Chapter 7 Implementing Strategies: Management Issues Strategic Management: Concepts and Cases. 9th edition Fred R. David PowerPoint Slides by Anthony F. Chelte Western New England College Fred R. David Prentice Hall

Chapter Outline The nature of Strategy Implementation Annual Objectives Policies Resource Allocation Fred R. David Prentice Hall

Chapter Outline Managing Conflict Matching Structure with Strategy Restructuring, Reengineering, and E-Engineering Linking Performance and Pay to Strategies Fred R. David Prentice Hall

Chapter Outline Managing Resistance to Change Managing the Natural Environment Creating a Strategy-Supportive Culture Fred R. David Prentice Hall

Chapter Outline Production/Operations Concerns When Implementing Strategies Human Resource Concerns When Implementing Strategies Fred R. David Prentice Hall

Implementing Strategies: Management Issues 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. Fred R. David Prentice Hall

Strategy Analysis & Choice Implementing Strategies: Management Issues Strategy Analysis & Choice Contrasting strategy formulation and strategy implementation Formulation is positioning forces before the action Implementation is managing forces during the action Fred R. David Prentice Hall

Strategy Analysis & Choice Implementing Strategies: Management Issues Strategy Analysis & Choice Contrasting strategy formulation and strategy implementation Formulation focuses on effectiveness Implementation focuses on efficiency Fred R. David Prentice Hall

Strategy Analysis & Choice Implementing Strategies: Management Issues Strategy Analysis & Choice Contrasting strategy formulation and strategy implementation Formulation is primarily an intellectual process Implementation is primarily an operational process Fred R. David Prentice Hall

Strategy Analysis & Choice Implementing Strategies: Management Issues Strategy Analysis & Choice Contrasting strategy formulation and strategy implementation Formulation requires good intuitive and analytical skills Implementation requires special motivation and leadership skills Fred R. David Prentice Hall

Strategy Analysis & Choice Implementing Strategies: Management Issues Strategy Analysis & Choice Contrasting strategy formulation and strategy implementation Formulation requires coordination among a few individuals Implementation requires coordination among many persons Fred R. David Prentice Hall

Strategy Analysis & Choice Implementing Strategies: Management Issues Strategy Analysis & Choice Strategy implementation – Varies among different types and sizes of organizations Fred R. David Prentice Hall

Strategy Analysis & Choice Implementing Strategies: Management Issues Strategy Analysis & Choice Strategy implementation Actions – Altering sales territories Adding new departments Closing facilities Hiring new employees Cost-control procedures Changing advertising strategies Building new facilities Fred R. David Prentice Hall

Management Perspectives Formulation to Implementation transition – Shift in responsibility From strategists to division and functional managers Fred R. David Prentice Hall

Organizational structure Management Issues Annual Objectives Policies Management Issues Resources Organizational structure Restructuring Rewards/Incentives Fred R. David Prentice Hall

Management Issues (continued) Resistance to Change Managers & strategy Management Issues Supportive culture Production/operations Human resources Downsizing Fred R. David Prentice Hall

Annual Objectives Decentralized activity Involves all managers in the firm Fred R. David Prentice Hall

Annual Objectives Basis for allocating resources Primary mechanism for evaluating managers Major instrument for monitoring progress toward long-term objectives Establish organizational, divisional, and departmental priorities Fred R. David Prentice Hall

Annual Objectives Horizontal consistency of objectives Vertical consistency of objectives Fred R. David Prentice Hall

Annual Objectives Objectives should state – Quantity Quality Cost Time Fred R. David Prentice Hall

Policies Policies facilitate solving recurring problems and guide the implementation of strategy Fred R. David Prentice Hall

Policies Policies set – Boundaries Constraints limits Fred R. David Prentice Hall

Policies Example Issues requiring management policy -- To offer extensive or limited management development workshops and seminars To centralize or decentralize employee-training activities To recruit through employment agencies, college campuses, and/or newspapers To promote from within or hire from the outside To establish a high- or low-safety stock of inventory To buy lease, or rent new production equipment Fred R. David Prentice Hall

Resource Allocation Resource Allocation – A central management activity that allows for strategy execution Fred R. David Prentice Hall

Resource Allocation Four types of resources – Financial resources Physical resources Human resources Technological resources Fred R. David Prentice Hall

Managing Conflict Conflict – Disagreement between two or more parties on one or more issues Fred R. David Prentice Hall

Managing Conflict Conflict is not always “bad” Absence of conflict Signal indifference or apathy Can energize opposing groups to action May help managers identify problems Fred R. David Prentice Hall

Managing Conflict Conflict Management and Resolution Avoidance Defusion Confrontation Fred R. David Prentice Hall

Matching Structure with Strategy Changes in Strategy Changes in Structure Structure largely dictates how objectives and policies will be established. Structure dictates how resources will be allocated Fred R. David Prentice Hall

Chandler’s Strategy-Structure Relationship New strategy Is formulated New administrative problems emerge Organizational performance declines Organizational performance improves New organizational structure is established Fred R. David Prentice Hall

Basic Forms of Structure Functional Structure Groups tasks and activities by business function Divisional Structure Decentralized and organized by geography, product, customer, or process Fred R. David Prentice Hall

Basic Forms of Structure Strategic Business Unit Structure (SBU) Groups similar divisions; delegates authority and responsibility to SBU executive Matrix Structure Most complex of all designs. Depends upon both vertical and horizontal flows of authority and communication Fred R. David Prentice Hall

Restructuring Restructuring – Reducing the size of the firm in terms of number of employees, divisions, or units, and the number of hierarchical levels in the firm’s organizational structure Fred R. David Prentice Hall

Restructuring Also called – Downsizing Rightsizing Delayering Fred R. David Prentice Hall

Restructuring Employed when ratios out of line with benchmarked competitors Primary benefit sought is cost reduction Fred R. David Prentice Hall

Reengineering Reengineering – Involves reconfiguring or redesigning work, jobs, and processes to improve cost, quality, service and speed. Fred R. David Prentice Hall

Reengineering Also called – Process management Process innovation Process redesign Fred R. David Prentice Hall

Reengineering Reengineering – Concerned more with employee and customer well-being than shareholder well-being Fred R. David Prentice Hall

Linking Performance and Pay to Strategies Most companies practicing pay-for-performance Fred R. David Prentice Hall

Linking Performance and Pay to Strategies Dual bonus system becoming more common Based on both annual objectives and long-term objectives Profit Sharing Incentive compensation used by 30% of companies Gain Sharing Performance targets set for employees or departments Fred R. David Prentice Hall

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? Fred R. David Prentice Hall

Managing Resistance to Change Change raises anxiety over fear of: Economic loss Inconvenience Uncertainty Break in status-quo Fred R. David Prentice Hall

Managing Resistance to Change Single greatest threat to successful strategy implementation Fred R. David Prentice Hall

Change Strategies Force Change Strategy Educative Change Strategy Rational or Self-Interest Change Strategy Fred R. David Prentice Hall

Managing the Natural Environment Wide appreciation for firms that conduct operations that “mend” rather than “harm” the environment. Fred R. David Prentice Hall

Creating a Strategy-Supportive Culture Strategists should strive to preserve, emphasize, and build upon aspects of existing culture that support new strategies. Fred R. David Prentice Hall

Creating a Strategy-Supportive Culture Elements linking culture to strategy: Formal statements of philosophy, charters, etc. used for recruitment and selection, and 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 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 Fred R. David Prentice Hall

Production/Operations Concerns Production processes typically constitute more than 70% of firm’s total assets Decisions on: Plant size Inventory/inventory control Quality control Cost control Technological innovation Fred R. David Prentice Hall

Human Resource Concerns Assessing staffing needs and costs Develop performance incentives ESOPs Child-care policies Work-life balance Fred R. David Prentice Hall

Key Terms Annual objectives Avoidance Benchmarking Bonus system Conflict Confrontation Culture Defusion Delayering Fred R. David Prentice Hall

Key Terms Decentralized structure Divisional structure Downsizing Educative change strategy Employee Stock Ownership Plan (ESOP) Fred R. David Prentice Hall

Key Terms Establishing annual objectives Force change strategy Functional structure Gain sharing Horizontal consistency of objectives Just in time Matrix structure Policy Profit sharing Fred R. David Prentice Hall

Key Terms Rational change strategy Reengineering Resistance to change Resource allocation Restructuring Rightsizing Self-interest change Triangulation Vertical consistency of objectives Fred R. David Prentice Hall