strategic management module 6 part 1
TRANSCRIPT
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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
Module Outline (cont’d)
Restructuring, Reengineering & E-Engineering
Managing Resistance to Change
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Module Outline (cont’d)
Creating a Strategy-Supportive Culture
Production/Operations Concerns When
Implementing Strategies
Module Outline (cont’d)
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
Nature of Strategy Implementation
Formulation vs. Implementation
� Formulation is primarily an intellectual process
� Implementation is primarily an operational process
Nature of Strategy Implementation
Formulation vs. Implementation
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� Formulation requires good intuitive & analytical skills
� Implementation requires special motivational & leadership skills
Nature of Strategy Implementation
Formulation vs. Implementation
� Formulation requires coordination among a few individuals
� Implementation requires coordination among many individuals
Nature of Strategy Implementation
Formulation vs. Implementation
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� Varies among different types & sizes of organizations
Nature of Strategy Implementation
Strategy Implementation
� Altering sales territories
� Adding new departments
� Closing facilities
� Hiring new employees
� Cost-control procedures
� Modifying advertising strategies
� Building new facilities
Nature of Strategy Implementation
Implementation Activities
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� Shift in responsibility
Nature of Strategy Implementation
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
Organizational structure
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
Organizational structure
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
Organizational structure
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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Divisional Structure
� 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
Divisional Structure
� 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
Organizational structure
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
Organizational structure
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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Management Issues (cont’d)
ManagementIssues
Supportive Culture
Production/Operations
Human Resources
Resistance to Change
Natural Environment
Management Issues
Resistance to Change
-- Single greatest threat to successful strategy implementation
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Management Issues
Resistance to Change
-- 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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Management Issues (cont’d)
ManagementIssues
Supportive Culture
Production/Operations
Human Resources
Resistance to Change
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
Management Issues (cont’d)
ManagementIssues
Supportive Culture
Production/Operations
Human Resources
Resistance to Change
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:
Management Issues (cont’d)
ManagementIssues
Supportive Culture
Production/Operations
Human Resources
Resistance to Change
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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Management Issues (cont’d)
ManagementIssues
Supportive Culture
Production/Operations
Human Resources
Resistance to Change
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