Module III Chapter:6

Planning-ii) Strategy Implementation

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Learning Objectives: 1.Explain the key aspects of strategy implementation and its relationship to strategic planning. 2.Describe the Chandlers thesis concerning the growth and development of an organization strategy and structure. 3. List the seven factors in the Seven-S model and explain how they interact in strategy implementation.
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4.Explain the concept of institutionalizing strategy. 5. Distinguish between the two basic types of operational plans. 6. Explain the concept of management by exception and describe its essential elements.

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1. What is strategy implementation? This is basically administrative tasks needed to put strategy in to practice. 2. Dimensions/Elements of strategy implementation: 1. Successful strategy implementation depends in part on the organization structure.
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2.The strategy must be institutionalized. 3. The strategy must be operationalized. 3. Role of TQM in strategic implementation: The total quality management (TQM) program offers strategic change in the three elements of strategic implementation.

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A successful TQM program may change the structure of an organization through conversion to a more team-oriented, worker empowered approach. This form of strategy implementation is far from easy. Two-thirds of all quality improvement programs fail because organizations do not adequately understand the process.
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4.Some thoughts on Strategy implementation: 1.Matching structure and strategy: Successful implementation depends in part on how the organization activities are divided, organized and coordinated-in short on the structure of the organization. The chances that an organization strategy will succeed are far greater when its structure matches its strategy. As its basic strategy changes over time, so must its structure.
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Chandlers thesis: Alfred Chandler examined the growth of development of 70 of the largest businesses in USA and observed a common pattern in their development. According to Chandler, Organizations passes through three stages of development, moving from a unit structure, to a functional structure, and then to a multidivisional structure. At first, the organizations are small. There is a single location, a single product and a single entrepreneurial decision maker.
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As an organization grows, increased volume and additional locations create new challenges. The Organization then becomes a unit firm, with several field units and an administrative office to handle coordination, specialization and standardization among the units. At the Second stage, organization moves to vertical integration. Vertical integration is the stage of broadening the scope of an organizations operations by buying a supplier or distributor that will contribute to efficient production of primary product or service offerings.

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Vertical integration creates new problems in moving goods and materials through the organizations various functions. Therefore, the organization evolves in to a functional organization, with finance, marketing, production and other subdivisions and formalized budgeting and planning systems.
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Functional organization is a form of departmentalization in which everyone engaged in one functional activity, such as marketing or finance, is grouped into one unit. At the third stage, an organization expands into different industries and diversifies its products. This poses a significant new challenge: selecting products and industries in which to invest the organizations capital. The result is multidivisional firms, which operates as collection of smaller businesses.
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Chandler observed that transition from one structure to another was often delayed and painful. He concluded that organizations do not readily change structure because their entrepreneurial founders excel at strategy but are generally neither interested in nor knowledgeable about organizational structure. Indeed, when organization is finally restructured, the entrepreneur often leaves.
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Chandlers thesis remains a topic for active research. Some critics have argued that he reversed the relationship between strategy and structure. Regardless of final verdict on Chandlers thesis, it is impossible to understand an organizations strategy without examining its structure. One model for organizational effectiveness further analyses interacting factors in strategy implementation known as The Seven S Model.
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The Seven-S-Model: The Consulting Firm of MCKinsey & Co has proposed the Seven-S-Model for successful strategy implementation. According to them, neglecting any one of seven factors could make the effort to change a slow, painful and even a doomed process.
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Each of these factors is equally important and interacts with other factors. Any number of circumstances may dictate which of these factors will be driving force in the execution of any particular strategy. These seven factors of Strategy implementation are as follows: 1.Structure:The Seven- S Model adds a contemporary perspective to the problem of Organizational structure.
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2. Strategy: The Seven-S-model emphasizes that, in practice, the development of strategies poses less a problem than their execution. 3. Systems: This Category consists of all the formal and informal procedures that allow organization to function, including capital budgeting, training and accounting systems.
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4.Style: Style refers not to personality, but to pattern of substantive and symbolic actions undertaken by top managers. It communicates priorities more clearly than words alone, and may profoundly influence performance. 5.Staff: Successful organizations view people as valuable resources who should be carefully nurtured, developed, guarded, and allocated.
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6.Skills: The term skills refers to those activities organizations do best and for which they are known. 7. Subordinate Goals: This refers to guiding concepts, values and aspirations that unite an organization in some common purpose. Subordinate goals are often captured in a mission statement, but they can also be phrased as a simple slogan.
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2.Institutionalizing Strategy: An Institution is collection of values, norms, roles and groups that develops to accomplish a certain goal. To institutionalize a business strategy, business leaders must also develop a system of values, norms, roles and goals that will support accomplishment of strategic goals.
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Strategy is institutionalized if it is connected to the culture, the quality system, and the other driving forces in the organization. The factors that contribute to successful strategy implementation are as follows: 1. Total Quality Management: 2. The Role of the Chief Executive Officer-CEO: 3. Culture: When an Organization culture is consistent with its strategy, the implementation of strategy is eased considerably.
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The concept of adaptable cultures by Kotter and Hesketh is an attempt to build organization culture on a foundation of paying attention to Key stakeholders such as employees, customers and stockholders, thus ensuring that culture can change when the organizations strategy must change.
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3.Operationalizing Strategy: Strategies set the general goal and course of action for organizations. Operational plans provide details needed to incorporate strategic plans into the organizations day-to-day operations. Operational plans fall into two general classes:
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1.Single-use Plans: are detailed course of action used once or occasionally to solve a problem that does not occur repeatedly. The followings are Single-use Plans: -Program: A single-use plan that covers a relatively large set of organizational activities and specifies major steps, their order and timing, and the unit responsible for each step.
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- Project: The smaller and separate portions of the programs. - Budgets: Formal quantitative statements of the resources allocated to specific programs or projects for a given period. Budgets are important components of programs and projects.

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2.Standing Plans: are established set of decisions used by managers to deal with recurring or organizational activities, major types are policies, procedures and rules. Policy: A standing plan that establishes general guidelines for decision making. Rules: Standing Plans that detail specific actions to be taken in a given situation.
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Procedure: A standing plan that contains detailed guidelines for handling organizational actions that occur regularly. Using Procedures to Implementation: Policies and Procedures are powerful tools for implementing strategy and gaining greater commitment from employees. Procedures for setting annual objectives, management by objectives and reward systems are brought out below:
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1.Annual Objectives : Identify precisely what must be accomplished each year in order to achieve an organizations strategic goals. Annual objectives clarify managers roles in the implementation of an organization strategy. Well designed annual objectives are clearly linked to the organizations long term goals and they are measurable. It is important that they quantify performance. In some areas like production, this kind of measurement is possible. In areas like public relations, it is difficult to create quantitative standards for public relations.
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2.Management by Objectives (MBO): This approach is proposed by Peter Drucker in his book The Practice of Management. MBO refers to a formal set of procedures that begins with goal setting and continues through performance review. The heart of MBO is the objectives, which spell out individual actions needed to fulfill units functional strategy and annual objectives.
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A key to MBO is the insistence on active involvement of managers and staff members at every organizational level. Elements of MBO System: Most effective MBO program share the following six elements: 1.Commitment to the program. 2. Top-level goal setting. 3. Individual goals. 4. Participation.
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5.Autonomy in implementation of plans. 6. Performance Review. Evaluation of MBO: The success of MBO program depends upon three key concepts- Specific goal setting, feedback on performance and participation. 3.Reward Systems: Rewards and incentives contribute to strategy implementation by shaping individual and group behavior.
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In setting up an incentive plan, organization is faced with series of choices: - Should bonuses be in cash or stock? - Current or deferred? - How will performance be measured? - How much discretion will managers have in awarding bonuses? - How large bonuses will be? The idea is to tailor the program to organizations objectives.
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Any Questions? Thank you

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