Implementing Strategies: Management & Operations Issues: Strategic Management: Concepts & Cases 11 Edition Fred David

Chapter 7
Implementing Strategies: Management &

Operations Issues
Strategic
Management:
Concepts & Cases
11th Edition
Fred David
Ch 7-1
Copyright 2007 Prentice Hall
Chapter Outline
The Nature of Strategy Implementation
Annual Objectives
Policies
Ch 7-2
Chapter Outline (cont’d)
Resource Allocation
Managing Conflict
Matching Structure with Strategy
Ch 7-3
Restructuring, Reengineering & E-Engineering
Linking Performance & Pay to Strategies
Managing Resistance to Change
Ch 7-4
Managing the Natural Environment
Creating a Strategy-Supportive Culture
Production/Operations Concerns When

Implementing Strategies
Ch 7-5
Human Resource Concerns When

Ch 7-6
Pretend that every single person you meet

has a sign around his or her neck that says,
“Make me feel important” –
Mary Kay Ash, CEO of Mary Kay, Inc.
Ch 7-7
The Nature of Strategy
Implementation
-- Successful strategy formulation does not

guarantee successful strategy implementation
Ch 7-8
Nature of Strategy
Implementation
Formulation vs. Implementation
 Formulation positions forces before the action
 Implementation manages forces during the

action
Ch 7-9
Nature of Strategy
Implementation
 Formulation focuses on effectiveness
 Implementation focuses on efficiency
Ch 7-10
Nature of Strategy
Implementation
 Formulation is primarily an intellectual process
 Implementation is primarily an operational

process
Ch 7-11
Nature of Strategy
Implementation
 Formulation requires good intuitive & analytical

skills
 Implementation requires special motivational &

leadership skills
Ch 7-12
Nature of Strategy
Implementation
 Formulation requires coordination among a

few individuals
 Implementation requires coordination among

many individuals
Ch 7-13
Nature of Strategy
Implementation
Strategy Implementation
 Varies among different types & sizes of

organizations
Ch 7-14
Nature of Strategy
Implementation
Implementation Activities
 Altering sales territories
 Adding new departments
 Closing facilities
 Hiring new employees
 Cost-control procedures
 Modifying advertising strategies
 Building new facilities
Ch 7-15
Nature of Strategy
Implementation
Management Perspectives
 Shift in responsibility
Division or
Strategists Functional
Managers
Ch 7-16
Management Issues
Annual Objectives
Policies
Resources
Management
Issues Organizational structure
Restructuring
Rewards/Incentives
Ch 7-17
Management Issues (cont’d)
Resistance to Change
Natural Environment
Supportive Culture
Management
Issues Production/Operations
Human Resources
Ch 7-18
Management Issues
Annual Objectives --
-- Decentralized activity
-- Directly involve all managers in the
organization
Ch 7-19
Management Issues
Purpose of Annual Objectives --
Basis for resource allocation

Mechanism for management evaluation
Metric for gauging progress on long-term
objectives
Establish priorities (organizational, division,
& departmental)
Ch 7-20
Management Issues
Consistency of Annual Objectives --
Across hierarchical levels

Horizontally consistent
Vertically consistent
Ch 7-21
Management Issues
Requirements of Annual Objectives
Measurable
Consistent
Reasonable
Challenging
Clear
Understood
Timely
Ch 7-22
Management Issues
Annual Objectives Should State
Quantity
Quality
Cost
Time
Be Verifiable
Ch 7-23
Management Issues
Annual Objectives
Policies
Resources
Management
Restructuring
Rewards/Incentives
Ch 7-24
Management Issues
Policies --
-- Facilitate the solving or recurring

problems & guide implementation of
strategy
Ch 7-25
Management Issues
Policies Establish --
Boundaries
Constraints
Limits
Ch 7-26
Management Issues
Annual Objectives
Policies
Resources
Management
Restructuring
Rewards/Incentives
Ch 7-27
Management Issues
Resource Allocation
-- Central management activity that

allows for the execution of strategy
Ch 7-28
Management Issues
4 Types of Resources
1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources
Ch 7-29
Management Issues
Managing Conflict
-- Disagreement between two more

parties on one or more issues
Ch 7-30
Management Issues
Managing Conflict
 Conflict not always “bad”
 No conflict may signal apathy
 Can energize opposing groups to
action
 May help managers identify problems
Ch 7-31
Management Issues
Conflict Management & Resolution
 Avoidance
 Diffusion
 Confrontation
Ch 7-32
Management Issues
Annual Objectives
Policies
Resources
Management
Restructuring
Rewards/Incentives
Ch 7-33
Management Issues
Matching Structure w/ Strategy
-- Changes in strategy = Changes in

structure
Ch 7-34
Management Issues
Structure & Strategy
 Structure dictates how objectives &

policies will be established
 Structure dictates how resources will
be allocated
Ch 7-35
Chandler’s Strategy-Structure
Relationship
Organizational
New strategy New administrative
performance
Is formulated problems emerge
declines
Organizational
New organizational
performance
structure is established
improves
Ch 7-36
Management Issues
Basic Forms of Structure
 Functional Structure
 Divisional Structure
 Strategic Business Unit Structure (SBU)
 Matrix Structure
Ch 7-37
Functional Structure
 Most widely used

 Simple and least expensive
 Groups activities by business function
 Disadvantages
 Forces accountability to the top
 Minimizes career development opportunities
 Characterized by low employee morale, line/staff
conflict, poor delegation of authority, inadequate
planning for products and markets
 Often leads to short-term and narrow thinking
Ch 7-38
Divisional Structure
 Second most common type of structure

 Can be organized by:
 Geographic area
 Product or service
 Customer
 Process
Ch 7-39
 Advantages
 Clear accountability
 Higher employee morale
 Creates career development opportunities for
managers
 Allows local control of situations
 Leads to a competitive climate within an
organization
 Allows new businesses and products to be added
easily
Ch 7-40
 Disadvantages
 Can be costly to set up
 Each division requires functional specialists
 Duplication of staff services, facilities, and
personnel
 Managers must be well qualified
 Requires an elaborate, headquarters-driven
control system
 Competition between divisions may become so
intense that it is dysfunctional
Ch 7-41
Appropriateness of Divisional Structure
 Geographic area – Organizations whose

strategies need to be tailored to fit the needs
and characteristics of customers in different
geographic areas
 Product or Service – When specific products
or services need special emphasis
 Process – When each process (division) is
responsible for generating revenues and
profits
Ch 7-42
The Strategic Business Unit (SBU)
 In multidivisional organizations, an SBU

structure can greatly facilitate strategy-
implementation efforts.
 Advantages of improved coordination and
accountability
 Disadvantages
 Requires an additional layer of management
 Role of the group vice president is often
ambiguous
Ch 7-43
Ch 7-44
The Matrix Structure
 Most complex of all designs – requires both
vertical and horizontal flows of authority and
communication
 Disadvantages
 Can result in higher overhead
 Dual lines of budget authority
 Dual sources of reward and punishment
 Shared authority
 Dual reporting channels
 Need for an extensive and effective
communication system
Ch 7-45
The Matrix Structure
 Advantages
 Project objectives are clear
 Many channels of communication
 Workers can see visible results of their work
 Shutting down a project can be accomplished
relatively easily
 Facilitates the use of specialized personnel,
equipment, and facilities
Ch 7-46
Ch 7-47
Do’s and Don’ts in Developing
Organizational Charts
 Do’s  Don’ts
 Reserve the title CEO for  Use the title president for
the top executive the top executive
 Use the title “chief” or  Use the title president for
“VP” or “manager” for functional business
functional business executives
executives
 Directly below the CEO it
is best to have a COO
and other “chief’ officers
Ch 7-48
Ch 7-49
Management Issues
Annual Objectives
Policies
Resources
Management
Restructuring
Rewards/Incentives
Ch 7-50
Management Issues
Restructuring
-- Reducing the size of the firm – # of

employees, divisions and/or units, # of
hierarchical levels
Ch 7-51
Management Issues
Restructuring
Downsizing
Rightsizing
Delayering
Ch 7-52
Management Issues
Reengineering
-- Reconfiguring or redesigning work,

jobs, & processes to improve cost,
quality, service, & speed
Ch 7-53
Management Issues
Reengineering
Process management
Process innovation
Process redesign
Ch 7-54
Management Issues
Annual Objectives
Policies
Resources
Management
Restructuring
Rewards/Incentives
Ch 7-55
Management Issues
Linking Pay/Performance to Strategies
-- Pay for performance systems
Ch 7-56
Management Issues
Linking Pay/Performance to Strategies
Dual bonus systems

Profit sharing systems
Gain sharing systems
Ch 7-57
Tests for Performance-Pay Plans
Does the plan capture attention?
Do employees understand the plan?
Is the plan improving communication?
Does the plan pay out when it should?
Is the company or unit performing better?
Ch 7-58
Ch 7-59
Natural Environment
Supportive Culture
Management
Human Resources
Ch 7-60
Management Issues
-- Single greatest threat to successful

strategy implementation
Ch 7-61
Management Issues
-- Raises anxiety; fear concerning

Economic loss
Inconvenience
Uncertainty
Break in status-quo
Ch 7-62
Management Issues
Change Strategies
Force Change Strategy

Educative Change Strategy
Rational or Self-Interest Change
Strategy
Ch 7-63
Natural Environment
Supportive Culture
Management
Human Resources
Ch 7-64
Management Issues
Natural Environment
-- Wide appreciation for firms that

“mend” rather than “harm” the
environment
Ch 7-65
Management Issues
Natural Environment – Environmental

Strategies
Develop/acquire “green” businesses

Divesting environmental-damaging
business
Low-cost producer through waste
minimization & energy conservation
Ch 7-66
Natural Environment
Supportive Culture
Management
Human Resources
Ch 7-67
Management Issues
Strategy-Supportive Culture
-- Preserve, emphasize, & build upon

aspects of existing culture that support
new strategies
Ch 7-68
Management Issues
Elements linking culture to strategy:
• Formal statements of philosophy, charters, etc. used

for recruitment and selection, socialization
• Designing of physical spaces, facades, buildings
• Deliberate role modeling, teaching and coaching
• Explicit reward and status system, promotion criteria
• Stories, legends, myths about key people and events
Ch 7-69
Management Issues
Elements linking culture to strategy:
• What leaders pay attention to, measure and control

• Leader reactions to critical incidents and crises
• How the organization is designed and structured
• Organizational systems and procedures
• Criteria used for recruitment, selection, promotion,
retirement
Ch 7-70
Natural Environment
Supportive Culture
Management
Human Resources
Ch 7-71
Management Issues
Production/Operations Concerns
-- Production processes typically

constitute more than 70% of firm’s total
assets
Ch 7-72
Management Issues
Production/Operations Decisions
Plant size
Inventory/Inventory control
Quality control
Cost control
Technological innovation
Ch 7-73
Natural Environment
Supportive Culture
Management
Human Resources
Ch 7-74
Management Issues
Human Resource Concerns
-- HR manager position has strategic

responsibility & has changed
dramatically as companies continue to
reorganize, outsource, etc.
Ch 7-75
Management Issues
Human Resource Strategic Responsibilities
Assessing staffing needs/costs

Developing performance incentives
ESOP’s
Child-care policies
Work-life balance issues
Ch 7-76
Diversity Issues
Women CEO’s in U.S. 2005 (examples)
CEO Company Age

Meg Whitman eBay 49
Andrea Jung Avon Products 47
Anne Mulcahy Xerox 52
Marjorie Magner Citigroup 56
Betsy Holden Kraft Foods 49
Ann Moore AOL Time Warner 57
Ch 7-77
Benefits of a Diverse Workforce
 Improves corporate culture

 Improves employee morale
 Leads to a higher retention of employees
 Leads to easier recruitment of employees
 Decreases complaints and litigation
 Increases creativity
 Decreases interpersonal conflict
Ch 7-78
Benefits of a Diverse Workforce
 Enables the organization to move into

emerging markets
 Improves client relations
 Increases productivity
 Improves the bottom line
 Maximizes brand identity
 Reduces training costs
Ch 7-79
For Review (Chapter 7)
Key Terms & Concepts
Annual Objectives Conflict
Avoidance Confrontation
Benchmarking Culture
Bonus System Defusion
Ch 7-80
Educative Change
Delayering
Strategy
Employee Stock Ownership

De-centralized Structure
Plans (ESOP’s)
Establishing Annual
Objectives
Downsizing Force Change Strategy
Ch 7-81
Functional Structure Just in Time (JIT)
Gain Sharing Matrix Structure
Glass Ceiling Policy
Horizontal Consistency
Profit Sharing
of Objectives
Ch 7-82
Rational Change
Restructuring
Strategy
Reengineering Rightsizing
Self-Interest Change
Strategy
Strategic Business Unit

Resource Allocation
(SBU)
Ch 7-83
Vertical Consistency
Triangulation
of Objectives
Ch 7-84

Implementing Strategies: Management & Operations Issues: Strategic Management: Concepts & Cases 11 Edition Fred David

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Implementing Strategies: Management & Operations Issues: Strategic Management: Concepts & Cases 11 Edition Fred David

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Chapter 7

Implementing Strategies: Management &

The Nature of Strategy Implementation

Matching Structure with Strategy

Restructuring, Reengineering & E-Engineering

Linking Performance & Pay to Strategies

Managing Resistance to Change

Managing the Natural Environment

Creating a Strategy-Supportive Culture

Production/Operations Concerns When

Human Resource Concerns When

Pretend that every single person you meet

-- Successful strategy formulation does not

 Formulation positions forces before the action

 Implementation manages forces during the

 Formulation focuses on effectiveness

 Implementation focuses on efficiency

 Formulation is primarily an intellectual process

 Implementation is primarily an operational

 Formulation requires good intuitive & analytical

 Implementation requires special motivational &

 Formulation requires coordination among a

 Implementation requires coordination among

 Varies among different types & sizes of

Basis for resource allocation

Across hierarchical levels

Annual Objectives Should State

-- Facilitate the solving or recurring

-- Central management activity that

-- Disagreement between two more

Conflict Management & Resolution

Matching Structure w/ Strategy

-- Changes in strategy = Changes in

Structure & Strategy

 Structure dictates how objectives &

Basic Forms of Structure

 Most widely used

 Second most common type of structure

 Geographic area – Organizations whose

 In multidivisional organizations, an SBU

-- Reducing the size of the firm – # of

-- Reconfiguring or redesigning work,

Linking Pay/Performance to Strategies

-- Pay for performance systems

Linking Pay/Performance to Strategies

Dual bonus systems

Do employees understand the plan?

Is the plan improving communication?

Does the plan pay out when it should?

Is the company or unit performing better?

-- Single greatest threat to successful

-- Raises anxiety; fear concerning

Force Change Strategy

-- Wide appreciation for firms that

Natural Environment – Environmental

Develop/acquire “green” businesses

-- Preserve, emphasize, & build upon

• Formal statements of philosophy, charters, etc. used

• What leaders pay attention to, measure and control

-- Production processes typically

Human Resource Concerns

-- HR manager position has strategic

Assessing staffing needs/costs