Ch 7(sm)

Copyright 2007 Prentice Hall Ch 7-1
Chapter 7
Implementing Strategies: Management &
Operations Issues
Strategic
Management:
Concepts & Cases
11th
Edition
Fred David
By:
Waseem sadiq

Chapter Outline
The Nature of Strategy Implementation
Annual Objectives
Policies

Chapter Outline (cont’d)
Resource Allocation
Managing Conflict
Matching Structure with Strategy

Restructuring, Reengineering & E-Engineering
Linking Performance & Pay to Strategies
Managing Resistance to Change

Managing the Natural Environment
Creating a Strategy-Supportive Culture
Production/Operations Concerns When
Implementing Strategies

Human Resource Concerns When

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.

-- 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

 Formulation focuses on effectiveness
 Implementation focuses on efficiency
Nature of Strategy
Implementation

 Formulation is primarily an intellectual process
 Implementation is primarily an operational
process
Nature of Strategy
Implementation

 Formulation requires good intuitive & analytical
skills
 Implementation requires special motivational &
leadership skills
Nature of Strategy
Implementation

 Formulation requires coordination among a
few individuals
 Implementation requires coordination among
many individuals
Nature of Strategy
Implementation

 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

 Shift in responsibility
Nature of Strategy
Implementation
Management Perspectives
Division or
Functional
Managers
Strategists

Management Issues
Management
Issues
ResourcesResources
Organizational structureOrganizational structure
RestructuringRestructuring
Rewards/IncentivesRewards/Incentives
Annual ObjectivesAnnual Objectives
PoliciesPolicies

Management Issues (cont’d)
Management
Issues
Supportive CultureSupportive Culture
Production/OperationsProduction/Operations
Human ResourcesHuman Resources
Resistance to ChangeResistance to Change
Natural EnvironmentNatural Environment

Management Issues
Annual Objectives --
-- Decentralized activity
-- Directly involve all managers in the
organization

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

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

Management Issues
Management
Issues
ResourcesResources
PoliciesPolicies

Management Issues
Policies --
-- Facilitate the solving or recurring
problems & guide implementation of
strategy

Management Issues
Policies Establish --
Boundaries
Constraints
Limits

Management Issues
Management
Issues
ResourcesResources
PoliciesPolicies

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

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

Management Issues
 Avoidance
 Diffusion
 Confrontation
Conflict Management & Resolution

Management Issues
Management
Issues
ResourcesResources
PoliciesPolicies

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

New administrative
problems emerge
New strategy
Is formulated
Organizational
performance
declines
Organizational
performance
improves
New organizational
structure is established
Chandler’s Strategy-Structure
Relationship

Management Issues
 Functional Structure
 Divisional Structure
 Strategic Business Unit Structure (SBU)
 Matrix Structure
Basic Forms of Structure

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

 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

 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

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

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

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

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

Management Issues
Management
Issues
ResourcesResources
PoliciesPolicies

Management Issues
Restructuring
-- Reducing the size of the firm – # of
employees, divisions and/or units, # of
hierarchical levels

Management Issues
Restructuring
Downsizing
Rightsizing
Delayering

Management Issues
Reengineering
-- Reconfiguring or redesigning work,
jobs, & processes to improve cost,
quality, service, & speed

Management Issues
Reengineering
Process management
Process innovation
Process redesign

Management Issues
Management
Issues
ResourcesResources
PoliciesPolicies

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

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?

Management
Issues

Management Issues
Resistance to Change
-- Single greatest threat to successful
strategy implementation

Management Issues
-- 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

Management
Issues

Management Issues
Natural Environment
-- Wide appreciation for firms that
“mend” rather than “harm” the
environment

Management Issues
Natural Environment – Environmental
Strategies
Develop/acquire “green” businesses
Divesting environmental-damaging
business
Low-cost producer through waste
minimization & energy conservation

Management
Issues

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:

• 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

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

Management
Issues

Management Issues
Human Resource Concerns
-- HR manager position has strategic
responsibility & has changed
dramatically as companies continue to
reorganize, outsource, etc.

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)

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

Key Terms & Concepts
For Review (Chapter 7)
Annual Objectives Conflict
Avoidance Confrontation
Benchmarking Culture
Bonus System Defusion

Delayering
Educative Change
Strategy
De-centralized Structure
Employee Stock Ownership
Plans (ESOP’s)
Establishing Annual
Objectives
Downsizing Force Change Strategy

Functional Structure Just in Time (JIT)
Gain Sharing Matrix Structure
Glass Ceiling Policy
Horizontal Consistency
of Objectives
Profit Sharing

Rational Change
Strategy
Restructuring
Reengineering Rightsizing
Self-Interest Change
Strategy
Resource Allocation
Strategic Business Unit
(SBU)

Vertical Consistency
of Objectives
Triangulation

Ch 7(sm)

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