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Strategy ImplementationStrategy Implementation

Payne

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What is Strategy Implementation?

• The sum total of the activates and choices required for the execution of a strategic plan – it is the process by which strategies are put into action through budgets, programs, and procedures.

• Implementation is the means to the ends (i.e., the strategy), these take place primarily through functional strategies and/or structure changes.

• Ask:– Who? – What? – How? – When?

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Top 10 Problems in Implementation

1. Slower implementation than originally planned.

2. Unanticipated major problems.

3. Ineffective coordination of activities.

4. Competing activities and crises that distract attention.

5. Insufficient capabilities of the involved employees.

6. Inadequate training and instruction of lower-level employees.

7. Uncontrollable external environmental factors.

8. Inadequate leadership and direction by departmental managers.

9. Poor definition of key implementation tasks and activities.

10. Inadequate monitoring of activities by the information system.

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Who Implements?

• Implementation involves a the whole management team – Every unit and all employees have a role and need to be

committed

• CEO, other senior executives, and heads of major organizational units must lead the process and orchestrate major initiatives– But they must rely on middle and lower-level managers to

push things on the front line and see that strategy is well-executed on a daily basis.

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Functional StrategiesFunctional Strategies: The collective pattern of day-to-day decisions made and actions taken by employees responsible for value activities. These include…

•Marketing Strategy• Customer Targeting • Product/service positioning, mix, breadth, and pricing

• Promotions practices• Distribution channels• Customer service policies• Product/service policies• Marketing research

•Operations Strategy• Capacity planning• Location and layout of facility• Equipment choices• Scheduling• Workforce policies

•R&D Strategy• Research focus/orientation• Project priorities (budget, quality, time)• Relationships to external organizations

•Information Systems• Hardware/software capability and integration

• Linkages to external organizations• Investments needed

•HR Strategy• Recruitment, Selection, Appraisals, Salaries, Wages, Training, etc.

•Financial Strategy• Capital, Investments, Returns• Resource allocation

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Functional Strategies - Examples• Linking Budgets to Strategy

– New strategies usually call for significant budget reallocations. Depriving strategy-critical groups of the funds needed to execute their pieces of the strategy can undermine the implementation process!

• Establishing Strategy-Supportive Policies– Provide top-down guidance regarding expected behaviors – Note: Too much policy can be as bad as the wrong policy or no

policy at all• Instituting Best Practices / Continuous Improvement

– Searching out and adopting best practices & benchmarking is integral to effective implementation (see next slide)

• Installing Support Systems– Mobilizing information and creating systems to use knowledge

effectively• Motivational Practices and Incentive Compensation Systems

– Monetary and Non-monetary reward systems to motivate positive actions

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Aspects Common to TQM and Continuous Improvement Programs

Basic Characteristics of TQM/CQI Programs:1. Valuable competitive asset in a company’s resource portfolio2. Have hard-to-imitate aspects3. Require substantial investment of management time and effort4. Expensive in terms of training and meetings5. Seldom produce short-term results6. Long-term payoff - Instilling a TQM culture

•Open organization•Employee empowerment•Zero-defects mentality•Flexible manufacturing•Process improvement•Measurement

• Committed leadership• Adoption & communication of

TQM• Closer customer relationships• Closer supplier relationships• Benchmarking• Increased training

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Employee Control and Rewards• Control:

– Challenge is how to ensure actions of employees stay within acceptable bounds

– Purpose of diagnostic control systems is to relieve managers of burden of constant monitoring

– Control methods establish boundaries on what not to do, allowing freedom to act with limits.

• Rewards (Two Types):– Monetary Incentives

• Salary raises• Performance bonuses • Stock options• Retirement packages• Promotions• Perks

– Non-Monetary Incentives• Praise• Constructive criticism• Special recognition• More, or less, job security• Interesting assignments• More, or less, job responsibility

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Structural Changes

• Changes to structure are often keys to strategy implementation success.

• A Few hard and fast rules for organizing:– Main rule: Structure must support and facilitate good strategy

execution. • Research indicates:

– Structure affects performance– Structure merits reassessment whenever strategy changes– New strategy typically involves different skills and key activities

• How work is structured is a means to an end - not an end in itself!– All the basic structures have strategic advantages and disadvantages– There is no ideal organization design– To do a good job of matching structure to strategy

• Pick a basic design• Modify as needed• Supplement with coordinating mechanisms and communication

arrangements

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Structural Forms

General Manager

Research &Development

ManufacturingHuman

Resources

Engineering MarketingFinance &Accounting

General Manager

Foundry &Castings

ScrewMachining

InspectionCustomer

Service

Milling &Grinding

Finishing &Heat Treating

Loading &Shipping

Billing &Accounting

Process-Oriented Functional Structure

Traditional Functional

Structure

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CEO

CorporateServices

Group VPSBU II

Strategically RelatedBusiness Units

Group VPSBU I

Strategically RelatedBusiness Units

Group VPSBU III

Strategically RelatedBusiness Units

Structural Forms (2)

HeadManufacture

HeadR&D

VentureManager 1

HeadMarketing

HeadFinance

VentureManager 2

VentureManager 3

VentureManager 4

R&DSpecialists

ProductionSpecialists

MarketingSpecialists

FinanceSpecialists

R&DSpecialists

ProductionSpecialists

MarketingSpecialists

FinanceSpecialists

R&DSpecialists

ProductionSpecialists

MarketingSpecialists

FinanceSpecialists

R&DSpecialists

ProductionSpecialists

MarketingSpecialists

FinanceSpecialists

General Manager

SBU Structure

Matrix Structure

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Strategic ControlStrategic Control

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Strategic Control Systems

• Strategic Control System: “a system to support managers in assessing the relevance of the organization’s strategy to its progress in the accomplishment of its goals, and when discrepancies exist to support areas needing attention” Lorange, Morton & Ghoshal, 1986

Controls come in two primary types:1. Feedback2. Concurrent

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Feedback Controls• Provides managers with information concerning

the outcomes of the organizational activities.– Budgets: holding employees accountable for staying

within or well below an established budget– Ratio Analysis: ROI, ROA, debt-to-equity, current

ratio, etc.– Audits: Measures and controls firm conduct by

comparing to established guidelines such as GAAP (general accepted accounting principles) or ethical standards.

– Goals and Objectives– Balanced Score Card Measures

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Concurrent Controls

• Provides managers with real-time information about processes and activities, so that deviations can be identified and corrected before they affect organizational results.– Statistical Process Control and Warning Systems: Setting

preferences for specific work activities (e.g., automobile manufacturing line assembly) and allowing for warnings to occur before it can impact outcomes.

– Inventory Controls: Tracks stock levels of different items so new orders can be made (e.g., Amazon.com)

– Behavioral Controls: Encourage employees to comply to norms and procedures (rules, regulations, and socialization processes).