Chapter 7 Implementing Strategies Management Operations Issues Strategic

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Chapter 7 Implementing Strategies: Management & Operations Issues Strategic Management: Concepts & Cases 11

Chapter 7 Implementing Strategies: Management & Operations Issues Strategic Management: Concepts & Cases 11 th Edition Fred David Copyright 2007 Prentice Hall 1

Chapter Outline The Nature of Strategy Implementation Annual Objectives Policies Copyright 2007 Prentice Hall

Chapter Outline The Nature of Strategy Implementation Annual Objectives Policies Copyright 2007 Prentice Hall 2

Chapter Outline (cont’d) Resource Allocation Managing Conflict Matching Structure with Strategy Copyright 2007 Prentice

Chapter Outline (cont’d) Resource Allocation Managing Conflict Matching Structure with Strategy Copyright 2007 Prentice Hall 3

Chapter Outline (cont’d) Restructuring, Reengineering & E-Engineering Linking Performance & Pay to Strategies Managing

Chapter Outline (cont’d) Restructuring, Reengineering & E-Engineering Linking Performance & Pay to Strategies Managing Resistance to Change Copyright 2007 Prentice Hall 4

Chapter Outline (cont’d) Managing the Natural Environment Creating a Strategy-Supportive Culture Production/Operations Concerns When

Chapter Outline (cont’d) Managing the Natural Environment Creating a Strategy-Supportive Culture Production/Operations Concerns When Implementing Strategies Copyright 2007 Prentice Hall 5

Chapter Outline (cont’d) Human Resource Concerns When Implementing Strategies Copyright 2007 Prentice Hall 6

Chapter Outline (cont’d) Human Resource Concerns When Implementing Strategies Copyright 2007 Prentice Hall 6

Implementing Strategies Pretend that every single person you meet has a sign around his

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. Copyright 2007 Prentice Hall 7

The Nature of Strategy Implementation -- Successful strategy formulation does not guarantee successful strategy

The Nature of Strategy Implementation -- Successful strategy formulation does not guarantee successful strategy implementation Copyright 2007 Prentice Hall 8

Nature of Strategy Implementation Formulation vs. Implementation n Formulation positions forces before the action

Nature of Strategy Implementation Formulation vs. Implementation n Formulation positions forces before the action n Implementation manages forces during the action Copyright 2007 Prentice Hall 9

Nature of Strategy Implementation Formulation vs. Implementation n Formulation focuses on effectiveness n Implementation

Nature of Strategy Implementation Formulation vs. Implementation n Formulation focuses on effectiveness n Implementation focuses on efficiency Copyright 2007 Prentice Hall 10

Nature of Strategy Implementation Formulation vs. Implementation n Formulation is primarily an intellectual process

Nature of Strategy Implementation Formulation vs. Implementation n Formulation is primarily an intellectual process n Implementation is primarily an operational process Copyright 2007 Prentice Hall 11

Nature of Strategy Implementation Formulation vs. Implementation n Formulation requires good intuitive & analytical

Nature of Strategy Implementation Formulation vs. Implementation n Formulation requires good intuitive & analytical skills n Implementation requires special motivational & leadership skills Copyright 2007 Prentice Hall 12

Nature of Strategy Implementation Formulation vs. Implementation n Formulation requires coordination among a few

Nature of Strategy Implementation Formulation vs. Implementation n Formulation requires coordination among a few individuals n Implementation requires coordination among many individuals Copyright 2007 Prentice Hall 13

Nature of Strategy Implementation n Varies among different types & sizes of organizations Copyright

Nature of Strategy Implementation n Varies among different types & sizes of organizations Copyright 2007 Prentice Hall 14

Nature of Strategy Implementation Activities n n n n Altering sales territories Adding new

Nature of Strategy Implementation Activities n n n n Altering sales territories Adding new departments Closing facilities Hiring new employees Cost-control procedures Modifying advertising strategies Building new facilities Copyright 2007 Prentice Hall 15

Nature of Strategy Implementation Management Perspectives n Shift in responsibility Strategists Copyright 2007 Prentice

Nature of Strategy Implementation Management Perspectives n Shift in responsibility Strategists Copyright 2007 Prentice Hall Division or Functional Managers 16

Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Copyright 2007

Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Copyright 2007 Prentice Hall 17

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human Resources Copyright 2007 Prentice Hall 18

Management Issues Annual Objectives --- Decentralized activity -- Directly involve all managers in the

Management Issues Annual Objectives --- Decentralized activity -- Directly involve all managers in the organization Copyright 2007 Prentice Hall 19

Management Issues Purpose of Annual Objectives -§Basis for resource allocation §Mechanism for management evaluation

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) Copyright 2007 Prentice Hall 20

Management Issues Consistency of Annual Objectives -§Across hierarchical levels §Horizontally consistent §Vertically consistent Copyright

Management Issues Consistency of Annual Objectives -§Across hierarchical levels §Horizontally consistent §Vertically consistent Copyright 2007 Prentice Hall 21

Management Issues Requirements of Annual Objectives §Measurable §Consistent §Reasonable §Challenging §Clear §Understood §Timely Copyright

Management Issues Requirements of Annual Objectives §Measurable §Consistent §Reasonable §Challenging §Clear §Understood §Timely Copyright 2007 Prentice Hall 22

Management Issues Annual Objectives Should State §Quantity §Quality §Cost §Time §Be Verifiable Copyright 2007

Management Issues Annual Objectives Should State §Quantity §Quality §Cost §Time §Be Verifiable Copyright 2007 Prentice Hall 23

Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Copyright 2007

Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Copyright 2007 Prentice Hall 24

Management Issues Policies --- Facilitate the solving or recurring problems & guide implementation of

Management Issues Policies --- Facilitate the solving or recurring problems & guide implementation of strategy Copyright 2007 Prentice Hall 25

Management Issues Policies Establish -- §Boundaries §Constraints §Limits Copyright 2007 Prentice Hall 26

Management Issues Policies Establish -- §Boundaries §Constraints §Limits Copyright 2007 Prentice Hall 26

Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Copyright 2007

Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Copyright 2007 Prentice Hall 27

Management Issues Resource Allocation -- Central management activity that allows for the execution of

Management Issues Resource Allocation -- Central management activity that allows for the execution of strategy Copyright 2007 Prentice Hall 28

Management Issues 4 Types of Resources 1. Financial resources 2. Physical resources 3. Human

Management Issues 4 Types of Resources 1. Financial resources 2. Physical resources 3. Human resources 4. Technological resources Copyright 2007 Prentice Hall 29

Management Issues Managing Conflict -- Disagreement between two more parties on one or more

Management Issues Managing Conflict -- Disagreement between two more parties on one or more issues Copyright 2007 Prentice Hall 30

Management Issues Managing Conflict § Conflict not always “bad” § No conflict may signal

Management Issues Managing Conflict § Conflict not always “bad” § No conflict may signal apathy § Can energize opposing groups to action § May help managers identify problems Copyright 2007 Prentice Hall 31

Management Issues Conflict Management & Resolution § Avoidance § Diffusion § Confrontation Copyright 2007

Management Issues Conflict Management & Resolution § Avoidance § Diffusion § Confrontation Copyright 2007 Prentice Hall 32

Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Copyright 2007

Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Copyright 2007 Prentice Hall 33

Management Issues Matching Structure w/ Strategy -- Changes in strategy = Changes in structure

Management Issues Matching Structure w/ Strategy -- Changes in strategy = Changes in structure Copyright 2007 Prentice Hall 34

Management Issues Structure & Strategy § Structure dictates how objectives & policies will be

Management Issues Structure & Strategy § Structure dictates how objectives & policies will be established § Structure dictates how resources will be allocated Copyright 2007 Prentice Hall 35

Chandler’s Strategy-Structure Relationship New strategy Is formulated Organizational performance improves Copyright 2007 Prentice Hall

Chandler’s Strategy-Structure Relationship New strategy Is formulated Organizational performance improves Copyright 2007 Prentice Hall New administrative problems emerge Organizational performance declines New organizational structure is established 36

Management Issues Basic Forms of Structure § Functional Structure § Divisional Structure § Strategic

Management Issues Basic Forms of Structure § Functional Structure § Divisional Structure § Strategic Business Unit Structure (SBU) § Matrix Structure Copyright 2007 Prentice Hall 37

Functional Structure n Most widely used q n n Groups activities by business function

Functional Structure n Most widely used q n n Groups activities by business function Disadvantages q q q n Simple and least expensive 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 Copyright 2007 Prentice Hall 38

Divisional Structure n n Second most common type of structure Can be organized by:

Divisional Structure n n Second most common type of structure Can be organized by: q q Geographic area Product or service Customer Process Copyright 2007 Prentice Hall 39

Divisional Structure n Advantages q q q Clear accountability Higher employee morale Creates career

Divisional Structure n Advantages q q q 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 Copyright 2007 Prentice Hall 40

Divisional Structure n Disadvantages q q q Can be costly to set up Each

Divisional Structure n Disadvantages q q q 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 Copyright 2007 Prentice Hall 41

Appropriateness of Divisional Structure n n n Geographic area – Organizations whose strategies need

Appropriateness of Divisional Structure n n n 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 Copyright 2007 Prentice Hall 42

The Strategic Business Unit (SBU) n n n In multidivisional organizations, an SBU structure

The Strategic Business Unit (SBU) n n n In multidivisional organizations, an SBU structure can greatly facilitate strategyimplementation efforts. Advantages of improved coordination and accountability Disadvantages q q Requires an additional layer of management Role of the group vice president is often ambiguous Copyright 2007 Prentice Hall 43

Copyright 2007 Prentice Hall 44

Copyright 2007 Prentice Hall 44

The Matrix Structure n n Most complex of all designs – requires both vertical

The Matrix Structure n n Most complex of all designs – requires both vertical and horizontal flows of authority and communication Disadvantages q q q 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 Copyright 2007 Prentice Hall 45

The Matrix Structure n Advantages q q q Project objectives are clear Many channels

The Matrix Structure n Advantages q q q 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 Copyright 2007 Prentice Hall 46

Copyright 2007 Prentice Hall 47

Copyright 2007 Prentice Hall 47

Do’s and Don’ts in Developing Organizational Charts n Do’s q q q Reserve the

Do’s and Don’ts in Developing Organizational Charts n Do’s q q q 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 Copyright 2007 Prentice Hall n Don’ts q q Use the title president for the top executive Use the title president for functional business executives 48

Copyright 2007 Prentice Hall 49

Copyright 2007 Prentice Hall 49

Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Copyright 2007

Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Copyright 2007 Prentice Hall 50

Management Issues Restructuring -- Reducing the size of the firm – # of employees,

Management Issues Restructuring -- Reducing the size of the firm – # of employees, divisions and/or units, # of hierarchical levels Copyright 2007 Prentice Hall 51

Management Issues Restructuring §Downsizing §Rightsizing §Delayering Copyright 2007 Prentice Hall 52

Management Issues Restructuring §Downsizing §Rightsizing §Delayering Copyright 2007 Prentice Hall 52

Management Issues Reengineering -- Reconfiguring or redesigning work, jobs, & processes to improve cost,

Management Issues Reengineering -- Reconfiguring or redesigning work, jobs, & processes to improve cost, quality, service, & speed Copyright 2007 Prentice Hall 53

Management Issues Reengineering §Process management §Process innovation §Process redesign Copyright 2007 Prentice Hall 54

Management Issues Reengineering §Process management §Process innovation §Process redesign Copyright 2007 Prentice Hall 54

Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Copyright 2007

Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Copyright 2007 Prentice Hall 55

Management Issues Linking Pay/Performance to Strategies -- Pay for performance systems Copyright 2007 Prentice

Management Issues Linking Pay/Performance to Strategies -- Pay for performance systems Copyright 2007 Prentice Hall 56

Management Issues Linking Pay/Performance to Strategies §Dual bonus systems §Profit sharing systems §Gain sharing

Management Issues Linking Pay/Performance to Strategies §Dual bonus systems §Profit sharing systems §Gain sharing systems Copyright 2007 Prentice Hall 57

Tests for Performance-Pay Plans Does the plan capture attention? Do employees understand the plan?

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? 58

Copyright 2007 Prentice Hall 59

Copyright 2007 Prentice Hall 59

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human Resources Copyright 2007 Prentice Hall 60

Management Issues Resistance to Change -- Single greatest threat to successful strategy implementation Copyright

Management Issues Resistance to Change -- Single greatest threat to successful strategy implementation Copyright 2007 Prentice Hall 61

Management Issues Resistance to Change -- Raises anxiety; fear concerning §Economic loss §Inconvenience §Uncertainty

Management Issues Resistance to Change -- Raises anxiety; fear concerning §Economic loss §Inconvenience §Uncertainty §Break in status-quo Copyright 2007 Prentice Hall 62

Management Issues Change Strategies §Force Change Strategy §Educative Change Strategy §Rational or Self-Interest Change

Management Issues Change Strategies §Force Change Strategy §Educative Change Strategy §Rational or Self-Interest Change Strategy Copyright 2007 Prentice Hall 63

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human Resources Copyright 2007 Prentice Hall 64

Management Issues Natural Environment -- Wide appreciation for firms that “mend” rather than “harm”

Management Issues Natural Environment -- Wide appreciation for firms that “mend” rather than “harm” the environment Copyright 2007 Prentice Hall 65

Management Issues Natural Environment – Environmental Strategies §Develop/acquire “green” businesses §Divesting environmental-damaging business §Low-cost

Management Issues Natural Environment – Environmental Strategies §Develop/acquire “green” businesses §Divesting environmental-damaging business §Low-cost producer through waste minimization & energy conservation Copyright 2007 Prentice Hall 66

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human Resources Copyright 2007 Prentice Hall 67

Management Issues Strategy-Supportive Culture -- Preserve, emphasize, & build upon aspects of existing culture

Management Issues Strategy-Supportive Culture -- Preserve, emphasize, & build upon aspects of existing culture that support new strategies Copyright 2007 Prentice Hall 68

Management Issues Elements linking culture to strategy: • • • Formal statements of philosophy,

Management Issues 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 69

Management Issues Elements linking culture to strategy: • • • What leaders pay attention

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 70

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human Resources Copyright 2007 Prentice Hall 71

Management Issues Production/Operations Concerns -- Production processes typically constitute more than 70% of firm’s

Management Issues Production/Operations Concerns -- Production processes typically constitute more than 70% of firm’s total assets Copyright 2007 Prentice Hall 72

Management Issues Production/Operations Decisions §Plant size §Inventory/Inventory control §Quality control §Cost control §Technological innovation

Management Issues Production/Operations Decisions §Plant size §Inventory/Inventory control §Quality control §Cost control §Technological innovation Copyright 2007 Prentice Hall 73

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human

Management Issues (cont’d) Resistance to Change Natural Environment Management Issues Supportive Culture Production/Operations Human Resources Copyright 2007 Prentice Hall 74

Management Issues Human Resource Concerns -- HR manager position has strategic responsibility & has

Management Issues Human Resource Concerns -- HR manager position has strategic responsibility & has changed dramatically as companies continue to reorganize, outsource, etc. Copyright 2007 Prentice Hall 75

Management Issues Human Resource Strategic Responsibilities §Assessing staffing needs/costs §Developing performance incentives §ESOP’s §Child-care

Management Issues Human Resource Strategic Responsibilities §Assessing staffing needs/costs §Developing performance incentives §ESOP’s §Child-care policies §Work-life balance issues Copyright 2007 Prentice Hall 76

Diversity Issues Women CEO’s in U. S. 2005 (examples) CEO Company Age Meg Whitman

Diversity Issues Women CEO’s in U. S. 2005 (examples) CEO Company Age Meg Whitman e. Bay 49 Andrea Jung Avon Products 47 Anne Mulcahy Xerox 52 Marjorie Magner Citigroup 56 Betsy Holden Kraft Foods 49 Ann Moore AOL Time Warner 57 Copyright 2007 Prentice Hall 77

Benefits of a Diverse Workforce n n n n Improves corporate culture Improves employee

Benefits of a Diverse Workforce n n n n Improves corporate culture Improves employee morale Leads to a higher retention of employees Leads to easier recruitment of employees Decreases complaints and litigation Increases creativity Decreases interpersonal conflict Copyright 2007 Prentice Hall 78

Benefits of a Diverse Workforce n n n Enables the organization to move into

Benefits of a Diverse Workforce n n n Enables the organization to move into emerging markets Improves client relations Increases productivity Improves the bottom line Maximizes brand identity Reduces training costs Copyright 2007 Prentice Hall 79

For Review (Chapter 7) Key Terms & Concepts Annual Objectives Conflict Avoidance Confrontation Benchmarking

For Review (Chapter 7) Key Terms & Concepts Annual Objectives Conflict Avoidance Confrontation Benchmarking Culture Bonus System Defusion Copyright 2007 Prentice Hall 80

For Review (Chapter 7) Key Terms & Concepts Delayering Educative Change Strategy De-centralized Structure

For Review (Chapter 7) Key Terms & Concepts Delayering Educative Change Strategy De-centralized Structure Employee Stock Ownership Plans (ESOP’s) Divisional Structure Establishing Annual Objectives Downsizing Force Change Strategy Copyright 2007 Prentice Hall 81

For Review (Chapter 7) Key Terms & Concepts Functional Structure Just in Time (JIT)

For Review (Chapter 7) Key Terms & Concepts Functional Structure Just in Time (JIT) Gain Sharing Matrix Structure Glass Ceiling Policy Horizontal Consistency of Objectives Profit Sharing Copyright 2007 Prentice Hall 82

For Review (Chapter 7) Key Terms & Concepts Rational Change Strategy Restructuring Reengineering Rightsizing

For Review (Chapter 7) Key Terms & Concepts Rational Change Strategy Restructuring Reengineering Rightsizing Resistance to Change Self-Interest Change Strategy Resource Allocation Strategic Business Unit (SBU) Copyright 2007 Prentice Hall 83

For Review (Chapter 7) Key Terms & Concepts Triangulation Copyright 2007 Prentice Hall Vertical

For Review (Chapter 7) Key Terms & Concepts Triangulation Copyright 2007 Prentice Hall Vertical Consistency of Objectives 84