Strategic

Planning
Module 5:
Strategy Implementation and Evaluation
Functional Level Strategy

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 Core Functional Areas

• Finance and Accounting

• Information Technology
• Marketing and Sales
• Operations
• Research and Development
• Human Resources

It is critical for strategic implementation and successful

business execution that there is synergy and collaboration
among all core functional areas of the business.

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 Functional Level Strategy

• The development and coordination of resources through

which business-level strategies can be executed effectively
and efficiently
• Concerned with coordinating functional areas such as:
– Marketing, Finance, Human Resources, Operations, IT and R&D

• Functional strategies are primarily concerned with:

– Assuring that functional strategies are supporting both business level
and corporate level strategies
– Efficiently utilizing employees within the functional unit to achieve
corporate objectives
– Integrating activities within the functional unit (advertising,
promotion, market research, purchasing, inventory, shipping, etc.)
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 Business Silos

Synergy and collaboration among core functional departments

is critical to successful strategy implementation.
©Allan Gardner, Dec 2018 All Right Reserved 5
 Strategy Implementation

• The most difficult step in the strategic process

• Most strategy implementations require change initiatives
– Top – Down communication process
– Employee motivation and buy-in
• Well-defined short-term objectives (6 months to 1 year)
• Allocation of resources
– Financial
– Physical
– Human
– Technological

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 Strategy Implementation – A Change Process
• Implementation of strategy is the process through which a
chosen strategy is put into action. It involves the design and
management of systems to achieve the best integration of
people, structure, processes and resources in achieving
organizational objectives.
• It affects an organization from top to bottom, including all the
functional and divisional areas of business. The steps:
– Institutionalization of strategy
– Setting proper organizational climate through communication
processes
– Developing Appropriate Operating Plans
– Developing appropriate organization structures
– Review of implemented strategy

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 Strategy Formulation – Implementation:
Interrelationship
Strategy Formulation Strategy Implementation

• It is positioning forces before • It is managing forces during

action.
• It focuses on effectiveness.
• It is an intellectual process
• It requires good intuitive and
analytical skills.
• It requires coordination
among few individuals.
• Concepts and tools do not
differ greatly for small, large,
profit or non profit
organization.
Allan Gardner, 2018 All Rights Reserved
action.
• It focuses on efficiency.
• It is primarily an operational
process.
• It requires special motivational
and leadership skills.
• It requires the contribution and
coopertaion of many individuals.
• Concepts and tools vary
substantially among small, large,
profit or non profit organization.
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 Common Strategy Implementation Problems

1. Took more time than planned

2. Unanticipated major problems
3. Ineffective coordination; poorly communicated
4. Competing activities and crises creating distractions
5. Employees with insufficient capabilities
6. Lower-level employees were inadequately trained
7. Uncontrollable external environmental factors
8. Poor departmental leadership and direction
9. Inadequately defined implementation tasks and activities
10. Inefficient information system to monitor activities

Allan Gardner, 2018 All Rights Reserved 9

 Who Implements Strategy?

• In general, those who implement strategy are a much larger

and more diverse set of people than those who formulate it

• In most large, multi-industry corporations, the implementers

are practically EVERYONE in the organization

• Note: many (probably MOST) of the people in the

organization who are crucial to successful strategy
implementation probably had little to do with the
development of the strategy

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 A Framework for Implementation

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 Strategy Evaluation – Effective Steps
Step 1
Review Strategies

Have significant differences occurred?

Can we improve?
No Yes
Step 2 Step 3
Measure Performance Take Corrective Action

Have significant differences occurred?

Can we improve?
No Yes

Continue
Present Course

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 Strategy Evaluation - Measurables
Cost control focus on operating costs
to income.
Value creation focus on:
Cost Control vs. • Patents & product innovations
• Time to achieve competency
Value Creation • Development time for new products
• Effectiveness of knowledge sharing
• Strength of employment brand
• New markets and revenue

Compares activity measures Measures or markers used

to results measures as a basis for best practice

Activity vs.
Benchmarks
Results
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 Measuring Performance
Areas to measure for increasing organizational returns
on strategy

Assets Profitability Sales

Return on
Employee
Productivity Investment
Satisfaction
Ratio

©Allan Gardner, Dec 2018 All Right Reserved 14

 Other Performance Measurables
• Activity vs. Results
– Activity measures focus on what an organization does
– Results measures focus on the outputs of those processes
• Cost Control vs. Value Creation
– Cost control measures focus on ratio of operating costs to income
– Value creation measures focus on
• Product innovation and patents
• Development time for new products
• Effectiveness of knowledge sharing and global collaboration
• Strength of employment brand
• New market development

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 Critical Success Factors (CSFs)
• Critical success factors can be defined as those particular
areas or issues which are important to the success of an
organization.
• To ensure the performance of an organization, special
attention and concern should be given to these areas as
they will decide the present and the future success of the
organization.
• Examples:
– Increased cash flow and profits
– Increase of customers
– Methods to increase productivity
– Development of new technology to maintain competitive
advantage
©2018, Allan Gardner, All Rights Reserved 16
 Key Performance Indicators (KPIs)

• KPIs help measure how well companies, business units,

projects or individuals are performing compared to their
strategic goals and objectives.
• A clear-cut instrument or metric to quantify and qualify the
tactical goals of an institute depending on its priorities.
• Indicators are actually calculations to judge or access the
performance or measure the success of a company, but they
don’t show how to improve or don’t provide the ways to
achieve success

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 Measurements Across Business Functions
Function Sample Measures
Finance and Accounting Revenue & profit per employee, profit per customer,
average collection period, EPS
Customer Service Number of complaints and complements, percent of
satisfied customers, response time
Human Resources Average training days/costs per employee, percentage of
talent retention, time to hire, benefit vs. labor costs

Information Technology Incident response time, number of unplanned outages,

network bandwith availability, software licenses used

Manufacturing Production costs of items, defects per million, on-time

delivery, inventory, scrap and returns, capacity
Procurement Cycle time of purchase order, time to procure, number of
emergency purchases, average costs of bid procedure

Sales and Marketing Market share, win rate, number of sales lost, average sales
revenue per salesperson, sales productivity ratio
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 Balanced Score Card

• Creates alignment of
business measurables with
Finance Customers organization strategy

• Can be used to measure

departmental or
Vision and organizational
Strategy effectiveness

• Encompasses multiple
Internal stakeholder perspectives
Learning and
Business
Growth
Processes

©Allan Gardner, Dec 2018 All Right Reserved 19

Balanced Scorecard Example

Vision and
Strategy

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Outcomes for Current Year & KPIs
(Annual Strategic Goals)

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 Financial Measures
• Balance Sheet
• Cash Flow Statement
• Debt Ratio
• EBITDA
– (Earnings before interest, taxes, depreciation & amortization)
• Income Statement
• Performance Ratios
– Return on assets, return on investment, return on sales, etc.
• Profitability Ratios
– Measures earning power and profitability

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 Benchmarking

• The process of measuring key performance indicators and

comparing them across multiple organizations
• Organizations compare various process competencies to
industry leaders and attempt to duplicate those processes
• Types of Benchmarking:
– Internal
– Competitive
– Industry
– World-class

Allan Gardner, 2018

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All Rights Reserved
 McKinsey 7-S Model for Strategy Execution
The plan to build and maintain
competitive advantage over rivals
Structure Division of tasks & people.
Reporting relationships

Strategy Systems
Core set of values that are
widely shared as culture &
work ethic. Includes Formal & informal
mission, vision and values Shared Values activities & procedures
(Culture) used to manage the
organization and get work
Distinctive competencies
done
of the organization as
well as its personnel
Skills Style

●Hard Elements
Staff
●Soft Elements The leadership
style of managers
People, their experience,
knowledge, skills & abilities
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 The Seven Elements Of McKinsey 7-S
Hard Elements
• Strategy
• Structure
• Systems
"Hard" elements are easier to define
or identify and management can
directly influence them. May include
strategy statements, organization
charts, reporting lines, formal
processes and IT systems.
Soft Elements
• Shared Values
• Skills
• Styles
• Staff
"Soft" elements can be more difficult
to describe, and are less tangible and
more influenced by culture. However,
these soft elements are as important
as the hard elements if the
organization is going to be successful.
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 Shared Values
Superordinate Goals

• The interconnecting center of McKinsey's model

• Set of traits, behaviors, and characteristics that the
organization believes in.
• Includes the organization’s mission, vision and values
• Superordinate Goals:
– Goals that are achieved by the joint work of several departments in
the organization
– Requires recognition of a higher priority that can be achieved through
collaboration, cooperation and focus
 Uses of the 7-S Model

• Helps identify the strengths and weaknesses of an

organization.
• Develops an understanding of the core and most influential
factors in an organization’s strategy
• Determines how best to realign an organization to a new
strategy or other organization design