoodTimely
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Management IssuesAnnual Objectives Should StateQuantityQualityCostTimeBe Verifiable
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Management IssuesManagementIssuesResourcesOrganizational structureRestructuringRewards/IncentivesAnnual ObjectivesPolicies
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Management IssuesPolicies ---- Facilitate the solving or recurring problems & guide implementation of strategy
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Management IssuesPolicies Establish --BoundariesConstraintsLimits
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Management IssuesManagementIssuesResourcesOrganizational structureRestructuringRewards/IncentivesAnnual ObjectivesPolicies
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Management IssuesResource Allocation-- Central management activity that allows for the execution of strategy
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Management IssuesFinancial resourcesPhysical resourcesHuman resourcesTechnological resources4 Types of Resources
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Management IssuesManaging Conflict-- Disagreement between two more parties on one or more issues
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Management IssuesConflict not always badNo conflict may signal apathyCan energize opposing groups to actionMay help managers identify problemsManaging Conflict
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Management IssuesAvoidanceDiffusionConfrontationConflict Management & Resolution
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Management IssuesManagementIssuesResourcesOrganizational structureRestructuringRewards/IncentivesAnnual ObjectivesPolicies
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Management IssuesMatching Structure w/ Strategy-- Changes in strategy = Changes in structure
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Management IssuesStructure dictates how objectives & policies will be establishedStructure dictates how resources will be allocatedStructure & Strategy
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New administrativeproblems emergeNew strategyIs formulatedOrganizationalperformance declinesOrganizational performanceimprovesNew organizationalstructure is establishedChandlers Strategy-Structure Relationship
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Management IssuesFunctional StructureDivisional StructureStrategic Business Unit Structure (SBU)Matrix StructureBasic Forms of Structure
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Management IssuesManagementIssuesResourcesOrganizational structureRestructuringRewards/IncentivesAnnual ObjectivesPolicies
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Management IssuesRestructuring-- Reducing the size of the firm # of employees, divisions, and/or units, # of hierarchical levels
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Management IssuesRestructuringDownsizingRightsizingDelayering
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Management IssuesReengineering-- Reconfiguring or redesigning work, jobs, & processes to improve cost, quality, service, & speed.
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Management IssuesReengineeringProcess managementProcess innovationProcess redesign
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Management IssuesManagementIssuesResourcesOrganizational structureRestructuringRewards/IncentivesAnnual ObjectivesPolicies
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Management IssuesLinking Pay/Performance to Strategies-- Pay for performance systems
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Management IssuesLinking Pay/Performance to StrategiesDual bonus systemsProfit sharing systemsGain Sharing systems
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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?
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Management Issues (contd)ManagementIssuesSupportive CultureProduction/OperationsHuman ResourcesResistance to ChangeNatural Environment
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Management IssuesResistance to Change-- Single greatest threat to successful strategy implementation
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Management IssuesResistance to Change-- Raises anxiety; fear concerningEconomic lossInconvenienceUncertaintyBreak in status-quo
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Management IssuesChange StrategiesForce Change StrategyEducative Change StrategyRational or Self-Interest Change Strategy
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Management Issues (contd)ManagementIssuesSupportive CultureProduction/OperationsHuman ResourcesResistance to ChangeNatural Environment
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Management IssuesNatural Environment-- Wide appreciation for firms that mend rather than harm the environment
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Management IssuesNatural Environment Environmental StrategiesDevelop/acquire green businessesDivesting environmental-damaging businessLow-cost producer through waste minimization & energy conservation
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Management Issues (contd)ManagementIssuesSupportive CultureProduction/OperationsHuman ResourcesResistance to ChangeNatural Environment
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Management IssuesStrategy-Supportive Culture-- Preserve, emphasize, & build upon aspects of existing culture that support new strategies
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Management Issues
Formal statements of philosophy, charters, etc. used for recruitment and selection, and 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:
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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:
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Management Issues (contd)ManagementIssuesSupportive CultureProduction/OperationsHuman ResourcesResistance to ChangeNatural Environment
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Management IssuesProduction/Operations Concerns-- Production processes typically constitute more than 70% of firms total assets
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Management IssuesProduction/Operations DecisionsPlant sizeInventory/Inventory controlQuality controlCost controlTechnological innovation
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Management Issues (contd)ManagementIssuesSupportive CultureProduction/OperationsHuman ResourcesResistance to ChangeNatural Environment
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Management IssuesHuman Resource Concerns-- HR manager position has strategic responsibility & has changed dramatically as companies continue to reorganize, outsource, etc.
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Management IssuesHuman Resource Strategic ResponsibilitiesAssessing staffing needs/costsDeveloping performance incentivesESOPsChild-care policiesWork-life balance issues
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Diversity IssuesWomen CEOs in U.S. 2004 (examples)
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Key Terms & ConceptsFor Review (Chapter 7)Annual ObjectivesConflictAvoidanceConfrontationBenchmarkingCultureBonus SystemDefusion
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Key Terms & ConceptsFor Review (Chapter 7)DelayeringEducative Change StrategyDe-centralized StructureEmployee Stock Ownership Plans (ESOPs)Divisional StructureEstablishing Annual ObjectivesDownsizingForce Change Strategy
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Key Terms & ConceptsFor Review (Chapter 7)Functional StructureJust in Time (JIT)Gain SharingMatrix StructureGlass CeilingPolicyHorizontal Consistency of ObjectivesProfit Sharing
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Key Terms & ConceptsFor Review (Chapter 7)Rational Change StrategyRestructuringReengineeringRightsizingResistance to ChangeSelf-Interest Change StrategyResource AllocationStrategic Business Unit (SBU)
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Key Terms & ConceptsFor Review (Chapter 7)Vertical Consistency of ObjectivesTriangulation
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