Chapter 7 Implementing Strategies Management Issues Strategic Management

Chapter 7 Implementing Strategies: Management Issues Strategic Management: Concepts and Cases. 9 th edition Fred R. David Power. Point Slides by Anthony F. Chelte Western New England College Fred R. David Prentice Hall Ch 7 -1

Chapter Outline • The nature of Strategy Implementation • Annual Objectives • Policies • Resource Allocation Fred R. David Prentice Hall Ch 7 -2

Chapter Outline • Managing Conflict • Matching Structure with Strategy • Restructuring, Reengineering, and EEngineering • Linking Performance and Pay to Strategies Fred R. David Prentice Hall Ch 7 -3

Chapter Outline • Managing Resistance to Change • Managing the Natural Environment • Creating a Strategy-Supportive Culture Fred R. David Prentice Hall Ch 7 -4

Chapter Outline • Production/Operations Concerns When Implementing Strategies • Human Resource Concerns When Implementing Strategies Fred R. David Prentice Hall Ch 7 -5

Implementing Strategies: Management Issues 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. Fred R. David Prentice Hall Ch 7 -6

Implementing Strategies: Strategy Analysis & Choice Management Issues Contrasting strategy formulation and strategy implementation – Formulation is positioning forces before the action – Implementation is managing forces during the action Fred R. David Prentice Hall Ch 7 -7

Implementing Strategies: Strategy Analysis & Choice Management Issues Contrasting strategy formulation and strategy implementation – Formulation focuses on effectiveness – Implementation focuses on efficiency Fred R. David Prentice Hall Ch 7 -8

Implementing Strategies: Strategy Analysis & Choice Management Issues Contrasting strategy formulation and strategy implementation – Formulation is primarily an intellectual process – Implementation is primarily an operational process Fred R. David Prentice Hall Ch 7 -9

Implementing Strategies: Strategy Analysis & Choice Management Issues Contrasting strategy formulation and strategy implementation – Formulation requires good intuitive and analytical skills – Implementation requires special motivation and leadership skills Fred R. David Prentice Hall Ch 7 -10

Implementing Strategies: Strategy Analysis & Choice Management Issues Contrasting strategy formulation and strategy implementation – Formulation requires coordination among a few individuals – Implementation requires coordination among many persons Fred R. David Prentice Hall Ch 7 -11

Implementing Strategies: Strategy Analysis & Choice Management Issues Strategy implementation – – Varies among different types and sizes of organizations Fred R. David Prentice Hall Ch 7 -12

Implementing Strategies: Strategy Analysis & Choice Management Issues Strategy implementation Actions – – Altering sales territories – Adding new departments – Closing facilities – Hiring new employees – Cost-control procedures – Changing advertising strategies – Building new facilities Fred R. David Prentice Hall Ch 7 -13

Management Perspectives Formulation to Implementation transition – – Shift in responsibility • From strategists to division and functional managers Fred R. David Prentice Hall Ch 7 -14

Management Issues Annual Objectives Policies Resources Management Issues Organizational structure Restructuring Rewards/Incentives Fred R. David Prentice Hall Ch 7 -15

Management Issues (continued) Resistance to Change Managers & strategy Supportive culture Management Issues Production/operations Human resources Downsizing Fred R. David Prentice Hall Ch 7 -16

Annual Objectives • Decentralized activity • Involves all managers in the firm Fred R. David Prentice Hall Ch 7 -17

Annual Objectives 1. Basis for allocating resources 2. Primary mechanism for evaluating managers 3. Major instrument for monitoring progress toward long-term objectives 4. Establish organizational, divisional, and departmental priorities Fred R. David Prentice Hall Ch 7 -18

Annual Objectives • Horizontal consistency of objectives • Vertical consistency of objectives Fred R. David Prentice Hall Ch 7 -19

Annual Objectives should state – – – Quantity Quality Cost Time Fred R. David Prentice Hall Ch 7 -20

Policies facilitate solving recurring problems and guide the implementation of strategy Fred R. David Prentice Hall Ch 7 -21

Policies set – – Boundaries – Constraints – limits Fred R. David Prentice Hall Ch 7 -22

Policies Example Issues requiring management policy -– – – To offer extensive or limited management development workshops and seminars To centralize or decentralize employee-training activities To recruit through employment agencies, college campuses, and/or newspapers To promote from within or hire from the outside To establish a high- or low-safety stock of inventory To buy lease, or rent new production equipment Fred R. David Prentice Hall Ch 7 -23

Resource Allocation – A central management activity that allows for strategy execution Fred R. David Prentice Hall Ch 7 -24

Resource Allocation Four types of resources – 1. 2. 3. 4. Financial resources Physical resources Human resources Technological resources Fred R. David Prentice Hall Ch 7 -25

Managing Conflict – Disagreement between two or more parties on one or more issues Fred R. David Prentice Hall Ch 7 -26

Managing Conflict • Conflict is not always “bad” • Absence of conflict – Signal indifference or apathy • Can energize opposing groups to action • May help managers identify problems Fred R. David Prentice Hall Ch 7 -27

Managing Conflict Management and Resolution – Avoidance – Defusion – Confrontation Fred R. David Prentice Hall Ch 7 -28

Matching Structure with Strategy Changes in Structure 1. Structure largely dictates how objectives and policies will be established. 2. Structure dictates how resources will be allocated Fred R. David Prentice Hall Ch 7 -29

Chandler’s Strategy-Structure Relationship New strategy Is formulated New administrative problems emerge Organizational performance improves Organizational performance declines New organizational structure is established Fred R. David Prentice Hall Ch 7 -30

Basic Forms of Structure 1. Functional Structure • Groups tasks and activities by business function 2. Divisional Structure • Decentralized and organized by geography, product, customer, or process Fred R. David Prentice Hall Ch 7 -31

Basic Forms of Structure 3. Strategic Business Unit Structure (SBU) • Groups similar divisions; delegates authority and responsibility to SBU executive 4. Matrix Structure • Most complex of all designs. Depends upon both vertical and horizontal flows of authority and communication Fred R. David Prentice Hall Ch 7 -32

Restructuring – Reducing the size of the firm in terms of number of employees, divisions, or units, and the number of hierarchical levels in the firm’s organizational structure Fred R. David Prentice Hall Ch 7 -33

Restructuring Also called – – Downsizing – Rightsizing – Delayering Fred R. David Prentice Hall Ch 7 -34

Restructuring • Employed when ratios out of line with benchmarked competitors • Primary benefit sought is cost reduction Fred R. David Prentice Hall Ch 7 -35

Reengineering – Involves reconfiguring or redesigning work, jobs, and processes to improve cost, quality, service and speed. Fred R. David Prentice Hall Ch 7 -36

Reengineering Also called – – Process management – Process innovation – Process redesign Fred R. David Prentice Hall Ch 7 -37

Reengineering – Concerned more with employee and customer well-being than shareholder well-being Fred R. David Prentice Hall Ch 7 -38

Linking Performance and Pay to Strategies Most companies practicing pay-forperformance Fred R. David Prentice Hall Ch 7 -39

Linking Performance and Pay to Strategies • Dual bonus system becoming more common – Based on both annual objectives and long-term objectives • Profit Sharing – Incentive compensation used by 30% of companies • Gain Sharing – Performance targets set for employees or departments Fred R. David Prentice Hall Ch 7 -40

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? Fred R. David Prentice Hall Ch 7 -41

Managing Resistance to Change raises anxiety over fear of: – Economic loss – Inconvenience – Uncertainty – Break in status-quo Fred R. David Prentice Hall Ch 7 -42

Managing Resistance to Change Resistance to change – – Single greatest threat to successful strategy implementation Fred R. David Prentice Hall Ch 7 -43

Change Strategies 1. Force Change Strategy 2. Educative Change Strategy 3. Rational or Self-Interest Change Strategy Fred R. David Prentice Hall Ch 7 -44

• 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. • 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. Fred R. David Prentice Hall Ch 7 -45

• Finally, a rational or self-interest change strategy is one that attempts to convince Individuals that the change is to their personal advantage. When this appeal is successful, strategy implementation can be relatively easy. However, implementation changes are seldom to everyone’s advantage. Fred R. David Prentice Hall Ch 7 -46

Managing the Natural Environment • Wide appreciation for firms that conduct operations that “mend” rather than “harm” the environment. Fred R. David Prentice Hall Ch 7 -47

Creating a Strategy-Supportive Culture Strategists should strive to preserve, emphasize, and build upon aspects of existing culture that support new strategies. Fred R. David Prentice Hall Ch 7 -48

Creating a Strategy-Supportive Culture Elements linking culture to strategy: 1. Formal statements of philosophy, charters, etc. used for recruitment and selection, and socialization 2. Designing of physical spaces, facades, buildings 3. Deliberate role modeling, teaching and coaching 4. Explicit reward and status system, promotion criteria 5. Stories, legends, myths about key people and events 6. What leaders pay attention to, measure and control 7. Leader reactions to critical incidents and crises 8. How the organization is designed and structured 9. Organizational systems and procedures 10. Criteria used for recruitment, selection, promotion, retirement Fred R. David Prentice Hall Ch 7 -49

Production/Operations Concerns • • Production processes typically constitute more than 70% of firm’s total assets Decisions on: – – – Plant size Inventory/inventory control Quality control Cost control Technological innovation Fred R. David Prentice Hall Ch 7 -50

Production/Operations Concerns • Just-In-Time (JIT) production approaches have withstood the test of time. JIT significantly reduces the cost of implementing strategies. With JIT parts and production materials are delivered to the production site just as they are needed rather than being stockpiled. Fred R. David Prentice Hall Ch 7 -51

Human Resource Concerns • • • Assessing staffing needs and costs Develop performance incentives ESOPs Child-care policies Work-life balance Fred R. David Prentice Hall Ch 7 -52

Key Terms • • • Annual objectives Avoidance Benchmarking Bonus system Conflict Confrontation Culture Defusion Delayering Fred R. David Prentice Hall Ch 7 -53

Key Terms • • • Decentralized structure Divisional structure Downsizing Educative change strategy Employee Stock Ownership Plan (ESOP) Fred R. David Prentice Hall Ch 7 -54

Key Terms • • • Establishing annual objectives Force change strategy Functional structure Gain sharing Horizontal consistency of objectives Just in time Matrix structure Policy Profit sharing Fred R. David Prentice Hall Ch 7 -55

Key Terms • • • Rational change strategy Reengineering Resistance to change Resource allocation Restructuring Rightsizing Self-interest change Triangulation Vertical consistency of objectives Fred R. David Prentice Hall Ch 7 -56