Mastering Strategy Implementation

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This article presents the Strategy Execution Framework – a comprehensive management model that allows managers to master one of the greatest management challenges – successfully implementing strategies. The powerful framework incorporates 18 success factors that are related to the process, content and context of strategy implementation. Collectively, these tools help organizations plan and implement and manage their strategies but also monitor, learn and adapt their strategy implementations to achieve sustainable organizational success.

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Mastering Strategy Implementation

  1. 1. © 2013 STRATEGOS CONSULTING Λ 1 This article presents the strategy execution framework – a comprehensive management model that allows managers to master one of the greatest management challenges – successfully implementing strategies. MASTERING STRATEGY IMPLEMENTATION Dr. Arnoud van der Maas linkedin.com/in/arnoudvandermaas slideshare.net/arnoudvandermaas arnoud@strataegos.com February 2013 The ability to develop and implement new strategies quickly and effectively is crucial for any organization. Despite its strategic importance many organiza- tions fail at strategy implementation. Be- cause of its high failure rate, achieving successful strategy implementation re- mains a continuing challenge for manag- ers. This article presents the strategy ex- ecution framework – a comprehensive management model that allows manag- ers to master one of the greatest man- agement challenges – successfully imple- menting strategies. The powerful frame- work incorporates 18 success factors that are related to the process, content and context of strategy implementation. Collectively, these tools help organiza- tions plan and implement and manage their strategies but also monitor, learn and adapt their strategy implementa- tions to achieve sustainable organiza- tional success. THE IMPORTANCE OF STRATEGY IMPLEMENTATION Strategy implementation has a substan- tial impact on organizational perfor- mance (Hrebiniak and Joyce, 1984), is crucial to organizational effectiveness (Sproull and Hofmeister, 1986) and is es- sential for the success of any organiza- tion (Noble, 1999). The successful imple- mentation of strong and robust strategies gives any organization a significant com- petitive edge. Strategy implementation is even more important in current turbulent organiza- tional environments. The environment of public and private organizations is in- creasingly dynamic (Volberda, 1996; D’Aveni, 1994). Developments such as the globalization of markets, rapid techno- logical change, deregulation of industries, a shift of organizations from the public to the private sector and the increasing ag-
  2. 2. STRATEGY & EXECUTION © 2014 STRATEGOS CONSULTING Λ 2 gressiveness of competition have radi- cally altered the competitive rules (Vol- berda, 1996). These environmental devel- opments have resulted in strong pres- sures for frequent strategic change (Ba- den-Fuller and Volberda, 1997; Thomas, 2002) to maintain a ‘fit’ with these chang- ing environments. In turbulent environ- ments, the ability to develop and imple- ment new strategies quickly and effec- tively may well mean the difference be- tween success and failure for organiza- tions (Drazin and Howard, 1984; Hauc and Kovac, 2000). Well-formulated strategies only produce superior performance for organizations when they are successfully implemented (Bonoma, 1984). Even the best-made strategies are worthless if they cannot be successfully implemented (Schilit, 1987). Strategic success requires an appropriate strategy but also requires that the strategy is implemented success- fully (Hussey, 1996), and timely. MOST STRATEGY IMPLEMENTA- TIONS FAIL Organizations often fail at strategy imple- mentation. Few intended strategies are successfully realized (Mintzberg, 1990), despite its strategic importance to any organization. Survey after survey reveals that strategy implementation is a top pri- ority for executives (Harvard Business Review, 2006). However, fewer than 15 percent of organizations around the world report that they are successful at strategy implementation (ibid). Various studies have reported implementation failure rates at 60 to 90 percent (Kaplan & Norton, 2005). The majority of strategies fail in the strategy implementation phase (Noble, 1999). After a comprehensive strategy or single strategic decision has been formu- lated, significant difficulties are often en- countered during the following strategy implementation process (Alexander, 1985). A widely shared experience is that all too often plans do not work out as in- tended (Wernham, 1984; Nutt, 1999). Many organizations have a fundamen- tal disconnect between the formulation of their strategy and the implementation of that strategy into useful action (Kaplan, 1995). This is the strategy imple- mentation problem: ‘the all too frequent failure to create change after seemingly viable plans have been developed’ (Nutt, 1983). Achieving successful implementa- tion remains a continuing challenge for managers responsible for executing strategies (Cravens, 1998). Strategy im- plementation is a multifaceted and highly complex organizational phenomenon (Wernham, 1985; Noble, 1999). The pro- cess tends to be messy, ambiguous and often involves many departments in the organization (Noble, 1999b, Schofield, 2004). Part of this complexity arises from the social and political aspects of strat- egy implementation, which need to be taken into account. Hence, there is a growing recognition that the most im- portant challenges in strategic manage- ment are in strategy implementation (Flood et al., 2000). THE STRATEGY EXECUTION FRAMEWORK To contribute to the understanding of strategy implementation, we developed a comprehensive framework for strategy implementation. The Strategy Execution Framework emerged from a qualitative survey of 55 executives within 44 public and private organizations (see Figure 1). Using Pettigrew’s (1985) process, con- tent, and context framework, 18 success factors for strategy implementation were identified and categorized into three groups: factors related to the context in which a strategy implementation takes place, the process by which the strategy is implemented and the content of the strategy implementation. This framework allows for a holistic view of strategy im- plementation. The strategy execution framework is a comprehensive management model that allows executive and managers to master one of the greatest management chal- lenges – successfully implementing strat- egies. This powerful framework incorpo- rates 18 ‘hard’ and ‘soft’ success factors or tools related to the process, content and context of a strategy implementation. Collectively, these tools help organiza- tions plan and execute their strategies but also monitor, learn and adapt their strategy to achieve sustainable organiza- tional success. STRATEGY IMPLEMENTATION CONTENT The content of strategy implementation refers to the product or ‘what’ of the strategy process. The following three practices increase strategy implementa- tion success.
  3. 3. STRATEGY & EXECUTION © 2014 STRATEGOS CONSULTING Λ 3 1 Formulate a Strategic Vision Successful strategy formulation and im- plementation begins with the formulation of a sound and clear strategic vision by top management. A strategic vision de- scribes the desired future state of the or- ganization. The strategic vision helps clarify the direction in which an organiza- tion is to move (Kotter, 1995). A clear and well-formulated strategic vision is a key requirement for effective organizational redesign (Miles et al., 1995). The strategic vision needs to be clearly defined and well formulated (Hussey, 1996). The strategic vision needs to be at- tractive and easy to communicate toward organizational members, customers, shareholders, and other relevant stake- holders. The simpler the strategic vision is, the easier it is to understand and exe- cute for organizational members. A clear and attractive strategic vision increases the confidence of employees in a suc- cessful outcome of a strategy implemen- tation effort. An attractive and ambitious new strategic vision can help to attract and unite organizational members and stimulate them to increase their effort (Trice & Beyer, 1991). However, the vision must also realistic and feasible. An unre- alistic strategic vision reduces the moti- vation and commitment of organizational members. 2 Develop the Strategy After formulating the strategic vision top management needs to develop a strategy that is able to achieve the strategic vision. A strategy is ‘a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there’ (Porter, 1980: xvi). A strat- egy serves as a roadmap to get where a company wants to go. In order to guide the strategy implementation effectively, the strategy needs to be realistic, based on a sound idea and be well thought out. No implementation can save a strategy, which is not feasible or sound to begin with. After the strategy is developed, it needs to be discussed with those who have to execute it, such as middle man- agers and key employees to assess whether the strategy is sound, realistic and feasible. Not only needs a strategy be sound and feasible it needs to be clear also. Or- ganizational members who have to im- plement the strategy need to have a clear understanding of the strategy. They need to understand what the (operational) ob- jectives of the strategy implementation are and what the consequences are for them as individuals. Furthermore, organi- zational members need to know what to do to make the strategy a success. Con- sequently, a strategy needs to be simple and focus on the essence of the strategy. STRATEGY IMPLEMTATION SUCCESS CONTENT Strategic vision Strategic plan Implementation plan CONTEXT Competent Management Align Strategy and Structure Change the Culture Empower employees Strategy commitment Political Interests Reward Performance PROCESS Leadership Communicate the Strategy Involve Employees People-oriented Management Monitor and Learn Hire and Retain Employees Train and Develop Employees
  4. 4. STRATEGY & EXECUTION © 2014 STRATEGOS CONSULTING Λ 4 When a strategy is clear and simple, it is easier to understand for organizational members. However, the need to develop a clear strategy goes against the reality of poli- cymaking processes in the public sector. Strategies and policies are often devel- oped in a way that reduces the level of clarity of the strategy or policy and makes implementation problematic (Baier et al., 1986). Unlike private firms, public organizations tend to be govern- ment by controlling bodies which consist of multiple and competing interests (Ring & Perry, 1981). The controlling body tends to consists of policy makers who often have different agendas, which are de- signed to benefit their own constituents, but not necessarily those of others in the controlling group (Nutt, 1979). Therefore, there is a need to create coalitions with multiple and often competing objectives in order to agree on a certain policy (Baumer, 1978) or strategy. A common method for securing policy support is to increase the ambiguity of a proposed pol- icy (Page, 1976). A usual observation of policymaking processes is that ‘difficult issues are often ‘settled’ by leaving them unresolved or specifying them in a form requiring subsequent interpretation’ (Baier et al., 1986: 206). ‘Policy ambiguity allows different groups and individuals to support the same policy for different rea- sons and with different expectations, in- cluding different expectations about the administrative consequences of the pol- icy’ (1986: 206). ‘Thus, official policy is likely to be vague, contradictory, or adopted without generally shared expec- tations about its meaning or implementa- tion’ (1986: 206). The lack of clarity allows policy makers to show their constituents that they have successfully represented their interests (Nutt, 1979). ‘In this way, the ambiguity or a policy increases the chance of its adoption, but at the cost of creating administrative complications’ (Baier et al., 1986: 207). Thus, policy am- biguity is less the result of deficiencies of policy makers than a natural conse- quence of gaining the required support for the policy and of changing prefer- ences over time (ibid). 3 Translate the Strategy After the strategy is developed, it needs to be translated into a well worked out strategy implementation plan. Even the best strategy is worthless when manag- ers cannot translate the strategy into op- erational reality. The strategy implemen- tation plan specifies the processes, activ- ities and operational objectives that are required to achieve the goals of the strat- egy. The strategic objectives need to be translated into measurable operational implementation sub-objectives (Reid, 1989) and linked to departmental and in- dividual goals (Kaplan, 1995). In addition, progress measurement points or ‘mile- stones’ need to be established (Owen, 1982). Measurable objectives provide an effective basis for management control of the implementation (ibid). Without concrete objectives and mile- stones, it is impossible to measure the progress of the strategy implementation. This makes managing and improving the strategy implementation impossible. Therefore, the implementation plan needs to contain clear and measurable objectives or targets. Clear and specific tasks need to be defined which are re- quired to achieve these targets. Everyone with strategy implementation responsi- bilities needs to know what to do in order to implement the strategy and what con- crete objectives they have to attain. Un- clear objectives leave room for differen- tial interpretation and discretion and may thus contribute to implementation failure (Barrett, 2004). Research has shown that specific and ambitious but realistic goals, which are accepted by organizational members lead to the best task performance (Erez & Kanfer, 1983). People need realistic chal- lenges to perform well. When organiza- tional members have decided that it is im- possible to reach a goal they will stop try- ing to reach that goal (ibid). Furthermore, effective strategy imple- mentation requires clear implementation tasks, activities and responsibilities. Im- plementation can only be successful when there is a clear and shared under- standing of who does what, when, at what cost (Allio, 2005). Not only should the necessary actions to implement the strategy be identified and planned, re- sponsibility for these actions should be allocated as well (Owen, 1982). By allo- cating clear responsibilities for the execu- tion of the implementation activities, pro- gress can be measured and controlled (Reid, 1989).
  5. 5. STRATEGY & EXECUTION © 2014 STRATEGOS CONSULTING Λ 5 STRATEGY IMPLEMENTATION PROCESS The process of strategy implementation refers to manner in which a strategy is im- plemented. These are the activities lead- ing to and supporting a strategy imple- mentation effort or ‘how’ the strategy is implemented (Ketchen et al., 1996). The following eight practices increase strat- egy implementation success. 1 Appoint a Strategy Implementation Leader During the strategy implementation ef- fort there needs to be one clear leader who is responsible for the outcome of the strategy implementation. The strategy implementation leader serves as project manager and problem owner of the strat- egy implementation. The implementation leader needs to be board member, espe- cially for strategic implementations. The implementation leader is responsible for articulating and communicating an at- tractive strategic vision that guides the strategy implementation. A successful leader inspires followers through the communication of a captivating vision designed to motivate followers to ambi- tious goals (Huy, 1999). Effective leaders have the ability to inspire confidence and enthusiasm of the new direction (Tush- man et al., 1986). Implementation leaders need to be decisive during the strategy implementa- tion effort. Taking decisions may be con- sidered to be is the primary task of man- agement. When taking these decisions a manager needs to be steadfast, resolved and not allow him or her to be influenced by others. Managers who want to execute ambitious and innovative plans need to be persistent in sticking the course through thick and thin (Gersick, 1994). During reorganizations in which employ- ees can lose their job or when established power positions are threatened, consid- erable resistance to change can arise. In such instances of considerable resistance to change, management has to be deci- sive and steadfast in taking decisions. Managers need to be able to take tough decisions when organizational members are not performing well. Strategy implementation leaders need to take decisions, which are perceived by organizational members to be fair. Re- search has found that organizational members are more committed to deci- sions, decision-makers and the organiza- tion when the procedures, which were used to arrive at the decision, are per- ceived as fair (Brockner et al., 2000). As Brockner et al state: ‘It’s not only what you do, but how you do it’. Finally, when leaders practice moral virtues such as fairness, integrity, hon- esty, loyalty, determination, courage and responsibility this increases the willing- ness of followers to follow a leader (Guil- lén & González, 2001). 2 Communicate the Strategy After the strategy is formulated, it needs to be communicated to the rest of the or- ganization, and especially to organiza- tional participants who are directly influ- enced by it. However, no less than 95 per- cent of organizational members do not understand the strategy of their own or- ganization (Kaplan & Norton, 2000). A strategy cannot be executed if organiza- tional members do not know what it is. The objective is to make organizational members understand what the strategy is all about and what its goals are. Further- more, employees need to know how the strategy influences their daily work. Com- municating the strategy in a very simple way makes it easier to understand for or- ganizational participants. An important part of the communica- tion of the strategy is the explaining and convincing of the strategy to employees. Not only needs the content of strategy to be clearly communicated, it also needs to be clearly explained in a way that em- ployees understand and may become convinced that the strategy is sound and effective. This can be done by explaining the advantages of the new strategy in a clear and practical way. Organizational members are more willing to accept un- desirable decisions when they have re- ceived clear and adequate explanations for those decisions (Brockner et al., 1990). It is important that organizational members understand why the implemen- tation or the new strategy is necessary. It is especially beneficial if organizational members see in their daily activities that something needs to be changed. Further- more, a perceived crisis may also be ben- eficial in establishing the need for change to organizational members. When organ- izational participants understand the
  6. 6. STRATEGY & EXECUTION © 2014 STRATEGOS CONSULTING Λ 6 need for the strategy implementation, they are more likely to be supportive of it. Communication of the strategy can be done through a wide range of communi- cation means, such as magazines, email, leaflets, information, and publicity meet- ings. However, two-way communication sessions with organizational members appear to be most effective. In these ses- sions, the strategy is explained and em- ployees get the opportunity to voice their views on the strategy and its implemen- tation. It is not only important to com- municate the strategy to the people but it is also important to listen to their reac- tions to the strategy. Extensive listening to comments from employees can take considerable time but builds commitment to the strategy. 3 Involve Stakeholders Relevant stakeholders need to be in- volved in the strategy formulation and implementation process. Involving stake- holders such as middle managers, em- ployees, customers, unions and investors may increase their commitment to the strategy. By sitting down with employees and explaining the strategy and asking for comments increases their under- standing of the strategy and their com- mitment to it. When employees feel that they have significant input in the strategy and see that certain ideas of their own are part of the strategy they tend to be very committed to that strategy. Participation allows management to tap into the specialized knowledge of lower-level employees. This can improve the strategy and the way in which imple- mentation tasks are performed. Further- more, by allowing employees to partici- pate their self-confidence can be in- creased. Finally, management can find out where there is support for the strat- egy and where resistance can be ex- pected. 4 Use a People-oriented Management Style Having a people-oriented management style is a key practice for successful im- plementation. As individuals go to work for both instrumental and social reasons, managers need to pay attention to both task performance and social relationships (Henderson & Argyle, 1986). Organiza- tional members have the need to be treated with the dignity of a human being – one with knowledge and free will (Guil- lén & Gonzalez, 2001). A relationship-oriented manager lis- tens, provides support and encourage- ment, coaching and counseling, develops social relations with subordinates, cele- brates social activities and empowers or- ganizational members during a strategy implementation effort. Relationship-ori- ented management consists of four main aspects. A first aspect is coaching and counsel- ing employees during the strategy imple- mentation effort. Employees eventually have to internalize the new activities, which are required to implement the strategy. Therefore, management must guide and coach the employees but they have to perform the implementation tasks themselves. Moreover, organiza- tional members are often quite capable of performing certain implementation tasks but need help doing it. By coaching em- ployees, they can become more confi- dent of their abilities and can become more involved and less passive. In addi- tion, managers can reduce resistance to change by being facilitative and support- ive (Kotter and Schlesinger, 1979). This may involve giving employees time off af- ter a demanding period and providing emotional support (ibid). A second part of relationship-oriented management is to develop and maintain personal relationships with subordinates. Better social relations have a positive in- fluence on the cooperation, motivation and effectiveness of organizational mem- bers (Henderson & Argyle, 1986). Celebrating social activities with or- ganizational members is a third aspect of relationship-oriented management. Or- ganizing social activities are a good way to develop close and personal relation- ships among organizational members, can create a positive atmosphere within the organization, create more unity within the organization, reduce the dis- tance between management and subor- dinates, and increase organizational com- mitment. Empowering organizational members is a final aspect of relationship-oriented management. Organizational members can be empowered by making them inde- pendent, delegating responsibilities, al- lowing participation, giving them more control over their work, giving them infor-
  7. 7. STRATEGY & EXECUTION © 2014 STRATEGOS CONSULTING Λ 7 mation about the strategy and its imple- mentation, and giving training and lead- ership courses. Self-responsibility and self-empowerment of organizational par- ticipants makes them more motivated, more self-confident and more willing to take initiative, which is beneficial to the strategy implementation effort. In addi- tion, empowerment or delegation has po- tential benefits such as improves speed and quality of decisions, reduced mana- gerial overload, enrichment of subordi- nates’ job, increased motivation of subor- dinates and provides opportunities for the development of leadership skills of subordinates (Yukl & Fu, 1999). In addi- tion, empowerment increases work per- formance (Cotton et al., 1988; Leana, 1986) and innovative behavior (Kanter, 1983). This in turn increases the motiva- tion of organizational members by mak- ing them feel more powerful (Conger & Kanungo, 1988). Moreover, empowerment increases self-determination, which increases the self-confidence of employees. Further- more, by giving employees more control over their work they feel more proud, im- portant, and involved. A final reason for the delegation of authority to employees is that they are the ones who encounter the problems during their work and are thus the ones who are most suited to solve these problems. 5 Monitor and Learn During the strategy implementation, it is important to monitor whether the goals of the implementation are being met and whether adjustments need to be made. The strategic goals translated into opera- tional goals with performance indicators need to be monitored to assess whether the objectives are being achieved. With- out concrete objectives and milestones, it is impossible to assess the progress of the execution. As strategy implementation plans are destined to change, implemen- tation teams need to regularly meet in well-structured, punctuated sessions to share information, reconfirm priorities (Allio, 2005) and make decisions. This way, management can make adjustments when needed and thus control the strat- egy implementation effort. To make these adjustments it is required to assign clear responsibilities for the achievement of those targets. When objectives are not being met, the person or persons respon- sible need to be held accountable. Many organizations have accountabil- ity problems, which may be the result of a lack of planning, the absence of a func- tional management information system, or the existence of cultural values which do not encourage holding persons, espe- cially in high positions, accountable (Kiggundu, 1996). When objectives are not being met it is possible that the assumptions underly- ing the strategy are flawed or obsolete. When this happens it needs to be decided whether incremental improvements will suffice or that a fundamentally new strat- egy is required. When a strategy implementation is finished it needs to be evaluated. This way, an organization may learn from the implementation, which can benefit future strategy implementations. Furthermore, it is important to conclude and evaluate a project so that employees see what they worked for, creating a sense of closure. 6 Achieve Visible Results Achieving visible improvements in per- formance, especially in the beginning of the strategy implementation (quick wins) increases the motivation and commit- ment of organizational members. When employees see that a strategy leads to visible results, they get more confidence in the strategy. Furthermore, people are more inclined to accept new things when they see that these things work and lead to results. There is often a significant fear for novelty. Consequently, strategy im- plementation is often perceived by em- ployees as threatening. However, when the strategy leads to results, this fear of change can be overcome. During the strategy implementation it is important to make change visible to the organization. By making change visible (such as new logo, uniforms and offices) management can show the organization that they are committed to the strategy and that things are really changing. It is especially important to achieve re- sults in the beginning of a strategy imple- mentation, in order to gain the confi- dence of the employees that the strategy might work. This is even more important when the company is in crisis and short- term results are needed to let employees regain confidence. Another reason for achieving results is that it motivates peo- ple. If they see that the changes really
  8. 8. STRATEGY & EXECUTION © 2014 STRATEGOS CONSULTING Λ 8 lead to results then they become more motivated. Conversely, if employees get the feeling that the strategy implementa- tion effort does not yield any results, they may even sabotage the effort. Finally, a strategy implementation project can run- down when the people see little results. 7 Hire and Retain Compe- tent Employees Recruitment, selection, promotion and demotion should provide the managers and employees who have the required skills and attitude to implement the new strategy successfully (Kotter, 1995; Pinto & Slevin, 1987). Especially when an organ- ization aims for radical change, new or- ganizational members and especially managers are required to achieve it (Stoddard & Jarvenpaa, 1995). Newly hired managers are three times more likely to initiate revolutionary change than existing management teams (Tush- man et al., 1986). In addition, outsiders may provide new cognitive perspectives, fresh awareness of the environment and an energizing assurance (Gersick, 1991). Existing organizational members are of- ten comfortable with the status quo and may fear losing control, opportunities, power and their ability to accomplish the new tasks (Stoddard & Jarvenpaa, 1995). Selection and hiring of employees is especially important if the existing em- ployees lack the knowledge and skills to implement the strategy. Another ad- vantage of hiring new employees is that they tend to be more dynamic and can serve as an example for the existing em- ployees, who are then expected to per- form better. It can be necessary to demote or lay off employees who do not have the re- quired skills and attitude to implement the strategy. In addition, some organiza- tional members may have to be removed to show that resistance to change is not tolerated (Stoddard & Jarvenpaa, 1995). However, letting employees go needs to be done with great hesitation and pru- dence as it can have a very negative in- fluence on survivors. When employees perceive future job loss possible, this can result in negative emotions resulting in reduced work motivation and task perfor- mance. When layoffs are inevitable it is crucial that they are clearly communi- cated and are done in a way, which is per- ceived fair by employees. Otherwise layoffs can have a very negative influence on the motivation and performance of survivors. 8 Train and Educate Organizational members Training and education of organizational members is another important lever for strategy implementation. Adequately trained staff is one of the most critical steps top management can take to en- sure successful strategy implementation (Edwards & Sharkansy, 1978). Highly edu- cated organizational members are more likely to adapt to intellectual demands, such as the use of information technology (Fuerst & Cheney, 1982), to be early adopters of innovations (Berry et al., 1998), are more receptive to innovation and strategic change (Wiersema & Ban- tel, 1992) which has a positive influence on receptivity to change. Training and education can consist of courses, collective classes, (on-the-job) training, and individual guidance and coaching. Implementing a new strategy often requires new activities and ways of thinking, which can be learned by training and educating employees. The quality of a strategy implementation effort de- pends on the quality of the people who have to implement it. Thus, the quality of organizational members may need to be improved by educating them. Training and education can improve employee knowledge and skills and make them per- form better. Training and education may allow employees to execute their tasks in a professional and skillful way. In addition, educating and training employees can in- crease the self-confidence of employees and thus increase their performance. STRATEGY IMPLEMENTATION CONTEXT The context of a strategy implementation refers to the circumstances under which both the strategy implementation pro- cess and content are determined. It refers to the ‘where’ of strategy implementa- tion. The following seven strategy imple- mentation practices increase strategy im- plementation success. 1 Appoint Competent Management The presence of competent employees and especially management is the most
  9. 9. STRATEGY & EXECUTION © 2014 STRATEGOS CONSULTING Λ 9 important success factor for strategy im- plementation. Inadequate capabilities of managers are a common cause of strat- egy implementation failure (e.g. Beer & Eisenstat, 2000; Pinto & Slevin, 1987; Al- exander, 1985). Without competent or- ganizational members, implementing a strategy successfully becomes very diffi- cult if not impossible. Organizational members with implementation responsi- bilities need to have sufficient skills and knowledge to implement the strategy. Eventually organizational members are the ones who have to perform the imple- mentation activities to make the strategy a success. Especially, having competent manage- ment is important. When top manage- ment is incompetent, the whole organiza- tion is affected and thus the strategy im- plementation effort as well. Furthermore, when employees have little confidence in the ability of management to execute the strategy then their commitment to the strategy will be low. Having incompetent members within a team has a negative influence on the per- formance of other organizational mem- bers. Well-performing organizational members have their motivation reduced when they have to work with or are de- pendent on poor performing colleagues. Especially the presence of incompetent managers has a very negative influence on the performance of subordinates. If a person is competent and that person’s manager is not, this is likely to have a neg- ative influence on the level of motivation and implementation performance. Suc- cessful organizational members tend to leave an organization when they have to work for incompetent managers and feel that their performance is not appreciated or even worked against. To increase the level of competence of organizational members several prac- tices can be used such as training and ed- ucation, coaching and counseling, giving feedback about performance, addressing poor performance, hiring and firing of or- ganizational members and bringing in ex- ternal expertise. 2 Align Structure and Strategy Successful strategy implementation re- quires a clear organization structure that is aligned to the strategy. It needs to be clear whom the authority has to make de- cisions. When possible, management must ensure that the organization struc- ture is clear, relatively decentralized and relatively formalized. When the existing structure does not meet these require- ments, it may represent a hindrance to strategy implementation and needs to be changed. The main advantage of a relatively de- centralized organization structure is that it increases the commitment of organiza- tional members to decision-making; deci- sions can be made more quickly, and may improve the quality of decisions as it makes more use of specialized knowledge of organizational members at lower levels in the organization. Centralized decision-making, one-way top-down communication and lack of in- put from lower levels of the organization may inhibit strategy formulation and im- plementation (Kiggundu, 1996). A cen- tralized organizational structure with rigid organizational policies combined with a perceived lack of control is related to maladaptive behavior in organizations (Martinko & Garnder, 1982). Individuals working in centralized organizations, tend to feel that management does not trust their skills and abilities resulting in a sense of incompetence (Lawler, 1992). Centralized control reduces self-determi- nation (Spreitzer, 1996), which in turn re- duces the intrinsic motivation of organi- zational members (Conger and Kanungo, 1988; Lawler, 1992). An explanation for this is that individuals tend to have a de- sire for personal control (Greenberger and Strasser, 1986). In addition, an au- thoritarian management style can re- move control and discretion from em- ployees, which increases their sense of powerlessness (Conger and Kanungo, 1988). Contrary, decentralized control helps organizational members feel that they are contributing to the operations of the organization, which promotes their sense of having impact (Martinko and Gardner, 1982). Furthermore, it may in- crease the motivation of organizational members. Competent management is the most important success factor for strategy implemen- tation.
  10. 10. STRATEGY & EXECUTION © 2014 STRATEGOS CONSULTING Λ 10 A moderately formalized organization structure creates clarity for organiza- tional members. Clear procedures, rules and responsibilities give employees cer- tainty during the implementation. When problems arise and responsibilities are not clear, organizational members may blame each other. A highly level of formalization reduces the propensity to change (e.g. Hage & Ai- ken, 1970; Bonoma & Zaltman, 1981). The greater the number of rules and regula- tions, the greater the rigidity and inflexi- bility within an organization. A high level of formalization discourages new ways of doing things and reinforces the status quo (Hage and Aiken, 1970). However, when formalization is low, organizational members have few rules or procedures to fall back on during the strategy imple- mentation. Thus, organizations must not be too formalized and become rigid but also not become too informal and be- come chaotic and uncontrollable (Vol- berda, 1996). 3 Change the Organization Culture A new strategy often requires changes in the way of thinking and habits of organi- zational members. Old habits and ways of thinking can prove to be an obstacle to strategy implementation. Fundamental organizational change often involves ma- jor uncertainty and can trigger intense emotions, such as anxiety (Huy, 2002) and a fear for job security. As a new strat- egy can be accompanied by layoffs, or- ganizational members may perceive it as a threat to job security. Job insecurity is related to a variety of negative responses such as lower job satisfaction, lower or- ganizational commitment, lower job in- volvement, increased psychological with- drawal, greater resistance to change, greater propensity to leave the organiza- tion, lower trust in management (Borg & Dov, 1992) and withdrawal cognitions and behaviors including reduced work ef- fort, increased absenteeism, and theft (Davy et al., 1997). An existing organization culture can be characterized by fear for making mis- takes, responsibility, participation, and change, acting as major barriers to strat- egy implementation success. When man- agers act in authoritarian and punitive ways, subordinates may become reluc- tant to make mistakes and engage in learning behaviors (Edmondson, 1999). Employees may become shaped by or- ganizations with high levels of centraliza- tion, formalization, and rigid rules and may become passive and unable to be creative or exercise initiative on the rare occasions that it is encouraged and re- warded (Martinko & Gardner, 1982). To implement a strategy successfully, proactive organizational members are needed who participate in strategy for- mulation and implementation. In order to participate, organizational members need to dare to take initiative, voice their opinion, and not be afraid to make mis- takes. Therefore, an empowering and fearless organization culture needs to be created in which organizational members are able to make mistakes without being punished for it. When organizational member believe that well-intentioned in- terpersonal risks will not be punished, this fosters learning behavior (Edmondson, 1999). To change an existing organizational cul- ture several strategies and tactics can be used. First, a very clear vision of the new organizational culture is needed. The vision must clearly describe the new culture and how it differs from the old culture what its advantages are. This needs to be communicated very clearly to the employees. Cultural change in- volves a lot of communication. Another tactic is to individually coach and council employees. This includes having open conversations with employees. Involve employees and give them information about their performance and the new cul- ture. Providing training and education, especially motivational courses, can also be used to change the culture. Further- more, visible changes, such as new uni- forms and a new corporate logo can be used to make the culture change more visible and tangible to organizational members. In addition, hiring employees who have a better fit with the new culture and demoting or letting go of employees who not able to fit in the new culture are A fearless culture must be created in which organiza- tional members are able to make mistakes without being punished for it.
  11. 11. STRATEGY & EXECUTION © 2014 STRATEGOS CONSULTING Λ 11 another tactic that can be used. Finally, leadership from top management is cru- cial in culture change. Top management need to serve as an example of the norms and values it wishes to convey to organi- zation. However, changing a culture is a diffi- cult and time-consuming process. It may take years to successfully change an ex- isting organizational culture. Changing habits, which have been the same for a very long time is not easy. 4 Empower Employees When organizational members have a high sense of implementation self-effi- cacy and believe that they can perform the new strategy implementation tasks successfully, they are more likely to per- form well. Contrary, organizational mem- bers with low self-efficacy have little am- bition to perform new tasks, especially more complex and unfamiliar tasks. As strategy implementation often entails new and unfamiliar tasks, this negatively influences the implementation effort. Even when organizational members do have the required capabilities they can be afraid to take on a job with more respon- sibility, which entails more risk. Another result of low self-efficacy may be that, or- ganizational members can become afraid to make mistakes, take initiative, and par- ticipate in decision-making. They are not confident that their endeavors will be successful. A low implementation self-efficacy may stem from a lack of self-confidence and self-esteem. An authoritarian man- agement style may be another source of low self-efficacy. Being in a subordinate position with little power has a negative influence on the level of self-efficacy of organizational members. In addition, when organizational members are not re- warded when they perform well but do get criticism when mistakes are made this may lower their implementation self-effi- cacy as well. Finally, organizational mem- bers may have low implementation self- efficacy because they have seen many things fail (including past implementa- tions). When they see others fail, they are more likely to expect that they will fail as well. Managers can increase the level of self- efficacy of employees through coaching and counseling, rewarding performance, a people-oriented management style and by creating an organizational culture in which people are able to make mistakes and learn from them. 5 Secure Strategy Commitment A lack of commitment to the strategy im- plementation can result in implementa- tion failure (Alexander, 1985; MacMillan, 1986). When organizational participants are committed to a strategy and its im- plementation, they are more motivated to implement the strategy and achieve its goals. Especially managers need to be very committed to the strategy and be resolved to implement it. Explicit man- agement commitment is needed because management provides leadership and re- wards to organizational members. However, not only is managerial com- mitment to the strategy required for strategy implementation success but also employee commitment. Without em- ployee commitment, the strategy imple- mentation is likely to fail. Employees who are not committed to a strategy will not be very motivated to implement that strategy. Organizational members may become uncommitted to the strategy im- plementation because of poor past im- plementation and organizational perfor- mance. Employees are likely to be cynical about organizational change because of the following reasons: feeling unin- formed, lack of communication and re- spect from managers, negative disposi- tion and lacking participation in decision- making (Reichers et al., 1997). Employee commitment can be se- cured by involving employees in the strategy formulation and implementation process. When employees think that it is (partly) their plan, they are more commit- ted and supportive of the plan. Another way of increasing employee commitment is by clearly communicating the strategy to employees. 6 Take Political Interests into Account Politics and struggles over power and leadership are just a few obstacles that may undermine an implementation effort (De Kluyver and Pearce, 2003). Strategy formulation and implementation inevita- bly raise questions of power within an or- ganization (Pettigrew and Whipp, 1991). The existence of conflicts, and the use of
  12. 12. STRATEGY & EXECUTION © 2014 STRATEGOS CONSULTING Λ 12 individual and group power needs to be taken into consideration (Bergadaà, 1999). The very prospect of change con- fronts established positions (ibid), which may lead to resistance to change. Re- sistance to change may lead to passivity toward the strategy or even sabotage. Managers can overcome resistance to change by involving potential opponents in decision-making, taking their interests seriously and clearly communicating the new strategy and its advantages to them. 7 Reward Implementation Performance Organizations need a reward system that monitors the progress toward full imple- mentation and demonstrates top man- agement’s interest and investment in at- taining the goals of the strategy (Stonich, 1981). Reward systems are essential for motivating staff and ensuring appropri- ate behavior in relation to the strategy (Hrebiniak & Joyce, 1984). Rewarding good implementation per- formance and addressing poor imple- mentation performance has a positive in- fluence on strategy implementation per- formance, due to the following reasons. First, rewarding performance increases the level of motivation of organizational members. When organizational members perform well during a strategy implemen- tation effort, they want to be rewarded for it. When persons are not rewarded based on their performance they are not likely to be motivated to make an extra effort and achieve results. Second, when organizational members see that another organizational member performs well and is rewarded for that, they may want those rewards as well. Consequently, they can become moti- vated to perform better as well. Con- versely, organizational members are not motivated to work hard when their badly performing colleague gets the same sal- ary. Finally, when organizational members are rewarded for their implementation performance their implementation self- efficacy may be increased. When they perform well and receive rewards such as compliments from management, they may be become more self-confident and more motivated to perform well during the strategy implementation. The following reward best practices have a positive influence on strategy im- plementation performance. First, feed- back is one of the most effective methods of increasing individual and group perfor- mance (Moss & Martinko, 1998). ‘Feed- back allows employees to assess their performance accurately, learn from er- rors, see how they are perceived by oth- ers, replace unproductive work habits, examine alternative modes of behavior, and increase self-awareness’ (Vinton, 1987). Second, informal rewards (pats on the back, a sense of pride, enthusiasm) are a very effective even more so than financial rewards. Giving compliments, praise, and recognition is really appreciated by or- ganizational participants. By giving com- pliments to organizational participants when they perform well during the strat- egy implementation effort, management can increase their level of motivation and self-confidence. However, employees of- ten do not receive compliments when they perform well but do get criticisms when they make mistakes. This has a very negative influence on the motivation, self-confidence, self-efficacy and perfor- mance of organizational members. Third, the use of collective rewards (such as profit sharing or bonuses with which an organization or a department as a whole is rewarded for its collective per- formance) has a positive influence on strategy implementation performance. Rewarding collective performance in- creases the level of motivation of organi- zational members with strategy imple- mentation responsibilities. Collective re- wards can give organizational members the feeling that they partly own the com- pany increasing their commitment to the organization. When organizational members are par- tially rewarded for their collective perfor- mance they have more incentive to make their department and the organization as a whole perform better. The aim is to con- vey that an organization is an interde- pendent system – individual performance is linked to organizational performance. Dr. Arnoud van der Maas (arnoud @stratae- gos.com) is a strategy consultant and au- thor in strategy execution. He is an interna- tional expert in strategy execution. Arnoud is owner of Strataegos Consulting – a strat- egy consultancy with a focus on strategy execution. Arnoud received a PhD in Strat-
  13. 13. STRATEGY & EXECUTION © 2014 STRATEGOS CONSULTING Λ 13 egy from Rotterdam School of Manage- ment, Erasmus University – one of the top business schools in Europe. This article is based on his PhD thesis on strategy execu- tion in an international context. Connect with him on LinkedIn or follow him on SlideShare or Twitter for articles and presentations on strategy and strategy exe- cution.
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