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Implementing Strategies: Management and Operations Issues

Chapter Seven

Chapter Objectives
2. 3.
Explain why strategy implementation is more difficult than strategy formulation. Discuss the importance of annual objectives and policies in achieving organizational commitment for strategies to be implemented. Explain why organizational structure is so important in strategy implementation. Compare and contrast restructuring and reengineering.
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Chapter Objectives (cont.)
5. 6. 7.
Describe the relationships between production/operations and strategy implementation. Explain how a firm can effectively link performance and pay to strategies. Discuss employee stock ownership plans (ESOPs) as strategic management concept. Describe how to modify an organizational culture to support new strategies.
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Comprehensive StrategicManagement Model

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 Strategy implementation focuses on efficiency.The Nature of Strategy Implementation  Strategy formulation is positioning forces before the action.  Strategy formulation focuses on effectiveness.  Strategy implementation is managing forces during the action. Copyright ©2013 Pearson Education 7-5 .

Copyright ©2013 Pearson Education 7-6 .The Nature of Strategy Implementation  Strategy formulation is primarily an intellectual process.  Strategy formulation requires good intuitive and analytical skills.  Strategy implementation is primarily an operational process.  Strategy implementation requires special motivation and leadership skills.

Some Management Issues Central to Strategy Implementation Copyright ©2013 Pearson Education 7-7 .

represent the basis for allocating resources are a primary mechanism for evaluating managers are the major instrument for monitoring progress toward achieving long-term objectives establish organizational. 3. 4. divisional. and departmental priorities Copyright ©2013 Pearson Education 7-8 . 2.Annual Objectives Annual objectives: 1.

The Stamus Company’s Hierarchy of Aims Copyright ©2013 Pearson Education 7-9 .

procedures. rules. and administrative practices established to support and encourage work toward stated goals  instruments for strategy implementation Copyright ©2013 Pearson Education 7-10 . forms. methods.Policies  Policy  specific guidelines.

constraints.Policies  Policies  set boundaries. and limits on the kinds of administrative actions that can be taken to reward and sanction behavior  clarify what can and cannot be done in pursuit of an organization’s objectives Copyright ©2013 Pearson Education 7-11 .

A Hierarchy of Policies Copyright ©2013 Pearson Education 7-12 .

Some Issues That May Require a Management Policy Copyright ©2013 Pearson Education 7-13 .

Resource Allocation  Resource allocation  central management activity that allows for strategy execution  often based on political or personal factors  Strategic management enables resources to be allocated according to priorities established by annual objectives Copyright ©2013 Pearson Education 7-14 .

Types of Resources Financial Physical Human Copyright ©2013 Pearson Education Technological 7-15 .

and misunderstandings occur between line managers and staff managers Copyright ©2013 Pearson Education 7-16 . schedules create pressure.Managing Conflict  Conflict  disagreement between two or more parties on one or more issues  Establishing annual objectives can lead to conflict because individuals have different expectations and perceptions. personalities are incompatible.

Managing Conflict  Avoidance  includes such actions as ignoring the problem in hopes that the conflict will resolve itself or physically separating the conflicting individuals  Defusion  includes playing down differences between conflicting parties while accentuating similarities and common interests Copyright ©2013 Pearson Education 7-17 .

Managing Conflict  Confrontation  exemplified by exchanging members of conflicting parties so that each can gain an appreciation of the other’s point of view or holding a meeting at which conflicting parties present their views and work through their differences Copyright ©2013 Pearson Education 7-18 .

Some Management Trade-Off Decisions Required in Strategy Implementation Copyright ©2013 Pearson Education 7-19 .

Matching Structure With Strategy  Structure largely dictates how objectives and policies will be established  Structure dictates how resources will be allocated Copyright ©2013 Pearson Education 7-20 .

Symptoms of an Ineffective Organizational Structure Copyright ©2013 Pearson Education 7-21 .

The Functional Structure  Functional structure  groups tasks and activities by business function. and management information systems Copyright ©2013 Pearson Education 7-22 . finance/accounting. research and development. marketing. such as production/operations.

Advantages and Disadvantages of a Functional Organizational Structure Copyright ©2013 Pearson Education 7-23 .

customer.The Divisional Structure  Divisional structure  functional activities are performed both centrally and in each separate division  Geographic area. process Copyright ©2013 Pearson Education 7-24 . product or service.

Advantages and Disadvantages of a Divisional Organizational Structure Copyright ©2013 Pearson Education 7-25 .

The Strategic Business Unit (SBU) Structure  SBU structure  groups similar divisions into strategic business units and delegates authority and responsibility for each unit to a senior executive who reports directly to the chief executive officer  can facilitate strategy implementation by improving coordination between similar divisions and channeling accountability to distinct business units Copyright ©2013 Pearson Education 7-26 .

Sonoco Products’ SBU Organizational Chart Copyright ©2013 Pearson Education 7-27 .

The Matrix Structure  Matrix structure  most complex of all designs because it depends upon both vertical and horizontal flows of authority and communication Copyright ©2013 Pearson Education 7-28 .

clear mutual understanding of roles and responsibilities. organizations need participative planning. and mutual trust and confidence Copyright ©2013 Pearson Education 7-29 . excellent internal communication. training.The Matrix Structure  For a matrix structure to be effective.

Advantages and Disadvantages of a Matrix Structure Copyright ©2013 Pearson Education 7-30 .

Typical Top Managers of a Large Firm Copyright ©2013 Pearson Education 7-31 .

rightsizing. or delayering Copyright ©2013 Pearson Education 7-32 . and number of hierarchical levels in the firm’s organizational structure  also called downsizing. number of divisions or units.Restructuring  Restructuring  involves reducing the size of the firm in terms of number of employees.

jobs. or process redesign Copyright ©2013 Pearson Education 7-33 . quality. process innovation. and speed  also called process management.Reengineering  Reengineering  involves reconfiguring or redesigning work. service. and processes for the purpose of improving cost.

Provide full transparency to all stakeholders 2. Reward long-term performance with longterm pay. rather than annual incentives 3.Linking Performance and Pay to Strategies 1. rather than on stock price Copyright ©2013 Pearson Education 7-34 . Base executive compensation on actual company performance.

Extend the time-horizon for bonuses. Increase equity between workers and executives. Replace short-term with long-term incentives 5.Linking Performance and Pay to Strategies 4. Delete many special perks and benefits for executives Copyright ©2013 Pearson Education 7-35 .

Do employees understand the plan? 3. Does the plan pay out when it should? 5. Does the plan capture attention? 2.Linking Performance and Pay to Strategies 1. Is the plan improving communication? 4. Is the company or unit performing better? Copyright ©2013 Pearson Education 7-36 .

Managing Resistance to Change  Force change strategy  involves giving orders and enforcing those orders  Educative change strategy  one that presents information to convince people of the need for change  Self-interest change strategy  one that attempts to convince individuals that the change is to their personal advantage Copyright ©2013 Pearson Education 7-37 .

teaching. materials used for recruitment and selection. 2. 4.Creating a Strategy-Supportive Culture 1. creeds. buildings Deliberate role modeling. and parables about key people and events Copyright ©2013 Pearson Education 7-38 . 3. facades. charters. and coaching by leaders Explicit reward and status system. myths. Formal statements of organizational philosophy. and socialization Designing of physical spaces. promotion criteria Stories. legends. 5.

and control 7. Organizational systems and procedures 10. selection. and “excommunication” of people Copyright ©2013 Pearson Education 7-39 . promotion. retirement. What leaders pay attention to. leveling off. How the organization is designed and structured 9. measure.Creating a Strategy-Supportive Culture 6. Leader reactions to critical incidents and organizational crises 8. Criteria used for recruitment.

Ways and Means for Altering an Organization’s Culture Copyright ©2013 Pearson Education 7-40 .

Production Management and Strategy Implementation Copyright ©2013 Pearson Education 7-41 .

Labor Cost-Saving Tactics Copyright ©2013 Pearson Education 7-42 .

Living to 100. and Being a “Well” Employee Copyright ©2013 Pearson Education 7-43 .The Key to Staying Healthy.

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