Chapter 9 Strategy Implementation: Organizing for 1.

Feasibility
Action 2. Sequence of execution
3. Location
Categories of root causes of Stall Points 4. Pace and nature of change
5. Stakeholder evaluation
1. Premium position backfires
2. Innovation management breaks down Budgets – made after programs have been
3. Core business abandoned developed. Planning the budget is the last real check a
4. Talent and capabilities run short corporation has on the feasibility of its selected
strategy.
Strategy Implementation – is the sum total of the
activities and choices required for the execution of a Procedures – after the program, divisional, and
strategic plan. It is a process by which objectives, corporate budgets are approved, procedures must be
strategies, and policies are put into action through the developed. Often called Standard Operating
development of programs, budgets, and procedures. Procedures (SOPs), they typically detail the various
activities that must be carried out to complete a
To begin the implementation process, strategy makers
corporation’s programs.
must consider these questions:
Organizational Routines – procedures are the primary
1. Who are the people who will carry out the
means by which organizations accomplish much of
strategic plan?
what they do.
2. What must be done to align the company’s
operations in the new intended direction? ACHIEVING SYNERGY
3. How is everyone going to work together to do
what is needed? Synergy is said to exist for a divisional corporation if
the return on investment of each division is greater that
Ten Problems in attempting to implement a what the return would be if each division were an
Strategic Change independent business.
1. Implementation took more time than originally Synergy can take place in one of six forms (Goold
planned. and Campbell)
2. Unanticipated major problems arose.
3. Activities were ineffectively coordinated. 1. Shared know-how
4. Competing activities and crises took attention 2. Coordinated Strategies
away from implementation. 3. Shared tangible resources
5. The involved employees had insufficient 4. Economies of scale or scope
capabilities to perform their jobs. 5. Pooled negotiating power
6. Lower-level employees were inadequately 6. New business creation
trained.
7. Uncontrollable external environmental factors Structure follows strategy – changes in corporate
created problems. strategy lead to changes in organizational structure.
8. Department managers provided inadequate
Chandler’s proposed sequence of structural
leadership and direction. changes
9. Key implementation tasks and activities were
poorly defined. 1. New strategy is created.
10. The information system inadequately 2. New administrative problems emerge.
monitored activities. 3. Economic performance declines.
4. New appropriate structure is invented.
Programs – the purpose of this is to make a strategy
5. Profit return to its previous level.
action oriented.
Stages of Corporate Development
Lean Six Sigma – this program was developed to
identify and improve a poorly performing process. 1. Simple Structure – company has little formal
structure, which allows the entrepreneur to
Matrix of Change – helps managers decide how
directly supervise the activities of every
quickly change should proceed, in what order changes
employee.
should take place, whether to start at a new site and
whether the proposed systems are stable and Its greatest weakness is its extreme reliance on the
coherent. This can address the following types of entrepreneur to decide general strategies as well
questions in terms of its: as detailed procedures. If the entrepreneur falters, the
company usually flounders. This is labeled by Greiner
as a crisis of leadership.
2. Functional structure – is the point when the
entrepreneur is replaced by a team of
managers who have functional
specializations.
Crisis of autonomy – in which people managing
diversified product lines need more decision-making
freedom than top management is willing to delegate to
them.
3. Divisional structure – is typified by the
corporation’s managing diverse product lines
in numerous industries; it decentralizes the
decision-making authority. Organizations
grow by diversifying their product lines and
expanding to cover wider geographical areas.
Crisis of control – in which the various units act to
optimize their own sales and profits without regard to
the overall corporation, whose headquarters seems far
away and almost irrelevant.
4. Beyond SBUs – the use of SBUs may result
in a red tape crisis in which the corporation
has grown too large and complex to be
managed through formal programs and rigid
systems, and procedures take precedence
over problem solving.
Entrepreneurs who start business generally have four
tendencies that work very well for small new ventures
but become Achilles’ heels for these same individuals
when they try to manage a larger firm with diverse
needs, departments, priorities, and constituencies:
1. Loyalty to comrades
2. Task oriented
3. Single-mindedness
4. Working in isolation
Organizational Life Cycle
1. Birth
2. Growth
3. Maturity
4. Decline
5. Death
Advanced Types of Organizational Structures
 Matrix Structure – functional and product forms
are combined simultaneously at the same level of
organization.
The matrix structure is often found in an organization
or SBU when the following three conditions exist:
1. Ideas need to be cross-fertilized across
projects or products.
2. Resources are scarce.
3. Abilities to process information and to make
decisions need to be improved.
3 distinct phases exist in the development of the
matrix structure (Davis and Lawrence)
1. Temporary cross-functional task forces
2. Product/brand management
3. Mature matrix
 Network Structure – a newer and somewhat
more radical organizational design, this is an
example of what could be termed a “non-structure”
because of its virtual elimination of in-house
business functions. A corporation organized in this
manner is often called virtual organization.
 Cellular/Modular Organization – is composed of
cells which can operate alone but which can
interact with other cells to produce a more potent
and competent business mechanism.
Reengineering and Strategy Implementation
Reengineering – is the radical redesign of business
processes to achieve major gains in cost, service, or
time. It is not in itself a type of structure, but it is an
effective program to implement a turnaround strategy.
Michael Hammer’s Principles of Reengineering
1. Organize around outcomes, not tasks
2. Have those who use the output of the process
perform the process
3. Subsume information- processing work into
the real work that produces the information
4. Treat geographically dispersed resources as
though they were centralized
5. Link parallel activities instead of integrating
their results
6. Put the decision point where the work is
performed and build control into the process
7. Capture information once and at the source
Six Sigma – is an analytical method for achieving near-
perfect results on a production line.
5 steps of Six Sigma
1. Define
2. Measure
3. Analyze
4. Improve
5. Establish
Job design – refers to the study of individual tasks in  MNCs provide their managers with international
an attempt to make them more relevant to the company assignments to improve organizational learning.
and to the employee(s). Global MNCs, in particular, emphasize
international experience, have a greater number of
Multinational Corporation – is a highly developed senior managers who have been expatriates, and
international company with a deep involvement have a strong focus on leadership development
throughout the world, plus a worldwide perspective in through the expatriate experience.66
its management and decision making. Unfortunately, not all corporations appropriately
Stages of International Development manage international assignments. While out of
the country, a person may be overlooked for an
1. Domestic Company important promotion (out of sight, out of mind).
2. Domestic company with export division Upon his or her return to the home country, co-
3. Primarily domestic company with workers may deprecate the out-of-country
international division experience as a waste of time.
4. Multinational corporation with multidomestic
Approaches to International Staffing
emphasis
5. MNC with global emphasis 1. Hiring and promoting people from the host
country
2. Using people with an international orientation
Chapter 10 Strategy Implementation: Staffing and regardless of their country of origin or host
Directing country assignment

Staffing - involves hiring new people with new skills,

firing people with inappropriate or substandard skills,
Leading - coaching people to use their abilities and
and/or training existing employees to learn new skills.
skills most effectively and efficiently to achieve
Staffing Follows Strategy – having formulated a new organizational objectives.
strategy, a corporation may find that it needs to either
Managing Corporate Culture
hire different people or retrain current employees to
implement the new strategy.  Organization culture exerts a powerful influence
on the behavior of all employees, therefore it can
Executive Succession – is the process of replacing a
affect the ability of the company to shift its strategic
key top manager.
direction.
Downsizing – refers to the planned elimination of
 In case of a strong culture the change in mission,
positions or jobs.
objectives, strategies and policies may not be
Guidelines proposed for successful downsizing accepted.

1. Eliminate unnecessary work instead of  Corporate culture has a strong tendency to resist
making across-the-board cuts change.
2. Contract out work that others can do cheaper
Assessing Strategy-Culture Compatibility
3. Plan for long-run efficiencies
4. Communicate the reasons for actions 1. Is the proposed strategy compatible with the
5. Invest in the remaining employees current culture?
6. Develop value-added jobs to balance out job 2. Can the culture be easily modified to make it
elimination more compatible with the new strategy?
3. Is management willing and able to make
International Issues in Staffing
major organizational changes and accept
 Implementing a strategy of international expansion probable delays and a likely increase in
takes a lot of planning and can be very expensive. costs?
 Because of cultural differences, managerial style 4. Is management still committed to
and human resource practices must be tailored to implementing a new strategy?
fit the particular situations in other countries. 5. Formulate a new strategy
Ninety percent of companies select employees for
Managing Diverse Cultures Following an
an international assignment based on their
Acquisition
technical expertise while ignoring other areas.
 1. Integration – equal merger or both cultures Essential Ingredients of TQM
in to a new corporate culture.
2. Assimilation – acquiring firm’s culture kept 1. An intense focus on customer satisfaction
intact, but subservient to that of acquiring 2. Internal as well as external customers
firm’s corporate culture. 3. Accurate measurement of every critical
3. Separation – conflicting cultures kept intact variable in a company’s operations
but kept separate in different units. 4. Continuous improvement of products and
4. Deculturation – forced replacement of services
conflicting acquired firm’s culture with that of 5. New work relationships based on trust and
the acquiring firm’s culture. teamwork

Action Plan – states what actions are going to be International Consideration in Leading
taken, by whom, during what time frame, and with what
Dimensions of National Culture
expected results.
1. Power Distance
1. Specific actions to be taken to make the
2. Uncertainty Avoidance
program operational
3. Individualism-Collectivism
2. Dates to begin and end each action
4. Masculinity-Femininity
3. Person responsible for carrying out each
5. Long Term Orientation
action
4. Person responsible for monitoring the
timeliness and effectiveness of each action
5. Expected financial and physical Chapter 11 Evaluation and Control
consequences of each action
Evaluation and Control process:
6. Contingency plans

Management by Objectives - is a technique that 1. Determine what to measure

2. Establish standards of performance
encourages participative decision making through
3. Measure actual performance
shared goal setting at all organizational levels, and
4. Compare actual performance with the
performance assessment based on the achievement of
standard
stated objectives.
5. Take corrective action
Process:
Performance – is the end result of activity.
1. Establishing and communicating
Types of Controls
organizational objectives.
2. Setting individual objectives through 1. Output Controls – specify what is to be
superior-subordinate interaction that help accomplished by focusing on the end result of
implement organizational objectives the behaviors through the use of objectives
3. Develop an action plan of activities needed to and performance targets or milestones.
achieve the objectives 2. Behavior Controls – specify how something
4. Periodically review the performance as it is to be done through policies, rules, standard
relates to the objectives and including the operating procedures, and orders form a
results in the annual performance appraisal superior.
3. Input Controls – emphasize resources, such
Total Quality Management – is an operational
as knowledge, skills, abilities, values, and
philosophy committed to customer satisfaction and
motives of employees.
continuous improvement.
ISO 9000 Standards Series – is a way of objectively
4 objectives
documenting a company’s high level of quality
1. Better, less variable quality of the product and operations.
service
ISO 14000 Standards Series – is a way to document
2. Quicker, less variable response in processes
the company’s impact on the environment.
to customer needs
3. Greater flexibility in adjusting to customers’ Activity-Based Costing – is a recently developed
shifting requirements accounting method for allocating indirect and fixed
4. Lower cost through quality improvement and costs to individual products or product lines based on
elimination of non-value-adding work the value-added activities going into that product.
Enterprise Risk Management – is a corporatewide,
integrated process for managing the uncertainties that
could negatively or positively influence the
achievement of the corporation’s objectives.
The process of rating risks involves 3 steps:
1. Identify the risks using scenario analysis or
brainstorming or by performing risk self-
assessments.
2. Rank the risks, using some scale of impact
and likelihood.
3. Measure the risks, using some agreed-upon
standard.
Primary measures of Corporate Performance
Traditional Financial Measures
 Return on Investment (IBIT / TA)
 Earnings per Share (Net earnings/ CS)
 Return on Equity (NI/TE)
 Operating Cash Flows – amount of money
generated by a company before the cost of
financing and taxes, is a broad measure of a
company’s funds.
 Free Cash Flow – the amount of money a
new owner can take out of the firm without
harming the business.
Stakeholder Measures
 These criteria typically deal with the direct
and indirect impacts of corporate activities
on stakeholder interests.
Shareholder Value – can be defined as the present
value of the anticipated future stream of cash flows
from the business plus the value of the company if
liquidated.
 Economic Value Added – has become an
extremely popular shareholder value
method of measuring corporate and
divisional performance and may be on its
way to replacing ROI as the standard
performance measure.
 Market Value Added – is the difference
between the market value of a corporation
and the capital contributed by shareholders
and lenders.
Balanced Scorecard Approach: Using Key
Perfomance Measures
Balanced scorecard – combines financial measures
that tell the results of actions already taken with
operational measures on customer satisfaction,
internal processes, and the corporation’s innovation
and improvement activities – the drivers of future
financial performance.
4 Areas of Balanced Scorecard
1. Financial
2. Customer
3. Internal Business Perspective
4. Innovation and Learning
Key performance measures – measures that are
essential for achieving a desired strategic option.
Evaluating Top Management and the Board of
Directors
1. Chairman-CEO Feedback Instrument
2. Management Audit
3. Strategic Audit
Responsibility Centers – are used to isolate a unit so
that it can be evaluated separately from the rest of the
corporation.
1. Standard cost centers – primarily used in
manufacturing facilities.
2. Revenue Centers – production, usually in
terms of unit or dollar/peso sales is measured
without consideration of resource costs.
3. Expense Centers – resources are measured
in dollars/peso, without consideration for
service or product costs.
4. Profit Centers – performance is measured in
terms of the difference between revenues and
expenditures.
5. Investment Centers – performance measured
in terms of the difference between its
resources and its services or products.
Benchmarking – is the continual process of measuring
products, services, and practices against the toughest
competitors or those companies recognized as
industry leaders.
Steps:
1. Identify the area or process to be examined.
It should be an activity that has the potential
to determine a business unit’s competitive
advantage.
2. Find behavioral and output measures of the
area or process and obtain measurements.
3. Select an accessible set of competitors and
best-in-class companies against which to
benchmark.
4. Calculate the differences among the
company’s performance measurements and
those of the best-in class and determine why
the differences exist.
 5. Develop tactical programs for closing performance of top SBU managers and
performance gaps. group-level executives when performance
6. Implement the programs and then compare factors and their importance vary from one
the resulting new measurements with those of SBU to another.
the best-in-class companies. 2. Long-term evaluation method –
compensates managers for achieving
Strategic Information Systems\ objectives set over a multiyear period.
3. Strategic-funds method – encourages
Enterprise Resource Planning – unites all of a
executives to look at developmental
company’s major business activities, form order
expenses as being different from expenses
processing to production, within a single family of
required for current operations.
software.
An effective way to achieve the desired strategic
Radio Frequency Identification – is an electronic
results through a reward system is to combine the three
tagging technology used in a number of companies to
approaches:
improve supply-chain efficiency.
1. Segregate strategic funds from short-term
Goal Displacement – is the confusion of means with
funds, as is done in the strategic-funds
ends and occurs when activities originally intended to
method.
help managers attain corporate objectives become
2. Develop a weighted-factor chart for each
ends in themselves – or are adapted to meet ends
SBU.
other than those for which they were intended.
3. Measure performance on three bases: The
 Behavior Substitution – refers to a pretax profit indicated by the strategic-funds
phenomenon when people substitute approach, the weighted factors, and the long-
activities that do not lead to goal term evaluation of the SBUs’ and the
accomplishment for activities that do lead to corporation’s performance.
goal accomplishment because the wrong
activities are being rewarded.
 Suboptimization – refers to the phenomenon
of a unit optimizing its goal accomplishment to
the detriment of the organization as a whole.

-CPA in Transit-

Guidelines for Proper Control

1. Control should involve only the minimum

amount of information needed to give a
reliable picture of events.
2. Controls should monitor only meaningful
activities and results, regardless of
measurement difficulty.
3. Controls should be timely so that corrective
action can be taken before it is too late.
4. Long-term and short-term controls should be
used.
5. Controls should aim at pinpointing
exceptions.
6. Emphasize the reward of meeting or
exceeding standards rather than punishment
for failing to meet standards.

Strategic Incentive Management

3 approaches to help match measurements and

rewards with explicit strategic objectives and time
frames:

1. Weighted-factor method -is particularly

appropriate for measuring and rewarding the