Behavioural Implementation

Overview
 Role of various stakeholders in strategic management
 Contribution of strategic management to corporate
governance
 Review task, styles and roles of strategic leaders
 Constituents of corporate culture and its impact on
corporate life
 Relationship of corporate culture and strategy of an
organisation
 Understanding of how corporate politics and use of
power can be made use of in strategic management
of an organisation
 Social responsibility and social responsiveness.
Stakeholder

 Individuals and groups who can affect and

are affected by ,the strategic outcomes
achieved and who have enforceable claims
on a firms performance
Strategic Behaviour
 Behaviour of strategist (individual as well as
in groups) crucial for guiding the organisation.
 Individuals and groups implement strategy
and drive an organisation to its objectives
 Leadership style, personal ethics and political
behaviour as well as social responsibility are
important aspects.
 Stakeholders affect, are affected and support
the effective strategic management as also
withhold participation
Stakeholders and Strategic Management

 Stakeholders relationship Management

 Stakeholder’s Analysis
 Enagagement Tactics for stakeholders
 Contributors/
External Stakeholders Support

Customers
Suppliers
Internal
Govt.Regulators
Stakeholders
Bank Creditors
Trade Unions Organisation Shareholders
Employers’Union
Employees
Mass Media
Managers
NGO’s Activities
Directors
Local Communities
General Public
Meet Expectations
Honour claims

ORGANISATION STAKE HOLDER RELATIONSHIP

Relationship Management
 Two way mutually supporting and contributory
relationship to meet diverse expectations and
claims (monetary and non monetary)
 All stakeholders not equally important
 Also interests expectations and claims vary over
time
 Stakeholder’s analysis to determine the relative
importance of stakeholders so that appropriate to
take appropriate engagement tactics to manage
stakeholder- organisation relationship.
Stakeholder’s Analysis

 Identify
 Identify expectations, concerns and interests
 Identify claims they can make on the
organisation
 Identify who are most important for
organisation
 Identify strategic challenges involved in
managing the stakeholder’s relationship.
 Power of Stakeholder Over Strategic Decision

Unknown Little /No Power Moderate Significant

degree of Power
power
Effect of Unknown

Strategy Little or No
Effect
On the Moderate
Effect
Stakeholder Significant
Effect
Stake Holder Engagement
 Direct and indirect support in organisational
affairs, participation in strategy formulation,
implementation and evaluation.
 If organisation doing well, challenge is
lessened
 If average returns, capability and flexibility
reduced – aim to satisfy each stakeholder
minimally or prioritise and engage more
important ones.
 If not doing well – attempt to minimise losses
Engagement Tactics
 Specific departments and personnel - corporate
communications or PR.
 Range of activities to disseminate information –
website, newsletters, posters, public events,
exhibitions, seminars, conferences
 Use Relationship management software for
complexities and taking decisions e.g WIPRO doctor
patient relationship software for health care
organisations.
 Open ,honest and transparent communication,
building trust and cooperation essential for success
– no tall claims on PR exercise or websites
Role of Top Management
 Case of Dhirubhai Ambani and involvement of
small shareholders – addressing in open stadia reps
of 1.8 million shareholders –resulted in capability to
raise funds at low cost
 NGO’s –stakeholder management is crucial as
funding and grants from external sources are crucial
and hence relationship with donors based on trust
and transparency.
 Generating trust by open communications,
participation and feed back as also effective project
implementation
Corporate Governance
 Deals with the management of relationships
between the Directors, managers, and other
stakeholders of the organisation.
 Two different perspectives – Agency and
Stewardship Theory
 Corporate governance is related to all
aspects of strategic management including
determination of strategic intent, strategy
formulation, strategy implementation and
strategy evaluation
Agency Theory
 Agency Theory – delegating decision making
authority by the Principals (Investors /owners
/shareholders) to another (agent) is called Agency
Theory. Owners provide risk capital to agents and
delegate the authority to manage that capital.
 If managers do not act in the interest of owners
,conflict of interest can arise called agency problem.
 Assumes managers to be self centered and
irresponsible to act against the interest of owners
Stewardship Theory
 Takes a positive view of managers,
considering them as stewards whose
interests are aligned with that of the owners
 Managers identity with their organisation and
derive satisfaction from behaviours that
support the organisational interests rather
than their own
 In contrast to agency theory, proposes
corporate governance mechanisms that
support and empower managers behaviours
Corporate Governance

 Involves a set of relationships amongst the

company’s management, its board of
directors ,shareholders and other
stakeholders
Corporate Governance

 These relationships, involving various roles

and incentives, provide the structure through
which the objectives of the company are set
and the means of attaining those objectives
and monitoring performance are determined.
Corporate Governance

 The extent to which companies are run in an

open and honest manner
Key Aspects

 Transparency of corporate structures and

operations
 Accountability of managers and boards to
shareholders
 Corporate responsibility towards
employees ,creditors, suppliers and local
communities
Measuring

 ICRA (Investment Information and Credit

Rating Agency ) provides ratings on
corporate governance of Indian Companies
 BSE is planning to introduce a corporate
governance index
Ratings

 Shareholding structures
 Executive management processes
 Stakeholder relationship
 Transparency
 Disclosures
 Financial Discipline
Mechanisms for Good Corporate
Governance
 Effective board of directors
 Fostering transparency through disclosure of
financial and operational information
 Framing a code of governance and
committing the organisation to its
implementation
 Designing sound internal control systems
Corporate Governance –Best
Practices
 Instituting effective auditing and evaluation
systems within organisations
 Proper risk management procedures
 Encouraging whistle blowing policies within
organisations.
 Designing fair compensations policies for
managers.
Steps to Improve
 Rahul Bajaj Committee 1997
 Kumarmanagalam Committee 1999
 Naresh Chandra Committee on Corporate Audit and
Governance (2002)
 Narayan Murthy SEBI Committee on Corporate
Governance
 National Foundation for Corporate Governance
(NFCG) – set up Min of Company Affairs in
partnership with CII and ICSI and ICAI
Other Issues

 Not only a corporate matter

 Other stakeholder have a role to play
 Govt –Policies and procedures for ethical
bahaviour
 Shareholders – conscious of rights and
responsibilities
 Mass media –report issues of general interest
to the public.
Corporate Governance and Strategy

 Clear link to stakeholder and strategic

management
 Link between owners/stakeholders, directors
on the board and the managers
 Behaviour of the three towards each others
as well as to the affairs of the organisation.
Linkages –Strategy and Corporate
Governance
 Strategic Intent – There should be mutual
understanding and compromise on the
Vision, mission (aspiration and purpose) ,
business definition, biz model and objectives
between the stakeholders, directors and
managers.
 Differing perception of the future can lead to
difficulties
Corporate Governance and Strategy
Formulation
 Decision on specific corporate and business
strategies is responsibility of top
management. Reconcile conflicting goals
 Follow guidance of Board of Directors as well
as keep strategies and objectives in mind.
 Strategies should reflect shareholders desire
for higher returns whereas managers would
like greater say in decision making, job
satisfaction, stable employment environment.
Strategy Implementation and Corporate
Governance
 Under the control of managers
 Board cannot directly intervene in
implementation
 Level of success determined by successful
implementation
 Thus there can be deviation in
implementation from strategy formulation
 Corporate Governance has to have
mechanism to ensure this does not occur.
Strategy Evaluation and Corporate
Governance
 Shareholders and directors have direct role
in evaluating effectiveness
 Use of operational and strategic controls
 Organisation objectives are achieved is
measured by results
 Annual performance reporting helps
shareholders evaluate performance
 Board of Directors continually evaluate,
monitor and review performance.
Role of Board of Directors
 Ultimate legal authority accountable to all
 Appointment – owners- shareholders,
controlling agencies, government, holding
company or parent company
 Provide guidance and directives for
managers
 Exercise authority as per memorandum and
articles of association of the organisation. In
accordance with Companies Act 1956 and
follow the policies of the organisation
Committees

 Can appoint committees and delegate

authority to take decisions –
 audit,
 renumeration,
 nomination,
 grievance - shareholder’s and investors,
 ethics and compliance and
 risk management
Boards Role

 Determine Co’s purpose and ethics

 Decide the direction and strategy
 Plan
 Monitor and control managers and the CEO
 Report and make recommendations to
shareholders
 Role vary with nature of co ownership- public,
private, family managed ,family owned
Major tasks

 Direction
 Technical collaborations
 New product development
 Senior management appointments
 Review and screen executive decisions in the
light of the environmental, business and
organisational implications
 Link between environment and organisation
Strategic Leaders

 Provide leadership to achieve objectives

 Run the strategic management process at
corporate (CEOs,MDs, EDs,President
COO,CFOs,CIO)business(GMs,VPs)
functional(mktg Mgr,Operational manager)
and operational levels(deputy
manager/Assistant manager)
 Leadership of Organisation rather than
leadership in organisation
Tasks

 Determining strategic Direction

 Effectively managing the Organisational
Resource Portfolio
 Sustaining an Effective Organisational
Culture
 Emphasising Ethical practices
 Establishing Balanced Organisational
Controls
Style

 Consistent with competencies required

 Characteristics of leader will decide the way
to make change and the type of change
 Personality characteristics of leaders linked
to business outcomes –innovativeness leads
to differentiation
 Personality and background cause
implementation actions
Managing Change

 Match type of change to strategy –larger

change chose unilateral and small change –
participative implementation.
 Strategic changes are transformational (big)
– redesign organisational structure,
redesigning systems and processes and
changing culture Use top down method to
start and build support by participative styles.
Style

 Indian leadership more nurturant-task

oriented (concern for task and for
subordinates) or entreprenuerial style than
participative
 Contingency approach dictated by
environment
 Cultural /national context
 Consultative with limited participation
Key Provisions
 Companies Act 1956
 Securities Contract (Regulations) Act, 1956
 Securities Contracts (Regulation) Amendment Act
2007.
 Securities and Exchange Board of India Act 1992
 Depositories Act, 1996.
 Listing Agreement with stock exchanges –rules
,processes and disclosures for companies to remain
listed – Clause 49 (corporate governance practices
that listed co must follow)
Board of Directors

 Highest body in an organisation responsible

for corporate governance.
 Directors play a strategic role of directing
,guiding, approving and reviewing strategic
decisions made by be the strategic leaders of
an organisation
Role of CEO

 Chief architect of organisation - mission

vision goals and objectives, purpose,
strategist or planner, implementation
 Organisation leader, organiser, organisation
builder
 Chief Administrator,implementor or
coordinator
 Communicator of organisational
purpose,motivator,personal leader or mentor
Role of CEO

 Time management
 Personal qualities and style
 Communication styles
 Demographic characteristics
 EI
 Managerial values
 Managerial styles
 Environment in which operating
Strategic leaders
 Responsible for the strategic management of an
organsation.
 Operate at corporate, business, functional and
operational levels
 Task include strategic direction, effectively
managing the organisational resources portfolio,
sustaining an effective organisational culture,
employing ethical practices and establishing
balanced organisational controls.
 CEO’s ,senior managers, business level executives
and operational managers play different roles in
strategic management
Roles
 Senior Managers -
 Below Chief executive are functional or profit centre
heads involved in strategic management.
 Sometimes can act as Directors for their function on
rotational basis
 Serve on top level committees
 Project management – modernisation, technology
up gradation, plan implementation
 Assist Board and CEO in formulation,
implementation and evaluation of strategy
 Made more effective through committees, task
forces, work groups and think tanks
Business Level Executives

 Profit Centre heads or divisional heads are

Chief Executives of their specific business
unit
 Based on practice concept adapted to suit
traditions, shared facilities, distribution
channels and manpower constriants
 Maintains coordination with other SBUs.
 Formulate and implement business level
strategy
Functional level and Operational Level
Managers
 Are the primary method of evolving departmental
and operational plans and implement the decisions
taken at the corporate and business levels.
 Implement functional and operational strategies
 Help in idea formulation, development of strategic
alternatives, refinement of business functional and
development plans, target setting at departmental
levels.
 Are the reservoirs of talent and expertise.
Developing Strategic leaders
 Choice of Future Strategists – Govt. (Central Services) /Non
Govt. (Tata Administrative Service). Selection by strategic
leaders from subordinates informal and giving responsibilities.
Also done by systematic career planning. Alternatives are Hire
laterally, succession planning and combination approaches of
the two.
 Present challenges,
 exposure to quality thinking,
 scope for intellectual development and
 provide empowerment
 Leadership training institute
 Executive Assistant to CEO
 Courses in Mgt Institute like IIMs
 Succession Planning –contingency plans to replace top leaders
Strategy and Style

 Chosen strategy has a significant impact on

the leadership style and strategists have to
adopt their style to suit the requirements of a
particular strategy.
 Development of strategists is responsibility of
top management and they do it through
exercising a choice of strategists and their
career planning and development and
succession planning.
Corporate Culture

 Composed of beliefs (assumptions of reality) and

values (assumptions about ideals) that are
desirable that the members of an organisation
share in common.
 Impact corporate strategy implementation and
culture should be strategy supportive.
 By relating strategy to culture a strategist can
evolve a meaningful approach to creating a good
strategy culture –fit
 Opposes or supports change
Impact
 Culture affects not only the way managers behave
within an organisation but also the decisions they
make about the organisation’s relationship with its
environment and its strategy”.
 Facilitates communication, decision making and
control as well as create cooperation and
commitment
 Strong -Explicit set of principles and values
communicated to employees which should be
shared widely.
Weak Culture
 Weakness – If sub cultures exist within, or few
values and behavioural norms are shared and
traditions are rare.
 Low sense of commitment, loyalty and identity
 Politicised organisational environment
 Hostility to change
 Promoting bureaucracy vs creativity and
entrepreneurship
 Unwillingness to look outside the organisation for
best practices.
Strong Culture -Reasons

 Founder or influential leader who established

values.
 Sincere and dedicated commitment to
operate the business as per values.
 Genuine concern for the organisation’s
stakeholder’s.
Impact of Culture on Two Different Types of Organisations

Dimensions of Corporate Family Bis and NRI Co MNC Subsidiaries and Prof
Culture Mgd Co

Mgr Skill and Cap Prof Qualif and rank Demo Skills and quality of
know

Performance or results Seniority, conformity to Originality of

achieved values,loyalty,relative fit of action,thinking
behav and posn ,innovation,update of skills
and knowledge
Managerial Style of plg/dec Info gathering,beaurocratic Selective info use ,intuitive
mkg mode,risk aversion and quantitative decision
making
Management Systems Relaince on business Elegant sophisticated and
Adopted sense and no frills systems rational systems
for quick action
Management Control Verbal reporting and Comprehensive and
remedial action written reporting and
rationalisation of failures
Behaviour and Attitude

 Behaviour – the way one conducts oneself,

way one reacts in a specified way, treatment
of others, moral conduct. Theory is that
behaviour is determined by conditioning
rather than by thought or feelings.
 Attitude- a settled opinion or way of thinking
and the behaviour reflecting this.
Composition of Corporate Culture

 Shared things
 Shared sayings
 Shared actions
 Shared feelings
Strategy Culture relationship

 Gives capability and acts as a source of

sustainable competitive advantage
 Strategic options can be limited by culture
 Defines the boundary of the organisation
facilitating individual interaction
 Limiting the scope of information processing
to appropriate levels
Strategy Implementation -Culture

 Widely shared relationships and strongly held

values enable managers to predict employee
reactions to certain strategic alternatives so
unintended consequences can be minimised.
 Managerial behaviour can facilitate or
obstruct the smooth implementation of
strategy.
 Creation of a strategy supportive culture is
the role of strategic leadership
Strategy Supportive Culture Fit
 Ignore corporate culture – not possible to
change it
 Adapt strategy implementation to suit
corporate culture –structure systems
processes adapted
 Change corporate culture to suit the strategic
requirements –manage cultural transitions by
assessing risks and removing roadblocks
 Change strategy to fit the corporate culture –
while formulating strategy itself
Power and Politics
 Use of politics and power in a positive sense is
helpful in strategy implementation.
 Strategists should understand corporate politics and
how power should be used for facilitating strategy
implementation.
 Affect a number of elements in the strategic
management process.
 Strategy implementation requires consensus
building ,managing coalitions and creating
commitment.
 Needs conflict resolution and balancing of interests.
Power and Politics
 Organisation must pull apart before it can pull
together again
 Strategists need to know when to use power and
politics to get things done and when to shun politics
and use of power to maintain harmony.
 Power and politics affects the way strategy is
implemented e.g vision and mission affected by
formation of groups and coalitions influencing
direction.
 Strategy Implementation -
Corporate Politics
 Carrying out of activities not prescribed by policies
for the purpose of influencing the distribution of
advantages within the organisation
 Power derived by managers within an organisation
from –reward/ coercive, legitimate/referant/expert
power
 Nature and structure lead to conflicts, coalitions,
drives and ambitions among people.
 Jockeying for power due to pyramid structure
Corporate Politics

 Negative –domination, manipulation and

subjugation. Self serving , deceptive and
dishonest for achieving personal or group
interests leading to conflict and disharmony
Behavioural Implementation
 Personal values and business ethics seek to
prevent an indiscriminate use of power
politics within organisation.
 Moral component that is often realised but it
is found difficult to operationalise.
 All managerial and strategic decisions are
ultimately subjective so purity of mind is
important so that subjectivity is not allowed
to harm the strategic interests if the
organisation.
Business Ethics Integrate Core Values

 Honesty
 Trust
 Respect
 Integrity
 Fairness
 Codes of conduct
Values and Ethics in Indian Context
(Prof S K Chakraborty IIM C)
 Ancient texts of Hinduism give insights into
managerial effectiveness.
 Education vs training
 Values vs skills
 Principles vs policies
 Wisdom vs knowledge
 Seven psycho –philosophical thoughts
 Model of Managerial Effectiveness
(Psycho- Philosophical Thoughts)
 Concept of self and reality
 Disidentification
 Theory of Gunas
 Theory of Samskaras
 Doctrine of Karma
 Theory and method of work
 Giving model of motivation
Values and Ethics- Indian Thoughts
 Concept of man embrace spiritual dimension beyond
the physical ,social and economic dimension
 Creative energies are derived for Supreme creative
Intelligence
 Managerial decision making requires interplay of both
analytic and holistic faculties
 Final resolution of managerial conflicts lies in the de
egoistaion of the self
 Key to cooperation and team work lies in realising that
the same atman dwells in all
Values and Ethics –Indian Thought
 Quality of managerial decision making and skills can
be improved through an understanding and
internalisation of the law of karma
 Motivational strategies need to be based on the
giving model rather than the needing model of man
 Ability for developing effective leadership styles
requires and understanding of te three qualities of
man - satwa(self righteousness), rajas(selfishness0
and tamas (laziness)
 All managerial decisions are subjective in the
ultimate analysis and the effectiveness of such
decsions depends critically on the purity of mind of
the decsion maker
CSR
 Possible to modify and reconcile divergent
personal values of dominant stakeholders within
organisations.
 Social responsibility is a contentious issue.
 For
 Against
 Creating consistency of between economic goals
and social performance
 Business opinion is gradual acceptance of social
responsibility due to combination of internal and
external
CSR

 Define scope
 Align social responsibility to process of
strategic management
 Social responsiveness is to be interlinked to
all phases of strategic management.