Assessment and Feedback: Student Template

Student ID Number(s):1839294
Programme: MBA
Module: 07 21652 Implementing Strategies and Managing Change
Name of Tutor: Dr. Mike Kennard
Assignment Title: With reference to the academic literature critically evaluate the extent
to which the capabilities to implement strategy and manage change effectively
enhances organizational performance. Use appropriate examples to illustrate your
argument.

Date and Time of Submission:25/03/2019, 11.20AM

Actual Word Count: 2800
Extension: No * Extension Due Date: Nil
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With reference to the academic literature critically evaluate the extent to which the
capabilities to implement strategy and manage change effectively enhances
organizational performance. Use appropriate examples to illustrate your argument.

Companies that are successful in implementing strategic plans are in the minority with
the real success rate being as low as only ten to thirty per cent (Raps, 2004). According to
Collier, no matter how good the strategic plans are, they are useless unless they can be
implemented effectively (1984). The same is also true in the case of change management
efforts. Only a few of these transformation efforts have been successful, while many of the
programs for organisational change failed (Kotter, 1995). However, Kotter adds that the basic
goal for most of these transformation programs has been the same: to make fundamental
changes in how business is conducted in order to help cope with a new, more challenging
market environment (1995). According to Noble, the failure to implement strategies can be
due to both external factors outside the firm's control as well as internal factors such as
process and events needed to bring the strategy to life (1999). In most cases, breakdowns in
strategy implementation are due to lack of capabilities, processes and activities that are
essential for successful execution (Cocks, 2010). According to Raps, the keys to successful
strategy implementation are managing organizational culture, organizational structures,
people and control systems and instruments (2004). Kotter meanwhile stresses on the
importance of leadership and culture in successfully managing change. As stated by Johnson
et al., capabilities are the abilities of the organisation to use or deploy its resources (2017).
Strategies cannot be implemented without the deployment of the various resources of the firm
such as human, financial and physical resources. The organizational capabilities to manage
these resources, such as organisational culture, leadership and organisational structure thus
become the capabilities to implement strategies and manage change. This essay will examine
how the various organisational capabilities to implement strategy and manage change
enhances organizational performance, either by imporving economic performance or by
enhancing overall organisatinoal effectiveness.

Schwartz and Davis define culture as the pattern of beliefs and expectations shared
by the organisations members which in turn produces norms that powerfully shape the
behaviour of individuals and groups in the organisation (1981). They further add that culture
is rooted in deeply held beliefs and values of the members and is very difficult to change. An
organisation’s culture greatly influences its strategy formulation process and also how
effectively it implements a given strategy (Smith and Vecchio, 1993). Smith and Vecchio
explain that any new strategy threatening to substantially change the organisational culture is
usually met resistance (1993). Cultural incompatibility is an important reason for strategy
execution failures (Collier, 1984). According to Raps, organisational culture determines the
extent of cooperation, degree of dedication and depth of strategic thinking within the
organisation which further implies that it also impacts employee motivation in implementing
strategies (2004). Raps explains that the top-management has to ensure that the
organisation’s culture is conducive to the strategies its executives are trying to implement
(2004). According to him, while senior executives may have sufficient understanding of the
rationale and urgency of the strategies being implemented, they must not assume that middle
and lower level managers have the same level of understanding. Instead, he says they must
communicate and persuade the validity of their ideas to the lower level managers. According
to Kotter, change programs are successful only when the changes are embedded into the
culture of the organisation (1995). He further adds that unless the changes are rooted in the
social norms and shared values of the organisations, they will be subject to degradation as
soon as the pressures for change are removed. Therefore, managing organisational culture is
an important capability for successful strategy implementation and change management.

A good example of this would be W.L Gore which instilled a culture of innovation and
business success through organisational culture (Wegner, 1991). Gore made use of
decentralised teams and hired associates instead of employees. Being an associate allowed
the organisation to get their commitment to the culture of the organisation and also ensured
their participation in team strategies and decisions. The effect of organisational culture on their
performance can be seen in their presence in the Fortune 500 list of companies (Wegner,
1991).

Leadership plays a critical role in determining the success or failure of strategic

implementation (Noble, 1999). Taylor used the term ‘strategic leadership’ to describe the
management of change to achieve a dramatic improvement in performance (1995). The need
for leadership in change management is also stressed by Kotter (1995). He stresses the
importance of a powerful guiding coalition of senior managers from different functions to drive
change forward. The senior management has the task of executing the business plan and
monitoring performance (De Feo and Janssen, 2001). The senior management are also
responsible for managing the organisational culture and structure and communicating its
commitment to new strategic direction to its employees (Raps, 2004). Since decision making
is an important task for the senior management while executing strategy, it would be useful to
examine how managerial decision making is affected by cognitive biases of the decision
makers. While decision making is the most important job of any executive, it can also prove to
be the toughest and the riskiest one, with serious implications on both the performance of the
business and the career of the executive (Hammond, Keeney and Raiffa, 2006). According to
Hammond, Keeney and Raiffa, bad decisions result not only from the flaws in the actual
decision-making process, but also from the way in which the mind of the decision maker works
(2006). Kahneman, Lovallo and Sibony explain that cognitive biases inherent to the decision
maker’s mind distorts their judgements during the decision-making process (2011). In their
paper titled ‘Before You Make That Big Decision’, the authors go on to describe the various
cognitive biases that cause distortions to the judgements of the decision maker such as
saliency bias, confirmation bias, anchoring bias and the halo effect (2011). Similar decision-
making biases/traps resulting from the unconscious decision-making routines used by the
human mind (heuristics) have also been identified by Hammond, Keeney and Raiffa in their
work, such as the anchoring trap, the status-quo trap, the sunk cost trap, the confirming
evidence trap, the framing trap and estimation and forecasting traps (2006).

While, both sets of authors agree that executives cannot rid themselves of these
biases, they do state that awareness of these decision-making traps can allow them to
counteract and compensate for them while making decisions. This is especially important in a
business context, where decisions are made by teams rather individuals. Kahneman, Lovallo
and Sibony state that executives typically depend on the judgement of their teams while
making strategic decisions and therefore, the awareness of these decision-making traps would
allow them to identify whether they have crept into the judgements of their teams (2006). The
authors also recommend a twelve-question checklist that is intended to identify cognitive
biases in team judgements that can serve as decision quality control measures.

Kahneman, Lovallo and Sibony cite a study by Mckinsey of more than 1000 major
business investments that showed that organisations were able to achieve returns up to seven
percentage points higher when they utilized techniques to reduce the effects of cognitive
biases in their decision-making processes (2006). The study surveyed data covering 1048
major decisions on matters such as mergers and capital expenditures in organisations which
showed that recognising and countering biases in the decision-making process resulted in
improved organisational performance through improvements in return on investments (Lovallo
and Sibony, 2010). This example illustrates how the quality control of decisions by senior
management leadership improves organisational performance. The role of group decision
making is also important in the context of strategy implementation. Involving middle managers
in the formulation of strategy helps to generate acceptance of the implementation (Raps,
2004). According to Raps, when middle managers are in strategy formulation, they will also
be more motivated since they see themselves as an important part of the process (2004).
Raps also adds that involving middle management will increases the chances for a smooth,
targeted and accepted strategy implementation. It also increases the general strategic
awareness of the employees in the organisation and helps in the achievement of a strategic
consensus (Raps, 2004).

Managing the organisational structure is also considered to be on the important

capabilities when it comes to implementing strategy and managing change. According to
Skivington and Daft, organisational structure acts as a framework for the rules, prescriptions
of authority, division of labour, and hierarchy of authority for the organisation (1991). They
further add that the structure acts as a mechanism for resource allocation and reinforces
central control in the organisation. According to Raps, the structure assigns accountabilities
so that the company can achieve its goals and objectives (2004). However, he adds that power
struggles within departments and bureaucracy can lead to failures in strategy implementation.
Organisational structure also has important implications for change management. Kotter
identifies organisational structure as one of the obstacles that can get in the way of
organisations attempting to achieve their vision (1995). Organisational structures can also
inhibit innovation in the organisation leading to reduced growth (Kennard, 2018). According to
Kennard, overcoming such structural barriers to innovation is an important area of innovation
management (2018). He explains that the different types of organisational structures come
with their own advantages and disadvantages. As an example, he explains how functional
structure while being simple may lead to silo mentality among the various departments
resulting in limited coordination, cooperation and communication. Kennard then goes on to
suggest that organisations should focus on developing boundary spanning roles when
organisational structures inhibit innovation (2018). He uses the example of how W.L Gore
manages its organisational structure to develop highly innovative products. Gore’s
organisational structure has no job titles, hierarchies or managers and there are also no formal
boundaries between divisions (Kennard, 2018). However, Kennard also mentions that
researches have explored the positive role of boundaries in stimulating innovation by
focussing attention and providing stimulus for solution discovery (2018). He therefore
concludes that finding the right balance between freedom and control through the
establishment of boundaries is key to innovation management.

The assessment of performance through control systems is crucial, both during and
after the strategy implementation process (Raps, 2004). According to Raps, control systems
ensure that the strategic initiatives are being implemented as intended (2004). He
recommends the usage of the balanced scorecard as a control system during the
implementation process. Financial data such as budgets and compensation can act as control
systems during the strategy implementation process (Stonich cited in Daft and Macintosh,
1984).

There have been several cases of organisations successfully implementing new

strategies and transformation programs to improve their organisational performance. The
transformation of IBM from a hardware-oriented business to one that focused on IT services
is a good example. Sam Palmisano, retired CEO of IBM transformed IBM through his vision,
leadership, changes to the organisational culture and structure (Bower, 2012). The
transformation of IBM can be analysed using Kotter’s eight step change management process.
The CEO of IBM had a new vision of analysing and using information to solve problems facing
modern businesses and governments (Bower, 2012). The top management was able to
communicate this new vision to the employees by holding on line town hall events for some
150,000 of its employees (Bower, 2012). IBM also made changes to its organisational
structure to support its new vision. The corporate executive committee that previous handled
the corporate functions was scrapped and replaced by teams for strategy, technology and
operations (Bower, 2012). Changes to organisational structure were also made by selling off
its low margin pc and hardware businesses. Instead, the company acquired dozens of
software firms to ensure that services were productised. By communicating its vision and
making changes to its organisational structure and culture, IBM successfully removed the
obstacles for the transformation and empowered employees to act on the new vision. It should
also be noted that IBM’s transformation was guided by the leadership and vision of its CEO.
When Sam Palmisano took over at IBM in 2002, the company’s profits were $3.07 a share
and the return on equity was 16% (Bower, 2012). The transformation of IBM greatly enhanced
its performance is clearly reflected in their profits of $13.06 per share and return on equity of
70% in 2010 (Bower, 2012). IBM’s capability to implement strategies and manage change
programs successfully enhanced its financial performance as shown by the example above.

The case of Nokia serves as a good example of an organisation that tried to resist the
changes happening in its external environment and ended up having disastrous
consequences in terms of organisational performance. Nokia was once a dominant player in
mobile phone market. As the size of the organisation grew, a complex and poorly implemented
matrix organisational structure caused much confusion and resulted in the loss of strategic
agility and entrepreneurialism at Nokia (Doz, 2017). The telecommunications giant therefore
was slow in innovating its products and failed to adapt to the changes happening in its external
environment allowing its competitors to capitalise and take away large chunks of its market
share. Competitors such as Apple and Samsung were able to capture a significant portion of
Nokia’s market share. Nokia was still using its outdated Symbian software while its competitors
were using much more user-friendly software. The company was eventually bought out by
Microsoft.

The above examples demonstrate how organisations are forced to implement new
strategies or change programs as a result of both external environment factors as well as
internal organisational pressures. The common aspect in both cases is that the fit between
the organisation and its environment is necessary for enhancing organisational performance.
According to the resource-based view theories an organisations resources and capabilities
are its source of competitive advantage. The organisations capabilities to implement strategies
and manage change can also be considered as sources of sustainable competitive advantage
(Egelhoff cited in Cocks, 2010).

The essay discusses the management of key strategy implementation and change
management capabilities such as organisational structure, organisational culture, leadership
and control systems. The examples of organisations discussed above show how the
capabilities to implementing strategy and manage change effectively enhance organisational
performance. This is true in most cases as organisations usually undergo transformations to
adapt to environmental changes and gain competitive advantage over its competitors.
However, it should be noted that each organisation is unique in terms of its resources and
capabilities and in terms of its external environment. Therefore, there is no single universally
accepted implementation and change management framework that can be utilized by all
organisations.
Reference List

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Collier, D. (1984). How to Implement Strategic Plans. Journal of Business Strategy (pre-
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Daft, R. and Macintosh, N. (1984). The Nature and Use of Formal Control Systems for
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De Feo, J. and Janssen, A. (2001). Implementing a strategy successfully. Measuring

Business Excellence, 5(4), pp.4-6.

Doz, Y. (2017). INSEAD Knowledge. [online] INSEAD Knowledge. Available at:

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Kennard, M. (2018). The A-Z of Innovation Management. York: York Publishing Services
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