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Bequilla, El Frances

Lucman, Anna Reham


Reponte, Jay Mark
Torayno, Angela

Strategy Implementation
The strategic management process does not end up upon deciding what strategy or strategies to use. There must be a
translation of strategic thoughts into strategic actions. This translation process would be much easier if the managers and
the employees of the organization:

1. Understand the business


2. Feel a part of the company or organization
3. Because they are involved in the formulation of strategies (strategic formulation) they have become committed
to helping the organization succeed.

There must therefore be understanding and commitment. Implementation of strategies affects an organization from top to
bottom. It involves all functional and divisional areas of the organization.

Even the most technically perfect strategic plan serve little purpose if it is not implemented

A technically imperfect plan that is well implemented will achieve more than a perfect plan that never gets off the
paper on which it is planned.

This means that no matter how perfect strategies are being planned or formulated, if they are not implemented well, then
these strategies serve little purpose or have no meaning. Many organizations spend a lot of money, energy and time trying
to develop strategies, and only think of the means and circumstances of implementing these strategies as afterthoughts.

Change comes from implementation, not through the plan.

Nature of strategy implementation

Successful strategy formulation does not guarantee successful strategy implementation

It is easier to say something (strategy formulation) than to do it (strategy implementation). Strategy formulation and
strategy implementation are fundamentally different and they can be contrasted as follows:

Strategy formulation Strategy implementation


Involves positioning the forces before the action Involves managing the forces during the action
Focuses on effectiveness Focuses on efficiency
Primarily an intellectual process Primarily an operational process
Requires good intuitive and analytical thinking Requires special motivation and leadership skills
Requires coordination among few individuals Requires coordination among many individuals

Strategy formulation concepts are the same for all types of organizations, whether they are small, large, profit or non-profit
organizations. However, strategy implementation varies or differs substantially among different types and sizes of
organizations. Activities under the strategy implementation such as the ff:

1. Altering sales territories 6. Developing financial budgets


2. Adding new departments 7. Developing new employee benefits
3. Closing facilities 8. Establishing cost-control procedures
4. Hiring new employees 9. Changing advertising strategies
5. Changing an organizations pricing strategy 10. Transferring managers among divisions
11. Building new facilities 13. Building a better management information
12. Transfer new employees system (MIS)

Obviously, these activities differ among manufacturing, service or governmental organizations.

Management perspectives

Usually for small organizations, the people who formulates the strategies are also the same ones that implement the same
strategies. However, for many companies that arent small organizations, the transition from strategy formulation to
strategy implementation requires the shifting of responsibilities from the strategists (who are involved in the formulation
process) to the divisional and functional managers (who are primarily responsible for the implementation process). This
shifting of responsibilities usually causes many problems to arise, especially if the decisions made during the formulation
process comes as a surprise to the middle or lower level managers.

Managers and employees are motivated more by perceived self-interest than by organizational interest, unless the
two coincide.

This means that managers and employees are more inclined in achieving their own objectives for their own interests rather
than for the interest of the organization, unless their interest and that of the organization are aligned. This is the reason
why divisional and functional managers must be involved in the strategy formulation process, not just the strategists. In the
same way, the strategists must also be involved in the strategy implementation process as much as possible.

Management changes are necessarily more extensive when strategies to be implemented move a firm in a new
direction.

If the strategists also have genuine personal commitment to the implementation process, then this also motivates the
employees and managers. But most of the times, strategists are too busy to actively support the strategy implementation
process and their lack of interest can be detrimental to the success of the organization.

The rationale for objectives and strategies should be clearly communicated throughout an organization.

The firm should develop competitor focus at all hierarchical levels by gathering and widely distributing
competitive intelligence.
All members of the organization should be well informed about the competitors accomplishments,
products, plans, actions and performance.
Employees should be able to benchmark their efforts against best-in-class competitors so that the challenge
becomes personal.
Major external opportunities and threats should become clear to members of the organization
Managers and employees questions should be answered
There must be top down flow of communication which is essential for bottom up support

Annual Objectives

Establishing annual objectives is a decentralized activity that directly involves all managers in the organization. There must
be active participation in this activity for there to be acceptance and commitment.

Annual objectives are essential for strategy implementation because they:

1. Represent the basis for allocating resources


2. Are a primary mechanism for evaluating managers
3. Are the major instrument for monitoring progress toward achieving long term objectives
4. Establish organizational, divisional and departmental priorities

Considerable time and effort should be devoted to ensure that annual objectives are:
1. Well conceived
2. Consistent with long term objectives
3. Supportive of strategies to be implemented

The purpose of annual objectives can be summarized as follows:

1. They serve as guidelines for action


2. They direct and channel efforts and activities of organization members
3. They provide a source of legitimacy in an organization by justifying activities to the stakeholders
4. They serve as standards of performance
5. They serve as important source of employee motivation and identification
6. They give incentives for managers and employees to perform
7. They provide a basis for organizational design

It is common for annual objectives to be stated in terms of profitability, growth and market share by

Business segment Customer groups


Geographic area Products

Annual objectives can be established based on long term objectives. A hierarchy of annual objectives can also be established
based on an organizations structure.

Objectives should be consistent across hierarchical levels and should form a network of supportive aims

Horizontal consistency of objectives is as important as vertical consistency of objectives.

For example, even if the manufacturing division was able to achieve its objective of producing more units, this would be
useless or not effective if the marketing department would not be able to sell the additional units produced.

Annual objectives should be:

1. Measurable 6. Communicated throughout the organization


2. Consistent 7. Characterized by appropriate time dimension
3. Reasonable 8. Accompanied by commensurate rewards and
4. Challenging sanctions.
5. Clear
Most of the time, objectives are usually stated in generalities, with little operational usefulness.

Objectives should state quantity, quality, cost and time and should also be verifiable.

Annual objectives should be compatible with employees and managers values and should be supported by clearly stated
policies.

More of something is not always better.

For example, improved quality or reduced cost may be more important than quantity.

Accompanied by commensurate rewards and sanctions:

So that the employees and the managers could understand that achieving the objectives is critical or important to a
successful strategy implementation.

Clear annual objectives:

These do not guarantee a successful strategy implementation but they do increase the likelihood that personal and
organizational aims can be achieved. However, managers should be aware that overemphasis of objectives can result to
undesirable conducts of the employees, such as faking the numbers, distorting the records, letting the objectives become
ends in themselves.

Policies

Policies serve as a mechanism for implementing strategies and achieving objectives.

Policies are needed to make a strategy work. Policies refer to the specific guidelines, methods, procedures, rules, forms,
and administrative practices that were established to support and encourage work toward stated goals. On a day to day
basis, policies:

Facilitate in solving recurring problems


They also guide the implementation of strategy.
They set the boundaries, constraints, and limits on the kinds of administrative actions that can be taken to reward
and sanction behavior.
They clarify what can and cannot be done
They let both the employees and the managers know what is expected of them (thus policies increase the likelihood
that strategies will be implemented successfully.)
They provide basis for management control
They allow coordination across organizational units
They reduce the amount of time managers have to spend to make decisions
They clarify what work is to be done and by whom
They promote the delegation of decision making to appropriate managerial levels where various problems arise

Policies can apply to all departments. They can also apply to single department. For example, a department may require
that all of its employees or workers should have at least one training and development course each year.

Policies should be stated in writing as much as possible. Many organizations have policy manuals to guide and direct
behavior.

Resource allocation

- A Central management activity


- Strategic management allows resources to be allocated based on priorities established by the annual objectives
(unlike those without strategic management in which resources are allocated based on political or personal
reasons)
- Types of resources used to achieve desired objectives:
1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources
- Allocation of resources to particular divisions or departments does not necessarily mean that strategies will be
implemented successfully since there are still some factors that prohibit successful implementation of strategies
such as:
1. Overprotection of resources
2. Placing too much emphasis on short run financial criteria
3. Organizational politics
4. Strategy targets that are vague
5. Reluctance to take risks
6. Lack of sufficient knowledge
Effective resource allocation does not guarantee a successful strategy implementation because programs,
personnel, controls and commitment must breathe life into the resources allocated.

Managing conflict

- Often occurs when there is interdependency(when they are dependent on each other) of objectives and the
competition for limited resources
- Unavoidable in organizations, this is why it must be managed and resolved before dysfunctional consequences
affect the organizations performance
- Ways to manage and resolve conflicts:
1. Avoidance
- Ignoring the problem hoping that the conflict will resolve itself
- Physically separating the conflicting individuals or groups
2. Defusion
- Playing down the differences between the conflicting parties while accentuating(make more
noticeable or prominent) similarities and common interests
- Compromising so that there is neither a winner or a loser
- Resorting to a majority rule
- Appealing to higher authorities
- Redesigning present positions
3. Confrontation
- Exchanging the members of the conflicting parties so that each of them can gain an appreciation
of the other partys point of view
- Holding a meeting in which the conflicting parties can present their views and then work through
the differences

Conflict is not always bad.


- This is because an absence of conflict can signal indifference and apathy (lack of interest, enthusiasm or concern).
Conflict rather energizes opposing groups into taking actions and may help managers identify problems
- Disagreement between two or more parties on one or more issues
- Establishing objectives can lead to conflict because:
Individuals have different expectations and perceptions
Schedules create pressure
Personalities are incompatible
Misunderstandings between line managers and staff managers occur (for example, a collection managers
objective to reduce bad debts by 50% may conflict with the divisional objective to increase sales by 20%).

Matching structure with strategy

Structures can shape the choice of strategies

When there are changes in strategies, this usually would require the way an organization is structured to also change for
two reasons:

1. Structures dictate how objectives and policies will be established.


For example, if the organization is organized based on geographic structure, then the objectives and policies are
also established in geographic terms. If the organizations structure is based on product groups, then the objectives
and policies are also stated in terms of products. Because of this, the objectives and policies structural format can
impact all other strategy implementation processes.
2. Structure dictate how resources will be allocated
For example, if the organization is structured based on customer groups, then the resources will also be allocated
based on customer groups. If the organization is structured based on functional business lines, then the resources
will also be allocated based on functional areas.

An organizations structure should be designed to facilitate the strategic pursuit of the organization. It must therefore follow
strategy. If the firm does not have strategies or mission(reason for being or existence), then it would be difficult to design
an effective structure.

There is no one optimal design or structure for a given strategy or type of organization.

What is appropriate for one organization may not be appropriate for a similar firm. However successful firms in a given
industry tend to organize themselves in a similar way. Consumer goods companies tend to be organized in a divisional
structure by product form.

Small firms tend to be functionally structured (centralized). Large firms tend to use strategic business unit (SBU) or matrix
structure. As an organization grows, their structure becomes more complex due to the concatenation or the linking together
of several basic strategies.

No firm could change its structure in response to every external or internal forces affecting it, because to do so would cause
chaos.

However, when an organization changes its strategy, its existing structure may no longer be effective. The following are the
symptoms of ineffective organizational structure:

1. Too many levels of management


2. Too many meetings attended by too many people
3. Too much attention being directed towards solving interdepartmental conflicts
4. Too large span of control
5. Too many unachieved objectives
6. Declining corporate or business performance
7. Losing ground to rival firms
8. Revenue and/or earnings divided by the number of employees and/or number of managers is low compared to rival
firms.

Changes in structure can facilitate the implementation of strategies. However, changes in structure should not create an
expectation that bad strategies will improve, bad managers become good, or bad products will sell solely because of this.

This is why strategies formulated must be workable, because a strategy that would require massive structural changes
would not be an attractive choice. Thus,

Types of organizational structure:

1. Functional structure (centralized)


- Groups tasks and activities by business function, such as
Productions/operations
Marketing
Finance/accounting
Research and development
Management information systems

For example, a university may be structured according to its major functions, such as the academic affairs,
student services, alumni relations, athletics, maintenance, and accounting.
Advantages:

1. Simple and inexpensive


- This is why it is the most widely used structure of all the seven structures
2. Promotes the specialization of labor and capitalizes on the specialization of business activities such as marketing
and finance
3. Encourages efficient use of managerial and technical talent
4. Minimizes the need for an elaborate control system
5. Allows rapid decision making

Disadvantages:

1. It forces accountability to the top


2. Minimizes career development opportunities
3. Sometimes characterized by low employee/manager morale, line/staff conflicts
4. Poor delegation of authority (delegation of authority and responsibility is not encouraged)
5. Inadequate planning for products and markets
6. Leads to short term and narrow thinking that may undermine what is best for the firm as a whole.
- For example, the R&D department may strive to overdesign products and components to achieve technical
elegance, while the manufacturing dept. may argue that low frills products is better since it can be mass
produced easily.
7. Leads to communication problems

Most large companies have abandoned the functional structure in favor of decentralization and improved
accountability.

2. Divisional structure (decentralized structure)


- as organizations grow, it becomes more difficult to manage different products and services in different markets.
This is why it becomes necessary to employ divisional structures to motivate the employees, control the operations,
and compete successfully in diverse locations.
- Functional activities are performed both centrally and in each separate division
Advantages:
1. Accountability is clear
- This means that divisional managers can be held responsible for the sales and profit levels
2. Promotes delegation of authority
- Because divisional structure is based on extensive delegation of authority, both the managers and employees
can easily see the results of their performance. Thus, employee morale is generally higher
3. Creates career development opportunities for managers
4. Allows local control of situations
5. Leads to a competitive climate within an organization
6. Allows new businesses and products to be added easily
7. Allows strict control and attention to products, customers and regions

Disadvantages:

1. Can be costly, because


- Each division requires functional specialists who must be paid
- There is duplication of staff, services, facilities and personnel. (for example, a functional specialist is also needed
centrally or at headquarters to coordinate divisional activities)
- The managers must be well qualified because this structure requires delegation of authority, and better qualified
individuals require higher salaries
- This structure requires an elaborate, headquarters driven control system
2. Duplication of functional activities
3. Requires skilled management forces
4. Requires an elaborate control system
5. Competitions among divisions may become so intense that it is dysfunctional and leads to limited sharing of
ideas and resources for the common good of the firm
6. Some regions/products/customers may receive special treatment, thus making it difficult to maintain consistent,
company-wide practices.

However the disadvantages of this structure is offset by its advantages.

Divisional structure divides. It fragments the companys resources. It also creates vertical communication channels
that insulate (isolate or cut off) business units and thus prevents them from sharing their strengths with one
another. Thus, the whole of the organization becomes less than the sum of its parts. (no synergy)

a. Divisional structure by geographic area


- Appropriate for organizations:
Whose strategies need to be tailored to fit the particular needs and characteristics of customers in
different geographic areas
That have similar branch facilities located in widely dispersed areas
- Allows local participation in decision making and improved coordination within a region
b. Divisional structure by product or services
- Most effective when specific products or services need special emphasis
- Used when the organization offers only a few products or services
- Used when an organizations products or services differ substantially
- Allows strict control over and attention to product lines
- Require more skilled management force and reduced top management control
c. Divisional structure by customer
- Effective when few major customers are of great importance and many different services are provided to these
customers
- Allows organizations to effectively cater to the requirements of clearly defined customer groups
d. Divisional structure by process
- Similar to functional structure, because activities are organized according to the way work is actually
performed. The difference however, is that functional departments are not accountable for profits or revenues,
whereas divisional process departments are evaluated on these criteria
- Each process division would be responsible for generating revenues and profits
3. Strategic business unit (SBU) structure
- It becomes more difficult to control and evaluate the divisional operations of an organization when the number, size,
and diversity of divisions in the organization increase. Increase in sales are often not accompanied by similar increase
in profitability. The span of control becomes too large at the top levels of the firm
- This is why SBU is necessary to facilitate strategy implementation efforts by improving coordination between similar
divisions and channeling accountability to distinct business units
- Groups similar divisions into SBUs according to certain common characteristics, such as:
Competing in the same industry
Being located in the same area
Having the same customers

- delegates authority and responsibility for each SBU to a senior executive who reports directly to the CEO
- makes the tasks of planning and control by the corporate officer more manageable
- disadvantages:
1. it requires additional layer of management which increases salary expenses
2. the role of the group vice president is often ambiguous
4. Matrix structure
- Widely used in many industries, including construction, health care, research and defense
- Most complex because it depends upon both vertical and horizontal flows of authority and communication (thus,
matrix). Functional and divisional structures on the other hand depend primarily on vertical flows of authority and
communication
- The most effective structural form when several variables, such as product, customer, technology, geography,
functional area, and line of business have equal strategic priorities. Thus firms usually are using this structure when
thy pursue strategies that add new products, customer groups, and technology to their range of activities, resulting
to addition of new product managers, functional managers, and geographic managers. All of whom have important
strategic responsibilities
Advantages:
1. Project objectives are clear
2. There are many channels of communication
3. Workers can clearly see the visible results of their work
4. Shutting down a project can be easily accomplished
5. It facilitates the use of specialized personnel, equipment, and facilities
6. Functional resources are shared, rather than duplicated as in a divisional structure
7. Individuals with a high degree of expertise can divide their time as needed among projects, and they in turn
develop their own skills and competencies more than in other structures

Disadvantages:

1. Requires excellent vertical and horizontal flows of communication (a need for extensive and effective
communication system)
2. Results to higher overhead (more costly) because it creates more management positions
3. Dual lines of budget authority (violation of unity-of-command principle)
4. Dual sources of reward and punishment
5. Shared authority
6. Dual reporting channels
7. Requires mutual trust and understanding
- To be effective, there must be
participative planning
clear mutual understanding of roles and responsibilities
excellent internal communication, mutual trust and confidence

Some Dos and Donts in Developing Organizational Charts

Reserve the title CEO for the top executive of the firm
Do not use the title president for the top person, use it for the division top managers if there are divisions within
the firm
Do not use the title president for functional business executives. They should have the title chief, or vice president
or manager or officer such as chief information officer or VP of Human resources.
Do not recommend a dual title(such as CEO and president) for just one executive
Directly below the CEO, it is best to have a COO (chief operating officer) with any division presidents reporting
directly to the COO
On the same level as the COO and also reporting directly to the CEO should be the functional business executives
such as the CFO(Chief Financial officer), VP of Human Resources, CSO(Chief strategy Officer), CIO(Chief Information
Officer), CMO(Chief Marketing Officer), VP pf Research and Development, VP of Legal Affairs, investment relations
officer, MO (maintenance officer), etc.
Controller and treasurer normally report to the CFO
Avoid having a particular person reporting to more than one person in the chain of command, to avoid violating
the unity of command principle (every employee should have just one boss)

Restructuring and Reengineering

Restructuring

- Aka downsizing, rightsizing, or delayering


- Involves reducing the size of the firm in terms of the number of employees, number of divisions or units, and the
number of hierarchical levels in the firms organizational structure
- This reduction in size is intended to improve both efficiency and effectiveness
- concerned primarily with the shareholder well-being rather than the employee well-being
- involves laying off managers and employees
- concerned with eliminating or establishing, shrinking or enlarging, and moving organizational departments and
divisions
- to streamline operations, increase efficiency and compete effectively
- firms often employ this when various ratios (such as headcount-to-sales volume, corporate staff to operating
employees, span of control figures) appear out of line with their competitors as determined through benchmarking
exercises (comparing a firm against the best firms in the industry on a wide variety of performance related criteria)
- primary benefit sought is cost reduction

- Downsides:
can however cause reduced employee commitment, creativity and innovation due to the uncertainty and
trauma associated with the pending and actual employee layoffs

Reengineering
- aka process management, process innovation, or process redesign
- is concerned more with employee and customer well-being, than shareholder well-being
- involve reconfiguring or redesigning work, jobs, and processes for the purpose of improving cost, quality, service
and speed
- One of its benefit is that it allows employees to see more clearly how their particular jobs affect the final product
or service being marketed by the firm.
- However, just like restructuring, this can also raise manager and employee anxiety, which, unless calmed, can lead
to corporate trauma
- does not usually affect the organizational structure or chart
- does not imply job loss or employee lay-offs
- its focus is changing the way work is actually carried out
- its cornerstones are:
decentralization
reciprocal interdependence
information sharing (for example, employees may be given weekly income statement of the firm and
extensive information on other companies performance.)
Restructuring:
concerned with eliminating or establishing, shrinking or enlarging, and moving organizational departments
and divisions
Characterized by strategic decisions ( long term, affecting all business functions)

Reengineering

Concerned with changing the way work is actually carried out


Characterized by many tactical decisions (short term, business function specific)

Six sigma

- Quality-boosting process improvement technique developed by Motorola and made famous by CEO Jack Welch of
General Electric
- Entails training several key persons in the firm in the techniques to monitor, measure, and improve processes and
eliminate defects
- Aims to improve work processes and eliminate waste by training select employees

Thus information technology is used in reengineering to break down functional barriers and create a work system based on
business processes, products, or outputs rather than on functions or inputs.

Reengineering must not only knock down internal walls that keep parts of the company from cooperating effectively. It
must also knock down external walls that prohibit or discourage the company from cooperating with other companies, even
competitors. (for example, HP shares all its forecasts with all of its supply chain partners and shares other critical
information with its distributors and other stakeholders. It also does all the buying of resin for its manufacturers, giving it a
volume discount of 5 percent. It has also established many alliances and cooperative agreement.

Linking Performance and Pay to Strategies


Companies should install the following policies to improve compensation practices:

1. Provide full transparency to all stakeholders


2. Reward long-term performance with long-term pay, rather than annual incentives
3. Base executive compensation on actual company performance (sales growth, etc.) , rather than on stock price
4. Extend the tome-horizon for bonuses. Replace short-term with long-term incentives
5. Increase equity between workers and executives. Delete many special perks and benefits for executives. Be more
consistent across levels, although employees with greater responsibility must receive greater compensation.

There are differences in the average executive pays among different countries. As firms acquire other firms in other firms
in other countries, these pay differences can cause resentment and even turmoil. Countries have different key factor in
determining pay, some of seniority (japan), others of performance. Japan also emphasize harmony among managers rather
than individual excellence. However, in an effort to cut costs and increase productivity, more and more Japanese companies
are switching from seniority based to performance based approaches (merit pay systems). This switching has hurt the
morale of many Japanese companies, which have trained workers for many years to cooperate rather than to compete and
to work in groups rather than individually.

Dual bonus system based on both annual objectives and long-term objectives is becoming more common. The percentage
of a managers annual bonus must be attributable to both short term and long term results. It is important that bonuses
should be based not solely on short term results because such a system ignores the long term company strategies and
objectives. The percentage attributable to short term versus long term may vary across hierarchical levels in the
organization.

Companies should have an appraisal system that gives genuine feedback and differentiates performance. Concise,
constructive feedback is the fuel workers use to get better. A company that does not differentiates performance risks losing
its best people.

Profits sharing is another widely used incentive compensation. But many argue that profits is affected by too many factors
(taxes, pricing, or an acquisition reduces profits; firm also try to minimize their profits to reduce taxes) for this to be a good
criterion.

Gain sharing on the other hand, requires employees or departments to establish performance targets. If the actual results
exceed the objectives then all the members get bonuses.
The following criteria could serve as bases for an effective bonus system:

Sales Quality
Profits Safety
Production efficiency
Bonus system can be an effective tool for motivating individuals to support strategy implementation efforts. This makes the
workers responsible for meeting their goals.

Five tests to determine whether the performance pay-plan will benefit an organization:

1. Does the plan capture attention?


- People are talking more about their activities and taking pride in the early successes under the plan
2. Do employees understand the plan?
- The participants can explain how it works and what they need to do to earn the incentive
3. Is the plan improving communication?
- The employees know more than they used to about the companys mission, plans, and objectives
4. Does the plan pay out when it should?
- The incentives are being paid for the desired results or withheld when objectives are not met
5. Is the company or unit performing better?
- The profits increase, market share has grown, gains have resulted in part from the incentives

Aside from dual bonus system, combinations of following reward strategy incentives can be used to encourage the
managers and employees to push hard for successful strategic implementation:

Salary raises Praise Increased job autonomy


Stock options Recognition Awards
Fringe benefits Criticism
Promotions Fear
Managing resistance to change
Change raises anxieties because people fear economic loss, inconvenience, uncertainty, and a break in normal social
patterns. Change has the potential to disrupt comfortable interaction patterns. This is why people resist change.

Resistance to change

- Considered the single greatest threat to successful strategy implementation


- Occurs in the form of sabotaging production machines, absenteeism, filing unfounded grievances, and an
unwillingness to cooperate
- People resist strategy implementation because they do not understand what is happening or why changes are
taking place. This is why employees need accurate information.
- In order for strategy implementation to be successful, managers must have the ability to develop an organizational
climate conducive to change.
Change must be viewed as an opportunity rather than a threat by both managers and employees.
- Can emerge at any stage or level of the strategy implementation process
- Commonly used strategies for implementing changes:
1. Force change strategy
- Involves giving orders and enforcing those orders
- Has the advantage of being fast, but causes low commitment and high resistance
2. Educative change strategy
- Presents information to convince people the need for change
- Implementation, however, becomes slow and difficult
3. Rational or self-interest change strategy
- Attempts to convince individuals that the change is to their personal advantage
- If successful, strategy implementation can be a relatively easy task
- However, implementation changes are seldom to everyones advantage.
- Most desirable
- Consists of four steps (Jack Duncan)
1. Employees are invited to participate in the process of change and in the details of transition
- This allows everyone to give opinions, to feel a part of the change process, and to identify their own
self-interests regarding the recommended change
2. Some motivation or incentive to change is required
- Self-interest can be the most important motivator
3. There should be communication so that people can understand the purpose of the changes.
4. There should be giving and receiving of feedback.
- So that everyone knows how things are going and how much progress is being made

The rate, speed, magnitude, and direction of changes vary over time according to the industry and organization. Strategists
should strive to create a work environment in which change is recognized as necessary and beneficial so that individuals
can more easily adapt to change.

Managers can improve the likelihood of successfully implementing change by carefully designing change efforts. It is not
enough to simply react to changes. Managers must anticipate change, and if possible, be the creator of change themselves.

Organizational changes is a continuous process. The most successful organizations today continuously adapt to changes in
the competitive environment. They also continuously change their competitive environment at an accelerating rate. This
philosophy mirrors the idea continuous quality improvement philosophy.

Creating a strategy-supportive culture


Aspects of an existing culture that support proposed new strategy should be preserved, emphasized and built by strategists.
Those aspects that are antagonistic to the proposed new strategy should be identified and changed.

The following are the techniques to alter an organizations culture:

Recruitment Positive reinforcement


Training Mentoring
Transfer Revising the Vision and/or Mission
Promotion Redesigning physical spaces/facades
Restructuring Altering reward systems
Reengineering Altering organizational
Role modeling policies/procedures/practices

The following elements are useful in linking culture to strategy:

1. Formal statements of organizational philosophy, charters, creeds, materials used for recruitment and selection, and
socialization
2. Designing of physical spaces, facades, buildings
3. Deliberate role modeling, teaching, and coaching by leaders
4. Explicit reward and status system, promotion criteria
5. Stories, legends, myths, and parables about key people and events
6. What leaders pay attention to, measure, and control
7. Leader reactions to critical incidents and organizational crises
8. How the organization is designed and structured
9. Organizational systems and procedures
10. Criteria used for recruitment, selection, promotion, leveling off, retirement, and excommunication of people
People form strong attachments to heroes, legends, the rituals of daily life and all the symbols of the workplace. When
attachments to a culture are severed in an organizations attempt to change direction, employees and managers often
were left confused, insecure, and often angry. This usually occurs when external conditions dictate the need for new
strategy.

Usually, new strategies are market-driven and dictated by competitive forces. This is why changing a firms culture to
fit a new strategy is usually more effective than changing the strategy itself to fit an existing culture.

Weak linkages between strategic management and organizational culture can jeopardize performance and success.
Unless something can be done to provide support for transitions from old to new, the force of a culture can neutralize
and emasculate (weakens and makes less effective) strategy changes.

Production/Operations concerns when implementing strategies


Production related decisions on the following can have dramatic effect on the success or failure of strategy-
implementation efforts:

Plant size Inventory control Equipment and


Plant location Quality control resource utilization
Product design Cost control Shipping and
Choice of equipment Use of standards packaging
Kind of tooling Job specialization Technological
Size of inventory Employee training innovation

Just-in-time (JIT)

- Significantly reduces the costs of implementing strategies


- Parts and materials are delivered to a production site just as they are needed, rather than being stockpiled as a
hedge against later deliveries
- Frees money tied up in inventory and greatly reduces the reorder lead time

Factors that should be considered before locating the production facilities:

1. Availability of resources
2. The prevailing wage rates in the area
3. Transportation costs related to shipping and receiving
4. Location of major markets
5. Political risks in the area or country
6. Availability of trainable employees

For high-tech companies, production flexibility may be more important than production costs because major product
changes can be needed often. Production system must be flexible enough to allow frequent changes and the rapid
introduction of new products

The problem with many organizations is that they realize too slowly that whenever there is a change in product strategy,
production system must also be altered. As strategies shift over time, so must the production policies covering the location
and scale of manufacturing facilities, the choice of manufacturing process, the degree of vertical integration of each
manufacturing facility, the use of R&D units, and others. Cost, product flexibility, volume flexibility, and product
performance and product consistency determines the manufacturing policies that are appropriate.

Cross-training of employees can facilitate strategy implementation. Through this, employees gain better understanding of
the whole business and can contribute better ideas in planning sessions. This, however, can cause managers into roles that
emphasize counseling and coaching over directing and enforcing. It may also require substantial investments in training and
incentives.
Human resource concerns when implementing strategies
Furloughs

- Alternative to laying-off employees to cut costs


- Temporary lay-offs, may be applied both to white-collared to blue-collared jobs

However, most organizations are still using temporary and part-time workers rather than hiring full-time employees. Harley
Davidson, for instance, used casual workers with no benefits and no minimum number of hours, allowing the company to
call up workers only as needed.

The following are ways to reduce labor costs to stay financially sound:

1. Salary freeze 9. Hire temporary instead of full-time employees


2. Hiring freeze 10. Hire contract employees instead of full-time
3. Salary reductions employees
4. Reduce employee benefits 11. Volunteer buyouts
5. Raise employee contribution to health-care 12. Halt production for 3 days a week (Toyota did
premiums this)
6. Reduce employee workweek 13. Layoffs
7. Mandatory furlough 14. Early retirement
8. Voluntary furlough 15. Reducing/eliminating bonuses

As companies continue to downsize and reorganize, the human resource managers job also changes in a rapid pace.
Strategic responsibilities of the HR manager now include:

Assessing the staffing needs and the costs for alternative strategies that are proposed during strategy formulation
Developing a staffing plan for effectively implementing strategies.
- Such staffing plan must consider how to best manage health care insurance costs. Before, it was only the
employer who pays such costs, but many companies are now also requiring the employees to pay part of their
health insurance premiums
- Such staffing plan must also include how to motivate the employees and managers during a time when layoffs
are common and workloads are high
Developing performance incentives that clearly link performance and pay to strategies
Empowering managers and employees through their involvement in strategic management activities
- This process yields the greatest benefits when all organizational members understand clearly how they will
benefit personally if the firm does well. Therefore, company benefit must be linked to the personal benefits
of the members
Linking company and personal benefits
Establishing and administering an Employee Stock Ownership Plan (ESOP)
Instituting an effective child-care policy
Providing leadership for managers and employees in a way that allows them to balance work and family

Even if the strategic management system is well designed, it can still fail if insufficient attention is given to the human
resource dimension. HR problems usually arise during implementation of strategies due to the following causes:

1. Disruption of social and political structures


- Strategy implementation poses a threat to many managers and employees due to the new power and status
relationships that are anticipated and realized. Managers and employees may engage in resistance behavior as their
roles, prerogative (right or privilege exclusive to a particular individual or class), and power in the firm change.
- This must therefore be anticipated and considered during strategy formulation process and managed during
strategy implementation process
2. Failure to match individuals aptitudes with implementation tasks
- There must be a matching of managers with strategy through the following methods:
Transferring managers Promotions
Developing leadership workshops Job enlargement
Offering career development activities Job enrichment

Usually, individual values, skills and abilities that are needed for successful strategy implementation are not always
considered during the strategy formulation process. Firms that select new strategies or significantly alter existing
strategies usually do not possess the right line and staff personnel in the right position.
3. Inadequate top management support for implementation activities
- Strategists (such as the CEO, small business owners, and government agency heads) often have inadequate support
in the implementation activities. They must therefore be personally committed to strategy implementation and
they must express this commitment in the most visible ways possible.
- Strategists formal statements about the importance of strategic management must be consistent with their actual
support and the rewards they give for activities completed and objectives reached.

It is important to ensure that human relationships facilitate rather than disrupt strategy implementation efforts. Managers
can do a lot of chatting and informal questioning to stay abreast or up to date with how things are progressing and to know
when to intervene.

Managers can also build support for the strategy-implementation process by giving orders, announcing few decisions that
depend primarily on informal questioning and seeking to probe and clarify until a consensus is achieved. Efforts should be
rewarded generously and visibly.

The best method for overcoming and preventing human resource problems is to actively involve as many managers and
employees as possible during the strategic management process. Although this is time consuming, this approach builds
understanding, trust, commitment and ownership and reduces resentment and hostility.

The true potential of strategy formulation and implementation resides in people.

Employee Stock Ownership Plans (ESOPs)


- Tax qualified, defined contribution, employee benefit plan whereby employees purchase stock of the company
through borrowed money or cash contributions
- Empower employees to work as owners
- Reduce worker alienation and stimulate productivity
- Has many benefits for the firm such as: substantial tax savings (principal, interest, and dividend payments in ESOPs
are tax deductible; banks lend money to ESOPs at below prime rate, and others)
- Not, however for every firm due to the costs associated (such as initial legal, accounting, appraisal, and actuarial
fees to set up ESOP, annual administration expenses)
- Do not work well in firms that have fluctuating payrolls and profits.
- Human resource managers should therefore conduct a preliminary research to determine the desirability of an
ESOP. If the benefits outweigh the costs, then they should also facilitate its establishment and administration

Balancing Work Life and Home Life


Wage disparities between men and women still exists.

Work/family topic is now being made part of the agenda of the meetings and thus is being discussed in many
organizations. Work/family strategies have become so popular among companies nowadays that strategies now
represent a competitive advantage for those firms that offer benefits such as:

Eldercare assistance Flexible scheduling


Job sharing Establishing country clubs
Adoption benefits Creating family/work interaction
On-site summer camp opportunities
Employee help lines Family days where family members are
Pet care invited into the workplace, taken on plant or
Lawn service referrals office tours, dined by management, and
Providing spouse relocation assistance as an given a chance to see exactly what the other
employee benefit family members do each day. This method is
Providing company resources as a family inexpensive and increases the employees
recreational and educational use pride in working for the organization

HR managers need to foster a more effective balancing of professional and private lives.

A good home life contributes immensely to a good work life.

Glass ceiling is the invisible barrier in many firms that bars or prevents women and minorities from the top-level
management positions. This glass ceiling must be removed, to promote women and minorities into the mid- and top-
level management positions.

There has been an increasing awareness of extramarital affairs due to office romances. According to research, more
men than women are engaged in these extramarital affairs at work, but the percentage of women also having
extramarital affairs are increasing steadily, compared to the percentage of men which is holding steadily. Only few of
the companies have written guidelines on office dating. Most of the employers usually turn a blind eye to marital
cheating. Some employers even explicitly allow office relationships.

If an affair is disrupting work of an employee, then the first step is to go to the offending person privately and try to
resolve the matter. If that fails, then the next step is to go to the HR manager to seek for assistance. Filing a
discrimination lawsuit cased on the affair is only used a last resort because the court generally rule that co-workers
injuries are not pervasive enough to warrant any damages.

Benefits of a Diverse Workforce


Many industries are now shifting being a culturally specialized agencies to becoming multicultural, generalist agencies as
many companies are now starting to embrace multicultural marketing using multicultural ad agencies in their efforts to
reinforce the multicultural component of their overall strategies.

For an organization to be effective, its workforce must mirror the diversity of its customers. This means that just as its
customers are diverse, so must its workforce.

Corporate Wellness Programs


Studies show that companies that have comprehensive, well-run employee wellness programs have impressive returns on
investments. This is because such programs reduce the employees healthcare insurance premiums. These programs can
also reduce the voluntary turn-over of employees. Practices such as the following are becoming common at companies to
promote corporate wellness culture:

Providing abundant bicycle racks


Conducting walking meetings
Offering five minute stress breaks

Employee wellness has now become a strategic issue for many firms. Many of the firms today would require a health
examination as part of an employment application as healthiness now becomes a hiring factor. Companies cannot afford to
let individuals to drive up their costs just because these individuals are not willing to address their own health problems.