Lecture 10

Strategy Implementation II
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 After studying this chapter, you should be able to do the

following:
  Describe the transition from formulating to
implementing strategies

Learning  Discuss five reasons why annual objectives are essential

for effective strategy implementation.
Objectives   Identify and discuss six reasons why policies are
essential for effective strategy implementation.
  Explain the role of resource allocation and managing
conflict in strategy implementation

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Discuss the need to match a firm’s structure

with its strategy.
Identify, diagram, and discuss seven different
types of organizational structure.

Cont.  Identify and discuss fifteen dos and don’ts in

constructing organizational charts.
Discuss four strategic production/operations
issues vital for successful strategy
implementation.

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 Even the most technically perfect

strategic plan will serve little purpose if
it is not implemented. Many
organizations tend to spend an inordinate
Introduction amount of time, money, and effort on
developing the strategic plan, treating
the means and circumstances under
which it will be implemented as after
thoughts.

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 Successful strategy formulation does not guarantee

successful strategy implementation. It is always
more difficult to do something (strategy
implementation) than to say you are going to do it
(strategy formulation).
Transitioning from
 The transition from strategy formulation to strategy
Formulating to
implementation requires a shift in responsibility
Implementing
from strategists to divisional and functional
Strategies managers. Implementation problems can arise
because of this shift in responsibility, especially if
strategy-formulation decisions come as a surprise to
middle- and lower-level managers

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 Annual objectives are essential for strategy

implementation for five primary reasons:
 They represent the basis for allocating resources.
 They are a primary mechanism for evaluating managers.
The Need for  They enable effective monitoring of progress toward
Clear Annual achieving long-term objectives.
Objectives  They establish organizational, divisional, and
departmental priorities.
 They are essential for keeping a strategic plan on track.

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 Policies refer to specific guidelines,

methods, procedures, rules, forms, and
administrative practices established to
support and encourage work toward stated
goals. Changes in a firm’s strategic
The Need for
direction do not occur automatically.
Clear Policies
 On a day-to-day basis, policies are needed
to make a strategy work. Policies facilitate
solving recurring problems and guide the
implementation of strategy.
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 Policies are essential instruments for strategy

implementation, for at least six reasons:
Policies set boundaries, constraints, and limits on the kinds of
administrative actions that can be taken to reward and sanction behavior.
Policies let both employees and managers know what is expected of
them, thereby increasing the likelihood that strategies will be
implemented successfully.

Cont. Policies provide a basis for management control and allow coordination
across organizational units.
Policies reduce the amount of time managers spend making decisions.
Policies also clarify what work is to be done and by whom.
Policies promote delegation of decision making to appropriate
managerial levels where various problems usually arise.
Policies clarify what can and cannot be done in pursuit of an
organization’s objectives

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 Company Strategy
 Acquire a chain of retail stores to meet our sales growth and
profitability objectives.
 Supporting Policies
 “All stores will be open from 8 AM to 8 PM Monday through
Saturday.” (This policy could increase retail sales if stores
A Hierarchy of currently are open only 40 hours a week.)

Policies  “All stores must submit a Monthly Control Data Report.” (This
policy could reduce expense-to-sales ratios.)
 “All stores must support company advertising by contributing 5
percent of their total monthly revenues for this purpose.” (This
policy could allow the company to establish a national
reputation.)

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 Increase the division’s revenues from $10 million in 2016 to

$15 million in 2018.
 Supporting Policies
 “Beginning in January 2017, each one of this division’s
salespersons must file a weekly activity report that includes
Divisional the number of calls made, the number of miles traveled, the
number of units sold, the dollar volume sold, and the number
Objective of new accounts opened.” (This policy could ensure that
salespersons do not place too great an emphasis in certain
areas.)
 “Beginning in January 2017, this division will return to its
employees 5 percent of its gross revenues in the form of a
Christmas bonus.” (This policy could increase employee
productivity.)

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 Increase production from 20,000 units in 2016 to 30,000

units in 2018.
 Supporting Policies
 “Beginning in January 2017, employees will have the
Production option of working up to 20 hours of overtime per week.”
Department (This policy could minimize the need to hire additional

Objective employees.)
 “Beginning in January 2017, perfect attendance awards
in the amount of $100 will be given to all employees
who do not miss a workday in a given year.” (This policy
could decrease absenteeism and increase productivity.)

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 Various approaches for managing and resolving conflict can be

classified into three categories:
 avoidance(ignoring the problem in hopes that the conflict will
resolve itself or physically separating the conflicting
individuals (or groups) ),
 defusion(playing down differences between conflicting parties
Manage while accentuating similarities and common interests,
compromising so that there is neither a clear winner nor loser ),
Conflict and
 confrontation(is 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. )

.
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 Changes in strategy often require changes in

the way an organization is structured, for
two major reasons.

Match Structure  First, structure largely dictates how

with Strategy objectives and policies will be established.
 The second major reason why changes in
strategy often require changes in structure is
that structure dictates how resources will be
allocated
LECTURE 10

Some Management Trade-Off
Decisions Required in Strategy
Implementation
14
 To emphasize short-term profits or long-term
growth
 To emphasize profit margin or market share
 To emphasize market development or market
penetration
 To lay off or furlough
 To seek growth or stability
 To take high risk or low risk
 To be more socially responsible or more
profitable
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 Too many levels of management

 Too many meetings attended by too many
people
Symptoms of  Too much attention being directed toward
an Ineffective solving interdepartmental conflicts
Organizational  Too large a span of control
Structure
 Too many unachieved objectives
 Declining corporate or business
performance
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 There are seven basic types of

organizational structure: (1)
functional, (2) divisional by
Types of geographic area, (3) divisional by
Organizational product, (4) divisional by customer,
Structure
(5) divisional by process, (6)
strategic business unit (SBU), and
(7) matrix.
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 The most widely used structure is the functional

or centralized type because this structure is the
simplest and least expensive of the seven
alternatives. A functional structure groups tasks
The and activities by business function, such as
Functional production and operations, marketing, finance and
accounting, research and development, and
Structure management information systems. A university
may structure its activities by major functions that
include academic affairs, student services, alumni
relations, athletics, maintenance, and accounting.

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 The divisional (decentralized) structure is the second-

most common type. Divisions are some times referred to as
segments, profit centers, or business units. As a small
The Divisional organization grows, it has more difficulty managing
different products and services in different markets. Some
Structure form of divisional structure generally becomes necessary to
motivate employees, control operations, and compete
successfully in diverse locations.

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 The divisional structure can be

organized in one of four ways: (1)
by geographic area, (2) by product
or service, (3) by customer, or (4)
Cont. by process. With a divisional
structure, functional activities are
performed both centrally and in
each separate division.

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Dr. Haji
Chief Executive Officer
and President

Example of Mr. Jadidi.

divisional
Dr.Huda Dr. Issa Dr. Chibololo. Dr.Malecela
Chief Legal and
Chief Financial Officer Chief Operation Officer Chief product officer Chief Sales Officer
Administrative Officer

structure Mr. Jengo

Vice-resident
General Manager,USA
Dr.Kamugisha
Vice-President, ASIA
Dr. Malengo
Vice-President, Europe

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 As the number, size, and diversity of

divisions in an organization increase,
controlling and evaluating divisional
The Strategic operations become increasingly difficult
Business Unit for strategists. Increases in sales often
(SBU) are not accompanied by similar increases
Structure in profitability. The span of control
becomes too large at top levels of the
firm.

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 For example, in a large conglomerate

organization composed of 90 divisions,
such as ConAgra, the chief executive
officer could have difficulty even
remembering the first names of divisional
Cont.
presidents.
 In multidivisional organizations, an SBU
structure can greatly facilitate strategy-
implementation efforts

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Njozi M,CEO

Example of General Councsel and

cooperate secretary
Mr Salmin,
Chief Marketing Officer
Azam
President of Sales
Hamad
Chief technical and
Operational Officer
Gaddi
Chief Financial Officer
Mosi,
Chief strategy Officer
Habiba,
Chief Human Resources
Officer

SBU Chanzi,
President,private Brands
and Commercial Food
Haji
President consumer
foods

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 A matrix structure is the most complex of all

designs because it depends on both vertical and
horizontal flows of authority and communication
(hence the term matrix).
The Matrix  In contrast, functional and divisional structures
Structure depend primarily on vertical flows of authority and
communication. A matrix structure can result in
higher overhead because it creates more
management positions.

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Example of
Matrix structure

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 Instead of chairman of the board, make it

chairperson of the board.
 Make sure the board of directors reveals diversity
in race, ethnicity, gender, and age.
Fifteen Guidelines for
 Make sure the chair of the board is not also the
Developing an
Organizational Chart CEO or president of the company.
 Make sure the CEO of the firm does not also carry
the title president.
 Reserve the title president for the division heads of
the firm.
 Make sure the firm has a COO.
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 Make sure only presidents of divisions report to the

COO.
 Make sure functional executives such as CFO, CIO,
CMO, CSO, R&D, CLO, CTO, and HRM report to the
CEO, not the COO.

Cont.  Make sure every executive has one boss, so lines in the
chart should be drawn accordingly, assuring unity of
command.
 Make sure span of control is reasonable, probably no
more than 10 persons reporting to any other person.
 Make sure diversity in race, ethnicity, gender, and age is
well represented among corporate executives
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 Avoid a functional type structure for all but the

smallest firms.
 Decentralize, using some form of divisional
structure, whenever possible.
 Use an SBU type structure for large,
Cont. multidivisional firms.
 Make sure executive titles match product
names as best possible in division-by-product
and SBU-designated firms.

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 Production processes typically constitute more than 70

percent of a firm’s total assets. Thus, a major part of the
strategy-implementation process takes place at the
production site. Strategic production-related decisions on
Strategic plant size, plant location, product design, choice of

Production/Ope equipment, kind of tooling, size of inventory, inventory

control, quality control, cost control, use of standards,
rations Issues job specialization, employee training, equipment and
resource utilization, shipping and packaging, and
technological innovation can determine the success or
failure of strategy-implementation efforts.

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 Four production/operations issues (1)

restructuring/reengineering, (2)
managing resistance to change, (3)
deciding where/how to produce goods,
Cont. and (4) managing an ESOP are
especially important for successful
strategy implementation and are
therefore discussed next .

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 Restructuring involves reducing the size of the

firm in terms of number of employees, number of
divisions or units, and number of hierarchical levels
Restructuring in the firm’s organizational structure.
and  This reduction in size is intended to improve both
Reengineering efficiency and effectiveness. Restructuring is
concerned primarily with shareholder well-being
rather than employee well-being

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 Reengineering involves reconfiguring or redesigning

work, jobs, and processes for the purpose of improving
cost, quality, service, and speed. Reengineering does not
usually affect the organizational structure or chart, nor
does it imply job loss or employee layoffs. The focus of
Cont. reengineering is changing the way work is actually carried
out.
 Reengineering is characterized by many tactical (short-
term, business-function-specific) decisions, whereas
restructuring is characterized by strategic (long-term,
affecting all business functions) decisions.

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 No organization or individual can escape change.

But the thought of change raises anxieties because
people fear economic loss, inconvenience,
uncertainty, and a break in normal social patterns.
Manage Almost any change in structure, technology,
Resistance to people, or strategies has the potential to disrupt
Change comfortable interaction patterns. For this reason,
people resist change. The strategic-management
process can impose major changes on individuals
and processes.

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 Reorienting an organization to get people to think and act

strategically is not an easy task. Strategy implementation can pose
a threat to many managers and employees.
 New power and status relationships are anticipated and realized.
New formal and informal groups’ values, beliefs, and priorities
may be largely unknown. Managers and employees may become
Cont. engaged in resistance behavior as their roles, prerogatives, and
power in the firm change.
 Disruption of social and political structures that accompany
strategy execution must be anticipated and considered during
strategy formulation and managed during strategy
implementation.

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 Resistance to change may be the single-greatest

threat to successful strategy implementation.
Resistance regularly occurs in organizations in the
form of sabotaging production machines,
absenteeism, filing unfounded grievances, and an
Cont. unwillingness to cooperate.
 People often resist strategy implementation because
they do not understand what is happening or why
changes are taking place. In that case, employees
may simply need accurate information.

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 Although there are various approaches for implementing

changes, three commonly used strategies are a force change
strategy
 A force change strategy involves giving orders and enforcing
those orders; this strategy has the advantage of being fast, but it
is plagued by low commitment and high resistance.
Cont.  The educative change strategy is one that presents
information to convince people of the need for change; the
disadvantage of an educative change strategy is that
implementation becomes slow and difficult. However, this type
of strategy evokes greater commitment and less resistance than
does the force change strategy.

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 Finally, a rational change strategy or

self- interest change strategy is one
that attempts to convince individuals that
the change is to their personal
advantage. When this appeal is
Cont. successful, strategy implementation can
be relatively easy. However,
implementation changes are seldom to
everyone’s advantage .

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 Just-in-time (JIT) production approaches have

withstood the test of time. Just-in-time
significantly reduces the costs of implementing
strategies. Parts and materials are delivered to a
Decide Where production site just as they are needed, rather than
and How to being stockpiled as a hedge against later
Produce Goods deliveries. Harley Davidson reports that at one
plant alone, JIT freed $22 million previously tied
up in inventory and greatly reduced reorder lead
time.

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Type of organization Strategy Being Production System

implemented adjustments
Hospital Adding a cancer center Purchase specialized
(Product Development) equipment and add
specialized people.
Bank Adding 10 new branches Perform site location
(Market Development) analysis.
Production Beerbrewery Purchasing a barley farm Revise the inventory
Management and operation (Backward
Integration)
control system.

Strategy Steel manufacturer Acquiring a fast-food Improve the quality

Implementation chain (Unrelated control system.
Diversification)
Computer company Purchasing a retail Alter the shipping,
distribution chain packaging, and
(Forward Integration) transportation systems.
 

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 Besides reducing worker alienation and stimulating

productivity, employee stock ownership plans (ESOPs)
allow firms other benefits, such as substantial tax
savings. An ESOP is a tax qualified, defined
Employee contribution, employee benefit plan whereby employees
Stock purchase stock of the company through borrowed money

Ownership or cash contributions

 These plans empower employees to work as owners; this is a
Plans (ESOPs) primary reason why the number of ESOPs have grown
dramatically to more than 10,000 firms covering more than 14
million employees. Today, ESOPs control more than $600
billion in corporate stock in the United States.

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 Any organization is only as good as its people! Thus,

human resource issues can make or break successful
strategy implementation. Thus, seven human resource
issues are discussed further in this section, as follows:
(1) linking performance and pay to strategy, (2)
Strategic balancing work life with home life, (3) developing a
Human diverse work force, (4) using caution in hiring a rival’s
Resource Issues employees, (5) creating a strategy-supportive culture,
(6) using caution in monitoring employees’ social
media, and (7) developing a corporate wellness
program.

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 An organization’s compensation system needs to be

aligned with strategic outcomes. Decisions on salary
increases, promotions, merit pay, and bonuses need to
Linking support the long-term and annual objectives of the firm.
Performance and  A dual bonus system based on both annual and long-term
Pay to Strategy objectives can be helpful in linking performance and pay
to strategies. The percentage of a manager’s annual
bonus attributable to short-term versus long-term results
should vary by hierarchical level in the organization

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 Work and family strategies now represent a competitive

advantage for those firms that offer such benefits as elder
care assistance, flexible scheduling, job sharing, adoption
benefits, on- site summer camp, employee help lines, pet
care, and even lawn service referrals. New corporate

Balance Work titles such as Work and Life Coordinator and Director of
Diversity are becoming common.
Life and Home  Globally, it is widely acknowledged that the best
Life countries for working women are Iceland, Norway,
Sweden, Finland, and Denmark, all of which rate above
the United States. According to the World Economic
Forum’s 2014 report on the global gender gap overall,
the United States, in fact, ranked number 20 overall.

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Women tend to be stronger in terms of

collaboration and people development, while
men tend to be stronger in individual decision
making. By having more women at the senior
Develop a level, companies are helping to improve
Diverse organizational health as well as financial
Workforce performance.
An organization can perhaps be most effective
when its workforce mirrors the diversity of its
customers. For global companies, this goal can be
optimistic, but it is a worthwhile goal.
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 The practice of hiring employees from rival firms has a

long tradition, but increasingly in our lawsuit-happy
environment, firms must consider whether that person(s)
had access to the “secret sauce formula, customer list,

Use Caution in programming algorithm, or any proprietary or

confidential information” of the rival firm. If the person
Hiring a Rival’s has that information and joins your firm, lawsuits could
Employees follow that hiring, especially if the person was under
contract at the rival firm or had signed a “noncompete
agreement.” The article says that to help safeguard the
firm from this potential problem, a “well-written
employee handbook” addressing the issue is necessary.

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• Recruitment
Training
Transfer
Ways and Means for
Altering an Promotion
Organization’s Restructuring
Culture
Reengineering
Role modeling
Positive reinforcement

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Mentoring
Revising vision and/or mission
Redesigning physical spaces/facades
Cont. Altering reward system
Altering organizational policies, procedures, and
practices

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 All organizations have a unique culture. For example, at

Facebook, Inc., employees are given unusual freedom to
choose and change assignments. Even low-level
Create a employees are encouraged to question and criticize
Strategy- managers. Facebook employees are rated on a normal
distribution curve (Bell curve), which creates a hectic,
Supportive intense work environment, where past accomplishments
Culture mean little, compared to what you have done lately for
the firm. Managers are not revered at Facebook as
bosses; rather, they are regarded as helpers

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 Many companies monitor employees’ and

prospective employees’ social media activities,
and have the legal right to do so, but there are
Use Caution in many pros and cons of this activity. Proponents of

Monitoring companies monitoring employees’ social media

activities emphasize that (1) a company’s
Employees’ reputation in the marketplace can easily be
Social Media damaged by disgruntled employees venting on
social media sites and (2) social media records
can be subpoenaed, like email, and used as
evidence against the company.

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 Proponents say companies have a responsibility to know the

nature of employees’ communication through social media as
related to clients, patients, suppliers, distributors, coworkers,
managers, technology, patents, procedures, policies, and much

Cont. more. To ignore social media communication by employees,

proponents say, is irresponsible and too risky for the firm.
 Using social media to research and screen job candidates, various
companies report finding pro-vocative/inappropriate photos and
information related to potential employees’ bias, stereotypes,
prejudices, drinking, and using drugs that led to rejection of the
candidate.

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 Corporate wellness has become a major strategic

issue in companies. If you owned a company and
paid the health insurance of employees, would you
desire to have a healthy workforce? Your likely
Develop a answer is yes, because health insurance premiums
Corporate are more costly for an unhealthy workforce.
Wellness  Corporate wellness programs have proliferated in
Program recent years due in part to the Affordable Care Act,
which increased the maximum incentives and
penalties employers may use to encourage employee
well-being.
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 Eat nutritiously, Eat a variety of fruits and vegetables

daily because they have ingredients that the body uses to
repair and strengthen itself.
 Stay hydrated, Drink plenty of water to aid the body in
eliminating toxins and to enable body organs to function
Seven Keys to Staying
efficiently; the body is mostly water.
Healthy, Living to
100, and Being a  Get plenty of rest, The body repairs itself during rest, so
“Well” Employee get at least seven hours of sleep nightly, preferably eight
hours.
 Get plenty of exercise,Exercise vigorously at least 30
minutes daily so the body can release toxins and
strengthen vital organs.

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 Reduce stress,The body’s immune system is

weakened when one is under stress, making the
body vulnerable to many ailments, so keep
stress to a minimum.
 Do not smoke, Smoking kills, no doubt about it
Cont. anymore.
 Take vitamin supplements, Consult your
physician, but because it is difficult for diet
alone to supply all the nutrients and vitamins
needed, supplements can be helpful in
achieving good health and longevity.
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