Implementing

Strategies
Implementing Strategy– What’s
wrong?
• 75% of executive teams do not have a clear
customer propositions (idea of the mix that
appeals to the target market) (Kaplan &
Norton, 2001).
• 85% of management teams spend less than
one hour per month discussing strategy
(Norton, 1996)
• 60% of organizations don't link strategy and
budgeting (Corporate strategic, 1999)
• 92% of organizations don't report on
strategic lead indicators (Corporate
strategic, 1999)
Cont….
• Less than 5% of an organization's workforce
understands its strategy (Kaplan & Norton,
2001)
• Only 51% of senior managers, 21% of middle
managers, and 7% of line employees have
personal goals linked with strategy (Kaplan &
Norton, 2001)
• Organizations find that up to 25% of strategy
measures change each year (Kaplan &
Norton, 2001)
• The failure rate of strategies is between 70-
90%, due primarily to poor implementation
(Charan & Colvin, 1999; Keichel, 1982)
The Nature of Strategy
Implementation
Successful strategy formulation does not
guarantee successful strategy
implementation.
It is always more difficult to do something
(strategy implementation) than to say you
are going to do it (strategy formulation)!
Although inextricably linked, strategy
implementation is fundamentally different
from strategy formulation.
Strategy formulation and implementation
can be contrasted in the following ways:
Strategy formulation Strategy implementation

Positioning forces Managing forces

before the action during the action
Focuses on Focuses on efficiency
effectiveness Primarily an
Primarily an
operational process
intellectual process
Requires special
Requires good
motivation and
intuitive and
leadership skills
analytical skills
Requires coordination Requires coordination
among a few among many
individuals individuals.
Some Management Issues Central
to Strategy Implementation
Establish annual objectives
Devise policies
Allocate resources
Alter an existing organizational structure
Restructure and reengineer
Revise reward and incentive plans
Minimize resistance to change
Match managers with strategy
Develop a strategy-supportive culture
Annual Objectives
Establishing annual objectives is a decentralized
activity that directly involves all managers in an
organization.
Active participation in establishing annual
objectives can lead to acceptance and
commitment.
Annual objectives are essential for strategy
implementation because they :
1. Represent the basis for allocating resources;
2. Are a primary mechanism for evaluating
managers;
3. Are the major instrument for monitoring
progress toward achieving long-term objectives;
and
4. Establish organizational, divisional, and
departmental priorities.
Policies
Changes in a firm’s strategic direction do not
occur automatically.
On a day-to-day basis, policies are needed to
make a strategy work.
Policies facilitate solving recurring problems
and guide the implementation of strategy.
Broadly defined, policy refers to specific
guidelines, methods, procedures, rules, forms,
and administrative practices established to
support and encourage work toward stated
goals.
Policies are instruments for strategy
implementation.
Cont...
Policies set boundaries, constraints, and limits on the
kinds of administrative actions that can be taken to
reward and sanction behaviour.
They clarify what can and cannot be done in pursuit
of an organization’s objectives.
Policies let both employees and managers know what
is expected of them, thereby increasing the likelihood
that strategies will be implemented successfully.
They provide a basis for management control, allow
coordination across organizational units, and reduce
the amount of time managers spend making decisions.
Policies also clarify what work is to be done and by
whom.
They promote delegation of decision making to
appropriate managerial levels where various problems
usually arise.
Resource Allocation
Resource allocation is a central management
activity that allows for strategy execution.
In organizations that do not use a strategic
management approach to decision making,
resource allocation is often based on political or
personal factors.
Strategic management enables resources to be
allocated according to priorities established by
annual objectives.
A number of factors commonly prohibit effective
resource allocation, including an overprotection of
resources, too great emphasis on short-run
financial criteria, organizational politics, vague
strategy targets, a reluctance to take risks, and a
lack of sufficient knowledge.
Managing Conflict
Interdependency of objectives and competition
for limited resources often leads to conflict.
Conflict can be defined as a disagreement
between two or more parties on one or more
issues.
Establishing annual objectives can lead to
conflict because:
o Individuals have different expectations and
perceptions
o Schedules create pressure
o Personalities are incompatible
o Misunderstandings between line managers and
staff managers
Cont...
Conflict is unavoidable in organizations, so it is
important that conflict be managed and
resolved before dysfunctional consequences
affect organizational performance.
Conflict is not always bad.
An absence of conflict can signal indifference
and apathy.
Conflict can serve to energize opposing groups
into action and may help managers identify
problems.
Various approaches for managing and resolving
conflict can be classified into three categories:
avoidance, diffusion, and confrontation.
Cont.....
Avoidance includes such actions as ignoring the
problem in hopes that the conflict will resolve itself
or physically separating the conflicting individuals
(or groups).
Diffusion can include playing down differences
between conflicting parties while accentuating
similarities and common interests, compromising so
that there is neither a clear winner nor loser,
resorting to majority rule, appealing to a higher
authority, or redesigning present positions.
Confrontation is exemplified by exchanging
members of conflicting parties so that each can gain
an appreciation of the other’s point of view or
holding a meeting at which conflicting parties
present their views and work through their
differences.
Matching Structure with
Strategy
Changes in strategy often require changes in the
way an organization is structured for two major
reasons.
First, structure largely dictates how objectives
and policies will be established.
The second major reason why changes in strategy
often require changes in structure is that structure
dictates how resources will be allocated.
Changes in strategy lead to changes in
organizational structure.
Structure should be designed to facilitate the
strategic pursuit of a firm and, therefore, follow
strategy.
Without a strategy or reasons for being (mission),
companies find it difficult to design an effective
structure.
Cont....
When a firm changes its strategy, the existing
organizational structure may become ineffective.
Some of the symptoms of an ineffective
organizational structure include:
o Too many levels of management
o Too many meetings attended by too many people
o Too much attention being directed toward solving
interdepartmental conflicts
o Too large a span of control
o Too many unachieved objective
o Declining corporate or business performance
o Losing ground to rival firms
Restructuring, Reengineering and
E-engineering
Restructuring and reengineering are becoming
commonplace on the corporate landscape across
the United States and Europe.
Restructuring—also called downsizing,
rightsizing, or delayering—involves reducing the
size of the firm in terms of number of employees,
number of divisions or units, and number of
hierarchical levels in the firm’s organizational
structure.
This reduction in size is intended to improve both
efficiency and effectiveness.
Restructuring is concerned primarily with
shareholder well-being rather than employee well-
being.
Cont....
Reengineering—also called process
management, process innovation, or process
redesign—involves reconfiguring or redesigning
work, jobs, and processes for the purpose of
improving cost, quality, service, and speed.
In contrast, reengineering is concerned more
with employee and customer well-being than
shareholder well-being.
The logic is that all firms tend to
bureaucratize over time.
Reengineering does not usually affect the
organizational structure or chart, nor does it
imply job loss or employee layoffs.
Cont...
In reengineering, a firm uses information
technology to break down functional
barriers and create a work system based
on business processes, products, or
outputs rather than on functions or inputs.
Cornerstones of reengineering are
decentralization, reciprocal
interdependence, and information sharing.
Linking Performance and Pay to
Strategies
There are no widely accepted methods, but a
dual bonus system based on both annual
objectives and long-term objectives is
becoming common.
The percentage of a manager’s annual bonus
attributable to short-term versus long-term
results should vary by hierarchical level in the
organization.
 A chief executive officer’s annual bonus could,
for example, be determined on a 75 percent
short term and 25 percent long-term basis.
 Cont...
In an effort to cut costs and increase
productivity, more and more companies are
switching from seniority-based pay to
performance-based approaches.
Profit sharing is another widely used form of
incentive compensation.
Gain sharing requires employees or departments
to establish performance targets; if actual results
exceed objectives, all members get bonuses.
Criteria such as sales, profit, production efficiency,
quality, and safety could also serve as bases for an
effective bonus system.
A bonus system can be an effective tool for
motivating individuals to support strategy-
implementation efforts.
Cont...
Five tests are often used to determine
whether a performance-pay plan will benefit
an organization:
1.Does the plan capture attention?
2.Do employees understand the plan?
3.Is the plan improving communication?
4.Does the plan pay out when it should?
5.Is the company or unit performing better?
Cont....
In addition to a dual bonus system, a
combination of reward strategy incentives,
such as salary raises, fringe benefits,
promotions, praise, recognition, criticism, fear,
increased job autonomy, and awards, can be
used to encourage managers and employees to
push hard for successful strategic
implementation.
The range of options for getting people,
departments, and divisions to actively support
strategy implementation activities in a
particular organization is almost limitless.
Managing Resistance to
Change
No organization or individual can escape change.
But the thought of change raises anxieties because
people fear economic loss, inconvenience,
uncertainty, and a break in normal social patterns.
Almost any change in structure, technology,
people, or strategies has the potential to disrupt
comfortable interaction patterns.
For this reason, people resist change.
The strategic-management process itself can
impose major changes on individuals and
processes.
Reorienting an organization to get people to think
and act strategically is not an easy task.
Cont...
Resistance to change can be considered
the single greatest threat to successful
strategy implementation.
Resistance regularly occurs in
organizations in the form of sabotaging
production machines, absenteeism, filing
unfounded grievances, and an
unwillingness to cooperate.
People often resist strategy
implementation because they do not
understand what is happening or why
changes are taking place.
Cont...
Resistance to change can emerge at any stage
or level of the strategy-implementation
process.
Although there are various approaches for
implementing changes, three commonly used
strategies are a force change strategy, an
educative change strategy, and a rational or
self-interest change strategy.
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.
Cont...
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.
A rational or self-interest change
strategy is one that attempts to convince
individuals that the change is to their
personal advantage.
Creating a Strategy-Supportive
Culture
Strategists should strive to preserve, emphasize,
and build upon aspects of an existing culture
that support proposed new strategies.
Aspects of an existing culture that are
antagonistic to a proposed strategy should be
identified and changed.
Substantial research indicates that new
strategies are often market-driven and dictated
by competitive forces.
For this reason, changing a firm’s culture to fit a
new strategy is usually more effective than
changing a strategy to fit an existing culture.
Cont...
Numerous techniques are available to alter
an organization’s culture, including
recruitment, training, transfer, promotion,
restructure of an organization’s design, role
modelling, positive reinforcement, and
mentoring.