Chapter 7 Implementing Strategies: Management Issues

Strategic Management: Concepts and Cases. 9th edition Fred R. David

PowerPoint Slides by Anthony F. Chelte Western New England College
Fred R. David Prentice Hall Ch 7-1

Chapter Outline
The nature of Strategy Implementation

Annual Objectives
Policies Resource Allocation
Fred R. David Prentice Hall Ch 7-2

Chapter Outline
Managing Conflict Matching Structure with Strategy Restructuring, Reengineering, and EEngineering Linking Performance and Pay to Strategies
Fred R. David Prentice Hall Ch 7-3

Chapter Outline
Managing Resistance to Change Managing the Natural Environment

Creating a Strategy-Supportive Culture

Fred R. David Prentice Hall

Ch 7-4

Chapter Outline
Production/Operations Concerns When Implementing Strategies Human Resource Concerns When Implementing Strategies
Fred R. David Prentice Hall Ch 7-5

Implementing Strategies: Management Issues

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.

Fred R. David Prentice Hall

Ch 7-6

Implementing Strategies: Strategy Analysis Issues & Choice Management

Contrasting strategy formulation and strategy implementation
Formulation is positioning forces before the action

Implementation is managing forces during the action

Fred R. David Prentice Hall

Ch 7-7

Implementing Strategies: Strategy Analysis Issues & Choice Management

Contrasting strategy formulation and strategy implementation
Formulation focuses on effectiveness

Implementation focuses on efficiency

Fred R. David Prentice Hall

Ch 7-8

Implementing Strategies: Strategy Analysis Issues & Choice Management

Contrasting strategy formulation and strategy implementation
Formulation is primarily an intellectual process

Implementation is primarily an operational process

Fred R. David Prentice Hall

Ch 7-9

Implementing Strategies: Strategy Analysis Issues & Choice Management

Contrasting strategy formulation and strategy implementation
Formulation requires good intuitive and analytical skills Implementation requires special motivation and leadership skills
Fred R. David Prentice Hall Ch 7-10

Implementing Strategies: Strategy Analysis Issues & Choice Management

Contrasting strategy formulation and strategy implementation
Formulation requires coordination among a few individuals Implementation requires coordination among many persons
Fred R. David Prentice Hall Ch 7-11

Implementing Strategies: Strategy Analysis Issues & Choice Management

Strategy implementation
Varies among different types and sizes of organizations

Fred R. David Prentice Hall

Ch 7-12

Implementing Strategies: Strategy Analysis Issues & Choice Management

Strategy implementation Actions
Altering sales territories Adding new departments Closing facilities Hiring new employees Cost-control procedures Changing advertising strategies Building new facilities
Fred R. David Prentice Hall Ch 7-13

Management Perspectives
Formulation to Implementation transition
Shift in responsibility
From strategists to division and functional managers

Fred R. David Prentice Hall

Ch 7-14

Management Issues

Annual Objectives
Policies Resources

Management Issues

Organizational structure Restructuring Rewards/Incentives

Fred R. David Prentice Hall

Ch 7-15

Management Issues (continued)

Resistance to Change
Managers & strategy Supportive culture

Management Issues

Production/operations Human resources Downsizing

Fred R. David Prentice Hall

Ch 7-16

Annual Objectives

Decentralized activity Involves all managers in the firm

Fred R. David Prentice Hall

Ch 7-17

Annual Objectives
1. Basis for allocating resources 2. Primary mechanism for evaluating managers 3. Major instrument for monitoring progress toward long-term objectives 4. Establish organizational, divisional, and departmental priorities
Fred R. David Prentice Hall Ch 7-18

Annual Objectives

Horizontal consistency of objectives Vertical consistency of objectives

Fred R. David Prentice Hall

Ch 7-19

Annual Objectives
Objectives should state
Quantity Quality Cost Time

Fred R. David Prentice Hall

Ch 7-20

Policies

Policies facilitate solving recurring problems and guide the implementation of strategy

Fred R. David Prentice Hall

Ch 7-21

Policies
Policies set
Boundaries Constraints limits

Fred R. David Prentice Hall

Ch 7-22

Policies
Example Issues requiring management policy - To offer extensive or limited management development workshops and seminars To centralize or decentralize employee-training activities To recruit through employment agencies, college campuses, and/or newspapers To promote from within or hire from the outside To establish a high- or low-safety stock of inventory To buy lease, or rent new production equipment
Fred R. David Prentice Hall Ch 7-23

Resource Allocation
Resource Allocation

A central management activity that allows for strategy execution

Fred R. David Prentice Hall

Ch 7-24

Resource Allocation
Four types of resources
1. 2. 3. 4. Financial resources Physical resources Human resources Technological resources

Fred R. David Prentice Hall

Ch 7-25

Managing Conflict
Conflict Disagreement between two or more parties on one or more issues

Fred R. David Prentice Hall

Ch 7-26

Managing Conflict
Conflict is not always bad Absence of conflict
Signal indifference or apathy

Can energize opposing groups to action May help managers identify problems

Fred R. David Prentice Hall

Ch 7-27

Managing Conflict

Conflict Management and Resolution

Avoidance Defusion Confrontation

Fred R. David Prentice Hall

Ch 7-28

Matching Structure with Strategy

Changes in Strategy

Changes in Structure

1. Structure largely dictates how objectives and policies will be established. 2. Structure dictates how resources will be allocated
Fred R. David Prentice Hall Ch 7-29

Chandlers Strategy-Structure Relationship

New strategy Is formulated New administrative problems emerge Organizational performance declines

Organizational performance improves

New organizational structure is established

Fred R. David Prentice Hall

Ch 7-30

Basic Forms of Structure

1. Functional Structure
Groups tasks and activities by business function

2. Divisional Structure
Decentralized and organized by geography, product, customer, or process

Fred R. David Prentice Hall

Ch 7-31

Basic Forms of Structure

3. Strategic Business Unit Structure (SBU)
Groups similar divisions; delegates authority and responsibility to SBU executive

4. Matrix Structure
Most complex of all designs. Depends upon both vertical and horizontal flows of authority and communication
Ch 7-32

Fred R. David Prentice Hall

Restructuring
Restructuring
Reducing the size of the firm in terms of number of employees, divisions, or units, and the number of hierarchical levels in the firms organizational structure
Ch 7-33

Fred R. David Prentice Hall

Restructuring
Also called
Downsizing Rightsizing Delayering

Fred R. David Prentice Hall

Ch 7-34

Restructuring
Employed when ratios out of line with benchmarked competitors Primary benefit sought is cost reduction

Fred R. David Prentice Hall

Ch 7-35

Reengineering
Reengineering

Involves reconfiguring or redesigning work, jobs, and processes to improve cost, quality, service and speed.

Fred R. David Prentice Hall

Ch 7-36

Reengineering
Also called
Process management Process innovation Process redesign

Fred R. David Prentice Hall

Ch 7-37

Reengineering
Reengineering

Concerned more with employee and customer well-being than shareholder well-being

Fred R. David Prentice Hall

Ch 7-38

Linking Performance and Pay to Strategies

Most companies practicing pay-forperformance

Fred R. David Prentice Hall

Ch 7-39

Linking Performance and Pay to Strategies

Dual bonus system becoming more common
Based on both annual objectives and long-term objectives

Profit Sharing
Incentive compensation used by 30% of companies

Gain Sharing
Performance targets set for employees or departments
Ch 7-40

Fred R. David Prentice Hall

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?

Fred R. David Prentice Hall Ch 7-41

Managing Resistance to Change

Change raises anxiety over fear of:
Economic loss Inconvenience Uncertainty Break in status-quo

Fred R. David Prentice Hall

Ch 7-42

Managing Resistance to Change

Resistance to change
Single greatest threat to successful strategy implementation

Fred R. David Prentice Hall

Ch 7-43

Change Strategies

Force Change Strategy Educative Change Strategy Rational or Self-Interest Change Strategy

Fred R. David Prentice Hall

Ch 7-44

Managing the Natural Environment

Wide appreciation for firms that conduct operations that mend rather than harm the environment.

Fred R. David Prentice Hall

Ch 7-45

Creating a Strategy-Supportive Culture

Strategists should strive to preserve, emphasize, and build upon aspects of existing culture that support new strategies.

Fred R. David Prentice Hall

Ch 7-46

Creating a Strategy-Supportive Culture

Elements linking culture to strategy:
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Formal statements of philosophy, charters, etc. used for recruitment and selection, and 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 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
Ch 7-47

Fred R. David Prentice Hall

Production/Operations Concerns

Production processes typically constitute more than 70% of firms total assets Decisions on:
Plant size Inventory/inventory control Quality control Cost control Technological innovation
Fred R. David Prentice Hall Ch 7-48

Human Resource Concerns

Assessing staffing needs and costs Develop performance incentives ESOPs Child-care policies Work-life balance

Fred R. David Prentice Hall

Ch 7-49

Key Terms

Annual objectives Avoidance Benchmarking Bonus system Conflict Confrontation Culture Defusion Delayering
Fred R. David Prentice Hall Ch 7-50

Key Terms

Decentralized structure Divisional structure Downsizing Educative change strategy Employee Stock Ownership Plan (ESOP)

Fred R. David Prentice Hall

Ch 7-51

Key Terms

Establishing annual objectives Force change strategy Functional structure Gain sharing Horizontal consistency of objectives Just in time Matrix structure Policy Profit sharing
Fred R. David Prentice Hall Ch 7-52

Key Terms

Rational change strategy Reengineering Resistance to change Resource allocation Restructuring Rightsizing Self-interest change Triangulation Vertical consistency of objectives
Fred R. David Prentice Hall Ch 7-53