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

Copyright 2007 Prentice Hall Ch 7-2 Chapter Outline The Nature of Strategy Implementation Annual Objectives Policies

Copyright 2007 Prentice Hall Ch 7-3 Chapter Outline ( cont’d ) Resource Allocation Managing Conflict Matching Structure with Strategy

Copyright 2007 Prentice Hall Ch 7-4 Chapter Outline ( cont’d ) Restructuring, Reengineering & E-Engineering Linking Performance & Pay to Strategies Managing Resistance to Change

Copyright 2007 Prentice Hall Ch 7-5 Chapter Outline ( cont’d ) Managing the Natural Environment Creating a Strategy-Supportive Culture Production/Operations Concerns When Implementing Strategies

Copyright 2007 Prentice Hall Ch 7-6 Chapter Outline ( cont’d ) Human Resource Concerns When Implementing Strategies

Copyright 2007 Prentice Hall Ch 7-7 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. Implementing Strategies

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

Copyright 2007 Prentice Hall Ch 7-9 Formulation positions forces before the action Implementation manages forces during the action Nature of Strategy Implementation Formulation vs. Implementation

Copyright 2007 Prentice Hall Ch 7-10 Formulation focuses on effectiveness Implementation focuses on efficiency Nature of Strategy Implementation Formulation vs. Implementation

Copyright 2007 Prentice Hall Ch 7-11 Formulation is primarily an intellectual process Implementation is primarily an operational process Nature of Strategy Implementation Formulation vs. Implementation

Copyright 2007 Prentice Hall Ch 7-12 Formulation requires good intuitive & analytical skills Implementation requires special motivational & leadership skills Nature of Strategy Implementation Formulation vs. Implementation

Copyright 2007 Prentice Hall Ch 7-13 Formulation requires coordination among a few individuals Implementation requires coordination among many individuals Nature of Strategy Implementation Formulation vs. Implementation

Copyright 2007 Prentice Hall Ch 7-14 Varies among different types & sizes of organizations Nature of Strategy Implementation Strategy Implementation

Copyright 2007 Prentice Hall Ch 7-15 Altering sales territories Adding new departments Closing facilities Hiring new employees Cost-control procedures Modifying advertising strategies Building new facilities Nature of Strategy Implementation Implementation Activities

Copyright 2007 Prentice Hall Ch 7-16 Shift in responsibility Nature of Strategy Implementation Management Perspectives Division or Functional Managers Strategists

Copyright 2007 Prentice Hall Ch 7-17 Management Issues Management Issues Resources Organizational structure Restructuring Rewards/Incentives Annual Objectives Policies

Copyright 2007 Prentice Hall Ch 7-18 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

Copyright 2007 Prentice Hall Ch 7-19 Management Issues Annual Objectives Decentralized activity -- Directly involve all managers in the organization

Copyright 2007 Prentice Hall Ch 7-20 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 Ch 7-21 Management Issues Consistency of Annual Objectives --  Across hierarchical levels  Horizontally consistent  Vertically consistent

Copyright 2007 Prentice Hall Ch 7-22 Management Issues Requirements of Annual Objectives  Measurable  Consistent  Reasonable  Challenging  Clear  Understood  Timely

Copyright 2007 Prentice Hall Ch 7-23 Management Issues Annual Objectives Should State  Quantity  Quality  Cost  Time  Be Verifiable

Copyright 2007 Prentice Hall Ch 7-24 Management Issues Management Issues Resources Organizational structure Restructuring Rewards/Incentives Annual Objectives Policies

Copyright 2007 Prentice Hall Ch 7-25 Management Issues Policies Facilitate the solving or recurring problems & guide implementation of strategy

Copyright 2007 Prentice Hall Ch 7-26 Management Issues Policies Establish --  Boundaries  Constraints  Limits

Copyright 2007 Prentice Hall Ch 7-27 Management Issues Management Issues Resources Organizational structure Restructuring Rewards/Incentives Annual Objectives Policies

Copyright 2007 Prentice Hall Ch 7-28 Management Issues Resource Allocation -- Central management activity that allows for the execution of strategy

Copyright 2007 Prentice Hall Ch 7-29 Management Issues 1. Financial resources 2. Physical resources 3. Human resources 4. Technological resources 4 Types of Resources

Copyright 2007 Prentice Hall Ch 7-30 Management Issues Managing Conflict -- Disagreement between two more parties on one or more issues

Copyright 2007 Prentice Hall Ch 7-31 Management Issues  Conflict not always “bad”  No conflict may signal apathy  Can energize opposing groups to action  May help managers identify problems Managing Conflict

Copyright 2007 Prentice Hall Ch 7-32 Management Issues  Avoidance  Diffusion  Confrontation Conflict Management & Resolution

Copyright 2007 Prentice Hall Ch 7-33 Management Issues Management Issues Resources Organizational structure Restructuring Rewards/Incentives Annual Objectives Policies

Copyright 2007 Prentice Hall Ch 7-34 Management Issues Matching Structure w/ Strategy -- Changes in strategy = Changes in structure

Copyright 2007 Prentice Hall Ch 7-35 Management Issues  Structure dictates how objectives & policies will be established  Structure dictates how resources will be allocated Structure & Strategy

Copyright 2007 Prentice Hall Ch 7-36 New administrative problems emerge New strategy Is formulated Organizational performance declines Organizational performance improves New organizational structure is established Chandler’s Strategy-Structure Relationship

Copyright 2007 Prentice Hall Ch 7-37 Management Issues  Functional Structure  Divisional Structure  Strategic Business Unit Structure (SBU)  Matrix Structure Basic Forms of Structure

Copyright 2007 Prentice Hall Ch 7-38 Functional Structure Most widely used  Simple and least expensive Groups activities by business function Disadvantages  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 Ch 7-39 Divisional Structure Second most common type of structure Can be organized by:  Geographic area  Product or service  Customer  Process

Copyright 2007 Prentice Hall Ch 7-40 Divisional Structure Advantages  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 Ch 7-41 Divisional Structure Disadvantages  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 Ch 7-42 Appropriateness of Divisional Structure 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 Ch 7-43 The Strategic Business Unit (SBU) In multidivisional organizations, an SBU structure can greatly facilitate strategy- implementation efforts. Advantages of improved coordination and accountability Disadvantages  Requires an additional layer of management  Role of the group vice president is often ambiguous

Copyright 2007 Prentice Hall Ch 7-44

Copyright 2007 Prentice Hall Ch 7-45 The Matrix Structure Most complex of all designs – requires both vertical and horizontal flows of authority and communication Disadvantages  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 Ch 7-46 The Matrix Structure Advantages  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 Ch 7-47

Copyright 2007 Prentice Hall Ch 7-48 Do’s and Don’ts in Developing Organizational Charts Do’s  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 Don’ts  Use the title president for the top executive  Use the title president for functional business executives

Copyright 2007 Prentice Hall Ch 7-49

Copyright 2007 Prentice Hall Ch 7-50 Management Issues Management Issues Resources Organizational structure Restructuring Rewards/Incentives Annual Objectives Policies

Copyright 2007 Prentice Hall Ch 7-51 Management Issues Restructuring -- Reducing the size of the firm – # of employees, divisions and/or units, # of hierarchical levels

Copyright 2007 Prentice Hall Ch 7-52 Management Issues Restructuring  Downsizing  Rightsizing  Delayering

Copyright 2007 Prentice Hall Ch 7-53 Management Issues Reengineering -- Reconfiguring or redesigning work, jobs, & processes to improve cost, quality, service, & speed

Copyright 2007 Prentice Hall Ch 7-54 Management Issues Reengineering  Process management  Process innovation  Process redesign

Copyright 2007 Prentice Hall Ch 7-55 Management Issues Management Issues Resources Organizational structure Restructuring Rewards/Incentives Annual Objectives Policies

Copyright 2007 Prentice Hall Ch 7-56 Management Issues Linking Pay/Performance to Strategies -- Pay for performance systems

Copyright 2007 Prentice Hall Ch 7-57 Management Issues Linking Pay/Performance to Strategies  Dual bonus systems  Profit sharing systems  Gain sharing systems

Copyright 2007 Prentice Hall Ch 7-58 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?

Copyright 2007 Prentice Hall Ch 7-59

Copyright 2007 Prentice Hall Ch 7-60 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

Copyright 2007 Prentice Hall Ch 7-61 Management Issues Resistance to Change -- Single greatest threat to successful strategy implementation

Copyright 2007 Prentice Hall Ch 7-62 Management Issues Resistance to Change -- Raises anxiety; fear concerning  Economic loss  Inconvenience  Uncertainty  Break in status-quo

Copyright 2007 Prentice Hall Ch 7-63 Management Issues Change Strategies  Force Change Strategy  Educative Change Strategy  Rational or Self-Interest Change Strategy

Copyright 2007 Prentice Hall Ch 7-64 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

Copyright 2007 Prentice Hall Ch 7-65 Management Issues Natural Environment -- Wide appreciation for firms that “mend” rather than “harm” the environment

Copyright 2007 Prentice Hall Ch 7-66 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 Ch 7-67 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

Copyright 2007 Prentice Hall Ch 7-68 Management Issues Strategy-Supportive Culture -- Preserve, emphasize, & build upon aspects of existing culture that support new strategies

Copyright 2007 Prentice Hall Ch 7-69 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 Management Issues Elements linking culture to strategy:

Copyright 2007 Prentice Hall Ch 7-70 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 Management Issues Elements linking culture to strategy:

Copyright 2007 Prentice Hall Ch 7-71 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

Copyright 2007 Prentice Hall Ch 7-72 Management Issues Production/Operations Concerns -- Production processes typically constitute more than 70% of firm’s total assets

Copyright 2007 Prentice Hall Ch 7-73 Management Issues Production/Operations Decisions  Plant size  Inventory/Inventory control  Quality control  Cost control  Technological innovation

Copyright 2007 Prentice Hall Ch 7-74 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

Copyright 2007 Prentice Hall Ch 7-75 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 Ch 7-76 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 Ch 7-77 Diversity Issues CEOCompanyAge Meg WhitmaneBay49 Andrea JungAvon Products47 Anne MulcahyXerox52 Marjorie MagnerCitigroup56 Betsy HoldenKraft Foods49 Ann MooreAOL Time Warner57 Women CEO’s in U.S (examples)

Copyright 2007 Prentice Hall Ch 7-78 Benefits of a Diverse Workforce 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 Ch 7-79 Benefits of a Diverse Workforce 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 Ch 7-80 Key Terms & Concepts For Review (Chapter 7) Annual ObjectivesConflict AvoidanceConfrontation BenchmarkingCulture Bonus SystemDefusion

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

Copyright 2007 Prentice Hall Ch 7-82 Key Terms & Concepts For Review (Chapter 7) Functional StructureJust in Time (JIT) Gain SharingMatrix Structure Glass CeilingPolicy Horizontal Consistency of Objectives Profit Sharing

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

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