Strategy Implementation

Payne
(8)

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 What is Strategy Implementation?
• The sum total of the activates and choices required for
the execution of a strategic plan – it is the process by
which strategies are put into action through budgets,
programs, and procedures.
• Implementation is the means to the ends (i.e., the
strategy), these take place primarily through
functional strategies and/or structure changes.
• Ask:
– Who?
– What?
– How?
– When?
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 Top 10 Problems in Implementation
1. Slower implementation than originally planned.
2. Unanticipated major problems.
3. Ineffective coordination of activities.
4. Competing activities and crises that distract attention.
5. Insufficient capabilities of the involved employees.
6. Inadequate training and instruction of lower-level employees.
7. Uncontrollable external environmental factors.
8. Inadequate leadership and direction by departmental managers.
9. Poor definition of key implementation tasks and activities.
10. Inadequate monitoring of activities by the information system.
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 Who Implements?

• Implementation involves a the whole management team

– Every unit and all employees have a role and need to be
committed

• CEO, other senior executives, and heads of major

organizational units must lead the process and
orchestrate major initiatives
– But they must rely on middle and lower-level managers to
push things on the front line and see that strategy is well-
executed on a daily basis.

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 Functional Strategies
Functional Strategies: The collective pattern of day-to-day
decisions made and actions taken by employees responsible for
value activities. These include…
• Marketing Strategy • R&D Strategy
• Customer Targeting • Research focus/orientation
• Product/service positioning, mix, • Project priorities (budget, quality, time)
breadth, and pricing • Relationships to external organizations
• Promotions practices • Information Systems
• Distribution channels • Hardware/software capability and
• Customer service policies integration
• Product/service policies • Linkages to external organizations
• Marketing research • Investments needed
• Operations Strategy • HR Strategy
• Capacity planning • Recruitment,Selection, Appraisals,
• Location and layout of facility Salaries, Wages, Training, etc.
• Equipment choices
• Financial Strategy
• Scheduling
• Capital, Investments, Returns
• Workforce policies
• Resource allocation
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 Functional Strategies - Examples
• Linking Budgets to Strategy
– New strategies usually call for significant budget reallocations.
Depriving strategy-critical groups of the funds needed to execute
their pieces of the strategy can undermine the implementation
process!
• Establishing Strategy-Supportive Policies
– Provide top-down guidance regarding expected behaviors
– Note: Too much policy can be as bad as the wrong policy or no
policy at all
• Instituting Best Practices / Continuous Improvement
– Searching out and adopting best practices & benchmarking is
integral to effective implementation (see next slide)
• Installing Support Systems
– Mobilizing information and creating systems to use knowledge
effectively
• Motivational Practices and Incentive Compensation Systems
– Monetary and Non-monetary reward systems to motivate positive
actions 6
 Aspects Common to TQM and
Continuous Improvement Programs
• Committed leadership •Open organization
• Adoption & communication of •Employee empowerment
TQM •Zero-defects mentality
• Closer customer relationships •Flexible manufacturing
• Closer supplier relationships •Process improvement
• Benchmarking •Measurement
• Increased training
Basic Characteristics of TQM/CQI Programs:
1. Valuable competitive asset in a company’s resource portfolio
2. Have hard-to-imitate aspects
3. Require substantial investment of management time and effort
4. Expensive in terms of training and meetings
5. Seldom produce short-term results
6. Long-term payoff - Instilling a TQM culture
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 Employee Control and Rewards
• Control:
– Challenge is how to ensure actions of employees stay
within acceptable bounds
– Purpose of diagnostic control systems is to relieve
managers of burden of constant monitoring
– Control methods establish boundaries on what not to do,
allowing freedom to act with limits.
• Rewards (Two Types):
– Monetary Incentives – Non-Monetary Incentives
• Salary raises • Praise
• Performance bonuses • Constructive criticism
• Stock options • Special recognition
• Retirement packages • More, or less, job security
• Promotions • Interesting assignments
• Perks • More, or less, job responsibility

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 Structural Changes
• Changes to structure are often keys to strategy implementation
success.
• A Few hard and fast rules for organizing:
– Main rule: Structure must support and facilitate good strategy
execution.
• Research indicates:
– Structure affects performance
– Structure merits reassessment whenever strategy changes
– New strategy typically involves different skills and key activities
• How work is structured is a means to an end - not an end in itself!
– All the basic structures have strategic advantages and disadvantages
– There is no ideal organization design
– To do a good job of matching structure to strategy
• Pick a basic design
• Modify as needed
• Supplement with coordinating mechanisms and communication
arrangements
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 Structural Forms
Traditional
Functional
General Manager
Structure
Process-Oriented
Functional Structure Research & Human
Manufacturing
Development Resources
General Manager

Finance &
Engineering Marketing
Accounting

Foundry & Screw Customer

Inspection
Castings Machining Service

Milling & Finishing & Loading & Billing &

Grinding Heat Treating Shipping Accounting

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 Structural Forms (2)
CEO
Corporate
Services SBU Structure

Group VP Group VP Group VP

SBU I SBU II SBU III

Strategically Related Strategically Related Strategically Related Matrix Structure

Business Units Business Units Business Units
General Manager

Head Head Head Head

R&D Manufacture Marketing Finance

Venture R&D Production Marketing Finance

Manager 1 Specialists Specialists Specialists Specialists

Venture R&D Production Marketing Finance

Manager 2 Specialists Specialists Specialists Specialists

Venture R&D Production Marketing Finance

Manager 3 Specialists Specialists Specialists Specialists

Venture R&D Production Marketing Finance

Manager 4 Specialists Specialists Specialists Specialists
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Strategic Control

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 Strategic Control Systems
• Strategic Control System: “a system to
support managers in assessing the relevance of
the organization’s strategy to its progress in
the accomplishment of its goals, and when
discrepancies exist to support areas needing
attention” Lorange, Morton & Ghoshal, 1986
Controls come in two primary types:
1. Feedback
2. Concurrent

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 Feedback Controls
• Provides managers with information concerning
the outcomes of the organizational activities.
– Budgets: holding employees accountable for staying
within or well below an established budget
– Ratio Analysis: ROI, ROA, debt-to-equity, current
ratio, etc.
– Audits: Measures and controls firm conduct by
comparing to established guidelines such as GAAP
(general accepted accounting principles) or ethical
standards.
– Goals and Objectives
– Balanced Score Card Measures
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 Concurrent Controls
• Provides managers with real-time information about
processes and activities, so that deviations can be
identified and corrected before they affect
organizational results.
– Statistical Process Control and Warning Systems: Setting
preferences for specific work activities (e.g., automobile
manufacturing line assembly) and allowing for warnings to
occur before it can impact outcomes.
– Inventory Controls: Tracks stock levels of different items
so new orders can be made (e.g., Amazon.com)
– Behavioral Controls: Encourage employees to comply to
norms and procedures (rules, regulations, and socialization
processes).
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