Chapter 7 Implementing Strategies: Management & Operations Issues A technically imperfect plan that is implemented well will achieve more than the perfect plan that never gets off the paper on which it is typed.

Strategy Implementation The Strategic Management process does not end when the firm decides what strategy or strategies to pursue There must be a translation of strategic thought into strategic action Implementing strategy affects an organization from top –bottom This chapter focuses on management issues Chapter 8 focuses on Marketing, finance/accounting , R&D, MIS issues

Summary Strategy Implementation means “Change” Real works begins when strategists are formulated Strategic Implementation requires support & hard work from all managers & employees Formulating the right strategies are not enough- managers & employees must be motivated to implement those strategies

Formulation vs. Implementation Nature of Strategy Implementation Formulation vs. Implementation Formulation focuses on effectiveness Implementation focuses on efficiency Formulation is positioning forces before the action Implementation is managing forces during the action It is always more difficult to do something (strategy implementation ) than to say you are going to do it (strategy formulation )

Division or Functional Managers Nature of Strategy Implementation Management Perspectives Shift in responsibility Strategists Division or Functional Managers

Organizational structure Management Issues This chapter focuses on Management Issues most central to Implementing Strategies Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives

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

Purpose of Annual Objectives -- Management Issues Purpose of Annual Objectives -- Basis for resource allocation Mechanism for management evaluation Major instrument for gauging progress on long-term objectives Establish priorities (organizational, division, & departmental)

Long term Company Objective Double company revenues in two years through Market development & Market penetration Divisional I Annual Objective Increase divisional revenues by 40% this year & 40% next year (Current revenues are $2 million) R&D annual Objective Develop new products this year that are successfully marketed Personnel annual obj Reduce employee absenteeism from 10% to 5% this year Marketing Increase number of sales people by 40 this year Divisional II Hierarchy of Aims Horizontal consistency of Obj as imp as Vertical Consistency of Obj

Policies Company Strategy Divisional Strategy Departmental Strategy Supporting policies Divisional Strategy Departmental Strategy Supporting Policies Refers to specific guidelines, methods, procedures, rules, forms & administrative practices established to support and encourage work toward stated goals

Management Issues Resources Allocation Financial resources Central management activity that allows for strategy execution Harmful if not consistent with priorities indicated by approved annual objectives Resource allocation often based on political & personal factors in those Org that do not use SM approach SM itself is sometimes referred to as a “Resource allocation process” Resources Allocation Financial resources Physical resources Human resources Technological resources

 Management Issues Managing Conflict Approaches to manage conflict Avoidance Defusion Confrontation Management Issues Managing Conflict Interdependence of Obj &Competition for limited resources often leads to Conflict Conflict not always “bad” No conflict may signal apathy(lack of concern / laziness) Can energize opposing groups to action May help managers identify problems 

Matching Structure with Strategy Changes in strategy often require changes in the way an organization is structured for two major reasons:

Changes in strategy lead to changes in Org structure Chandler’s Strategy- Structure Relationship.. Matching Structure with Strategy New strategy Is formulated New administrative problems emerge Organizational performance declines Organizational performance improves New organizational structure is established Structure largely dictates how objectives & policies will be established

Basic Forms of Structure Management Issues Basic Forms of Structure Functional Structure Divisional Structure Strategic Business Unit Structure (SBU) Matrix Structure

Management Issues Restructuring Downsizing Rightsizing 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 firms organization’s structure Restructuring Downsizing Rightsizing Delayering

Management Issues Reengineering Process management Process innovation Concerned more with employee and customer well-being than shareholder well-being Involves redesigning work, jobs, and processes for the purpose of improving cost, quality, service and speed Reengineering Process management Process innovation Process redesign

Reengineering Restructuring Focus is changing the way work is actually carried out. Concerned more with employee and customer well being than shareholder well being Cornerstone-Decentralization, reciprocal interdependence & info sharing No longer is it enough for companies to put up simple Web sites for customers and employees Companies must reinvent the way they do business to take full advantage of the internet- E-engineering Concerned with eliminating or establishing, shrinking or enlarging and moving Org departments and divisions

Linking Performance-Pay to Strategies How can an Organization’s reward system be more closely linked to strategic performance? How can decisions on salary increases, promotions, merit pay, and bonuses be more closely aligned to support the Long term strategic objectives of the Organization? No widely accepted answers to these questions, but a dual bonus system based on both Annual objectives & Long term objectives is becoming common A bonus system can be an effective tool for motivating individuals to support Strategy implementation efforts

Resistance to change Why do people resist change? Need accurate information Develop Org climate conducive to change Must be viewed as opportunity rather than as a threat by managers & employees Why do people resist change? Do not understand what is happening Why changes are taking place Approaches for implementing change Force change strategy Educative change strategy Rational /self-interest change strategy Which one is more desirable?

Rational /self-interest change strategy Forced change strategy Educative change strategy Rational /self-interest change strategy Involves giving orders and enforcing those orders; Fast but plagued by low commitment & high resistance Presents info to convince people of the need to change; Implementation become slow & difficult Evokes greater commitment & less resistance Convince individuals that the change is to their personal advantage Four steps (Read Book)

Managing Resistance to Change No organization or individual can escape change SM process can impose major changes Reorienting an organization to get people to think and act strategically is not an easy task Sabotaging production machines Absenteeism Filling unfounded grievances Unwillingness to cooperate Resistance regularly occurs

Managing the Natural Environment Earth itself has become a stakeholder for all business firms All businesses functions are affected by natural environment considerations or by striving to make a profit Firms that take more than give to the natural environment  The ecological challenge facing all organizations requires managers to formulate strategies that preserve & conserve natural resources & control pollution Natural environmental issues in Business administration curricula

Firms should formulate & implement strategies from an environmental perspective Developing or acquiring green businesses Divesting or altering environmental damaging businesses Waste minimization and energy conservation & pursuing differentiation strategy through green product features Environmental representative on BOD Conduct regular environmental audits Incorporate Environmental values in Mission statement Provide training programs for Employees/managers

Creating a Strategy-Supportive Culture Strategists should strive to preserve, emphasize, and build upon aspects of an existing culture that support proposed new strategies Strategies are often market-driven & dictated by competitive forces Changing firm’s culture to fit a new strategy is usually more effective than changing a strategy to fit an existing culture Determine firms culture changes that needs to be made Obtrusive Observation Jack Duncan Triangulation Questionnaire Personal interviews

Management Issues Production/Operations Concerns -- adjustments in production systems that could be required to implement various strategies Table 7-4 Bank- adding 10 new branches(market development)-site location analysis Hospital- adding cancer center( Product development)- Purchase of specialized equipment

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

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

Diversity Issues Women CEO’s in U.S. 2004 (examples) Carly Fiorina Hewlett-Packard 49 yrs old Meg Whitman eBay 47 yrs old Andrea Jung Avon Products 45 yrs old Anne Mulcahy Xerox 50 yrs old Marjorie Magner Citigroup 54 yrs old Betsy Holden Kraft Foods Mary Sammons Rite Aid 57 yrs old