Chapter 7 Implementing Strategies: Management & Operations Issues Strategic Management: Concepts & Cases 11 th Edition Fred David Ch 7-1 Chapter Outline The Nature of Strategy Implementation Annual Objectives Policies Ch 7-2 1
Chapter Outline (cont d) Resource Allocation Managing Conflict Matching Structure with Strategy Ch 7-3 Chapter Outline (cont d) Restructuring, Reengineering & E-Engineering Linking Performance & Pay to Strategies Managing Resistance to Change Ch 7-4 2
Chapter Outline (cont d) Managing the Natural Environment Creating a Strategy-Supportive Culture Production/Operations Concerns When Implementing Strategies Ch 7-5 Chapter Outline (cont d) Human Resource Concerns When Implementing Strategies Ch 7-6 3
Implementing Strategies 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 4
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 vs. Implementation Formulation focuses on effectiveness Implementation focuses on efficiency Ch 7-10 5
Nature of Strategy Implementation Formulation vs. Implementation Formulation is primarily an intellectual process Implementation is primarily an operational process Ch 7-11 Nature of Strategy Implementation Formulation vs. Implementation Formulation requires good intuitive & analytical skills Implementation requires special motivational & leadership skills Ch 7-12 6
Nature of Strategy Implementation Formulation vs. 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 7
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 Strategists Division or Functional Managers Ch 7-16 8
Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Ch 7-17 Management Issues (cont d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human Resources Ch 7-18 9
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 10
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 11
Annual Objectives Should State Quantity Quality Cost Time Be Verifiable Ch 7-23 Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Ch 7-24 12
Policies -- -- Facilitate the solving or recurring problems & guide implementation of strategy Ch 7-25 Management Issues Policies Establish -- Boundaries Constraints Limits Ch 7-26 13
Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Ch 7-27 Management Issues Resource Allocation -- Central management activity that allows for the execution of strategy Ch 7-28 14
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 15
Managing Conflict Conflict not always bad (لا مبالاة ( apathy No conflict may signal 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 16
Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Ch 7-33 Management Issues Matching Structure w/ Strategy -- Changes in strategy = Changes in structure Ch 7-34 17
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 New strategy Is formulated New administrative problems emerge Organizational performance declines Organizational performance improves New organizational structure is established Ch 7-36 18
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 19
Divisional Structure Second most common type of structure Can be organized by: Geographic area Product or service Customer Process Ch 7-39 Divisional Structure 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 20
Divisional Structure 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 21
The Strategic Business Unit (SBU) In multidivisional organizations, an SBU structure can greatly facilitate strategyimplementation 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 22
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 23
Ch 7-47 Do s and Don ts in Developing Organizational Charts Do s Reserve the title CEO for the top executive Use the title chief or VP or manager for functional business executives Directly below the CEO it is best to have a COO and other chief officers Don ts Use the title president for the top executive Use the title president for functional business executives Ch 7-48 24
Ch 7-49 Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Ch 7-50 25
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 26
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 27
Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Ch 7-55 Management Issues Linking Pay/Performance to Strategies -- Pay for performance systems Ch 7-56 28
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 29
Ch 7-59 Management Issues (cont d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human Resources Ch 7-60 30
Resistance to Change -- Single greatest threat to successful strategy implementation Ch 7-61 Management Issues Resistance to Change -- Raises anxiety; fear concerning Economic loss Inconvenience Uncertainty Break in status-quo Ch 7-62 31
Change Strategies Force Change Strategy Educative Change Strategy Rational or Self-Interest Change Strategy Ch 7-63 Management Issues (cont d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human Resources Ch 7-64 32
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 33
(cont d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations 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 34
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 35
(cont d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations 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 36
Production/Operations Decisions Plant size Inventory/Inventory control Quality control Cost control Technological innovation Ch 7-73 Management Issues (cont d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human Resources Ch 7-74 37
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 (employee stock ownership plans) Child-care policies Work-life balance issues Ch 7-76 38