Lecture 6

Implementing Strategies:
Management & Operations Issues
 Strategy Formulation vs. Implementation
Strategy Formulation
 Positioning forces
before the action (company
sets itself apart from the competition and
delivers a product)
 Focus on effectiveness
 Primarily intellectual (a
mental exercise involving creative
thinking, sound judgment and
imagination, and not guesswork)
 Requires good
intuitive and analytical
skills
 Requires coordination
among a few people
Strategy Implementation
 Managing forces during
the action
 Focus on efficiency
 Primarily operational
(specifying a company's business
strategy and developing strategic
initiatives and operational plans)
 Requires special
motivation and
leadership skills
 Requires coordination
among many people
Nature of Strategy Implementation
Management Perspectives

 Shift in responsibility

Divisional or
Strategists Functional
Managers
 Management Issues Central to
Strategy Implementation
 Establish annual objectives
 Devise policies
 Allocate resources
 Alter existing
organizational structure
 Restructure & reengineer
 Revise reward & incentive
plans
 Minimize resistance to
change
 Match managers to strategy
(matching internal and external environment)
 Develop a strategy-
supportive culture
 Adapt production/operations
processes
 Develop an effective human
resources function
 Downsize & furlough (mandatory
temporary leave of absence) as needed
 Link performance & pay to
strategies
Purpose of Annual Objectives

Basis for resource allocation

Mechanism for management evaluation
Major instrument for monitoring progress
toward achieving long-term objectives
Establishpriorities (organizational, divisional,
and departmental)
 Annual Objectives
Horizontal consistency of objectives
While horizontal consistency means that goals of different sub-
units and their managers should be consistent with each other.
An example of horizontal consistency could be that “there is no need for the marketing department to
plan on doubling sales if the production department cannot produce the additional units.

Vertical consistency of objectives

Vertical consistency suggests they should agree with work-
group goals, work- group goals should be consistent with sub-
unit goals, and the latter should be consistent with organization-
wide. Vertically fit — Strategic or vertical alignment is the systematic synchronization
of organizational levels, people, processes, systems, plans, objectives, ...

Policies
 A policy is a set of rules or guidelines for an
organization and their employees to follow in
or to achieve compliance.
 Policies provide guidance, consistency,
accountability, efficiency, and clarity on how
an organization operates.

Resource Allocation
Four Types of Resources
1. Financial resources: money or its equivalent. Bank
Deposits: money placed into banks

2. Physical resources: raw materials, buildings and

facilities, machinery, energy, and supplies.

3. Human resources
4. Technological resources
Managing Conflict

 Conflict is not always “bad”

 Lack of conflict may signal apathy (Lack of
Interest)

 Can energize opposing groups to action

 May help managers identify problems
Managing Conflict
Approaches for managing and resolving
conflict
Approach Approach

Avoidance Avoidance

Approach Avoidance

Diffusion

Confrontation
Matching Structure with Strategy

 Structure dictates how objectives

and policies will be established
 Structure dictates how resources

will be allocated
 Changes in strategy often lead to

changes in organizational
structure
 Basic Forms of Structure
 Functional Structure: The Functional structure is
one where employees are grouped together, according to their area
of specialization

 Divisional Structure: Divisional structure refers to

the structure wherein the organizational functions are grouped
together, into divisions, depending on product, service, market or
geographies.
 Strategic Business Unit Structure (SBU):Group similar divisions into strategic business
units and delegate authority and responsibility for each unit to a senior executive
who reports directly to the chief executive office
 Matrix Structure: Matrix management is an organizational structure in which some
individuals report to more than one supervisor or leader (e.g. Philips, Carter Pillar)
Divisional Structure

 Canbe organized in one of four

ways:
 By geographic area
 By product or service

 By customer

 By process
Restructuring

Restructuring is called
Downsizing involves reducing the number of employees
a company has to increase profitability and reduce
redundancies (reduce size of employees).
Rightsizing is about more than reducing the number of
employees. It's about getting the organization to the right
size for its new business objectives.
Delayering: process of removing layers of
management in order to improve organizational
efficiency
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?

Managing Resistance to Change
 Force change strategy
 Educative change strategy

 Rational or self-interest change

strategy
Creating a Strategy-Supportive Culture

1. Formal statements of organizational philosophy

2. Deliberate role modeling, teaching, and
coaching
3. Explicit reward and status system
4. Stories, legends (stories of famous
persons), myths (stories of different
culture) , and parables (moral or spiritual
lessons)
Creating a Strategy-Supportive Culture

6. What leaders pay attention to

7. Leader reactions to critical incidents and
crises
8. Organizational design and structure
9. Organizational systems and procedures
10. Criteria for recruitment, selection,
promotion, leveling off, retirement, and
“excommunication” of people
Human Resource Concerns - Actions
Assessing staffing needs/costs
Furloughs: mandatory temporary
leave of absence
Developing performance incentives
ESOPs: An employee stock ownership plan (ESOP) is a
contribution plan that is a stock bonus plan or a stock bonus/money
purchase plan

Matching managers with strategy

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