Chapter 4

Implementing Strategies: Management &

Operations Issues

Indra Prasad Joshi

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 Nature of Strategy
Implementation
Formulation vs. Implementation

• Formulation focuses on effectiveness

• Implementation focuses on efficiency

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 Strategy implementation

• Successful strategy formulation does not guarantee

successful strategy implementation. It is always more
difficult to do something (strategy implementation) than
to say you are going to do it (strategy formulation).

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 Management
Perspectives

• In all but the smallest organizations, the transition from

strategy formulation to strategy implementation requires
a shift in responsibility from strategists to divisional and
functional managers.

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Management Issues

Annual Objectives

Policies

Resources
Management
Issues Organizational Structure

Restructuring

Rewards/Incentives

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Management Issues (cont’d)

Resistance to Change

Natural Environment

Supportive Culture
Management
Issues Production/Operations

Human Resources

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 Management
Perspectives
• Management issues central to strategy implementation
include:
1. establishing annual objectives,
2. devising policies,
3. allocating resources,
4. altering an existing organizational structure,
5. revising reward and incentive plans,
6. minimizing resistance to change,
7. matching managers with strategy,
8. developing a strategy-supportive culture,
9. adapting production/operations processes
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 Management
Perspectives

• Managers and employees throughout an organization

should participate early and directly in strategy-
implementation decisions.

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 Nature of Strategy
Implementation
Management Perspectives

• Shift in responsibility Divisional or

Strategists Functional
Managers

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 ANNUAL OBJECTIVES
• 1. Establishing annual objectives is a decentralized
activity that directly involves all managers in an
organization.
• 2. Annual objectives are essential for strategy
implementation because they:
• a. Represent the basis for allocating resources.
• b. Are a primary mechanism for evaluating managers.
• c. Are the major instrument for monitoring progress
towards achieving long-term objectives.
• d. Establish organizational, divisional, and
departmental priorities.
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 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,
divisional, and departmental)

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 Annual objectives
• Annual objectives should be:
1. measurable,
2. consistent,
3. reasonable,
4. challenging,
5. clear,
6. communicated throughout the organization,
characterized by an appropriate time dimension,
7. and accompanied by commensurate rewards and
sanctions.
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POLICIES

• Changes in a firm’s strategic direction do not occur

automatically. On a day-to-day basis, policies are needed
to make a strategy work.
• Broadly defined, policy refers to specific guidelines,
methods, procedures, rules, forms, and administrative
practices established to support and encourage work
toward stated goals.
• Policies let both employees and managers know what is
expected of them, thereby increasing the likelihood that
strategies will be implemented successfully.

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 Management Issues

Four Types of Resources

1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources

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RESOURCE ALLOCATION

• Resource allocation is a central management activity that

allows for strategy execution.
• In organizations that do not use a strategic-management
approach to decision making, resource allocation is often based
on political or personal factors.
• Strategic management enables resources to be allocated
according to priorities established by annual objectives.

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MANAGING CONFLICT

• A. Resource-Specific Conflict
• Interdependency of objectives and competition for limited
resources often leads to conflict.
• Conflict can be defined as a disagreement between two or more
parties on one or more issues.

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Approaches for Managing and Resolving Conflict

1. Avoidance includes such actions as ignoring the

problem in hopes that the conflict will resolve itself
or physically separating the conflicting individuals
(or groups).

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Approaches for Managing and Resolving Conflict

1. Diffusion can include playing down differences

between conflicting parties while emphasis
similarities and common interests, compromising
so that there is neither a clear winner nor loser,
resorting to majority rule, appealing to a higher
authority, or redesigning present positions.

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Approaches for Managing and Resolving Conflict

1. Confrontation is exemplified by exchanging

members of conflicting parties so that each can
gain an appreciation of the other’s point of view, or
holding a meeting at which conflicting parties
present their views and work through their
differences.

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 Management Issues

Managing Conflict
 Conflict not always “bad”
 No conflict may signal
apathy/indifference
 Can energize opposing groups to
action
 May help managers identify problems

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MATCHING STRATEGY WITH STRUCTURE

• A. Changes in Strategy Often Require Changes in Structure

• 1. Changes in strategy often require changes in the way an organization is
structured for two major reasons.
• a. First, structure largely dictates how objectives and policies will be
established.
• For example, objectives and policies established under a geographic
organizational structure are couched in geographic terms. Objectives and
policies are stated largely in terms of products in an organization whose
structure is based on product groups. The structural formula for developing
objectives and policies can significantly impact all other strategy-
implementation issues.
• b. The second major reason why changes in strategy often require
changes in structure is that structure dictates how resources will be
allocated.

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MATCHING STRATEGY WITH STRUCTURE

• Changes in strategy lead to changes in organizational

structure. Structure should be designed to facilitate the
strategic pursuit of a firm and, therefore, follow strategy.
• 3. There is not just one optimal organizational design or
structure for a given strategy or type of organization.

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Indra Prasad Joshi
 Management Issues

Basic Forms of Structure

 Functional Structure
 Divisional Structure
 Strategic Business Unit Structure (SBU)
 Matrix Structure

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LINKING PERFORMANCE AND PAY TO STRATEGIES

• Profit sharing is a widely used form of incentive compensation.

• Gain sharing requires employees or departments to establish
performance targets; if actual results exceed objectives, all
members get bonuses.
• Criteria such as sales, profit, production efficiency, quality, and
safety could also serve as bases for an effective bonus system.

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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?

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MANAGING RESISTANCE TO CHANGE
• A. Resistance to Change
• It may take on such forms as sabotaging[destroying]
production machines, absenteeism, filing unfounded
grievances, and an unwillingness to cooperate.
• Resistance to change can emerge at any stage or level of
the strategy-implementation process.
• There are three commonly used strategies for
implementing change:
• a. Force change strategy
• Educative change strategy
• Self-interest change strategy
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 Management Issues

Production/Operations Concerns

 Production/operations capabilities,
limitations, and policies can significantly
enhance or inhibit attainment of objectives.
 Production processes typically
constitute more than 70% of firm’s
total assets
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 Management Issues

Examples on adjustment of
Production/Operations Decisions
 Plant size
 Inventory/Inventory control
 Quality control
 Cost control
 Technological innovation

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 Management Issues
Human Resource Strategic Responsibilities

 Assessing staffing needs/costs

 Developing performance incentives
 ESOPs
 Child-care policies
 Work–life balance issues

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 Human Resource problems that arise
when businesses implement strategies:

1. Disruption of social and political structures

2. Failure to match individuals’ aptitudes\abilities with
implementation tasks
3. Inadequate top management support for
implementation activities

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 Employee Stock Ownership Plans
(ESOPs)

• . 1. An ESOP is a tax-qualified, defined-contribution,

employee benefit plan whereby employees purchase
stock of the company through borrowed money or cash
contributions.
• 2. ESOPs reduce worker alienation\estrangement,
stimulate productivity, and allow substantial tax savings
for the firm.

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 Balancing Work Life and
Home Life

• Work/family strategies have become so popular among

companies that the strategies now represent a competitive
advantage for those firms that offer such benefits as elder
care assistance, flexible scheduling, job sharing, and so
on.

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 MBO technique

• According to George S. Odiorne, the system of

management by objectives can be described as a process
whereby the superior and subordinate jointly identify its
common goals, define each individual's major areas of
responsibility in terms of the results expected of him, and
use these measures as guides for operating the unit and
assessing the contribution of each of its members.

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 Unique
features/advantages
Some of the important features and advantages of MBO are:
• Motivation – Involving employees in the whole process of goal setting and
increasing employee empowerment. This increases employee job satisfaction and
commitment.
• Better communication and coordination – Frequent reviews and interactions
between superiors and subordinates helps to maintain harmonious relationships
within the organization and also to solve many problems.
• Clarity of goals
• Subordinates tend to have a higher commitment to objectives they set for
themselves than those imposed on them by another person.
• Managers can ensure that objectives of the subordinates are linked to the
organization's objectives.
• Everybody will be having a common goal for whole organization. That means, it is
a directive principle of management.
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 Employee empowerment
Empowerment Is Also Known As:
• Employee involvement and participative management are often used to mean
empowerment. They are not really interchangeable.
Examples of Empowerment
• These are examples of empowerment in action.
• The manager of the Human Resources department added weeks to the process of
hiring new employees by requiring his supposedly empowered staff members to
obtain his signature on every document related to the hiring of a new employee.
When the time problem was brought to his attention, he fostered empowerment
by telling employees they no longer needed his signature unless the hire
involved extraordinary circumstances.

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 Cont….
• The company's management style involved sharing the
goals, sharing each employee's expectations and
framework with the employee, and then, getting out of
the way while employees were empowered to set goals,
accomplish their objectives, and determine how to do
their jobs.
• Empowerment is a desirable management and
organizational style that enables employees to practice
autonomy, control their own jobs, and use their skills and
abilities to benefit both their organization and
themselves.
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 Organizational
Development
• Organization development (OD) is a deliberately planned, organization-wide
effort to increase an organization's effectiveness and/or efficiency. OD theorists and
practitioners define it in various ways. Its multiplicity of definition reflects the
complexity of the discipline and is responsible for its lack of understanding. For
example, Vasudevan has referred to OD being about promoting organizational
readiness to meet change, and it has been said that OD is a systemic learning and
development strategy intended to change the basics of beliefs, attitudes and
relevance of values, and structure of the current organization to better absorb
disruptive technologies, shrinking or exploding market opportunities and ensuing
challenges and chaos. It is worth understanding what OD is not. It is not training,
personal development, team development, HRD (human resource development),
L&D (learning and development) or a part of HR although it is often mistakenly
understood as some or all of these. OD interventions are about change so involve
people - but OD also develops processes, systems and structures. The primary
purpose of OD is to develop the organization, not to train or develop the staff.

Indra Prasad Joshi

 Review
• Allocating resources can be a political and an ad hoc
activity in firms that do not use strategic management.
Why is this true? Does adopting strategic management
ensure easy resource allocation? Why?
• Allocating resources can be ad hoc and political in the absence
of strategic management because no good substitute approach
for making major decisions exists. Intuition, subjectivity, and
emotions are not adequate for making resource allocation
decisions that have strategic ramification for an entire
organization.
• Strategic management does not assure easy resource
allocation, but it generally results in more effective resource
allocation.
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 Review
• Compare strategy formulation with strategy
implementation in terms of each being an art or a
science.
• The strategy-formulation process is more of a science,
whereas strategy implementation is more of an art.
Strategy implementation involves motivating
employees. However, neither strategy formulation nor
strategy implementation is a pure science or art
because, for example, intuition and good subjective
judgment are always essential in strategy formulation.
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 Review

• Identify and discuss three policies that apply to

your present business policy class.
• Answers to this question will vary for each class.
Policies that may be discussed include grading
policies, attendance policies, and honor code policies.

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 Review
• Explain the following statement: Horizontal
consistency of goals is as important as vertical
consistency.
• This is a true statement. Horizontal consistency of
objectives is as important as vertical consistency.
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.”
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 Review
• In your opinion, what approaches to conflict
resolution would be best for resolving a
disagreement between a personnel manager and a
sales manager over the firing of a particular
salesperson? Why?
• Various approaches for minimizing and resolving
conflict can be classified in three ways: avoidance,
defusion, and confrontation. Depending on the
situation, any of these three alternative approaches
could justifiably be most effective in solving a dispute
between a personnel manager and sales manager.
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 Review
• As production manager of a local newspaper, what
problems would you anticipate in implementing a
strategy to increase the average number of pages
in the paper by 40 percent?
• Problems that could be encountered include the need
to obtain additional advertising to cover the cost of
additional pages, as well as needing additional
employees. A problem could arise in deciding
whether to raise the price of the paper. There may
need to be an increase in the market area coverage of
the paper.
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 Review
• Explain why successful strategy implementation
often hinges on whether the strategy-formulation
process empowers managers and employees.
• Managers and employees make or break a firm.
More and more, firms are empowering managers
and employees through involvement in the strategic-
management process. Lack of involvement or
“empowering” often results in a lack of commitment
to see the firm do well.
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Review

• Discuss three ways the book discusses linking

performance and pay to strategies.
• Some methods of linking performance to pay include
profit sharing, gain sharing, and bonus systems. Profit
sharing is widely used but can be a less than desirable
criterion since individuals may not be clearly able to
affect profits. Gain sharing requires employees or
departments to establish performance targets. If actual
results exceed objectives, all members get bonuses. In a
bonus system, if an organization meets certain agreed-
upon objectives, every member of the enterprise shares
in the benefits. Criteria for bonus systems include sales,
profit, production efficiency, quality and safety.

Indra Prasad Joshi