Strategic Management

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Module 12 Nature of Strategy

Implementation and Evaluation

Course learning outcome:

1. To know the nature of Strategy implementation.
2. To assess which strategy is suitable for your business to succeed.
3. To have knowledge on how to execute such strategies for the
business success.

Nature of Strategy Implementation

We keep hearing news stories and anecdotes about this “successful business” or
that “entrepreneur who hit the big time with his business idea”. These stories
often leave us in a state of wonder and awe, and we find ourselves wanting to
know more. More about how the business became a success, more about what
inspired a normal working guy (or girl) to think of a novel and brilliant business
idea, and more about how someone can start a business, and make her dreams a
reality.

We become so fixated on these stories that, all too often, we overlook the other
side of that reality: that just as businesses become big and successful, there are
also companies – perhaps in greater numbers – that fail.

What many often fail to realize, is that they can also learn from business ideas
that tanked and business ventures that never really got off the ground. Better,
they can also learn a lot from businesses that were able to get started, and then,
somewhere along the way, something went wrong. They were having problems
and great difficulty in maintaining their operations, until most of them declared
bankruptcy or liquidated.

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Businesses fail for a lot of reasons. Some had to close up shop because of
economic upheavals that simply did not provide any room for new businesses to
try making headway in their operations. Others blame the actions of
competitors, and even the business challenges that are inherent in the market.
There are also those businesses that blame the lack of resources for the failure.

However, this makes one wonder: if the economy, the competitors, the market
and its challenges, and the availability of resources are at fault, how come other
businesses were able to survive, and even become hugely successful? At this
point, the most logical reason that comes to mind is mismanagement. More
often than not, it is about how the business was unable to manage its strategies
very well.

Strategic management is considered to be one of the most vital activities of any

organization, since it encompasses the organization’s entire scope of strategic
decision-making. Through the strategic management process, it allows the
organization to formulate sets of decisions, actions and measures – collectively
known as strategies – that are subsequently implemented in order to achieve
organizational goals and objectives.

Strategy formulation – where the organization’s mission, objectives, and

strategies are defined and set – is the first stage in strategic management. That is
where it all begins, which means that, if the organization was unable to complete
that stage with very good results, then the company’s strategy management is
already a bust from the start. Many organizations fail during the first stage, in
the sense that they are unable to come up with strategies that will potentially
take the organization where it wants to be.

However, there are also a lot of businesses that are able to formulate excellent
and very promising strategies. And yet, the end result is still the organization
having problems and even ultimately closing down. What could have gone
wrong?

Most probably, it was because of poor implementation of the strategies.

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STRATEGY IMPLEMENTATION

The second stage of strategic management, after strategy formulation, is

“strategy implementation” or, what is more familiar to some as “strategy
execution”. This is where the real action takes place in the strategic management
process, since this is where the tactics in the strategic plan will be transformed
into actions or actual performance.

Needless to say, it is the most rigorous and demanding part of the entire
strategic management process, and the one that will require the most input of
the organization’s resources. However, if done right, it will ensure the
achievement of objectives, and the success of the organization.

If strategy formulation tackles the “what” and “why” of the activities of the
organization, strategy implementation is all about “how” the activities will be
carried out, “who” will perform them, “when” and how often will they be
performed, and “where” will the activities be conducted.

And it does not refer only to the installation or application of new strategies. The
company may have existing strategies that have always worked well in the past
years, and are still expected to yield excellent results in the coming periods.
Reinforcing these strategies is also a part of strategy implementation.

The basic activities in strategy implementation involve the following:

 Establishment of annual objectives

 Formulation of policies for execution of strategies

 Allocation of resources

 Actual performance of tasks and activities

 Leading and controlling the performance of activities or tactics in various levels

of the organization

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Incidentally, businesses may also find that they have to perform further planning
even during the implementation stage, especially in the discovery of issues that
must be addressed.

Strategy implementation is the stage that demands participation of the entire

organization. Formulation of the strategies are mostly in the hands of the
strategic management team, with the aid of senior management and key
employees. When it comes to implementation, however, it is the workforce that
will execute the strategic plan, with top or senior management taking the lead.

FACTORS THAT SUPPORT STRATEGY IMPLEMENTATION

Effective execution of strategies is supported by five key components or factors.

All five must be present in order for the organization to be able to carry out the
strategies as planned.

People

There are two questions that must be answered: “Do you have enough people to
implement the strategies?” and “Do you have the right people in the
organization to implement the strategies?”

The number of people in your workforce is an issue that is easier to address,

because you can hire additional manpower. The tougher part of this is seeing to
it that you have the right people, looking into whether they have the skills,
knowledge, and competencies required in carrying out the tasks that will
implement the strategy.

If it appears that the current employees lack the required skills and
competencies, they should be made to undergo the necessary trainings,

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seminars and workshops so that they will be better equipped and ready when
it’s time to put the strategic plan into action.

In addition, the commitment of the people is also something that must be

secured by management. Since they are the implementers, they have to be fully
involved and committed in the achievement of the organization’s objectives.

Resources

One of the basic activities in strategy implementation is the allocation of

resources. These refer to both financial and non-financial resources that (a) are
available to the organization and (b) are lacking but required for strategy
implementation.

Of course, the first thing that comes to mind is the amount of funding that will
support implementation, covering the costs and expenses that must be incurred
in the execution of the strategies. Another important resource is time. Is there
more than enough time to see the strategy throughout its implementation?

Structure

The organizational structure must be clear-cut, with the lines of authority and
responsibility defined and underlined in the hierarchy or “chain of command”.
Each member of the organization must know who he is accountable to, and who
he is responsible for.

Management should also define the lines of communication throughout the

organization. Employees, even those on the lowest tier of the organizational
hierarchy, must be able to communicate with their supervisors and top
management, and vice versa. Ensuring an open and clear communication
network will facilitate the implementation process.

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Systems

What systems, tools, and capabilities are in place to facilitate the

implementation of the strategies? What are the specific functions of these
systems? How will these systems aid in the succeeding steps of the strategic
management process, after implementation?

Culture

This is the organizational culture, or the overall atmosphere within the company,
particularly with respect to its members. The organization should make its
employees feel important and comfortable in their respective roles by ensuring
that they are involved in the strategic management process, and that they have
a very important role. A culture of being responsible and accountable for one’s
actions, with corresponding incentives and sanctions for good and poor
performance, will also create an atmosphere where everyone will feel more
motivated to contribute to the implementation of strategies.

These factors are generally in agreement with the key success factors or
prerequisites for effective implementation strategy, as identified by McKinsey.
These success factors are presented in the McKinsey 7s Framework, a tool made
to provide answers for any question regarding organizational design.

The emphasis of the framework is “coordination over structure”, which also

supports how strategy implementation is described to involve the entire
organization and not just select departments or divisions.

The 7 factors are divided into two groups: the Hard S (strategy, structure and
systems) and the Soft S (style, shared values, staff and skills)

Strategy

The strategy – or the plan of the business to achieve competitive advantage and
sustainable growth – must be long-term and clearly defined. It must indicate a
direction that leads to the attainment of objectives. When you take the
organization’s mission and core values, the strategy should also be in line with
them.

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Structure

The organizational structure must be visible to everyone, and clearly identify

how the departments, divisions, units and sections are organized, with the lines
of authority and accountability clearly established.

Systems

There should be a clear indication and guide on how the main activities or
operations of the business are carried out. The processes, procedures, tasks, and
flow of work make up the systems of the organization.

Style

This addresses the management or leadership style in force within the

organization, from top management to the team leaders and managers in the
smaller units. Strategy implementation advocates participative leadership styles,
and so this is really more about defining and describing the interactions among
the leaders in the organization and, to some extent, how they are perceived by
those that they lead or manage.

Staff

Organizations will always have to deal with matters regarding staffing. Human
resources, after all, is one of the most important assets or resources of an
organization. Thus, much attention is given to human resource processes,
specifically hiring, recruitment, selection and training.

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Skills

Employees without skills are worthless resources to the organization. In order to

aid the organization on the road towards its goals, the employees must have the
skills, competencies and capabilities required in the implementation of
strategies.

Shared Values

This is at the heart of the McKinsey 7s framework, and they refer to the
standards, norms and generally accepted attitudes that ultimately spur members
of the organization to act or react in a certain manner. Employee behavior will
be influenced by these standards and norms, and their shared values will
become one of the driving forces of the organization as it moves forward.

Usually, organizations may take a look at each of these key success factors for
individual analysis. However, the McKinsey approach takes a wider approach,
assessing if they are well-aligned with the other factors or not. All seven
prerequisites are interconnected, which means all seven must be present, and
they must be effectively aligned with each other, in order to ensure effective
strategy implementation, and overall organizational effectiveness.

WHAT CAUSES FAILURE OF STRATEGY IMPLEMENTATION?

Going back to the earlier discussion on why some businesses failed, even with
the best-laid plans and strategies, have you ever wondered what went wrong in
the implementation of these strategies?

In a study conducted by Fortune Magazine, it was revealed that nine out of ten
organizations are unable to fully, completely and properly implement their
strategic plan, often resulting to complete business failure. We’re looking at nine
out of ten organizations that just wasted their resources, opportunities, and
probably even very good strategies that have been formulated in the first stage
of the strategic management process.

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The most common reasons why implementation of the strategies are

unsuccessful are:

1. The employees and managers do not fully understand the strategy, and this
arises mainly from their lack of understanding of the mission and objectives
of the organization. This lack of understanding may be traced to a number of
reasons, such as:

o Lack of effective communication, or lack of communication, in general. It falls

upon the shoulders of senior management and the strategic management team
to communicate the organizational mission and goals to every member of the
workforce, and also make them understand the strategy and each member’s
particular role in how it will be carried out.

o Lack of ownership on the part of the “implementers”, the members of the

workforce. Since the employees and maybe even the supervisors of the smaller
units are unaware of the strategy, or do not understand it, there is very little
motivation and sense of empowerment to make them perform well in their
respective tasks and functions. There is a lack of ownership, since the employees
do not feel that they have a stake in the plan, and this results to poor
implementation of the strategy.

o Confusing, convoluted, and generally overwhelming plan. Some people can only
assimilate several things at one time. If they are presented with a plan that
seems too massive and too ambitious for them, their natural response would
involve shutting down and refusing to understand. Thus, it is important that the
strategy formulation be carried out properly, and the strategic plan prepared in a
user-friendly manner. Also, communication is key. No matter how overwhelming
the strategic plan may be, it can still be understood and accepted by the
workforce if communicated properly.

2. The strategy is disconnected from with crucial aspects of the business such
as budgeting and employee compensation and incentives. Executing the
strategies involves funding, resource allocation, financial management and
other budgeting matters, and if there is no link connecting these activities to
the strategies, then there is no way that they will be implemented
effectively. This is largely an issue that must be addressed in the strategy
formulation stage.

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3. The strategy is paid little attention by management. All too often, the
owners, managers and supervisors become too caught up in the day-to-day
operations of the business, they rarely refer to the strategic plan. Before
long, they end up adopting a dismissive attitude towards the strategic plan,
treating the strategies as something related to the overall management
process, but still separate. They devote a token number of hours in a month
to go over the plan and discuss strategies, but that’s it. After the discussion,
they will put it at the back of their minds, and continue as they were.

In order to ensure the success of the strategy implementation, covering all your
bases is important. The best way to go about that is by following the essential
steps to executing the strategies.

STEPS IN STRATEGY IMPLEMENTATION

To ensure an effective and successful implementation of strategies, it’s a good

idea to have a system to go about it. Take a look at the steps to ensure that
happens.

Step #1: Evaluation and communication of the Strategic Plan

The strategic plan, which was developed during the Strategy Formulation stage,
will be distributed for implementation. However, there is still a need to evaluate
the plan, especially with respect to the initiatives, budgets and performance.
After all, it is possible that there are still inputs that will crop up during
evaluation but were missed during strategy formulation.

There are several sub-steps to be undertaken in this step.

1. Align the strategies with the initiatives. First things first, check that the
strategies on the plan are following the same path leading to the mission and
strategic goals of the organization.

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2. Align budget to the annual goals and objectives. Financial assessments

conducted prior will provide an insight on budgetary issues. You have to evaluate
how these budgetary issues will impact the attainment of objectives, and see to
it that the budget provides sufficient support for it. In the event that there are
budgetary constraints or limitations, they must first be addressed before
launching fully into implementation mode.

3. Communicate and clarify the goals, objectives and strategies to all members of
the organization. Regardless of their position in the organization’s hierarchy,
everyone must know and understand the goals and objectives of the
organization, and the strategies that will be employed to achieve them.

Step #2: Development of an implementation structure

The next step is to create a vision, or a structure, that will serve as a guide or
framework for the implementation of strategies.

1. Establish a linking or coordination mechanism between and among the various

departments and their respective divisions and units. This is mainly for purposes
of facilitating the delegation of authority and responsibility.

2. Formulate the work plans and procedures to be followed in the implementation

of the tactics in the strategies.

3. Determine the key managerial tasks and responsibilities to be performed, and

the qualifications required of the person who will perform them.

4. Determine the key operational tasks and responsibilities to be performed, and

the qualifications required of the person who will perform them.

5. Assign the tasks to the appropriate departments of the organization.

6. Evaluate the current staffing structure, checking if you have enough manpower,
and if they have the necessary competencies to carry out the tasks. This may
result to some reorganization or reshuffling of people. In some cases, it may also
require additional training for current staff members, or even hiring new
employees with the required skills and competencies. This is also where the
organization will decide if it will outsource some activities instead.

7. Communicate the details to the members of the organization. This may be in the
form of models, manuals or guidebooks.

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Step #3: Development of implementation-support policies and programs

Some call them “strategy-encouraging policies” while others refer to them as

“constant improvement programs”. Nonetheless, these are policies and
programs that will be employed in aid of implementation.

1. Establish a performance tracking and monitoring system. This will be the basis
of evaluating the progress of the implementation of strategies, and monitoring
the rate of accomplishment of results, or if they were accomplished at all. Define
the indicators for measuring the performance of every employee, of every unit
or section, of every division, and of every department.

2. Establish a performance management system. Quite possibly, the aspect of

performance management that will encourage employee involvement is a
recognition and reward structure. When creating the reward structure, make
sure that it has a clear and direct link to the accomplishment of results, which
will be indicated in the performance tracking and monitoring system.

3. Establish an information and feedback system that will gather feedback and
results data, to be used for strategy evaluation later on.

4. Again, communicate these policies and programs to the members of the

organization.

Step #4: Budgeting and allocation of resources

It is now time to equip the implementors with the tools and other capabilities to
perform their tasks and functions.

1. Allocate the resources to the various departments, depending on the results of

financial assessments as to their budgetary requirements.

2. Disburse the necessary resources to the departments, and make sure everything
is properly and accurately documented.

3. Maintain a system of checks and balances to monitor whether the departments

are operating within their budgetary limits, or they have gone above and beyond
their allocation.
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Step #5: Discharge of Functions and activities

It is time to operationalize the tactics and put the strategies into action, aided by
strategic leadership, utilizing participatory management and leadership styles.

Throughout this step, the organization should also ensure the following:

 Continuous engagement of personnel by providing trainings and reorientations.

 Enforce the applicable control measures in the performance of the tasks.

 Evaluate performance at every level and identify performance gaps, if any, to

enable adjusting and corrective actions. It is possible that the corrective actions
may entail changes in the policies, programs and structures established and set
in earlier steps. That’s all right. Make the changes when necessary.
Basically, the results or accomplishments in Step #5 will be the input in the next
step, which is the third stage of Strategic Management: “strategy evaluation”.

Some argue that implementation of strategies is more important than the

strategies themselves. But this is not about taking sides or weighing and making
comparisons, especially considering how these two are important stages in
Strategic Management. Thus, it is safe to say that formulating winning strategies
is just half the battle, and the other half is their implementation.

Strategy Evaluation Process and its Significance

Strategy Evaluation is as significant as strategy formulation because it throws

light on the efficiency and effectiveness of the comprehensive plans in achieving
the desired results. The managers can also assess the appropriateness of the
current strategy in todays dynamic world with socio-economic, political and
technological innovations. Strategic Evaluation is the final phase of strategic
management.

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The significance of strategy evaluation lies in its capacity to co-ordinate the task
performed by managers, groups, departments etc, through control of
performance. Strategic Evaluation is significant because of various factors such as
- developing inputs for new strategic planning, the urge for feedback, appraisal
and reward, development of the strategic management process, judging the
validity of strategic choice etc.

The process of Strategy Evaluation consists of following steps:

1. Fixing benchmark of performance - While fixing the benchmark,

strategists encounter questions such as - what benchmarks to set, how to set
them and how to express them. In order to determine the benchmark
performance to be set, it is essential to discover the special requirements for
performing the main task. The performance indicator that best identify and
express the special requirements might then be determined to be used for
evaluation. The organization can use both quantitative and qualitative criteria for
comprehensive assessment of performance. Quantitative criteria includes
determination of net profit, ROI, earning per share, cost of production, rate of
employee turnover etc. Among the Qualitative factors are subjective evaluation
of factors such as - skills and competencies, risk taking potential, flexibility etc.

2. Measurement of performance - The standard performance is a bench

mark with which the actual performance is to be compared. The reporting and
communication system help in measuring the performance. If appropriate means
are available for measuring the performance and if the standards are set in the
right manner, strategy evaluation becomes easier. But various factors such as
managers contribution are difficult to measure. Similarly divisional performance
is sometimes difficult to measure as compared to individual performance. Thus,
variable objectives must be created against which measurement of performance
can be done. The measurement must be done at right time else evaluation will
not meet its purpose. For measuring the performance, financial statements like -
balance sheet, profit and loss account must be prepared on an annual basis.

3. Analyzing Variance - While measuring the actual performance and

comparing it with standard performance there may be variances which must be
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analyzed. The strategists must mention the degree of tolerance limits between
which the variance between actual and standard performance may be accepted.
The positive deviation indicates a better performance but it is quite unusual
exceeding the target always. The negative deviation is an issue of concern
because it indicates a shortfall in performance. Thus in this case the strategists
must discover the causes of deviation and must take corrective action to
overcome it.

4. Taking Corrective Action - Once the deviation in performance is

identified, it is essential to plan for a corrective action. If the performance is
consistently less than the desired performance, the strategists must carry a
detailed analysis of the factors responsible for such performance. If the
strategists discover that the organizational potential does not match with the
performance requirements, then the standards must be lowered. Another rare
and drastic corrective action is reformulating the strategy which requires going
back to the process of strategic management, reframing of plans according to
new resource allocation trend and consequent means going to the beginning
point of strategic management process.

Business Policy

Business Policy defines the scope or spheres within which decisions can be taken
by the subordinates in an organization. It permits the lower level management to
deal with the problems and issues without consulting top level management
every time for decisions.

Business policies are the guidelines developed by an organization to govern its

actions. They define the limits within which decisions must be made. Business
policy also deals with acquisition of resources with which organizational goals
can be achieved. Business policy is the study of the roles and responsibilities of
top level management, the significant issues affecting organizational success and
the decisions affecting organization in long-run.

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Features of Business Policy

An effective business policy must have following features:

1. Specific- Policy should be specific/definite. If it is uncertain, then the

implementation will become difficult.

2. Clear- Policy must be unambiguous. It should avoid use of jargons and

connotations. There should be no misunderstandings in following the policy.

3. Reliable/Uniform- Policy must be uniform enough so that it can be

efficiently followed by the subordinates.

4. Appropriate- Policy should be appropriate to the present organizational

goal.
5. Simple- A policy should be simple and easily understood by all in the
organization.

6. Inclusive/Comprehensive- In order to have a wide scope, a policy must

be comprehensive.

7. Flexible- Policy should be flexible in operation/application. This does not

imply that a policy should be altered always, but it should be wide in scope so as
to ensure that the line managers use them in repetitive/routine scenarios.

8. Stable- Policy should be stable else it will lead to indecisiveness and

uncertainty in minds of those who look into it for guidance .

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Difference between Policy and Strategy

The term “policy” should not be considered as synonymous to the term

“strategy”. The difference between policy and strategy can be summarized as
follows:

1. Policy is a blueprint of the organizational activities which are

repetitive/routine in nature. While strategy is concerned with those
organizational decisions which have not been dealt/faced before in same form.

2. Policy formulation is responsibility of top level management. While

strategy formulation is basically done by middle level management.

3. Policy deals with routine/daily activities essential for effective and

efficient running of an organization. While strategy deals with strategic decisions.

4. Policy is concerned with both thought and actions. While strategy is

concerned mostly with action.

5. A policy is what is, or what is not done. While a strategy is the

methodology used to achieve a target as prescribed by a policy.

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REFERENCES

https://www.cleverism.com/strategy-implementation-process/
https://www.managementstudyguide.com/strategy-evaluation.htm
https://www.managementstudyguide.com/business-policy.htm

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