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

Ch 7-1

Chapter Outline
The nature of Strategy Implementation
Annual Objectives
Policies
Resource Allocation
Fred R. David

Ch 7-2

Chapter Outline
Managing Conflict
Matching Structure with Strategy
Restructuring, Reengineering, and EEngineering
Linking Performance and Pay to Strategies
Fred R. David

Ch 7-3

Chapter Outline
Managing Resistance to Change
Managing the Natural Environment
Creating a Strategy-Supportive Culture

Fred R. David

Ch 7-4

Chapter Outline
Production/Operations Concerns
When Implementing Strategies
Human Resource Concerns When
Implementing Strategies
Fred R. David

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

Ch 7-6

Implementing Strategies:
Strategy
Analysis
&
Choice
Management Issues
Contrasting strategy formulation and
strategy implementation
Formulation is positioning forces before the action
Implementation is managing forces during the action

Fred R. David

Ch 7-7

Implementing Strategies:
Strategy
Analysis
&
Choice
Management Issues
Contrasting strategy formulation and
strategy implementation
Formulation focuses on effectiveness
Implementation focuses on efficiency

Fred R. David

Ch 7-8

Implementing Strategies:
Strategy
Analysis
&
Choice
Management Issues
Contrasting strategy formulation and
strategy implementation
Formulation is primarily an intellectual process
Implementation is primarily an operational process

Fred R. David

Ch 7-9

Implementing Strategies:
Strategy
Analysis
&
Choice
Management Issues
Contrasting strategy formulation and
strategy implementation
Formulation requires good intuitive and analytical
skills
Implementation requires special motivation and
leadership skills
Fred R. David

Ch 7-10

Implementing Strategies:
Strategy
Analysis
&
Choice
Management Issues
Contrasting strategy formulation and
strategy implementation
Formulation requires coordination among a few
individuals
Implementation requires coordination among many
persons
Fred R. David

Ch 7-11

Implementing Strategies:
Strategy
Analysis
&
Choice
Management Issues
Strategy implementation
Varies among different types and sizes
of organizations

Fred R. David

Ch 7-12

Implementing Strategies:
Strategy
Analysis
&
Choice
Management Issues
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

Ch 7-13

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

Fred R. David

Ch 7-14

Management Issues

Annual Objectives
Policies
Resources

Management
Issues

Organizational structure
Restructuring
Rewards/Incentives

Fred R. David

Ch 7-15

Management Issues (continued)

Resistance to Change
Managers & strategy
Supportive culture

Management
Issues

Production/operations
Human resources
Downsizing

Fred R. David

Ch 7-16

Annual Objectives

Decentralized activity
Involves all managers in the firm

Fred R. David

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

Ch 7-18

Annual Objectives

Horizontal consistency of objectives

Vertical consistency of objectives

Fred R. David

Ch 7-19

Annual Objectives
Objectives should state

Quantity
Quality
Cost
Time

Fred R. David

Ch 7-20

Policies

Policies facilitate solving recurring

problems and guide the implementation
of strategy

Fred R. David

Ch 7-21

Policies
Policies set
Boundaries
Constraints
limits

Fred R. David

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

Ch 7-23

Resource Allocation
Resource Allocation
A central management activity that allows
for strategy execution

Fred R. David

Ch 7-24

Resource Allocation
Four types of resources
1.
2.
3.
4.

Financial resources
Physical resources
Human resources
Technological resources

Fred R. David

Ch 7-25

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

Fred R. David

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

Ch 7-27

Managing Conflict
Conflict Management and Resolution
Avoidance
Defusion
Confrontation

Fred R. David

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

Ch 7-29

Chandlers Strategy-Structure
Relationship
New strategy
Is formulated

Organizational
performance
improves

New administrative
problems emerge

Organizational
performance
declines

New organizational
structure is established

Fred R. David

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

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
Fred R. David

Ch 7-32

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

Fred R. David

Ch 7-33

Restructuring
Also called
Downsizing
Rightsizing
Delayering

Fred R. David

Ch 7-34

Restructuring

Employed when ratios out of line with

benchmarked competitors

Primary benefit sought is cost reduction

Fred R. David

Ch 7-35

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

Fred R. David

Ch 7-36

Reengineering
Also called
Process management
Process innovation
Process redesign

Fred R. David

Ch 7-37

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

Fred R. David

Ch 7-38

Linking Performance and Pay

to Strategies

Most companies practicing pay-forperformance

Fred R. David

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
Fred R. David

Ch 7-40

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

Ch 7-41

Managing Resistance to Change

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

Fred R. David

Ch 7-42

Managing Resistance to Change

Resistance to change
Single greatest threat to successful strategy
implementation

Fred R. David

Ch 7-43

Change Strategies

Force Change Strategy

Educative Change Strategy
Rational or Self-Interest Change Strategy

Fred R. David

Ch 7-44

Managing the Natural

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

Fred R. David

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

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
Fred R. David

Ch 7-47

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

Ch 7-48

Human Resource Concerns

Assessing staffing needs and costs

Develop performance incentives
ESOPs
Child-care policies
Work-life balance

Fred R. David

Ch 7-49

Key Terms

Annual objectives
Avoidance
Benchmarking
Bonus system
Conflict
Confrontation
Culture
Defusion
Delayering
Fred R. David

Ch 7-50

Key Terms

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

Fred R. David

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

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

Ch 7-53