Lecture 7 Implementing Strategies: Management Issues

1
Lecture 7Implementing StrategiesManagement
Issues
2
Objectives

• Understand the management issues in relation to
  implementation of strategies.

3
Outline Management Issues

• The nature of strategy implementation
• Management issues
• Annual objectives
• Policies
• Resources
• Matching Structure with strategy
• Strategy-culture fit
• Leadership
• HRM
• Linking performance and pay to strategies
• Managing resistance to change and conflicts

4
Implementing Strategies Management Issues

• Contrasting strategy formulation and strategy
  implementation
• Formulation is positioning forces before the
  action
• Implementation is managing forces during the
  action
• Formulation focuses on effectiveness
• Implementation focuses on efficiency
• Formulation is primarily an intellectual process
• Implementation is primarily an operational process

5
Implementing Strategies Management Issues

• Contrasting strategy formulation and strategy
  implementation
• Formulation requires good intuitive and
  analytical skills
• Implementation requires special motivation and
  leadership skills
• Formulation requires coordination among a few
  individuals
• Implementation requires coordination among many
  persons

6
The Nature of Strategy Implementation

• -- Successful strategy formulation does not
  guarantee successful strategy implementation
• Varies among different types sizes of
  organizations

7
Nature of Strategy Implementation
Implementation Activities

• Altering sales territories
• Adding new departments
• Closing facilities
• Hiring new employees
• Cost-control procedures
• Modifying advertising strategies
• Building new facilities

8
Nature of Strategy Implementation
Management Perspectives

• Shift in responsibility

Division or FunctionalManagers
Strategists
9
Management Issues
Annual Objectives --
-- improve sales by 3
10
Policies

• Policies facilitate solving recurring problems
  and guide the implementation of strategy.
• Policy refers to specific guidelines, methods,
  procedures, rules, forms, and administrative
  practices established to support and encourage
  work toward stated goals.

11

• Policies can apply to all division and
  departments. They also apply to a single
  department.
• Ex
• Company strategy Acquire a chain of retail
  stores to meet our sales growth and profitability
  objectives.
• Supporting policies for example
• All stores will be open from 8 a.m. to 8 p.m..
  Monday through Saturday. (currently stores are
  open only 40 hours a week.)

12
Resource Allocation

• Resource Allocation
• A central management activity that allows for
  strategy execution
• Resource are allocated according to priorities
  established by annual objectives instead of
  political or personal factors.

13
Matching Structure with Strategy

• Structure follows strategy----Changes in strategy
  lead to changes in organisational
  structure
• Structure largely dictates how objectives and
  policies will be established. The structural
  format for developing objectives and policies
  significantly impact all other strategy-implementa
  tion
• Structure dictates how resources will be allocated

14

• When a firm changes its strategy, the existing
  organisational structure may become ineffective.
  Symptoms of an ineffective organisational
  structure include
• too many levels of management,
• too many meetings attended by too many people,
• too much attention being directed toward solving
  interdepartmental conflicts,
• too large a span of control, and
• too many unachieved objectives.

15
Chandlers Strategy-StructureRelationship
New administrative problems emerge
New strategy Is formulated
Organizational performance declines
Organizational performance improves
New organizational structure is established
Source Chandler (1962 in David 2005, p.250)
16
Type of Organisational structure

• Traditional designs
• Functional structure
• Division structure
• Hybrid structure
• Contemporary designs
• Matrix structure
• networked structure
• Team based structure

17
Strategy and Structure

• In examining an organisation, two questions have
  to be answered
• Is the current structure the most appropriate
  means of organising to meet goals?
• If not, then what organisational changes are
  required? (alternatives)
• How feasible or workable are these structural
  alternatives?
• What advantages and disadvantages of each
  alternative?

18
Restructuring (narrow view)

• Restructuring also called downsizing,
  rightsizing, or delayering
• Reducing the size of the firm in terms of number
  of employees, divisions, or units, and the number
  of hierarchical levels in the firms
  organizational structure

19
Restructuring

• Employed when ratios out of line with benchmarked
  competitors
• Intended to improve both efficiency and
  effectiveness.
• Primary benefit sought is cost reduction
• Concerned with shareholder well-being rather than
  employee well-being.

20
Corporate restructuring (broad view) along nine
variables

• Changing structures
• Delayering
• Project-based organisation
• Decentralisation
• Changing processes (system and people)
• Use of IT
• New HR policy
• Horizontal/vertical linkage
• Changing boundaries
• Business diversification
• Outsourcing
• Strategic alliance

Source Whittington et al. (1999 in Ruigrok,
Pettigrew, Peck, and Whittington 1999)
21
Restructure example Toll Holdings

• In 2006 Toll merged with Patrick Corporation,
  gaining control of Patrick Corporations ports,
  rail and air businesses.
• Also in 2006, Toll acquired SembCorp Logistics,
  providing the Toll Group with one of the most
  extensive supply chain and in-country physical
  distribution networks in Asia.
• As at 19 April 2007, Tolls Market
  Capitalisation was approximately 13.1 billion,
  ranking it the 23rd largest company in the
  SP/ASX 100.

22
Restructure example Toll Holdings

• In order to lay the foundation for continued
  growth, Toll has proposed separating its
  transport infrastructure assets from its network
  and supply chain business. The overarching
  objective of the Restructure Proposal is to
  maximise shareholder value.

23
Restructure example Toll Holdings

• Toll Toll will continue the consistent strategy
  of providing integrated logistics solutions using
  appropriate infrastructure within the Asia
  Pacific region to underpin its highly successful
  model and improve return on capital.
• Asciano will control a unique transport
  infrastructure portfolio, and focus on investment
  opportunities in ports, rail, airports, toll
  roads and similar transport infrastructure assets

24
(No Transcript)
25
Structure-strategy other examples

• Port reform
• Create commercialised port authorities or
  corporation
• Privatisation of port businesses
• Labour reform

26
Strategy Implementation Managing culture

• organisational culture is an expression of the
  values, beliefs and assumptions that dominate the
  organisation. It tells employees what is
  important and what type of behaviour is expected.

27
Changing culture

• Changing culture to fit a new strategy is a tough
  executive challenge
• Especially when prevailing culture is entrenched
  unhealthy
• Senior executives must personally lead efforts to
  create a strategy-supportive culture!

28
Culture Change Matrix

large
Size and complexity
small
Cultural homogeneity
high
low
Source Sharplin, A. 1985, Strategic Management,
Mc Graw Hill.
29
Managing Culture

• Strategy-Culture Compatibility
• Consider the following
• Is the planned strategy compatible with the
  firms 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?

30
Assessing StrategyCulture Compatibility
Is the planned strategy compatible

with the current culture?
No
Yes
Tie changes into the culture.
Can the culture be modified to

make it more compatible with the

new strategy?
yes
No
Introduce minor culture-changing activities
Is management willing and able to

make major organizational

No
changes and accept probable

delays

No
Yes
Manage around the culture by

Is management still committed

establishing a new structural unit

to implementing the strategy?
to implement the new strategy.
No
Yes
Find a joint-venture partner or

Formulate a different strategy
contract with another company

to carry out the strategy.
31
Managing Culture

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

32
Discussion

• Consider the acquisition case that DP world
  purchased PO, do you think the different culture
  of terminal operators ownership would impact
  operational performance?

33
Leadership

• Effective strategy implementation requires
  leadership, which leading people to use their
  abilities and skills most effectively and
  efficiently to achieve organizational objectives
• Leadership is the ability to develop and
  articulate a vision of the future for the
  organisation or a unit of the organisation, to
  motivate others to buy into the vision and to get
  it implemented.

34
Leadership Varies under Different Situation

• The environment is stable or turbulent
• Stable effective management may be more critical
  than visionary leadership skills.
• Turbulent strategic leadership skills will be
  essential
• Change is being forced from the outside or there
  are much change required strong leadership
  skills to convince people to change their ways

35
Leadership Varies under Different Situation

• The changes required are consistent with the
  culture and values of the organisation.
• As changing culture and core values of the
  organisation is very difficult and excellent
  leadership is necessary

36
Management Issues
Human Resource Concerns
-- HR manager position has strategic
responsibility has changed dramatically as
companies continue to reorganize, outsource, etc.
37
Human Resource Concerns

• What are the strategic responsibilities of the
  human resource manager?
• Assessing staffing needs and costs
• Develop performance incentives
• Employment Stock Ownership Plan (ESOP)
• whereby employees purchase stock of the company
  through borrowed money or cash contributions.
  This plan empowers employees to work as owners.
• Work/ family strategies
• Child-care policies
• Work-life balance

38
Linking Performance and Payto Strategies

• Most companies practicing pay-for-performance, an
  effective tool for motivating individuals to
  support strategy implementation
• Dual bonus system becoming more common
• Based on both annual objectives and long-term
  objectives
• Ex a 16 return on equity objective is achieved
  all employees receive a performance sharing cash
  award.

39
Linking Performance and Payto Strategies

• Profit Sharing
• Incentive compensation used by 30 of companies
• Gain Sharing
• Performance targets set for employees or
  departments, actual results exceed objectives,
  all members get bonus.
• Other reward strategy incentives such as salary
  raises, stock options, fringe benefits,
  promotions, praise, recognition, criticism, fear,
  increased job autonomy, and awards can be used to
  encourage managers and employees to push hard for
  successful strategy implementation.

40
Changing Management

• Reasons why changes might be resisted by people
  and raises anxiety
• Lack of understanding and uncertainty about the
  changed proposed
• Self-interest loss (economic loss, power loss,
  relationship, competence)
• Different perceptions (e.g. people with the
  perception of serving the public in the case of
  privatisation of public organisation)
• Lack trust in management
• Change is a surprise

41
Managing Resistance to Change

• Areas for Change in an Organisation
• Changing structure
• Changing technology (ex automation,
  computerisation)
• Changing people (changing the quality and
  characteristics of employees)
• Changing Culture

42
Managing Resistance to Change

• Resistance to change is considered the single
  greatest threat to successful strategy
  implementation.
• People do not resist change per se, they resist
  being changed and feeling being powerless to do
  anything about it.

43
Strategies of Managing Resistance to Change

• Force Change Strategy
• Involves giving orders and enforcing those orders
• Fast but is plagued by low commitment and high
  resistance.
• Educative Change Strategy
• Presents information to convince people of the
  need for change
• Slow and difficult but evokes high commitment and
  less resistance
• Rational or Self-Interest Change Strategy
• Attempts to convince individuals that the change
  is to their personal advantage. The strategy
  implementation can be relatively easy if the
  appeal is successful. However, implementation
  changes are seldom to everyones advantage.

44
Managing Conflict

• Conflict
• Disagreement between two or more parties on one
  or more issues

45
Managing Conflict

• Reducing/resolving conflict
• Change situational factors
• Appeal to superordinate goals
• Interpersonal conflict-handling techniques
• Avoidance
• Accommodation
• Competition
• Compromise
• Collaboration
• Source Bartol et al. 2005.

46
Conflict-resolution techniques
Soure Robbins et al. 2006.