that must be carried out to complete a 1. New strategy is created.
 These structures emphasize collaboration over
STRATEGY IMPLEMENTATION
Strategy implementation - the sum total of the activities
and choices required for the execution of a strategic plan. It
is the process by which objectives, strategies, and policies
are put into action through the development of programs,
budgets, and procedures.
Who implements strategy?
 Depending on how a corporation is organized,
those who implement strategy will probably be a
much more diverse set of people than those who
formulate it. In most large, what must be done
multi-industry corporations, the implementers are
everyone in the organization.
What must be done?
DEVELOPING PROGRAMS, BUDGETS, AND
PROCEDURES
Programs - purpose is to make a strategy action oriented.
 Lean Six Sigma. - developed to identify and
improve a poorly performing process
 Matrix of change proposed by Brynjolfsson,
Renshaw, and Van Alstyne to help managers
decide how quickly change should proceed, in
what order changes should take place, whether
to start at a new site, and whether the proposed
systems are stable and coherent
The matrix of change can be used to address the following
types of questions:
 Feasibility: Do the proposed programs and
activities constitute a coherent, stable system?
Are the current activities coherent and stable? Is
the transition likely to be difficult?
 Sequence of execution: Where should the
change begin? How does the sequence affect
success? Are there reasonable stopping points?
 Location: Are we better off instituting the new
programs at a new site, or can we reorganize the
existing facilities at a reasonable cost?
 Pace and nature of change: Should the change
be slow or fast, incremental or radical? Which
blocks of current activities must be changed at
the same time?
 Stakeholder evaluations: Have we overlooked
any important activities or interactions? Should
we get further input from interested stakeholders?
Which new programs and current activities offer
the greatest sources of value?
Budgets- Planning a budget is the last real check a
corporation has on the feasibility of its selected strategy. An
ideal strategy might be found to be completely impractical
only after specific implementation programs are costed in
detail.
Procedures - After the program, divisional, and corporate
budgets are approved, procedures must be developed
 Often called Standard Operating Procedures
(SOPs), they typically detail the various activities
corporation’s programs
 Also known as organizational routines,
procedures are the primary means by which
organizations accomplish much of what they
do.
 Once in place, procedures must be updated
to reflect any changes in technology as well
as in strategy
ACHIEVING SYNERGY
 This is the reason corporations commonly
reorganize after an acquisition
Synergy is said to exist for a divisional corporation if the
return on investment (ROI) of each division is greater
than what the return would be if each division were an
independent business.
According to Goold and Campbell, synergy can take
place in one of six forms:
 Shared know-how: Combined units often
benefit from sharing knowledge or skills. This
is a leveraging of core competencies.
 Coordinated strategies: Aligning the
business strategies of two or more business
units may provide a corporation significant
advantage by reducing inter-unit competition
and developing a coordinated response to
common competitors (horizontal strategy).
 Shared tangible resources: Combined units
can sometimes save money by sharing
resources, such as a common manufacturing
facility or R&D lab.
 Economies of scale or scope: Coordinating
the flow of products or services of one unit
with that of another unit can reduce inventory,
increase capacity utilization, and improve
market access
 Pooled negotiating power: Combined units
can combine their purchasing to gain
bargaining power over common suppliers to
reduce costs and improve quality. The same
can be done with common distributors
 New business creation: Exchanging
knowledge and skills can facilitate new
products or services by extracting discrete
activities from various units and combining
them in a new unit or by establishing joint
ventures among internal business units.
STRUCTURE FOLLOWS STRATEGY
 Alfred Chandler concluded that changes in
corporate strategy led to changes in
organizational structure.
 these structural changes occur because the
old structure, having been pushed too far, has
caused inefficiencies that have become too
obviously detrimental to bear.
Chandler, therefore, proposed the following as the
sequence of what occurs:
2. New administrative problems emerge.
3. Economic performance declines.
4. New appropriate structure is invented.
5. Profit returns to its previous level.
STAGES OF CORPORATE DEVELOPMENT
Stage I: Simple Structure- The entrepreneur tends to
make all the important decisions personally and is
involved in every detail and phase of the organization.
The Stage I company has little formal structure, which
allows the entrepreneur to directly supervise the
activities of every employee
 has no functional or product categories and is
appropriate for a small, entrepreneur-
dominated company with one or two product
lines that operates in a reasonably small,
easily identifiable market niche
 greatest strengths of a Stage I corporation are
its flexibility and dynamism.
 greatest weakness is its extreme reliance on
the entrepreneur to decide general strategies
as well as detailed procedures. If the
entrepreneur falters, the company usually
flounders. This is labeled by Greiner as a
crisis of leadership
Stage II: Functional Structure- point when the
entrepreneur is replaced by a team of managers who
have functional specializations.
 The transition to this stage requires a
substantial managerial style change for the
chief officer of the company,
 The great strength of a Stage II corporation
lies in its concentration and specialization in
one industry.
 Its great weakness is that all its eggs are in
one basket.
 crisis of autonomy
Stage III: Divisional Structure- it decentralizes the
decision-making authority
 Stage III organizations grow by diversifying
their product lines and expanding to cover
wider geographical areas.
 crisis of control
Stage IV: Beyond SBUs- the divisional structure is not
the last word in organization structure.
 Even with its evolution into SBUs during the
1970s and 1980s, the divisional structure is
not the last word in organization structure
 The use of SBUs may result in a red tape
crisis in which the corporation has grown too
large and complex to be managed through
formal programs and rigid systems, and
procedures take precedence over problem
solving.
competition in the managing of an
organization’s multiple overlapping projects and
developing businesses.
 pressure-cooker crisis
Blocks to Changing Stages
 Corporations often find themselves in difficulty
because they are blocked from moving into the
next logical stage of development. Blocks to
development may be internal (such as lack of
resources, lack of ability, or refusal of top
management to delegate decision making to
others) or external (such as economic
conditions, labor shortages, and lack of market
growth).
Entrepreneurs who start businesses generally have four
tendencies that work very well for small new ventures but
become Achilles’ heels for these same individuals when
they try to manage a larger firm with diverse needs,
departments, priorities, and constituencies:
 Loyalty to comrades: This is good at the
beginning but soon becomes a liability as
“favoritism.”
 Task oriented: Focusing on the job is critical at
first but then becomes excessive attention to
detail.
 Single-mindedness: A grand vision is needed
to introduce a new product but can become
tunnel vision as the company grows into more
markets and products.
 Working in isolation: This is good for a
brilliant scientist but disastrous for a CEO with
multiple constituencies
ORGANIZATIONAL LIFE CYCLE- organizational life
cycle approach places the primary emphasis on the
dominant issue facing the corporation.
 Organizational structure is only a secondary
concern.
 describes how organizations grow, develop,
and eventually decline. It is the organizational
equivalent of the product life cycle in marketing.
 These stages are Birth (Stage I), Growth
(Stage II), Maturity (Stage III), Decline (Stage
IV), and Death (Stage V).
ADVANCED TYPES OF ORGANIZATIONAL
STRUCTURES- A new strategy may require more flexible
characteristics than the traditional functional or divisional
structure can offer.
Matrix Structure- functional and product forms are
combined simultaneously at the same level of the
organization.
 Employees have two superiors, a product or
project manager, and a functional manager
 The “home” department—that is, engineering,
manufacturing, or sales—is usually functional
and is reasonably permanent. People from
these functional units are often assigned
 temporarily to one or more product units or
projects.
 The product units or projects are usually
temporary and act like divisions in that they are
differentiated on a product-market basis.
 very useful when the external environment
(especially its technological and market aspects)
is very complex and changeable.
The matrix structure is often found in an organization or
SBU when the following three conditions exist:
Ideas need to be cross-fertilized across projects
 source: Instead of having each unit develop
or products.
 Resources are scarce.
 Abilities to process information and to make
 decisions need to be improved.
Davis and Lawrence, authorities on the matrix form of
organization, propose that three distinct phases exist in
the development of the matrix structure:
1. Temporary cross-functional task forces: These are
initially used when a new product line is being introduced. A
project manager is in charge as the key horizontal link.
2. Product/brand management: If the cross-functional
task forces become more permanent, the project manager
becomes a product or brand manager and a second phase
begins. In this arrangement, function is still the primary
organizational structure, but product or brand managers act
as the integrators of semi-permanent products or brands.
3. Mature matrix: The third and final phase of matrix
development involves a true dual-authority structure. Both
the functional and product structures are permanent. All
employees are connected to both a vertical functional
superior and a horizontal product manager. Functional and
product managers have equal authority and must work well
together to resolve disagreements over resources and
priorities.
Network Structure–The Virtual Organization- example of
what could be termed a “non-structure” because of its
virtual elimination of in-house business functions. Many
activities are outsourced
 A newer and somewhat more radical
organizational design,
 becomes most useful when the environment of a
firm is unstable and is expected to remain so
 In its ultimate form, a network organization is a
series of independent firms or business units
linked together by computers in an information
system that designs, produces, and markets a
product or service.
A corporation organized in this manner is often called a
virtual organization because it is composed of a series of
project groups or collaborations linked by constantly
changing nonhierarchical, cobweb-like electronic networks.
Cellular/Modular Organization: A New Type of Structure?
According to Miles and Snow et al., “a cellular
organization is composed of cells (self-managing teams,
autonomous business units, etc.) which can operate alone
but which can interact with other cells to produce a more
potent and competent business mechanism.”
 This combination of independence and
interdependence allows the cellular/modular
organizational form to generate and share the
knowledge and expertise needed to produce
continuous innovation.
 The cellular/modular form includes the
dispersed entrepreneurship of the divisional
structure, customer responsiveness of the
matrix, and self-organizing knowledge and
asset sharing of the network.
The cellular/modular structure is used when it is
possible to break up a company’s products into self-
contained modules or cells and where interfaces can be
specified such that the cells/modules work when they
are joined together.
 is similar to a current trend in industry of using
internal joint ventures to temporarily combine
specialized expertise and skills within a
corporation to accomplish a task which
individual units alone could not accomplish
REENGINEERING AND STRATEGY
IMPLEMENTATION
Reengineering is the radical redesign of business
processes to achieve major gains in cost, service, or
time. It is not in itself a type of structure, but it is an
effective program to implement a turnaround strategy
 Business process reengineering strives to
break away from the old rules and procedures
that develop and become ingrained in every
organization over the years.
Michael Hammer, who popularized the concept of
reengineering, suggests the following principles for
reengineering:
 Organize around outcomes, not tasks:
Design a person’s or a department’s job
around an objective or outcome instead of a
single task or series of tasks.
 Have those who use the output of the
process perform the process: With
computer-based information systems,
processes can now be reengineered so that
the people who need the result of the process
can do it themselves.
 Subsume information-processing work
into the real work that produces the
information: People or departments that
produce information can also process it for
use instead of just sending raw data to others
in the organization to interpret.
 Treat geographically dispersed resources
as though they were centralized: With
modern information systems, companies can
provide flexible service locally while keeping
the actual resources in a centralized location
for coordination purposes.
 Link parallel activities instead of
integrating their results: Instead of having
separate units perform different activities that
must eventually come together, have them
communicate while they work so that they can
do the integrating.
 Put the decision point where the work is
performed and build control into the
process: The people who do the work should
make the decisions and be self-controlling.
 Capture information once and at the
its own database and information processing
activities, the information can be put on a
network so that all can access
Six Sigma is an analytical method for achieving near-
perfect results on a production line
 The Greek letter Sigma denotes variation in
the standard bell-shaped curve
One sigma equals 690,000 defects per 1

million
Six Sigma reduces the defects to only 3.4 per million—
thus saving money by preventing waste. The process of
Six Sigma encompasses five steps. 1. Define a process
where results are poorer than average.
2. Measure the process to determine exact current
performance.
3. Analyze the information to pinpoint where things are
going wrong.
4. Improve the process and eliminate the error.
5. Establish controls to prevent future defects from
occurring.
Savings attributed to Six Sigma programs have ranged
from 1.2% to 4.5% of annual revenue for a number of
Fortune 500 firms.
A new program called Lean Six Sigma is becoming
increasingly popular in companies. This program
incorporates the statistical approach of Six Sigma with
the lean manufacturing program originally developed by
Toyota
DESIGNING JOBS TO IMPLEMENT STRATEGY
 Organizing a company’s activities and people
to implement strategy involves more than
simply redesigning a corporation’s overall
structure; it also involves redesigning the way
jobs are done.
Job design refers to the study of individual tasks in an
attempt to make them more relevant to the company
and to the employee(s).
Job enlargement - combining tasks to give a worker
more of the same type of duties to perform
Job rotation - moving workers through several jobs to
increase variety
Job enrichment - altering the jobs by giving the worker
more autonomy and control over activities
 Job characteristics model is a good example
of job enrichment.
INTERNATIONAL ISSUES IN STRATEGY
IMPLEMENTATION
International company is one that engages in any
combination of activities, from exporting/importing to full-
scale manufacturing, in foreign countries.
Multinational corporation (MNC), in contrast, is a highly
developed international company with a deep
involvement throughout the world, plus a worldwide
perspective in its management and decision making
multidomestic (each country’s industry is essentially
separate from the same industry in other countries) to
global (each country is a part of one worldwide industry).
According to Spulber in his book, Global Competitive
Strategy, the forces pushing for standardization are:
 Convergence in customer preferences and
income across target countries.
 Competition from successful global products.
 Growing customer awareness of international
brands.
 Economies of scale.
 Falling trading costs across countries.
 Cultural exchange and business interactions
among countries.
The forces pushing for customization to local markets are:
 Persistent differences in customer preferences.
 Persistent differences in customer incomes.
 The need to build local brand reputation
 Competition from successful, innovative
domestic companies.
 Variations in trading costs across countries.
 Local regulatory requirements
INTERNATIONAL STRATEGIC ALLIANCES
Strategic alliances, such as joint ventures and licensing
agreements, between an MNC and a local partner in a
host country are becoming increasingly popular as a
means by which a corporation can gain entry into other
countries, especially less developed countries
The key to the successful implementation of these
strategies is the selection of the local partner
A successful joint venture may require as much as two
years of prior contacts between the parties.
Key drivers for strategic fit between alliance partners are
the following:
 Partners must agree on fundamental values
and have a shared vision about the potential for
joint value creation.
 Alliance strategy must be derived from
business, corporate, and functional strategy.
 The alliance must be important to both partners,
especially to top management.
  Partners must be mutually dependent for
achieving clear and realistic objectives.
 Joint activities must have added value for
customers and the partners.
 The alliance must be accepted by key
stakeholders.
 Partners contribute key strengths but protect
core competencies.
STAGES OF INTERNATIONAL DEVELOPMENT
Stage 1 (Domestic company): The primarily domestic
company exports some of its products through local
dealers and distributors in the foreign countries. The impact
on the organization’s structure is minimal because an
export department at corporate headquarters handles
everything.
Stage 2 (Domestic company with export division):
Success in Stage 1 leads the company to establish its own
sales company with offices in other countries to eliminate
the middlemen and to better control marketing. Because
exports have now become more important, the company
establishes an export division to oversee foreign sales
offices.
Stage 3 (Primarily domestic company with international
division): Success in earlier stages leads the company to
establish manufacturing facilities in addition to sales and
service offices in key countries. The company now adds an
international division with responsibilities for most of the
business functions conducted in other countries.
Stage 4 (Multinational corporation with multidomestic
emphasis): Now a full-fledged MNC, the company
increases its investments in other countries. The company
establishes a local operating division or company in the
host country, such as Ford of Britain, to better serve the
market. The product line is expanded, and local
manufacturing capacity is established. Managerial
functions (product development, finance, marketing, and so
on) are organized locally. Over time, the parent company
acquires other related businesses, broadening the base of
the local operating division.
Stage 5 (MNC with global emphasis): The most
successful MNCs move into a fifth stage in which they have
worldwide human resources, R&D, and financing strategies.
Typically operating in a global industry, the MNC
denationalizes its operations and plans product design,
manufacturing, and marketing around worldwide
considerations. Global considerations now dominate
organizational design.
CENTRALIZATION VERSUS
DECENTRALIZATION
A basic dilemma an MNC faces is how to organize authority
centrally so that it operates as a vast interlocking system
that achieves synergy and at the same time decentralize
authority so that local managers can make the decisions
necessary to meet the demands of the local market or host
government. To deal with this problem, MNCs tend to
structure themselves either along product groups or
geographic areas.
Product-group structure- enables the company to
introduce and manage a similar line of products around
the world. This enables the corporation to centralize
decision making along product lines and to reduce costs.
Geographic-area structure- allows the company to
tailor products to regional differences and to achieve
regional coordination.
CHAPTER 10: STRATEGY IMPLEMENTATION:
STAFFING AND DIRECTING
STAFFING
Staffing is one key to implementation at Enterprise
which is about hiring and promoting a certain kind of
person. It is about focuses on the selection and use of
employees.
Why is staffing important? The implementation of new
strategies and policies often calls for new human
resource management priorities and a different use of
personnel. Such staffing issues can involve:
1. hiring new people with new skills
2. firing people with inappropriate or
substandard skills
3. training existing employees to learn new skills
“What if” conditions:
If growth strategies are to be implemented:
1. new people may need to be hired and
trained
2. Experienced people with the necessary
skills need to be found for promotion to
newly created managerial positions
If a corporation follows a growth through
acquisition strategy (acquisition of
another company):
1. it may find that it needs to replace several
managers in the acquired company
BUT to deal with integration issues (such as
issues related to merging of two companies or
acquisition of another company), some
companies are appointing special integration
managers to shepherd companies through the
implementation process.
Integration managers - to prepare a A company can identify and prepare its people for
competitive profile of the combined company.
 strengths and weaknesses
 draft an ideal profile of what the combined
company should look like
 develop action plans to close the gap
between the actuality and the ideal
 establish training programs to unite the
combined company and to make it more
competitive.
To be more successful, they must have:
 a deep knowledge of the acquiring
company
 a flexible management styles
 an ability to work in cross-functional
project teams
 a willingness to work independently
 sufficient emotional and cultural
intelligence to work well with people from
all backgrounds
If a corporation adopts a retrenchment
strategy,
1. Many people may need to be laid off or
fired - being laid off is the same as being
fired
2. Top management, as well as the divisional
managers, need to specify the criteria to
be used in making these personnel
decisions. Should employees be fired
based on low seniority or based on poor
performance?
Corporations find it easier to close or sell off an
entire division than to choose which individuals
to fire.
STAFFING FOLLOWS STRATEGY
Staffing requirements are likely to follow a change in
strategy. For example, promotions should be based not
only on current job performance but also on whether a
person has the skills and abilities to do what is needed
to implement the new strategy.
1. Changing Hiring and Training
Requirements
Firstly, having formulated a new strategy, a
corporation may find that it needs to either hire
different people or retrain current employees to
implement the new strategy. Secondly, one way to
implement a company’s business strategy, such as
overall low cost, is also through training and
development.
 Growth strategy - Training is especially
important for a differentiation strategy
emphasizing quality or customer service.
 Retrenchment strategy - Training is also
important when implementing a retrenchment
strategy. Successful downsizing means that a
company has to invest in its remaining
employees.
2. Matching the Manager to the Strategy
Executive characteristics influence strategic
outcomes for a corporation. It is possible that a
current CEO may not be appropriate to implement
a new strategy.
Research indicates that there may be a career life
cycle for top executives:
1. learning stage - during the early years of
executives’ tenure, they tend to experiment
intensively with product lines to learn about
their business.
2. harvest stage - their accumulated knowledge
allows them to reduce experimentation and
increase performance.
3. decline stage - they reduce experimentation still
further, and performance declines
Executive Type - executives with a particular mix
of skills and experiences and paired with a
specific corporate strategy.
SELECTION AND MANAGEMENT DEVELOPMENT
Selection and development are important not only to
ensure that people with the right mix of skills and
experiences are initially hired but also to help them grow
on the job so that they might be prepared for future
promotions.
1. Executive Succession: Insiders versus
Outsiders
Executive succession - the process of replacing
a key top manager.
 Promotion of current manager: For example,
companies using relay executive succession,
in which a candidate is chosen to take over the
CEO position, have significantly higher
performance than those that hire someone from
the outside or hold a competition between
internal candidates. These “heirs apparent” are
provided special assignments including
membership on other firms’ boards of directors.
Some of the best practices for top management
succession are:
 encouraging boards to help the CEO create a
succession plan
 identifying succession candidates below the top
layer
 measuring internal candidates against outside
candidates to ensure the development of a
comprehensive set of skills
 providing appropriate financial incentives
Succession planning - has become the most
important topic discussed by boards of directors.
2. Identifying Abilities and Potential
important positions in several ways.
1. establish a sound performance appraisal
system to identify good performers with
promotion potential
2. examine human resource system to ensure not
only that people are being hired without regard
to their racial, ethnic, or religious background,
but also that they are being identified for
training and promotion in the same manner.
3. using assessment centers to evaluate a
person’s suitability for an advanced position
 Job rotation - moving people from one job to
another. It is also used in many large corporations
to ensure that employees are gaining the
appropriate mix of experiences to prepare them for
future responsibilities.
Benefits? Rotating people among divisions is one
way that a corporation can improve the level of
organizational learning
PROBLEMS IN RETRENCHMENT
Some firms have experienced declining sales and profits
and are attempting to cut costs. Due to this, workers were
laid or fired.
Downsizing (sometimes called “rightsizing” or
“resizing”) - refers to the planned elimination of positions
or jobs and is used to implement retrenchment strategies.
UNSUCCESSFUL DOWNSIZING:
 After the layoffs, the remaining employees had to
do not only their work but also the work of the
people who had gone. Because the survivors
often didn’t know how to do the departeds’ work,
morale and productivity plummeted.
 Downsizing can seriously damage the learning
capacity of organizations. Creativity drops
significantly (affecting new product development),
and it becomes very difficult to keep high
performers from leaving the company.
 cost-conscious executives tend to defer
maintenance, skimp on training, delay new
product introductions, and avoid risky new
businesses—all of which leads to lower sales
and eventually to lower profits
SUCCESSFUL DOWNSIZING:
Guidelines that have been proposed for successful
downsizing:
 Eliminate unnecessary work instead of making
across-the-board cuts
 Contract out work that others can do cheaper
 Plan for long-run efficiencies
 Communicate the reasons for actions
 Invest in the remaining employees (survivors)
 Develop value-added jobs to balance out job
elimination
INTERNATIONAL ISSUES IN STAFFING
Implementing a strategy of international expansion takes a
lot of planning and can be very expensive.
1. One common mistake is failing to educate the
person about the customs and values in other
countries.
- Thus, because of cultural differences,
managerial style and human resource
practices must be tailored to fit the
particular situations in other countries.
2. A lack of knowledge of national and ethnic
differences can make managing an
international operation extremely difficult.
- intercultural training - Because of the
importance of cultural distinctions,
multinational corporations (MNCs) are
now putting more emphasis on this
training for managers being sent on an
assignment to a foreign country. This
type of training is one of the commonly
cited reasons for the lower expatriate
failure rates.
- Expatriates - To improve organizational
learning, many MNCs are providing their
managers with international assignments
lasting as long as five years. Upon their
return to their companies, these
expatriates have an in-depth
understanding of the company’s
operations in another part of the world.
This has value to the extent that these
employees communicate this
understanding to others in decision-
making positions
The companies that do a good job of
managing foreign assignments follow
three general practices:
 When making international
assignments, they focus on
transferring knowledge and
developing global leadership.
 They make foreign assignments to
people whose technical skills are
matched or exceeded by their
cross-cultural abilities.
 They end foreign assignments
with a deliberate repatriation
process, with career guidance and
jobs where the employees can
apply what they learned in their
assignments.
Once a corporation has established itself
in another country, it hires and promotes
people from the host country into higher-
level positions.
- International orientation - Another
approach to staffing the managerial
positions of MNCs is to use people with
an “international” orientation, regardless
of their country of origin or host country
assignment.
- Immigrants - Some corporations take
advantage of immigrants and their
children to staff key positions when
negotiating entry into another country
and when selecting an executive to
manage the company’s new foreign
operations
Product and SBU managers who are
based at corporate headquarters often
travel around the world to work
personally with country managers. These
managers and other mobile workers are
being called stealth expatriates
because they are either cross-border
commuters (especially in the EU) or the
accidental expatriate who goes on
many business trips or temporary
assignments due to offshoring and/or
international joint ventures
LEADING
Leading is about specifying clear performance
objectives and promoting a team-oriented corporate
culture. It is about the use of programs to better align
employee interests and attitudes with a new strategy.
Implementation also involves leading through coaching
people to use their abilities and skills most effectively
and efficiently to achieve organizational objectives
WITHOUT LEADING?
1. Without direction, people tend to do their work
according to their personal view of what tasks
should be done, how, and in what order.
2. They may approach their work as they have in
the past or emphasize those tasks that they
most enjoy—regardless of the corporation’s
priorities. This can create real problems,
particularly if the company is operating
internationally and must adjust to customs
and traditions in other countries.
Leading - this direction may take the form of
management leadership, communicated norms of
behavior from the corporate culture, or agreements
among workers in autonomous work groups.
It may be accomplished more formally through action
planning or through programs, such as Management By
Objectives and Total Quality Management. Procedures
can be changed to provide incentives to motivate
employees to align their behavior with corporate
objectives.
MANAGING CORPORATE CULTURE
Because an organization’s culture can exert a powerful
influence on the behavior of all employees, it can
strongly affect a company’s ability to shift its strategic
direction.
OTHER INFO. Organizational culture
can refer to the culture of any type of
organization (including corporations),
corporate culture specifically pertains to
the culture of a corporation.
problem for a strong culture - a change in mission,
objectives, strategies, or policies is not likely to be
successful if it is in opposition to the accepted culture of
the company. Corporate culture has a strong tendency
to resist change because its very reason for existence
often rests on preserving stable relationships and
patterns of behavior.
An optimal culture is one that best supports the mission
and strategy of the company of which it is a part. This
means that corporate culture should support the
strategy. Unless strategy is in complete agreement with
the culture, any significant change in strategy should be
followed by a modification of the organization’s culture.
Optimal culture is the organizational
culture that best supports your
organization's strategy to be successful.
A key job of management involves managing corporate
culture. In doing so, management must evaluate what a
particular change in strategy means to the corporate
culture, assess whether a change in culture is needed,
and decide whether an attempt to change the culture is
worth the likely costs.
ASSESSING STRATEGY-CULTURE
COMPATIBILITY
When implementing a new strategy, a company
should take the time to assess strategy-culture
compatibility
1. Is the proposed strategy compatible with the
company’s current culture? - identifying how
the new strategy will achieve the mission better
than the current strategy does (if not...)
2. Can the culture be easily modified to make it
more compatible with the new strategy? -
introducing a set of culture-changing activities
(if not...)
3. Is management willing and able to make major
organizational changes and accept probable
delays and a likely increase in costs? -
establishing a new structural unit to implement
the new strategy (if not...)
4. Is management still committed to implementing
the strategy? - find a jointventure partner or
contract with another company to carry out the
strategy (if not, formulate different strategy)
MANAGING CULTURAL CHANGE THROUGH
COMMUNICATION
Communication - is key to the effective
management of change.
Rationale for strategic changes should be
communicated to workers not only in newsletters
and speeches, but also in training and development
programs. This is especially important in
decentralized firms where many employees work in
business units.
Companies in which major cultural changes have
successfully taken place had the following
characteristics in common:
- The CEO and other top managers had a
strategic vision of what the company could
become and communicated that vision to
employees at all levels. The current
 performance of the company was compared to
that of its competition and constantly updated.
- The vision was translated into the key elements
necessary to accomplish that vision
MANAGING DIVERSE CULTURES FOLLOWING AN
ACQUISITION
When merging with or acquiring another company, top
management must give some consideration to a
potential clash of corporate cultures. Cultural
differences are even more problematic when a
company acquires a firm in another country.
There are four general methods of managing two
different cultures. The choice of which method to
use should be based on (1) how much members of
the acquired firm value preserving their own culture
and (2) how attractive they perceive the culture of the
acquirer to be.
Integration
- a relatively balanced give-and-take of cultural and
managerial practices between the merger partners,
and no strong imposition of cultural change on either
company
- two cultures in such a way that the separate cultures
of both firms are preserved in the resulting culture
- Equal merger of both cultures into a new corporate
culture
Assimilation
- the domination of one organization over the other.
The domination is not forced, but it is welcomed by
members of the acquired firm, who may feel for many
reasons that their culture and managerial practices
have not produced success.
- The acquired firm surrenders its culture and adopts
the culture of the acquiring company.
- Acquiring firm’s culture kept intact, but subservient to
that of acquiring firm’s corporate culture
Separation
- a separation of the two companies’ cultures.
- Conflicting cultures kept intact, but kept separate in
different units
Deculturation
- disintegration of one company’s culture resulting
from unwanted and extreme pressure from the other
to impose its culture and practices.
- this is the most common and most destructive
method of dealing with two different cultures
accompanied by much confusion, conflict, resentment,
and stress. Main reason why executives tend to leave
after their company is being acquired.
- Forced replacement of conflicting acquired firm’s
culture with that of the acquiring firm’s culture.
ACTION PLANNING
After a program has been selected to implement a
particular strategy, an action plan should be developed
to put the program in place or activities can be directed
toward accomplishing strategic goals through action
planning.
Action plan - states what actions are going to be taken,
by whom, during what time frame, and with what
expected results.
EXAMPLE: action plan to develop a new advertising
program:
1. Specific actions to be taken to make the
program operational
2. Dates to begin and end each action
3. Person (identified by name and title)
responsible for carrying out each action
4. Person responsible for monitoring the
timeliness and effectiveness of each action
5. Expected financial and physical
consequences of each action
6. Contingency plans
Importance of Action Plan:
1. Action plans serve as a link between strategy
formulation and evaluation and control.
2. action plan specifies what needs to be done
differently from the way operations are
currently carried out.
3. During the evaluation and control process that
comes later, an action plan helps in both the
appraisal of performance and in the
identification of any remedial actions, as
needed.
MANAGEMENT BY OBJECTIVES
Management By Objectives (MBO) is a technique that
encourages participative decision making through
shared goal setting at all organizational levels and
performance assessment based on the achievement of
stated objectives (powerful implementation technique). It
links organizational objectives and the behavior of
individuals (link between plans and performance).
TOTAL QUALITY MANAGEMENT
Total Quality Management (TQM) is an operational
philosophy committed to customer satisfaction and
continuous improvement. It is committed to
quality/excellence and to being the best in all functions.
TQM’s essential ingredients are:
1. An intense focus on customer satisfaction
2. Internal as well as external customers
3. Accurate measurement of every critical
variable in a company’s operations
4. Continuous improvement of products and
services
5. New work relationships based on trust and
teamwork
INTERNATIONAL CONSIDERATIONS IN LEADING
5 dimensions of national culture (Hofstede)
1. Power distance (PD) is the extent to which a
society accepts an unequal distribution of
power in organizations. People in those
countries scoring high on this dimension tend
to prefer autocratic to more participative
managers.
2. Uncertainty avoidance (UA) is the extent to
which a society feels threatened by uncertain
and ambiguous situations. People in those
nations scoring high on this dimension tend to
want career stability, formal rules, and clear-
cut measures of performance.
3. Individualism-collectivism (I-C) is the extent
to which a society values individual freedom
and independence of action compared with a
tight social framework and loyalty to the group.
People in nations scoring high on
individualism tend to value individual success
through competition, whereas people scoring
low on individualism (thus high on collectivism)
tend to value group success through
collective cooperation.
4. Masculinity-femininity (M-F) is the extent to
which society is oriented toward money and
things (which Hofstede labels masculine) or
toward people (which Hofstede labels
feminine). People in nations scoring high on
masculinity tend to value clearly defined sex
roles where men dominate, and to emphasize
performance and independence, whereas
people scoring low on masculinity (and thus
high on femininity) tend to value equality of
the sexes where power is shared, and to
emphasize the quality of life and
interdependence.
MODULE 7.1: STRATEGIC HRM & JOB ANALYSIS
Strategic human resource management (SHRM) -
can be thought of as “the pattern of planned human
resource deployments and activities intended to enable
an organization to achieve its goals.”
In recent years organizations have recognized that the
success of the strategic management process depends
largely on the extent to which the HRM function is
involved. The strategic choice consists of answering the
following questions abou competition.
1. Where to compete? In what market or markets
(industries, products, etc.) will we compete?
2. How to compete? On what criterion or differentiating
characteristic(s) will we compete? Cost? Quality?
Reliability? Delivery?
3. With what will we compete? What resources will allow
us to beat our competition? How will we acquire,
develop, and deploy those resources to compete?
WHAT IS THE ROLE OF HRM IN STRATEGY
FORMULATION?
A firm’s strategic management decision-making process
usually takes place at its top levels, with a strategic
planning group consisting of the chief executive officer,
the chief financial officer, the president, and various vice
presidents. However, each component of the process
involves people-related business issues. Therefore, the
HRM function needs to be involved in each of those
components.
Four levels of integration
1. Administrative Linkage: focused on day-to-
day activities
2. One-Way Linkage: firm’s strategic business
planning function develops the strategic plan
and then informs the HRM function of the plan
3. Two-Way Linkage: allows for consideration of
human resource issues during the strategy
formulation process
4. Integrative Linkage: based on continuing
rather than sequential interaction.
WHAT ARE THE MORE POPULAR TYPOLOGIES OF
GENERIC STRATEGIES AND THE VARIOUS HRM
PRACTICES ASSOCIATED WITH IT?
Typologies - classification based on types or categories.
After an organization has chosen its strategy, it has to
execute that strategy—make it come to life in its day-to-
day workings. The strategy a company pursues dictates
certain HR needs.
For a company to have a good strategy foundation,
certain tasks must be accomplished in pursuit of the
company’s goals, individuals must possess certain skills
to perform those tasks, and these individuals must be
motivated to perform their skills effectively.
Five important variables determine success in strategy
implementation:
1. organizational structure
2. task design
3. the selection, training, and development of
people
4. reward systems
5. types of information and information systems.
From among the variables mentioned, HRM has the
primary responsibility for the three of these five
implementation variables
1. Task - for the strategy to be successfully
implemented, the tasks must be designed and
grouped into jobs in a way that is efficient and
effective.
2. People - HRM function must ensure that the
organization is staffed with people who have
the necessary knowledge, skills and abilities to
perform their part in implementing the strategy.
3. Reward Systems - HRM function must develop
performance management and reward systems
that lead employees to work for and support the
strategic plan.
In other words, the role of the HRM function becomes one
of (1) ensuring that the company has the proper number of
employees with the levels and types of skills required by
the strategic plan and (2) developing “control” systems that
ensure that those employees are acting in ways that
promote the achievement of the goals specified in the
strategic plan.
Moreover, HRM can also directly affect the two remaining
variables
1. Structure
2. Information and Decision Systems
According to Michael Porter of Harvard, competitive
advantage stems from a company’s being able to create
value in its production process. Value can be created in
one of two ways.
1. value can be created by reducing costs
- “overall cost leadership” strategy focuses on
becoming the lowest cost producer in an industry.
2. value can be created by differentiating a product
or service in such a way that it allows the
company to charge a premium price relative to its
competitors
- “differentiation” strategy attempts to create the
impression that the company’s product or service
is different from that of others in the industry. The
perceived differentiation can come from creating
a brand image, from technology, from offering
unique features, or from unique customer service.
HUMAN RESOURCE MANAGEMENT NEEDS IN
STRATEGIC TYPES
While all of the strategic types require competent people in
a generic sense, each of the strategies also requires
different types of employees with different types of
behaviors and attitudes.
cost strategy - Companies tend to specifically define the
skills they require and invest in training employees in these
skill areas. They also rely on behavioral performance
management systems with a large performance-based
compensation component.
differentiation strategy - Companies need to be highly
creative and cooperative; to have only a moderate concern
for quantity, a long-term focus, and a tolerance for
ambiguity; and to be risk takers. Employees in these
companies are expected to exhibit role behaviors that
include cooperating with others, developing new ideas, and
taking a balanced approach to process and results.
Role behaviors - Behaviors that are required of an
individual in his or her role as a jobholder in a social work
environment.
WHAT ARE THE DIFFERENT HRM ISSUES AND
PRACTICES ASSOCIATED WITH VARIOUS
DIRECTIONAL STRATEGIES?
Strategic typologies are useful for classifying the ways
different organizations seek to compete within an industry.
However, it is also necessary to understand how increasing
size (growth) or decreasing it (downsizing) affects the HRM
function. Companies have used four possible categories
of directional strategies to meet objectives.
1. External Growth Strategy - An emphasis on
acquiring vendors and suppliers or buying
businesses that allow a company to expand
into new markets.
2. Internal Growth Strategy - A focus on new
market and product development, innovation,
and joint ventures.
3. Concentration Strategy - A strategy focusing
on increasing market share, reducing costs,
or creating and maintaining a market niche for
products and services.
4. Downsizing - The planned elimination of
large numbers of personnel, designed to
enhance organizational effectiveness.
STRATEGY EVALUATION AND CONTROL
A final component to the strategic management process
is that of strategy evaluation and control. It is extremely
important for the firm to constantly monitor the
effectiveness of both the strategy and the
implementation process. This monitoring makes it
possible for the company to identify problem areas and
either revise existing structures and strategies or devise
new ones.
Two important roles of human resources in providing
strategic competitive advantage are the following
1. Emergent Strategies: consist of the
strategies that evolve from the grassroots of
the organization and can be thought of as
what organizations do, as opposed to what
they intend to do. While, intended strategies
is consistent to the definition of strategy, “the
pattern or plan that integrates an
organization’s major goals, policies, and
action sequences into a cohesive whole”,
emergent strategy on the other hand can be
thought of as “a pattern in a stream of
decisions or actions.”
2. Enhancing Firm Competitiveness:
companies are becoming interested in the
idea of a “learning organization,” in which
people continually expand their capacity to
achieve the results they desire.
MODULE 7.2: STRATEGIC HRM & JOB ANALYSIS
WORK- FLOW ANALYSIS AND ORGANIZATION
STRUCTURE
Work-flow design - is a process of analyzing tasks
necessary for production of a product or service, prior to
assigning tasks to a particular job category or person.
Organization structure – refers to the relatively stable
and formal network of vertical and horizontal
interconnections among jobs that constitute the
organization.
Work-flow analysis - is useful in providing a means for
managers to understand all tasks required to produce a
high-quality product and the skills necessary to perform
those tasks. It includes analyzing:
1. work inputs - identify the inputs used in the
development of the work unit’s product. These
inputs can be broken down into the raw
materials, equipment and human skills
needed to perform the task.
Raw inputs: what materials, data, and
information are needed
Equipment: what special equipment, facilities,
and systems are needed
Human resources: what knowledge, skills,
and abilities are need by those performing the
tasks
2. work processes - are the activities that
members of a work unit engage in to produce
a given output. Process consist of operating
procedures and these procedures includes all
the task (are usually broken down into those
performed by each person in the work unit)
that must be performed in the production of
the output.
Lean Production is processes that
emphasize manufacturing goods with
minimum amount of time, materials, money
and people to leverage technology and
flexible, well-trained and skilled personnel to
produce more custom products for less.
Batch Work Methods use large groups of
low skilled employees to churn out long runs
of identical mass products stored in
inventories for later sale.
3. work outputs - is the result of work carried
out by people using equipment or service over
a certain unit of time. Once these outputs
have been identified, it is necessary to specify
standards for the quantity and quality of these
outputs. Once the output of the work has
been identified, it is possible to examine the
work processes used to generate the output.
Organization structure provides a cross-
sectional overview of the static relationship
between individuals and units that create
outputs. Two dimensions of structure are:
Centralization refers to the degree to which
decision-making authority resides at the top of
the organizational chart as opposed to being
distributed throughout lower levels.
Departmentalization refers to the degree to
the degree to which work units are grouped
based on functional similarity or similarity of
workflow. It also refers to the formal structure
of the organization, composed of various
departments and managerial positions and their
relationships with each other.
Two common configurations of organization
structure tend to emerge in an organization.
Functional
- Functional departmentalization
- High level of centralization
- High efficiency
- Inflexible
- Insensitive to subtle differences across
products, regions and clients
Divisional
- Workflow Departmentalization
- Low level of centralization
- Semi- autonomous
- Flexible and innovative
- Sensitive to subtle differences across
products, regions and clients
JOB ANALYSIS is a systematic investigation of task,
duties and responsibilities of a job and the necessary
knowledge, skills and abilities of the person needs to
perform the job adequately.
Job Analyst - People who collects information about job
content, how the job is done and the personal
requirements needed to do the job successfully. Following
are the main importance and uses of job analysis:
Job redesign is an effort where job responsibilities
and tasks are reviewed, and possibly re-allocated
among staff, to improve output. Redesigning jobs
can lead to improvements in both productivity and
in job satisfaction.
Human resource planning is the process of
making sure there's adequate staffing, and that
employees are qualified to meet the needs of the
company. It requires accurate information about the
levels of skills required in various job to ensure that
enough individuals are available in the organization
to meet the HR needs of strategic plan.
Selection identifies the most qualified applicants
for employment. It is necessary to determine the
task that will be performed by the individual hired
and the knowledge, skills and abilities the individual
must have to perform the job effectively.
Training is the process of increasing the
knowledge and skills of an employee for doing a
particular job. It involves the development of skills
that are usually necessary to perform a specific job.
Performance appraisal is a regular review of an
employee's job performance and overall
contribution to a company. Through job analysis,
the organization can identify the behaviors and
results that distinguish effective performance from
ineffective performance.
Career Planning entails matching an individual’s
skills and aspirations with opportunities that are or
 may become available in the organizations. This
allows HR to guide individuals into jobs in which they
will succeed and be satisfied.
Job Evaluation is a systematic way of determining
the value/worth of a job in relation to other jobs in an
organization. It tries to make a systematic
comparison between jobs to assess their relative
worth for the purpose of establishing a rational pay
structure
COMPONENTS OF JOB ANALYSIS
1. Job Content describes the duties and
responsibilities of the job in a manner that can
range from global to a very detailed description
of tasks and procedural steps
2. Job Requirement identify the formal
qualification, knowledge, skills, abilities and
personal characteristics that employees need to
perform the content of the job in a particular
situation or context
3. Job context refers to situational and supporting
information about a particular job. Its purpose,
where it fits within the organization, scope data,
availability of guidelines, the potential
consequences of error, the amount of closeness
of supervision, work setting and cultural, physical
and working conditions.
HR use job analysis as a tool to ensure that the employees
give their maximum output and fulfill the objectives related
to a job. They can lay down guidelines and frameworks
which would help them recruit the most apt person, ensure
they have the right skills and monitor their roles,
responsibilities & output. Job analysis helps HR managers
to decide the salaries, incentives & other benefits in
accordance with the job title, position, location etc.
Similarly, job analysis is important for employees and
prospective candidates as they get a thorough
understanding of what is actually required from them.
Employees have a clear picture on their deliverables, the
wages, workplace environment, benefits etc. A candidate
while applying can easily identify the best job for their
which suits their skills, training, previous experience, areas
of interest etc. Thus, job analysis is a critical component for
both the managers as well as employees in maximizing the
output for the company.
A good job analysis helps in creating a job description
and job specification, which are quite similar terms. Job
description and job specification are both a part of Job
analysis given by a company.
3 JOB ANALYSIS METHODS THAT EVERY HR
PROFESSIONAL NEEDS TO KNOW
Job Analysis Method: Interview - with this job analysis
method, job analysts conduct interviews with incumbents to
collect information about their tasks and how they are
coping with them.
Structured interviews follow a systematic approach
where employees are interviewed accurately and
consistently, following a preset format. In a
structured interview, you typically see that:
 All interviewees are asked the same
questions in the same order.
 Interviewers record, compare and evaluate
answers against standardized criteria.
 The interview process remains the same even
if the interviewer changes.
Unstructured interviews unravel without a preset
structure. The interview process is carried out as a
conversation with no specific questions predefined.
Nevertheless, the interviewer should make the
purpose and focus of the interview clear to the
employees.
Namely, that the purpose of the interview is to
understand their job role better in order to improve
or modify their role. In an unstructured interview,
you typically see that:
 Interviewees may receive different questions
or the same questions may be asked in a
different order.
 Interviewers don’t always use standardized
criteria for recording, comparing and
evaluating answers.
 The interview process varies depending on
the interviewer.
JOB ANALYSIS METHOD: QUESTIONNAIRES
The questionnaire job analysis method requires
employees, supervisors, and managers to fill out forms,
namely questionnaires. It’s one of the most widely used
job analysis methods because it’s inexpensive to create
and easy to distribute to numerous individuals at a
faster rate.
Questionnaires can have different question forms, such
as open-ended questions, multiple choice, checklists or
a mix of all of them. Questionnaires used for job
analysis collect data about all aspects that influence
how a job is completed, including both internal and
external factors.
Position Analysis Questionnaire (PAQ) is a
standardized job analysis questionnaire containing 194
items. These items represent work behavior, work
conditions and job characteristics that can be
generalized across a wide variety of jobs.
JOB ANALYSIS METHOD: OBSERVATION
The observation method enables job analysts to
observe employees in their daily routines. The
information collected through observation is extremely
useful and reliable since it’s via first-hand knowledge.
Observation is the only job analysis method that allows
the job analyst or HR professional to directly obtain the
data, whereas other job analysis methods collect data
indirectly and in an orchestrated environment.
When using this particular method, a job analyst
observes an employee and records what they do and do
not do. This helps job analysts and HR professionals
reach a more reliable conclusion.
Some of the disadvantages of using the observation job
analysis method include:
1. Distortion of information if an employee is
aware of the observation.
2. Awareness may affect the work output during
the observation.
3. Not all job duties and reactions can be
observed in the set time frame.
4. Higher managerial and executive roles may
be difficult to observe fully.
HR may decide to change the way the work is done in
order for the work unit to perform more effectively and
efficiently. This requires redesigning the existing jobs.
 Job design is the process of defining how
work will be performed and the tasks that will
be required in a given job.
 Job redesign refers to changing the tasks or
the way work is performed in an existing job.
Methods on Job Design
 job specialization – involves using
standardized work procedures and having
employees perform repetitive, precisely,
defined and simplified task
 job enlargement - horizontal expansion of a
job by adding similar duties and
responsibilities
 job rotation - increase task variety by moving
the employee from one job to another
 job enrichment - vertical expansion of a job
by adding planning and decision-making
responsibilities
Major elements of various approaches to job
designs
Mechanistic Approach - The focus of the mechanistic
approach is identifying the simplest way to structure
work that maximizes efficiency. This most often entails
reducing the complexity of the work to provide more
human resource efficiency—that is, making the work so
simple that anyone can be trained quickly and easily to
perform it. This approach focuses on designing jobs
around the concepts of task specialization, skill
simplification, and repetition.
Specialization + skill variety + work methods autonomy
Motivational Approach - The motivational approach to
job design focuses on the job characteristics that affect
the psychological meaning and motivational potential,
and it views attitudinal variables as the most important
outcomes of job design. The prescriptions of the
motivational approach focus on increasing job
complexity through job enlargement, job enrichment,
and the construction of jobs around sociotechnical
systems.
Decision making autonomy + task significance +
interdependence
Biological Approach - A theme common to nearly all
organizations is the need to identify clearly the outputs of
work, to specify the quality and quantity standards for
those outputs, and to analyze the processes and inputs
necessary for producing outputs that meet the quality
standards. This conception of the work-flow process is
useful because it provides a means for the manager to
understand all the tasks required to produce a number of
high-quality products as well as the skills necessary to
perform those tasks.
Ergonomics is concerned with the interface between
individuals’ psychological characteristics and the physical
work environment.
Physical demands +ergonomics + work conditions
Perceptual-Motor Approach - The perceptual-motor
approach to job design has its roots in the human-factors
literature and focuses on human mental capabilities and
limitations. The goal is to design jobs in a way that
ensures that they do not exceed people's mental
capabilities. This approach generally tries to improve
reliability, safety, and user reactions by designing jobs in
a way that reduces the information processing
requirements of the job. This approach, similar to the
mechanistic approach, generally has the effect of
decreasing the job's cognitive demands.
Job complexity + information processing + equipment use
CHAPTER 8
INTRODUCTION
Competition forces business organizations to implement
new competitive strategies. In this sense, training and
retraining activities should be an ongoing process for the
organizations in order to compete successfully.
Giving employees opportunities to learn and develop
creates a positive work environment, which supports the
business strategy by attracting talented employees as
well as motivating and retaining current employees.
Training can:
✓ Increase employees’ knowledge of foreign competitors
and cultures.
✓ Help ensure that employees have the basic skills to
work with new technology.
✓ Help employees understand how to work effectively in
teams to contribute to product and service quality.
✓ Ensure that the company’s culture emphasizes
innovation, creativity, and learning
✓ Ensure employment security by providing new ways
for employees to contribute to the company when their
jobs change, their interests change, or their skills become
obsolete.
✓ Prepare employees to accept and work more effectively
with each other.
TRAINING: ITS ROLE IN CONTINUOUS LEARNING AND
COMPETITIVE ADVANTAGE
Working in organizations should be a continual learning
process. Continuous learning is vital for the organization to
create effective employees and for them to easily adapt
with changes in skill requirements, work roles and work
structures.
Continuous learning refers to a learning system that
requires employees to understand the entire work system
and they are expected to acquire new skills, apply them on
the job, and share what they have learned with other
employees.
Training refers to a planned effort by a company to facilitate
learning of job-related competencies, knowledge, skills,
and behaviors by employees. The goal of training is for
employees to master the knowledge, skills, and behaviors
emphasized in training and apply them to their day-to-day
activities.
Formal training refers to training and development
programs, courses, and events that are developed and
organized by the company. On the other hand, informal
learning refers to learning that is learner initiated, involves
action and doing, is motivated by an intent to develop, and
does not occur in a formal learning setting.
Explicit knowledge, sometimes referred to as “know-what”,
refers to knowledge that is formalized and codified, well
documented, easily articulated, and easily transferred from
person to person. Examples of explicit knowledge include
processes, checklists, flowcharts, formulas, and definitions.
Tacit knowledge, sometimes referred to as “know-how”,
refers to personal knowledge based on individual
experiences that make it difficult to codify. It is best
acquired through informal learning.
Knowledge management is the systematic way of
enhancing company performance in storage, assessment,
sharing, refinement, and creation of an organization's
knowledge assets.
DESIGNING EFFECTIVE FORMAL TRAINING
ACTIVITIES
A key feature of training activities that contribute to
competitiveness is that they are intended according to the
instructional design process to address the specific
objectives. Training design process refers to a systematic
approach for designing training programs to be effective
and produce learning. Figure 7.1 illustrates the six stages
of this process, which emphasizes that effective training
practices involve more than just choosing the most well-
liked or lively training method. The training design process
should be systematic yet flexible enough to adapt to
business needs.
Needs Assessment
The first step in the instructional design process, needs
assessment, is a diagnostic phase of a training plan. Needs
assessment refers to the process used to address
issues and determine if the employees need training to
improve organizational performance. Needs
assessment measures the competencies of a company,
a group, or an individual as they relate to what is
required. It is necessary to find out what is happening
and what should be happening before deciding if
training will help, and if it will help, what kind is needed
Training needs can be determined by analyzing
organizational outcomes and looking at future
organizational needs. Organizational analysis involves
determining the business appropriateness of training,
given the company’s business strategy, its resources
available for training, and support by managers and
peers for training activities
Person analysis helps identify who needs training.
Person analysis involves (1) determining whether
performance deficiencies result from a lack of
knowledge, skill, or ability (a training issue) or from a
motivational or work- design problem; (2) identifying
who needs training; and (3) determining employees’
readiness for training.
Task analysis includes identifying the important tasks
and knowledge, skills, and behaviors that need to be
emphasized in training for employees to complete their
tasks.
Ensuring Employees’ Readiness for Training
The second step in the training design process is to
evaluate whether employees are ready for training.
Readiness for training refers to employee characteristics
that provide employees with the desire, energy, and
focus necessary to learn from training.
Motivation to learn is the desire of the trainee to learn
the content of the training program.
Self-efficacy is the employees' belief that they can
successfully learn the content of the training program.
Managers can increase employees' self-efficacy level by:
 Letting employees know that the purpose of
training is to improve performance, not identify
incompetencies.
 Providing as much information as possible
about the training program and its purpose.
 Showing employees the training success of
their peers.
 Providing employees with feedback.
Creating A Learning Environment
 Employees need to know why they should learn.
Employees need meaningful training content.
 training method for geographically dispersed
 Employees need to have opportunities to
practice.
 Employees need feedback.
 Employees learn by observing, experiencing,
and interacting with others.
 Employees need to commit training content to
memory.
 Employees need the training program to be
properly coordinated and arranged.
Ensuring Transfer of Training
Transfer of training refers to on-the-job use of
knowledge, skills, and behaviors learned in training.
Figure 7.3 illustrates that transfer of training is
influenced by manager support, peer support,
opportunity to use learned capabilities, technology
support, and self- management skills.
Figure 7.3 Work Environment Characteristics Influencing
Transfer of Training
Managers can facilitate transfer through use of action
plans. An action plan is a written document that includes
the steps that the trainee and manager will take to
ensure that training transfers to the job.
Selecting Training Methods
Presentation methods refer to methods in which
trainees are passive recipients of information. ads.
These methods ideal for presenting new facts,
information, different philosophies, and alternative
problem-solving solutions or processes.
Instructor-led classroom format
 -least expensive, least time-consuming ways to
present information.
 -more active participation, job-related examples,
and exercises that the instructor can build, the
more likely trainees will learn and use the
information presented
 Distance learning
 -save on travel costs
 -lack of interaction between the trainer and the
audience.
Audiovisual techniques
 -Learners can work independently
 -allow users to access the materials at any time or
place.
 -learners get a consistent presentation.
 problems result from having too much content for
the trainee to learn, overuse of humor or music,
and drama that distracts from the key learning
points
Hands-on methods are training methods that require
the trainee to be actively involved in learning. These
methods are ideal for developing specific skills,
understanding how skills and behaviors can be
transferred to the job, experiencing all aspects of
completing a task, and dealing with interpersonal issues
that arise on the job.
On-the-job training -needs less investment in time or
money for materials, trainer’s salary, or instructional
design
Simulations
 -eliminate the need to travel to a central training
location
 -get trainees involved in learning provide a
consistent
 -message of what needs to be learned
 -safely put employees in situations that would be
dangerous in the real world
Business games and case studies

 -stimulate more learning than presentation methods
 -help trainees develop the willingness to take risks
given uncertain outcomes.
Behavior modeling - -one of the most effective
techniques for teaching interpersonal skills.
 E-Learning
 -takes advantage of the web’s dynamic nature and
ability to use many positive learning features.
 -gives learner control over the pace of learning,
exercises, and use of links to other material.
 -allows activities to be incorporated into training
without trainees or the instructor having to be
physically present in a training room.
 Group- or team-building methods are training
methods designed to improve team or group
effectiveness. In group-building methods, trainees
share ideas and experiences, build group identity,
understand the dynamics of interpersonal
relationships, and get to know their own strengths
and weaknesses and those of their co-workers.
Advice for Choosing A Training Method
In choosing a method:
1.Identify the type of learning outcome that you want
training to influence.
 -Group-building methods are unique because they
focus on individual as well as team learning.
2.Compare the presentation methods to the hands-on
methods.
 -most hands-on methods provide a better learning
environment
 -presentation methods are less effective
 -E-learning or blended learning can be an effective
trainees.
 -To take advantage of the positive features of both
face-to-face and technology-based instruction, you
should consider a blended learning approach.
Evaluating Training Programs
Training Outcomes is a way to evaluate the effectiveness of
a training program based on cognitive, skill-based, affective,
and results outcomes
Table 7.1 Outcomes Used in Evaluating Training Programs
SPECIAL TRAINING ISSUES
CROSS-CULTURAL PREPARATION
An expatriate is an employee sent by his or her company to
manage operations in a different country.
 To be successful in overseas assignments,
expatriates need to be:
 Competent in their area of expertise
 Able to communicate verbally and nonverbally in the
host country.
 Flexible, tolerant, and sensitive to cultural differences.
 Motivated to succeed, able to enjoy the challenges,
and willing to learn.
 Supported by their families.
Figure 7.4 Three Phases of Cross-Cultural Preparation
Phase One: Predeparture Phase
Phase Two: On-Site Phase
Phase Three: Repatriation Phase
MANAGING WORKFORCE DIVERSITY AND INCLUSION
Diversity training refers to learning efforts that are designed
to change employee attitudes about diversity and
or/develop skills needed to work with a diverse workforce.
Managing diversity and inclusion involves creating an
environment that allows all employees to contribute to
organizational goals and experience personal growth.
To successfully manage a diverse work force, companies
need to ensure that:
Employees understand how their values and stereotypes
influence their behavior toward others of different gender,
ethnic, racial, or religious backgrounds.
Employees gain an appreciation of cultural differences
among themselves.
Behaviors that isolate or intimidate minority group member
improve.
Types of diversity training:
Attitude awareness and change programs
Behavior based programs
Key Components of Effective Managing Diversity
Programs
1.Top Management Support
2.Recruitment and Hiring
3.Identifying and Developing Talent
4.Employee Support
5.Ensuring Fair Treatment
6.Holding Managers Accountable
7.Improving Relationships with External Stakeholders
Onboarding, or socialization, refers to the process
of helping new hires adjust to social and
performance aspects of their new jobs.
Figure 7.5 The Four Steps in Onboarding
CHAPTER 11
EVALUATION AND CONTROL
Evaluation and control process ensure that a
company is achieving what it set out to accomplish. It
compares performance with desired results and
provides the feedback necessary for management to
evaluate results and take corrective action, as needed
FIVE-STEP FEEDBACK MODEL
1. Determine what to measure: Top managers and
operational managers need to specify what
implementation processes and results will be monitored
and evaluated. The processes and results must be
capable of being measured in a reasonably objective
and consistent manner. The focus should be on the
most significant elements in a process—the ones that
account for the highest proportion of expense or the
greatest number of problems. Measurements must be
found for all important areas, regardless of difficulty.
2. Establish standards of performance: Standards
used to measure performance are detailed expressions
of strategic objectives. They are measures of acceptable
performance results. Each standard usually includes a
tolerance range, which defines acceptable deviations.
Standards can be set not only for final output but also
for intermediate stages of production output.
3. Measure actual performance: Measurements must
be made at predetermined times.
4. Compare actual performance with the standard: If
actual performance results are within the desired
tolerance range, the measurement process stops here.
5. Take corrective action: If actual results fall outside
the desired tolerance range, action must be taken to
correct the deviation. The following questions must be
answered:
a. Is the deviation only a chance fluctuation?
b. Are the processes being carried out incorrectly?
c. Are the processes appropriate to the achievement of
the desired standard? Action must be taken that will not
only correct the deviation but also prevent it happening
again.
d. Who is the best person to take corrective action?
Top management is often better at the first two steps of
the control model than it is at the last two follow-through
steps
Evaluation and control information consists
performance data and activity reports
 Evaluation and control information must be
relevant to what is being monitored
One of the obstacles to effective control is the difficulty
in developing appropriate measures of important
activities and outputs
MEASURING PERFORMANCE
Performance is the end result of activity. Select
measures to assess performance based on the
organizational unit to be appraised and the objectives to
be achieved
APPROPRIATE MEASURES
Some measures, such as return on investment (ROI)
and earnings per share (EPS), are appropriate for
evaluating a corporation’s or a division’s ability to
achieve a profitability objective
 This type of measure inadequate for
evaluating additional corporate objectives
such as social responsibility or employee
development
Steering controls- measure variables that influence
future profitability.
TYPES OF CONTROLS
Controls can be established to focus on actual
performance results (output), the activities that generate
the performance (behavior), or on resources that are
used in performance (input).
Output controls specify what is to be accomplished by
focusing on the end result of the behaviors through the
use of objectives and performance targets or milestones
 most appropriate when specific output
measures have been agreed on but the
cause–effect connection between activities
and results is not clear
Behavior controls specify how something is to be done
through policies, rules, standard operating procedures,
and orders from a superior.
 most appropriate when performance results
are hard to measure, but the cause–effect
connection between activities and results is
clear.
Input controls emphasize resources, such as
knowledge, skills, abilities, values, and motives of
employees.
 most appropriate when output is difficult to
measure and there is no clear cause–effect
relationship between behavior and
performance
ACTIVITY-BASED COSTING (ABC)
of - a recently developed accounting method for
allocating indirect and fixed costs to individual
products or product lines based on the value-
added activities going into that product.
- very useful in doing a value-chain analysis of a
firm’s activities for making outsourcing
decisions.
- allows accountants to charge costs more
accurately than the traditional method because
it allocates overhead far more precisely
- calculates an average cost of setting up the
machinery and charges it against each batch of
pens that requires retooling, regardless of the
size of the run.
Traditional cost accounting, in contrast, focuses on
valuing a company’s inventory for financial reporting
purposes
- useful when direct labor accounts for most of
total costs and a company produces just a few
products requiring the same processes
ENTERPRISE RISK MANAGEMENT
Enterprise Risk Management (ERM) is a corporatewide,
integrated process for managing the uncertainties that
could negatively or positively influence the achievement
of the corporation’s objectives.
- In the past, managing risk was done in a
fragmented manner within functions or
business units
The process of rating risks involves three steps:
1. Identify the risks using scenario analysis or
brainstorming or by performing risk self-assessments.
2. Rank the risks, using some scale of impact and
likelihood.
3. Measure the risks, using some agreed-upon standard.
Some companies are using value at risk, or VAR (effect
of unlikely events in normal markets), and stress testing
(effect of plausible events in abnormal markets)
methodologies to measure the potential impact of the
financial risks they face
PRIMARY MEASURES OF CORPORATE
PERFORMANCE
Traditional Financial Measures
Return On Investment (ROI). - The most commonly
used measure of corporate performance (in terms of
profits)
- It is simply the result of dividing net income
before taxes by the total amount invested in the
company (typically measured by total assets).
Earnings Per Share (EPS)- involves dividing net
earnings by the amount of common stock, also has
several deficiencies as an evaluation of past and future
performance
 - First, because alternative accounting principles
are available, EPS can have several different but
equally acceptable values, depending on the
principle selected for its computation.
- Second, because EPS is based on accrual
income, the conversion of income to cash can be
near term or delayed. Therefore, EPS does not
consider the time value of money
Return On Equity (ROE)- involves dividing net income by
total equity, also has limitations because it is also derived
from accounting-based data
- EPS and ROE are often unrelated to a
company’s stock price.
Operating cash flow- the amount of money generated by
a company before the cost of financing and taxes, is a
broad measure of a company’s funds
- company’s net income plus depreciation,
depletion, amortization, interest expense, and
income tax expense.
Free cash flow- much narrower
- The amount of money a new owner can take out
of the firm without harming the business
- net income plus depreciation, depletion, and
amortization less capital expenditures and
dividends.
Free cash flow ratio- very useful in evaluating the stability
of an entrepreneurial venture.
- cash flow may be harder to manipulate than
earnings, the number can be increased by selling
accounts receivable, classifying outstanding
checks as accounts payable, trading securities,
and capitalizing certain expenses, such as direct-
response advertising.
Stakeholder Measures- Each stakeholder has its own set
of criteria to determine how well the corporation is
performing. These criteria typically deal with the direct and
indirect impacts of corporate activities on stakeholder
interests
- Top management should establish one or more
stakeholder measures for each stakeholder
category so that it can keep track of stakeholder
concerns.
Shareholder Value- present value of the anticipated future
stream of cash flows from the business plus the value of
the company if liquidated.
- Arguing that the purpose of a company is to
increase shareholder wealth, shareholder value
analysis concentrates on cash flow as the key
measure of performance
- The value of a corporation is thus the value of its
cash flows discounted back to their present value,
using the business’s cost of capital as the
discount rate.
Two shareholder value measures:
Economic Value Added (EVA) has become an
extremely popular shareholder value method of
measuring corporate and divisional performance and
may be on its way to replacing ROI as the standard
performance measure
- measures the difference between the pre-
strategy and post-strategy values for the
business
- The formula to measure EVA is:
EVA = after tax operating income -
(investment in assets X weighted average
cost of capital)
Market Value Added (MVA)- difference between the
market value of a corporation and the capital contributed
by shareholders and lenders.
- it measures the stock market’s estimate of the
net present value of a firm’s past and
expected capital investment projects.
- To calculate MVA
1. Add all the capital that has been put into a
company—from shareholders, bondholders,
and retained earnings
2. Reclassify certain accounting expenses,
such as R&D, to reflect that they are actually
investments in future earnings. This provides
the firm’s total capital.
3. Using the current stock price, total the
value of all outstanding stock, adding it to the
company’s debt. This is the company’s market
value. If the company’s market value is
greater than all the capital invested in it, the
firm has a positive MVA—meaning that
management (and the strategy it is following)
has created wealth. In some cases, however,
the market value of the company is actually
less than the capital put into it, which means
shareholder wealth is being destroyed
Balanced Scorecard Approach: Using Key
Performance Measures
“Balanced scorecard,” that includes non-financial as
well as financial measures.
- combines financial measures that tell the
results of actions already taken with
operational measures on customer
satisfaction, internal processes, and the
corporation’s innovation and improvement
activities—the drivers of future financial
performance.
- Thus, steering controls are combined with
output controls.
Goals or objectives in each of four areas
1. Financial: How do we appear to shareholders?
2. Customer: How do customers view us?
3. Internal business perspective: What must we excel
at?
4. Innovation and learning: Can we continue to
improve and create value?
Key performance measures—measures that are
essential for achieving a desired strategic option
Evaluating Top Management and the Board of
Directors
Chairman-CEO Feedback Instrument- increasing
number of companies are evaluating their CEO by using
a 17-item questionnaire developed by Ram Charan, an
authority on corporate governance.
- The questionnaire focuses on four key areas:
(1) company performance,
(2) leadership of the organization,
(3) team-building and management
succession, and
(4) leadership of external constituencies
Management Audit- very useful to boards of directors
in evaluating management’s handling of various
corporate activities.
- developed to evaluate activities such as
corporate social responsibility, functional
areas such as the marketing department, and
divisions such as the international division.
- These can be helpful if the board has selected
particular functional areas or activities for
improvement.
Strategic Audit. - type of management audit
- provides a checklist of questions, by area or
issue, that enables a systematic analysis of
various corporate functions and activities to
be made.
- extremely useful as a diagnostic tool to
pinpoint corporatewide problem areas and to
highlight organizational strengths and
weaknesses.
- help determine why a certain area is creating
problems for a corporation and help generate
solutions to the problem
PRIMARY MEASURES OF DIVISIONAL AND
FUNCTIONAL PERFORMANCE
Responsibility Centers- used to isolate a unit so that it
can be evaluated separately from the rest of the
corporation.
1. Standard cost centers- primarily used in
manufacturing facilities.
- are computed for each operation on the basis
of historical data
- In evaluating the center’s performance, its
total standard costs are multiplied by the units
produced.
- The result is the expected cost of production,
which is then compared to the actual cost of
production.
2. Revenue centers: With revenue centers, production,
usually in terms of unit or dollar sales, is measured
without consideration of resource costs
- The center is thus judged in terms of
effectiveness rather than efficiency.
3. Expense centers: Resources are measured in dollars,
without consideration for service or product costs
4. Profit centers: Performance is measured in terms of
the difference between revenues (which measure
production) and expenditures (which measure resources)
- typically established whenever an
organizational unit has control over both its
resources and its products or services
Transfer pricing is commonly used in vertically
integrated corporations and can work well when a price
can be easily determined for a designated amount of
product
5. Investment centers performance is measured in terms
of the difference between its resources and its services or
products
Using Benchmarking to Evaluate Performance
Benchmarking is “the continual process of measuring
products, services, and practices against the toughest
competitors or those companies recognized as industry
leaders.
- increasingly popular program, is based on the
concept that it makes no sense to reinvent
something that someone else is already using.
- found to produce best results in companies that
are already well managed.
The benchmarking process usually involves the following
steps:
1. Identify the area or process to be examined. It should
be an activity that has the potential to determine a
business unit’s competitive advantage.
2. Find behavioral and output measures of the area or
process and obtain measurements.
3. Select an accessible set of competitors and best-in-
class companies against which to benchmark. These may
very often be companies that are in completely different
industries, but perform similar activities.
4. Calculate the differences among the company’s
performance measurements and those of the best-in-
class and determine why the differences exist.
5. Develop tactical programs for closing performance
gaps.
6. Implement the programs and then compare the
resulting new measurements with those of the best-in-
class companies.
INTERNATIONAL MEASUREMENT ISSUES
The three most widely used techniques for international
performance evaluation are ROI, budget analysis, and
historical comparisons.
ENTERPRISE RESOURCE PLANNING (ERP)
- ERP unites all of a company’s major business
activities, from order processing to production,
within a single family of software modules.
- The system provides instant access to critical
information to everyone in the organization, from
the CEO to the factory floor worker.
There are three reasons ERP could fail:
(1) insufficient tailoring of the software to fit the company,
(2) inadequate training, and
(3) insufficient implementation support
RADIO FREQUENCY IDENTIFICATION (RFID)
- is an electronic tagging technology used in a
number of companies to improve supply-chain
efficiency.
- By tagging containers and items with tiny chips,
companies use the tags as wireless bar-codes to
track inventory more efficiently.
DIVISIONAL AND FUNCTIONAL IS SUPPORT
- At the divisional or SBU level of a corporation,
the information system should be used to support,
reinforce, or enlarge its business-level strategy
through its decision support system.
- SBU pursuing a strategy of overall cost
leadership could use its information system to
reduce costs either by improving labor
productivity or improving the use of other
resources such as inventory or machinery
PROBLEMS IN MEASURING PERFORMANCE
- The lack of quantifiable objectives or
performance standards and the inability of the
information system to provide timely and valid
information are two obvious control problems.
SHORT-TERM ORIENTATION
Long-run evaluations may not be conducted because
executives
(1) don’t realize their importance,
(2) believe that short-run considerations are more important
than long-run considerations,
(3) aren’t personally evaluated on a long-term basis, or
(4) don’t have the time to make a long-run analysis
Short-term orientation in which managers consider only
current tactical or operational issues and ignore long-term
strategic ones.
GOAL DISPLACEMENT
- the confusion of means with ends and occurs
when activities originally intended to help
managers attain corporate objectives become
ends in themselves—or are adapted to meet
ends other than those for which they were
intended.
Two types of goal displacement are behavior
substitution and suboptimization.
Behavior Substitution- refers to a phenomenon when
people substitute activities that do not lead to goal
accomplishment for activities that do lead to goal
accomplishment because the wrong activities are being
rewarded.
- Managers, like most other people, tend to
focus more of their attention on behaviors that
are clearly measurable than on those that are
not. Employees often receive little or no
reward for engaging in hard-to-measure
activities such as cooperation and initiative.
Suboptimization refers to the phenomenon of a unit
optimizing its goal accomplishment to the detriment of
the organization as a whole.
GUIDELINES FOR PROPER CONTROL
In designing a control system, top management should
remember that controls should follow strategy.
The following guidelines are recommended:
1. Control should involve only the minimum amount
of information needed to give a reliable picture of
events: Too many controls create confusion. Focus on
the strategic factors by following the 80/20 rule: Monitor
those 20% of the factors that determine 80% of the
results.
2. Controls should monitor only meaningful
activities and results, regardless of measurement
difficulty: If cooperation between divisions is important
to corporate performance, some form of qualitative or
quantitative measure should be established to monitor
cooperation.
3. Controls should be timely so that corrective
action can be taken before it is too late: Steering
controls, controls that monitor or measure the factors
influencing performance, should be stressed so that
advance notice of problems is given.
4. Long-term and short-term controls should be
used: If only short-term measures are emphasized, a
short-term managerial orientation is likely.
5. Controls should aim at pinpointing exceptions:
Only activities or results that fall outside a
predetermined tolerance range should call for action.
6. Emphasize the reward of meeting or exceeding
standards rather than punishment for failing to meet
standards: Heavy punishment of failure typically results
in goal displacement. Managers will “fudge” reports and
lobby for lower standards
- If corporate culture complements and reinforces the
strategic orientation of a firm, there is less need for an
extensive formal control system.
STRATEGIC INCENTIVE MANAGEMENT
- To ensure congruence between the needs of
a corporation as a whole and the needs of the
employees as individuals, management and
the board of directors should develop an
incentive program that rewards desired
performance. This reduces the likelihood of
the agency problems
- Incentive plans should be linked in some way
to corporate and divisional strategy
The following three approaches are tailored to help
match measurements and rewards with explicit strategic
objectives and time frames:
1. Weighted-factor method: The weighted-factor
method is particularly appropriate for measuring and
rewarding the performance of top SBU managers and
group-level executives when performance factors and
their importance vary from one SBU to another.
2. Long-term evaluation method: The long-term
evaluation method compensates managers for
achieving objectives set over a multiyear period. An
executive is promised some company stock or
“performance units” (convertible into money or stock) in
amounts to be based on long-term performance.
3. Strategic-funds method: The strategic-funds
method encourages executives to look at developmental
expenses as being different from expenses required for
current operations. The accounting statement for a
corporate unit enters strategic funds as a separate entry
below the current ROI. It is, therefore, possible to
distinguish between expense dollars consumed in the
generation of current revenues and those invested in
the future of a business. Therefore, a manager can be
evaluated on both a short- and a long-term basis and
has an incentive to invest strategic funds in the future.
An effective way to achieve the desired strategic results
through a reward system is to combine the three
approaches:
1. Segregate strategic funds from short-term funds, as is
done in the strategic-funds method.
2. Develop a weighted-factor chart for each SBU.
3. Measure performance on three bases: The pretax
profit indicated by the strategic-funds approach, the
weighted factors, and the long-term evaluation of the
SBUs’ and the corporation’s performance.