1. Strategy Implementation
HCAD 5390

2. Strategy Implementation
Good strategic planning is not enough
Process by which strategies are put into action
Process details are unique to each organization and each strategy
Sub-strategies, programs, action plans, policies, procedures, resource allocations, budgets, authority/responsibility delegation, teams and task forces, reward and control systems, and individual assignments

3. Keys to Strategy Implementation
Resources and competencies
Functional area sub-strategies
Specific decisions and actions

4. Resources and Competencies
Strategy implementation depends on resources and competencies possessed by the firm
These include:
Money in certain amounts
Physical space of certain dimensions
Particular types of equipment
Specified numbers of people with …
Certain skills, capabilities, and competencies
Control and reporting systems
Attitude, intuition, and imagination

5. Resources and Competencies: Systems
Collections of policies, procedures, and protocols, backed by EDP and communications equipment, and people who work with them
Purpose is to simplify and regularize the performance of routine, high-volume tasks
Producing results that are as uniform and predictable as possible
Modern business organizations depend on them

6. Examples of Organizational Systems
Accounting and budgeting system
Management information system
Manufacturing control system
Compensation and reward system
Planning system

7. Resources and Competencies: Human Resources
People possess competencies and carry out details of strategic plans
Personnel costs are high proportion of operating budget in health care organizations
Ensure enough people in the right places with the right competencies
Balance operational and strategic duties
Think of strategic human resource management

8. Resources and Competencies: Organizational Structure
Taken for granted and assumed immutable
Formal framework of departments, units, and groups into which people and the activities they perform are organized
Some structures are better suited to certain strategies than other structures
A carefully chosen structure can give an organization a sustainable competitive advantage

9. Organizational Structure
Organizational design
Selecting the structure and control systems that are most strategically effective for pursuing sustainable competitive advantage.
The role of structure and control
To coordinate strategy implementation.
To motivate and provide incentives for superior performance.

10. The Role of Organizational Structure
Building blocks of organizational structure
Differentiation in the allocation of people and resources to create value.
Vertical differentiation in the distribution of decision-making authority.
Horizontal differentiation in dividing up people and tasks into functions and divisions.
Integration
The means used in coordinating people and functions to accomplish organizational tasks.

11. Differentiation, Integration, Bureaucratic Costs
Bureaucratic costs and strategy implementation:
Bureaucratic costs increase with organizational complexity.
More differentiation = more managers.
More integration = more coordination.
Better strategy implementation = better bottom-line performance and profitability.

12. Vertical Differentiation
Span of control (division of authority)
The number of subordinates that a single manager directly manages.
Organizational hierarchy choices
Flat structures
Few organizational levels
Wide spans of control
Tall structures
Many organizational levels
Narrow spans of control

13. Tall and Flat Structures

14. Problems with Tall Structures
Principle of minimum chain of command
Maintaining a hierarchy with the least number of levels of authority needed to achieve a strategy.
Sources of bureaucratic costs:

15. Centralization or Decentralization
Authority patterns in organizations:
Centralized
Decision making retained in the hands of upper-level managers.
Decentralized
Decisions delegated to lower levels in the organization.

16. Centralization (Structural) Choice?
Advantages of decentralization
Reduced information overload on upper managers.
Increased motivation and accountability throughout organization.
Fewer managers; lower bureaucratic costs.
Advantages of centralization
Easier coordination of organizational activities.
Decisions fitted to broad organizational objectives.
Exercise of strong leadership in crisis.
Faster decision making and response.

17. Horizontal Differentiation
Focus is on division and grouping of tasks to meet business objectives.
Simple structure:
Characteristic of small entrepreneurial companies.
Entrepreneur takes on most managerial roles.
No formal organization arrangements.
Horizontal differentiation is low.

18. Structure Follows Strategy:
Changes in corporate strategy lead to changes in organizational structure

19. Structure Follows Strategy:
New strategy is created
New administrative problems emerge
Economic performance declines
New appropriate structure is invented
Profit returns to its previous levels

20. Stages of corporate development
Simple Structure
Functional Structure
Divisional Structure
Beyond SBU’s

21. Simple Structure: Stage I: Entrepreneur
Decision making tightly controlled
Little formal structure
Planning short range/reactive
Flexible and dynamic

22. Functional Structure:
Stage II:
Management team
Functional specialization
Delegation decision making
Concentration/specialization in industry

23. Divisional Structure:
Stage III:
Diverse product lines
Decentralized decision making
SBU’s
Almost unlimited resources

24. Beyond SBU’s: Stage IV: Increasing environmental uncertainty
Technological advances
Size & scope of worldwide businesses
Multi-industry competitive strategy
Better educated personnel

25. Functional Structure Disadvantages Advantages
Functional orientation creates communication problems.
Performance and profitability measurement problems.
Location versus function problems (coordination).
Strategic problems due to structural (vertical and horizontal) mismatches.
Advantages
Task grouping facilitates specialization and productivity.
Better monitoring of work processes, reduced costs.
Greater control over organizational activities.

26. Functional Structure

27. Mutlitdivisional Structure
Disadvantages
Establishing the divisional-corporate authority relationship
Distortion of information by divisions
Competition for resources by divisions
Transfer pricing problems between divisions
Short-term research and development focus
Bureaucratic costs
Advantages
Enhanced corporate control by division
Enhanced strategic control of each SBU in portfolio
Growth is easier. New units don’t have to be integrated across organization
Stronger pursuit of internal efficiencies. Performance of individual units is readily measurable.

28. Multidivisional Structure

29. Matrix Structure Advantages Disadvantages
Flexibility of the structure and membership
Minimum of direct hierarchical control
Maximizes use of employees’ skills
Motivates employees; frees up top management
Disadvantages
High bureaucratic costs
High costs (time and money) for building relationships
Two-boss employee’s role conflict

30. Matrix Structure
 Two-boss employee

31. Network Structure:
“non structure” – elimination of in-house business functions
Termed “virtual organization”
Useful in unstable environments
Need for innovation and quick response

32. Network Structure Packagers Designers Suppliers Distributors Corporate
Headquarters
(Broker)
Promotion/
Advertising
Agencies
Manufacturers

33. Effective implementation requires:
Leadership
Leading people to use their abilities and skills most effectively and efficiently to achieve organizational objectives

34. Staffing follows strategy:
Matching the manager to the strategy
Executive type
Executives with a particular mix of skills and experiences

35. Leadership: Three Interdependent Activities
Leadership is the process of transforming organizations from what they are to what the leader would have them become
Leadership should be
Proactive
Goal-oriented
Focused on the creation and implementation of a creative vision

40. Managing corporate culture:
Affects firm’s ability to shift its strategic direction
Strong tendency to resist change
Corporate culture should support the strategy

41. Strategy-Culture Compatibility:
Consider the following:
Is the planned strategy compatible with the firm’s current culture?
Can the culture be easily modified to make it more compatible with new strategy?
Is management willing to make major organizational changes?
Is management committed to implementing the strategy?

42. Managing corporate culture:
Communication
Key to effective management of change
Rationale for strategic change should be communicated to all

43. What Is Organizational Culture?
The collection of values and norms shared by people and groups in an organization.
Shared values and a common culture increase integration and improve coordination.
Values
Beliefs and ideas about common goals and proper behaviors.
Norms
Act as guidelines or expectations that prescribe acceptable behavior by organizational members.

44. Organizational Culture
Ways of transmitting organizational culture:

45. Culture and Strategic Leadership
The influence of the founder
Initial cultural values and management style is imprinted on the organization by its founder.
Organizational structure
Structure follows strategy. Strategic leadership affects the cultural norms and values that develop in the organization.

46. Strategic Reward Systems
Individual reward systems
Piecework plans
Commission systems
Bonus plans
Promotion
Group and organizational reward systems
Group-based bonus systems
Profit sharing systems
Employee stock option systems
Organization bonus systems

47. Functional Area Sub-Strategies
Strategies are implemented by front-line personnel in the functional areas
Functional area managers participate in corporate strategic planning process
Not enough to just take functional area concerns into account

48. Functional Area Strategic Contributions
Provide background to initial thinking about strategic possibilities
Suggest specific strategies to address opportunities identified
Perform activities that make chosen strategies a reality

49. Marketing Strategy Contributions (I)
Closest contact to market and external environment
Strategic knowledge inputs:
market segments,
customers preferences,
firm’s reputation and market position,
competitor intelligence,
market threats and opportunities,
industry and general environment

50. Marketing Strategy Contributions (II)
Growth strategy recommendations:
new products or services
enhancements of existing products or services
new customers to be served
unmet customers’ needs
new technologies with market appeal
customer service improvements
new distribution channels
new market segments

51. Marketing Strategy Contributions (III)
Roles in strategy implementation:
Publicize strategic innovations to customers
Explain value of new product features
Boost demand through aggressive advertising, price promotions, personal selling, and direct marketing
Communications link between the business and its market

52. Operations Strategic Contributions
Core of the business, creating products and services sold to customers
If strategic goal is to increase sales …
Does operations have the capacity?
If strategy based on new products or features …
Can operations manufacture them?
Low-cost leadership or retrenchment strategies
Depend on cost-cutting in operations

53. R&D Strategic Contributions
May dominate the business (pharma, biotech) or be non-existent (physician practice)
Pharmaceutical company research pipelines
Shift research into new scientific area or away from an existing area
Ability to develop new products or features called for by

54. Information System Strategic Contributions (I)
Critical functional area in health care industry
Perform typical business functions:
Cost accounting
Inventory control
HR and employee benefits
Customer relations
Corporate communications

55. Information System Strategic Contributions (II)
Perform unique health care functions:
Tracking services delivered to support claims filed
Claims submission and collection
Carry out physician clinical orders
Maintain record of patient conditions and treatments
Gather and correlate clinical outcomes data
Gather data on treatment costs and efficacy
Evaluate physicians regarding resource utilization and clinical outcomes
Transmit all these data among organization stakeholders

56. Information System Strategic Contributions (III)
Specific strategic roles:
Basis for differentiation from competitors
Capacity to handle increased volume of customers or sales
Facilitate cost-cutting by streamlining operational processes and identifying points of cost inefficiency
Reveal value chain points at which differentiated value added is possible

57. Human Resources Strategic Contributions (I)
Supports all other functions in carrying out operational and strategic responsibilities
Assure that right numbers and types of personnel are available for strategic initiatives
Hire and develop employees to ensure that appropriate competencies are available when needed

58. Human Resources Strategic Contributions (II)
Recommend motivational and reward activities to enhance organizational performance
Propose organizational structures better suited to new strategies
Oversee workforce reduction during retrenchment

59. Creating Functional Area Strategies
Each functional area creates a strategic plan
A plan that supports and meshes with the organization-wide plan
A plan that is synchronized with plans in other functional areas
Functional area managers must participate in organization-wide planning and be in communication with each other

60. Strategy Implementation Actions (I)
Overall strategy broken down into manageable parts
Scope of each part defined in detail
Goals and deadlines set for accomplishment
Appropriate resources allocated

61. Strategy Implementation Actions (II)
Right numbers and types of people assigned
Policies and procedures to guide their actions
One person assigned overall responsibility for each part
Progress measured and tracked
Changes and adjustments when appropriate

62. Examples of Strategy Implementation Actions (I)
Marketing campaigns – new, refocus, expand or contract, discontinue, different media, test pilots
Facilities – new, expand, repurpose, close
Products/services – new (create, develop, invent), redesign, add new features, discontinue
Product prices – raise, lower, bundle or unbundle products

63. Examples of Strategy Implementation Actions (II)
Operating processes – reengineer, tasks (new, reorder, combine, separate, perform differently or less expensively)
Departments, offices, teams – new, refocus, discontinue, expand, split up
Employees – new, transfer, retrain or develop, lay off
New systems for monitoring and measuring operating performance

64. Delegating Implementation Tasks
Best if implementers involved in planning
Task content must fit expertise and skills of person assigned
If right person not available?
Temporary stand-in for operational duties
Special training for another employee
Worth hiring a new, trained employee
Involve HR in strategic planning

65. Delegation Through the Organizational Hierarchy
Functional area heads work with the managers of departments, facilities, and units
Together they formulate sub-strategies to carry out the area strategies
Managers break the work down into bundles of tasks for assignment to teams, task forces, and work groups (ad hoc or permanent)
Programs or projects may be set up to implement specific strategic elements
Tasks are assigned to individual employees

66. Elements in a Strategy Action Plan
Policies
Procedures
Methods
Rules
Objectives
Time deadlines
Personnel assignments

67. Allocation of Resources
People, space, equipment, supplies, website space, agenda time at meetings, authority, discretion, and money
Money is usually the most critical strategic resource
Purpose of capital expenditures
Replace existing capital assets
Acquire new non-strategic capital assets
Carry out strategic plans

68. Choosing Strategic Capital Expenditures (I)
Identify and describe all capital spending requests
amount
timing
assets acquired
purposes
Describe non-financial benefits of each request
patient satisfaction
less maintenance downtime
lower employee turnover
speedier member enrollment

69. Choosing Strategic Capital Expenditures (II)
Set priorities on basis of urgency factors
relevance to current operations
response to legal mandate
response to competitors’ moves
critical element in strategic plans
Project cash flows for each request
Perform financial analysis of each request
Net present value
Discounted cash flow
Payback period

70. Choosing Strategic Capital Expenditures (III)
Compare and evaluate financial and non-financial benefits of all capital requests
Using standard criteria decided beforehand
Decide which to fund and in what amounts

71. Strategic Objectives and Deadlines
Long and short-term objectives
Accompanied by dates for achievement
Purposes served:
Guide and motivate employees
Basis for measuring progress and evaluating employees, particularly managers
Establish priorities for each unit or subunit
Basis for allocating resources

72. Examples of Strategic Objectives
May be applied to market segments, geographic areas, products/services, facilities, operating unit
May be stated in terms of sales, profits, market share, patient volume, employees hired/trained, or other metrics showing strategic progress
Good objectives are measurable, challenging, achievable, publicized, consistent, time-based

73. Potential Implementation Problems (I)
Original plan poorly conceived
Took more time than planned
Unanticipated internal/external problems arose
Poor coordination of activities
Crises or competing activities diverted attention
Assigned employees lacked necessary skills

74. Potential Implementation Problems (II)
Assigned employees were inadequately trained
Insufficient allocation of resources
Uncontrollable external environmental factors
Inadequate lower-level leadership and direction
Poorly defined key tasks and activities
Inadequate monitoring of activities and progress