Chapter Five

Strategy Implementation,
Control and Evaluation
 5.1 STRATEGY
IMPLEMENTATION
SUCCESS DEPENDS 10 % ON
INSPIRATION AND 90% ON
PERESPIRATION!
Successful strategy formulation
does not guarantee successful
strategy implementation.
Strategy formulation & implementation

Chapter 5 Strategy Implementation, Control and Evaluation

Strategy Formulation Strategy Implementation

Does the strategy fit the How well has the strategy
resources & environment? been executed?

Strongly • Achieve strategic competitiveness

• Earn above-average returns Successfully

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 STRATEGY FORMULATION AND
IMPLEMENTATION
 Strategy formulation is what an organization is going
to do – example; choosing cost leadership strategy

Chapter 5 Strategy Implementation, Control and Evaluation

 Strategy implementation is doing it.
 Strategy implementation involves transferring
formulated strategies into action
 Asan example, the execution of the chosen strategy may
involve:
 Building new facilities

 Establishing cost control procedures

 Modifying employee hiring practices & benefits

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 Establish annual objectives and action plan
 Devise policies

Control and Evaluation

Chapter 5 Strategy Implementation,
 Allocate resources

 Restructure and reengineer

 Revise reward and incentive plans

 Minimize resistance to change

 Develop a strategy-supportive culture

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 STRATEGY IMPLEMENTATION CONT’D …

Chapter 5 Strategy Implementation, Control and Evaluation

 For successful execution of the formulated strategy, the
following must be considered:
 Acquiring human, financial, & physical resources
 Organizational structure, culture, & internal systems
must be consistent with the formulated strategy
 Making necessary internal changes in order to achieve
the objectives
 Briefly, resources must match with the formulated
strategy for its implementation

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 COMPONENTS OF STRATEGY
IMPLEMENTATION

Chapter 5 Strategy Implementation, Control and Evaluation

1. Is the formulated strategy communicated properly?
2. Are structuring mechanisms properly aligned?
3. Are functional area conflicts reconciled?
4. Does leadership inspire commitment to the formulated
strategy
5. Do reward systems reinforce appropriate behavior?
6. Are functional issues addressed & implemented?
7. Does the control system provide appropriate feedback?

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1. COMMUNICATING
STRATEGY

Chapter 5 Strategy Implementation, Control and Evaluation

 Before a strategy can be implemented it must be
understood.
 A clear understanding of strategy gives purpose to
the activities of each organization member.
 It allows the employee to link whatever task is at
hand to the overall organizational direction

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2. STRATEGY & STRUCTURE

Chapter 5 Strategy Implementation, Control and Evaluation

 Achieving a fit between strategy & structure
is a complex process that involves how:
 Activities will be grouped &
 Groups will be coordinated

 This refers to the need for identifying the

appropriate types of organizational structure,
linking organizational units, & decision
making.

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ORGANIZATIONAL STRUCTURE
 It is a firm’s role configuration, procedures,

Chapter 5 Strategy Implementation, Control and Evaluation

governance, control mechanisms, authority &
decision-making processes
 Thus, organizational structure must be
congruent with the strategy to achieve
strategic competitiveness
 However, the structure should be changed
when no longer provides the coordination,
control & direction required to implement the
strategy successfully
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 ORGANIZATIONAL STRUCTURE
CONT’D …

Chapter 5 Strategy Implementation, Control and Evaluation

 Organizational structure facilitates the
implementation of the strategy
 According to Alfred D. Chandler structure
follows strategy. In other words, changes in
strategy ultimately led to or resulted in
changes in the organization’s structure.
 Therefore, from among the several different
types of structures, firms are expected to
select the right type of structure that matches
with the formulated strategy.

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3. RECONCILING FUNCTIONAL
AREA CONFLICTS

Chapter 5 Strategy Implementation, Control and Evaluation

 Operations – maintain efficiency by having few
production runs & variations as possible
 Marketing – provide customers with wider
product lines & as many options as possible
(color, accessories, etc.)
 This can lead to conflict & poor strategy
implementation unless it is explicitly managed
 Thus,integrate functional strategies – formulation,
communication, participation, & trade-offs
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4. LEADERSHIP COMMITMENT

Chapter 5 Strategy Implementation, Control and Evaluation

 Thebehavior & activities of top management
contribute to strategy implementation by:
 Supporting the strategy & building the culture
of the organization by example
 Making decisions based on skills, personality, &
experience
5. DESIGN & IMPLEMENT REWARD
SYSTEMS

Chapter 5 Strategy Implementation, Control and Evaluation

 Recognizing or not outstanding performance
sends different signals
 The timing & criteria used to determine
salary increments & bonuses have impacts on
performance

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6. FUNCTIONAL ISSUES

Chapter 5 Strategy Implementation, Control and Evaluation

 The most common functional areas &
issues:
Marketing:
 Products/services
 Pricing & distribution

 Promotion, etc.

Operations:
 Production methods & processes
 Adequate capacity to meet demand

 Adequate inventory level & proper inventory control

 Availability of appropriate employees & raw materials,

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FUNCTIONAL ISSUES CONT’D …

Chapter 5 Strategy Implementation, Control and Evaluation

Accounting & Finance:
 Availability of long & short-term financing
 Cost of capital
 Dividend policy
 The effect of currency revaluation &
devaluation
 The overall tax regimes
 Preparation of budgets, etc.
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FUNCTIONAL ISSUES CONT’D …
Research & Development:

Chapter 5 Strategy Implementation, Control and Evaluation

 Basic & applied research activity
 Develop & improve products

 New & improved production processes for efficiency

improvement, etc.
Personnel & labor relations:
 Obtain in a timely & cost effective manner new employees
 Retain & maintain appropriate human resources
 Administer salary & benefits
 Enhancing cooperation with union & avoid labor strikes
to promote implementation of the strategy, etc.

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FUNCTIONAL ISSUES CONT’D …

Chapter 5 Strategy Implementation, Control and Evaluation

 Information systems
 Providesupport for internal decision-making &
for monitoring the progress of strategy
implementation
 Provide information about external trends:
markets, political, economic, technological
environments, etc.
 It is important that the information system
provides information that is:
 Timely
 Relevant

 Complete

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 7. IMPLEMENTATION AS A
PROCESS
 In general, implementation is the action phase of the
strategic management process

Chapter 5 Strategy Implementation, Control and Evaluation

 Implementation is the process of making things happen
& involves (Holt, 1993):
 Allocating resources through budgets
 Developing programs & projects that activate the
organization
 Articulating policies, procedures & rules that can be
used in guiding activities on daily basis

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SKILLS NEEDED FOR IMPLEMENTA
TION

Chapter 5 Strategy Implementation, Control and Evaluation

Team and Craftsman skills:
 Organizations
need the capability to manage
their systems as well as controlling the
financial and human resources aspects
properly.
 They should possess a balance of skills
necessary to implement a strategy
successfully. The breadth of services or
products offered has implications for the types
of skill required.
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SKILLS NEEDED CONT’D …

Chapter 5 Strategy Implementation, Control and Evaluation

A broad scope of services may be dealt with
Either by competent, adaptable individuals
who can turn their hands to a variety of
tasks (the ‘craftsman’ approach), or
Through a number of specialists brought
together in project teams to tackle specific
problems (the ‘team’ approach).
Both approaches require highly trained,
experienced and probably expensive staff.

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SKILLS NEEDED CONT’D …

Chapter 5 Strategy Implementation, Control and Evaluation

 Strategic change will have a significant
impact on the people within the organization.
 The issues, which are important, are
manpower configuration, recruitment,
training, and development.

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5.2. Strategic
Control and
Evaluation
STRATEGY CONTROL AND
EVALUATION

Chapter 5 Strategy Implementation, Control and Evaluation

Why does actual performance sometimes not match
the performance desired in the strategic objectives?
 Was the strategic plan severely flawed in its
formulation?
 Did management’s implementation of the plan fall
short?
 Were there uncontrollable factors external to the
organization that prevented achievement of the
plan?
These questions suggest the importance of Control &
Evaluation and a need to understand how the plan can
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STRATEGY CONTROL &
EVALUATION (CONT’D…)

Chapter 5 Strategy Implementation, Control and Evaluation

 Too many strategic plans end up collecting dust
on a shelf.
 Controlling and evaluation planning activities
and status of implementation of a plan is as
important as identifying strategic issues and
goals.
 One advantage of control & evaluation is to
ensure that the organization is following the
direction established during strategic planning.
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 PURPOSE OF CONTROL

Chapter 5 Strategy Implementation, Control and Evaluation

 The purpose of control could be to
determine whether:
Selected strategies implemented
successfully
The resources are used wisely
Set objectives are achieved, etc.

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STEPS IN CONTROLLING &
EVALUATION PROCESS

Chapter 5 Strategy Implementation, Control and Evaluation

 Steps in controlling & evaluation
process:
1. Setting standards for performance
2. Measure actual performance
3. Compare actual performance with the standard
4. Analyze the reasons for significant deviations, if
any
5. Take corrective action when performance does
not fall within acceptable range
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 CONTROL SYSTEMS
▫ Control is one of the functions of management & is

Chapter 5 Strategy Implementation, Control and Evaluation

needed at all levels & in all activities of an
organization
▫ Components of management control systems include
budgets, statistical reports, policies/procedures, &
performance appraisal
▫ Thus, the progress toward desired ends must be
periodically monitored & evaluated in order to take
corrective action timely
▫ In general, control is necessary for goal achievement

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CONTROL SYSTEMS CONT’D …
 The two main types of internal controls used to
support the implementation of strategies in

Chapter 5 Strategy Implementation, Control and Evaluation

large firms are strategic & financial controls.
 Strategic control
Entails corporate-level managers to evaluate
the performance of division managers & their
units using long-term & strategically relevant
criteria
Allows corporate-level managers to evaluate
strategic actions of business-level strategy –
exchanging information through formal &
informal face-to-face meeting
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CONTROL SYSTEMS CONT’D …
Financial control

Chapter 5 Strategy Implementation, Control and Evaluation

 Entailsobjective criteria (e.g. ROI) that
corporate-level managers use to evaluate both
individual business units & the managers
responsible for their performance

 Requires each division's performance to be

largely independent – the units are oriented
towards financial outcomes
Therefore, the effectiveness of financial
control is based on SBUs independence

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 CONTROL SYSTEMS CONT’D …
• Financial data are the most commonly used warning

Chapter 5 Strategy Implementation, Control and Evaluation

signals: profit, sales, ROI, ROE, cost figures, etc.
▫ These financial figures are periodically monitored &
compared with projected or expected figures
▫ Substantial discrepancies in any of the figures
indicate something unanticipated is happening
• The other frequently used tool for monitoring financial
performance is budget – in essence, a budget is a plan
for allocating resources

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 CONTROL SYSTEMS CONT’D …
• There are also non-financial controls that are used as

Chapter 5 Strategy Implementation, Control and Evaluation

early warning signals to potential problems
▫ Productivity measures
▫ Quality measures
▫ Feedback from customers

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 7-S MODEL / FRAMEWORK
 The international consulting firm of McKinsey developed 7-S
Framework for evaluating strategy

Chapter 5 Strategy Implementation, Control and Evaluation

 . According to the model:
 A strategy is usually successful when the other S’s in the
framework fit, or support, the strategy
 If a chosen strategy has run into problems during
implementation, it is often because there is a lack of fit b/n the
strategy & one or more of the other S’s
 The 7-S model posits that organizations are successful when they
achieve an integrated harmony among
 Three hard S's of strategy, structure, & systems, &
 Four soft S's of skills, staff, style, & super-ordinate goals (now
referred to as shared values)

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Chapter 5 Strategy Implementation, Control and Evaluation

Systems

Style
Structure

Shared
Values

Staff
Strategy

Skills
7-S MODEL CONT’D …

Chapter 5 Strategy Implementation, Control and Evaluation

 Strategy
 The positioning & actions taken by an
enterprise, in response to or anticipation of
changes in the external environment, intended
to achieve competitive advantage

 Structure
 The way in which tasks & people are specialized
& divided, & authority is distributed; how
activities & reporting relationships are
grouped; the mechanisms by which activities in
the organization are coordinated
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7-S MODEL CONT’D …

Chapter 5 Strategy Implementation, Control and Evaluation

 Systems
 The formal & informal procedures used to
manage the organization, including
management control systems, performance
measurement & reward systems, planning,
budgeting & resource allocation systems, &
management information systems

 Staff
 The people, their backgrounds & competencies;
how the organization recruits, selects, trains,
socializes, manages the careers, & promotes
employees
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7-S MODEL CONT’D …
 Skills

Chapter 5 Strategy Implementation, Control and Evaluation

 The distinctive competencies of the organization;
what it does best along dimensions such as
people, management practices, processes,
systems, technology, & customer relationships
 Style/culture
 What they focus attention on, what questions
they ask of employees, how they make decisions;
also the organizational culture
 Shared values
 The core or fundamental set of values that are
widely shared in the organization & serve as
guiding principles of what is important

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EVALUATION SYSTEMS
In general, evaluation refers to measuring &

Chapter 5 Strategy Implementation, Control and Evaluation


controlling the organization’s progress with respect to
its strategy & when discrepancies exist, taking
corrective action
 Corrective action may require adjusting performance
objectives because of:
 Changes in circumstances
 Shifting contingency plan
 Fine-tuning strategies

 However, the system must encourage efficient

operations that are consistent with the plan while
allowing the flexibility to adapt the changing
conditions
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EVALUATION SYSTEMS CONT’D …

Chapter 5 Strategy Implementation, Control and Evaluation

• There are two types of evaluation systems: process
evaluation & outcome evaluation
 Process evaluation
• Emphasizes on uncovering the deficiencies in an
ongoing program
▫ Monitoring the progress of an organization against
the strategic plan while it is under implementation
▫ Helps to know whether the organization is moving
toward the strategic goals
• Four phases of process evaluation (Cox III et al, 1994):
▫ Problem identification
▫ Solution development
▫ Implementation of the solution
▫ Feedback evaluation

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 EVALUATION SYSTEMS CONT’D …
 Outcome evaluation

Chapter 5 Strategy Implementation, Control and Evaluation

 Could be undertaken at the end of the entire
strategic management process with the aim of
determining what has been accomplished
The outcome from such an evaluation:
 How much of the stated goal was accomplished?
 What other effects, that were not otherwise anticipated,
resulted from this program?
 The outcome evaluation closes the loop of the strategic
management process & returns managers to the first
phase of formulating a vision & mission for a new
process

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 BALANCED SCORECARD
A new approach to strategic management was

Chapter 5 Strategy Implementation, Control and Evaluation


developed in the early 1990's by Drs. Robert Kaplan
(Harvard Business School) and David Norton. They
named this system the 'balanced scorecard'. 
 The balanced scorecard is a management system (not
only a measurement system) that enables organizations
to clarify their vision and strategy and translate them
into action.
 It provides feedback around both the internal business
processes and external outcomes in order to
continuously improve strategic performance and
results.
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BALANCED SCORECARD CONT’D …
 The balanced scorecard suggests that we view

Chapter 5 Strategy Implementation, Control and Evaluation

the organization from four perspectives, and to
develop metrics, collect data and analyze it
relative to each of these perspectives:
 The Financial Perspective
 The Customer Perspective
 The Business Process Perspective
 The Learning & Growth Perspective

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 THE BALANCED SCORECARD

Chapter 5 Strategy Implementation, Control and Evaluation

FINANCIAL/REGULATORY
CUSTOMER
To satisfy our constituents,
To achieve our vision,
what financial & regulatory
what customer needs must
objectives must
we serve?
we accomplish?

INTERNAL
To satisfy our customers and
stakeholders, in which business
processes must we excel?

LEARNING & GROWTH

To achieve our goals, how
must we learn, communicate
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and grow?
THE FINANCIAL PERSPECTIVE

Chapter 5 Strategy Implementation, Control and Evaluation

 Financial perspective: measures reflecting
financial performance, for example number of
debtors, cash flow or return on investment.
 The financial performance of an organization
is fundamental to its success.

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 THE CUSTOMER PERSPECTIVE
 The customer perspective addresses the question

Chapter 5 Strategy Implementation, Control and Evaluation

of how the firm is viewed by its customers and
how well the firm is serving its targeted
customers.
 Customer Perspective – measures those having a
direct impact on customers, for example time
taken to process a phone call, results of customer
surveys, number of complaints or competitive
rankings (an increasing realization of the
importance of customer focus & customer
satisfaction in any business)
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THE BUSINESS PROCESS
PERSPECTIVE
 Internal business process objectives address the question

Chapter 5 Strategy Implementation, Control and Evaluation

of which processes are most critical for satisfying
customers and shareholders.
 This perspective allow the managers to know how well
their business is running, and whether its products and
services conform to customer requirements.
 Business Process Perspective - measures reflecting the
performance of key business processes, for example cycle
time, completion rate, workload and employee
utilization, transactions per employee, errors or rework

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THE LEARNING AND GROWTH PERSPECTIVE

 Learning and growth perspective address the

Chapter 5 Strategy Implementation, Control and Evaluation

question of how the firm must learn, improve,
and innovate in order to meet its objectives.
Much of this perspective is employee-
centered.
 Learning and growth perspective - measures
describing the company's learning curve - for
example, number of employee suggestions or
total hours spent on staff training, ease of
communication & knowledgeable employees
etc.
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Chapter 5 Strategy Implementation,
Control and Evaluation
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Thank you!