A Multicriteria Model for Strategic Implementation of Business Process Management
8.Strategic Implementation in Strategic Management
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STRATEGY IMPLEMENTATION Eugene Miheso Swinnerstone
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By generating the company goals it means there is a vision for the company. For the vision to be supported there needs to be an implementation of those stated goals.
Transcript of 8.Strategic Implementation in Strategic Management
STRATEGY IMPLEMENTATION
Eugene Miheso Swinnerstone
Introduction Though important strategy formulation is
not a sufficient condition for its success. Many times strategies fail because of poor implementation.
Strategy implementation is the sum total of the activities and choices required for the execution of a strategic plan. It consists of processes of transforming a plan into action and ensuring that the intended out comes do result.
Introduction contd. Strategy implementation tries to find answers
to the following questions. Who are the people to carry out the strategic
plan? What must be done to align the company’s
operations in the new intended direction? How is every one going to work together to do
what is needed? What activities need to be undertaken in order
to achieve the agreed objectives? What is the timescale for the implementation
of these plans? How will progress be monitored and controlled?
Introduction contd
The prime aim in implementing strategy is to deliver the mission and objectives of the organization
Importantly, the process of implementation relies on human resources to carry out these tasks. Changes in strategy may necessitate reorganization
Individuals and groups may need to experiment and to learn about new areas. They need to be organized, given incentives and may possibly even require to be trained
Problems frequently encountered during strategy implementation
Implementation may take more time than originally planned.
Unanticipated major problems may arise. Activities may be ineffectively coordinated Competing activities and crises may take attention away
from implementation. The involved employees may have insufficient capabilities
to perform the jobs. Lower – level employees may be inadequately trained. Uncontrollable external environmental factors may create
problems Departmental managers could provide inadequate
leadership and direction Key implementation tasks and activities may be poorly
defined The information system may inadequately monitor
activities.
The basic implementation process
Strategychoice
Statement of themain strategyobjectives•Quantifiable•Non-quantifiable
Formulation ofSpecific plans•Tasks•Tactics•Programmes•Policies •Procedures •Deadlines•Responsibilities
Resourceallocation andbudgeting
Monitoring and controlProcedures•Objectives•Resources•Validity of the plannedenvironmental [email protected]
The implementation process
To turn general strategies into specific implementation plans involves four basic elements: Identification of general strategic objectives –
specifying the general results expected from the strategy initiatives
Formulation of specific plans – taking the general objectives and turning them into specific tasks and deadlines
Resource allocation and budgeting – indicating how the plans are to be paid for
Monitoring and control procedures – ensuring that the objectives are being met and that only the agreed resources are spent and that budgets are adhered to.
Major components of the strategy implementation process
Communication of measurable corporate objectives and strategy Determination of key managerial tasks that need to be accomplished Assigning tasks to various departments of the organization Establish coordination mechanisms and how authority will be
delegated Budgeting and allocation of resources to the implementing
departments Formulate and state policies and procedures as guides to the tactical
decisions and actions Clarify goals of various individual managers preferably through a
participatory approach like MBO Operationalise ways and state the indicators to measure
performance Build an IT based MIS to provide adequate and timely data for
business evaluation Install a reward system to motivate staff and achieve desirable
behavior like creativity Develop staff and inculcate corporate values and styles of behavior
and leadership Ascertain adequacy of control mechanisms Evaluate performance ascertain gaps and provide feed back on
regular basis
Key terms in the implementation process
Programmes: A program is a statement of the activities needed to
accomplish a single use plan. The purpose to a programme is to make the strategy action-oriented.
Tactics A tactic is a specific operating plan detailing how a
strategy is to be implemented in terms of when (timing tactics) and where (market location tactics) it is to be put in action. By their nature tactics are narrower in scope and shorter in their time horizon than are strategies
Budgets: A budget is a statement of a corporation’s programs in
monetary terms. After programs are developed, the budget process begins. Planning a budget is the last real check a corporation has on the feasibility of its selected strategy.
Key terms in the implementation process
Procedures: Procedures, sometimes termed “Standard Operating
Procedures’’ (SOPS) are a system of sequential steps or techniques that describe in detail how particular task or job is to be done.
Policies A policy is a broad guide line for decision making that links
the formulation of a strategy with implementation. Policies help to ensure that;
Strategic decisions are implemented There is a basis for control The amount of time executives spend making decisions is
reduced Similar situations are handled consistently Coordination between units occurs
Achieving synergy One of the goals to be achieved in strategy
implementation is synergy between and among functions and business units, which is why corporations commonly reorganize after an acquisition.
Synergy is a concept that two businesses will generate more profits together than they could separately
Synergy can take place in one of six ways; Shared know-how Coordinated strategies Shared tangible resources Economies of scale or scope Pooled negotiating power New business creation
Objectives, task setting and communication processes
The process of task setting and communications will cover what is to be done, by what time and with what resources. Typical questions will include: Who developed the strategies that are now being
implemented? Who will implement the strategies? What objectives and tasks will they need to
accomplish? How can objectives and tasks be handled in fast-
changing environments? How will the implementation process be
communicated and coordinated? In reality, the answers to the above questions will
depend primarily on the way that the strategies have been developed
Translating corporate objectives into tasks in a functional organization
Corporate strategic plan objective:Increase return on capital from 10% to 12% over three years
MarketingObjective:Increase marketshare from 5%to 7% over three years
Operations objective:Decreasemanufacturingcost by 3% over three years
Human ResourcesObjective:Recruit and trainfour new skilledstaff in association withR&D
Finance objective:Introduce newcash managementsystem to reduce financecosts by 2%over 3 years
Research andDevelopmentObjective:Complete newProductProgramme to Enhance qualityWhile reducingCosts by 3%Over 3 years
Marketingaction plan•Deadlines•Milestones•Resources•etc.
Operationsaction plan•Deadlines•Milestones•Resources•etc.
Humanresourcesaction plan•Deadlines•Milestones•Resources•etc.
Financeaction plan•Deadlines•Milestones•Resources•etc.
Research &Developmentaction plan•Deadlines•Milestones•[email protected]
Resource Allocation
Most strategies need resources to be allocated to them if they are to be implemented successfully
The resource allocation process is used to provide the necessary funds for proposed strategies. In circumstances of limited resources, the centre is usually responsible for allocating funds using various decision criteria
Criteria for allocation include the delivery of the organization’s mission and objectives, its support of key strategies such as core competencies and its risk-taking profile
Some special circumstances such as unusual changes in the environment may support other resource allocation criteria
Information, Monitoring & Control
Monitoring and control procedures are an important aspect of implementation because information can be used:
To assess resource allocation choices; To monitor progress on implementation; To evaluate the performance of individual managers
as they go about the achievement of their implementation tasks;
To monitor the environment for significant changes from the planning assumptions and projections;
To provide a feedback mechanism and the fine-tuning essential for emergent strategy implementation, especially in fast-changing markets
Information, Monitoring & Control
Main elements of a strategic control system: Customer satisfaction Quality measures Market share It may also be necessary to apply such
indicators externally to monitor competition in order to assess the relative performance of the organization against others in the market place
It is important to distinguish between financial monitoring (cash flow, earnings per share, etc) and strategic controls which may include these financial elements but will also have a broader perspective
Improving strategic controls Concentrate on the key performance indicators and
factors for success – too many elements to be monitored may result in information overload
Distinguish between corporate, business and operating levels of information and only monitor where relevant
Avoid over-reliance on quantitative data. Numbers are usually easier to measure but may be misleading and simplistic
As controls become established, consider relaxing them. Eventually, they may interfere with the most important task of clear and insightful strategic exploration
Create realistic expectations of what the control system can do as it is being introduced or upgraded
The role of Organizational structurein strategy implementation
Generally designing the organizational structure involves answering the following questions How does the firm structure itself to get effective
results? Which organizational structure is best in the
circumstances of the firm? What tasks need to be performed to accomplish the
strategy? To whom should these tasks be assigned? To what extent do these tasks depend on each other? How can we ensure effective performance of these
tasks Any change in corporate strategy is very likely to
require some sort of change in the organization structure and in the kind of skills needed in particular positions.
Structure follows strategy Changes in corporate strategy leads to
changes in organizational structure. Changes in the environment tend to be
reflected in changes in a corporation’s strategy, thus leading to changes in a corporation’s structure.
Strategy, structure and the environment need to be closely aligned; otherwise, organizational performance will suffer e.g. a business unit following a differentiation strategy needs more freedom from headquarters to be successful than does another unit following a low cost strategy.
Organizational structure contd.
Managers must therefore closely examine the way their company is structured in order to decide what if any changes should be made in the way work is accomplished for example should activities be grouped differently?
Should the authority to make decisions be centralized at headquarters or decentralized to managers in distant locations?
Should a company be organized into a tall structure with many layers of managers, each having a narrow span of control (that is few employees to supervise) for better control of subordinates or should it be organized into a flat structure with few layers of managers each having a wide span of control (that is more employees to supervise) to give more freedom to subordinates?
Tall versus Flat OrganizationsAdvantages Disadvantages
Tall More promotional opportunities
Smoother progression from one level to another
Small spans of control lead to more personal contact
Coordination problems Information distortion Motivational problems-less
span of control More expensive in terms of
management overheads Extra levels of management
slow down decision-making and communication
Flat Wide span of control encourages more delegation
Lower management costs Better communication Promotions are real and
meaningful Closer contract between
senior management and lower levels
Lack of personal contact Fewer promotions Higher risk of failure when
promoted
Advantages Disadvantages Senior management free to
concentrate on strategy-reduces information overload
Reduces bureaucratic costs –reduces communication and coordination costs since information does not have to be constantly sent to the top of the organization for decisions to be made.
Better local decisions due to local expertise
Quicker responses to customer needs Better motivation- handling
challenging tasks motivates low level managers
Flexibility-low level managers are authorized to make spot-on-decisions.
Training / career path
Loss of control – managers at all levels can make their own decisions
Dysfunctional decisions due to a lack of goal congruence – many decisions may make the organization to loose focus of its broad objectives
Poor decisions made by inexperienced managers
Inappropriate for crisis situations where speedy decision making and a concerted response by the whole organization is required
Training costs Duplication Extra costs re information
Centralization v DecentralizationThe arguments for and against decentralization
DIFFERENT TYPES OF STRUCTURES
Entrepreneurial/simple structure This type of structure is built around the owner
manager and is typical of small companies in the early stages of their development.
The structure is totally centralized with all key decisions being made by the strategic leader.
The entrepreneur tends to make all the important decisions personally and is involved in every detail and phase of the organization.
Advantage Disadvantages
· Fast decision making
More responsive to market
Good control Close bond to
workforce
· Lack of career structure
May be too centralized
Cannot cope with diversification / growth
Entrepreneurial/simple structure
The Functional structure
This type of structure is common in organizations that have outgrown the entrepreneurial structure and now organize the business on a functional basis. It is most appropriate to small companies, which have few products and locations, which exist in a relatively stable environment.
CEO
Marketing Dept Production Dept Finance Dept Personnel Dept
Functional structure
Advantage Disadvantages Economies of scale Standardization &
Specialization Greater control of
organizational activities
Communication problems – functional orientations
Measurement problems Location problems Conflicts between
CEO
Chemical Division Plastics Division Electric Division
Multidivisional structure
Functions
Advantage Disadvantages
Enables product growthEnhance corporate financial controlReduced overload at the centerEnhances growth and diversificationStronger pursuit for internal efficiency – divisional managers are more accountableTraining of general managers
Potential loss of control – dilemma apportioning authority between the operating division and the corporate head quarterDistortion of informationLack of goal congruenceCompetition for resourcesTransfer pricingShort term research and development focusBureaucratic [email protected]
Geographic Structure
When a company operates a geographic structure, geographic regions become the basis for the grouping of organizational activities.
For example, a company may divide its manufacturing operations and establish manufacturing plants in different regions of the country.
This allows it to be responsive to the needs of regional customers and reduces transportation costs. Common in organizations that operate over a wide geographic area usually used in sales and production, accounts being centralized.
Central operations
CEO
Regional operations
Regional operations
Regional operations
Regional operations
Geographic Structure
Individual stores
Advantage DisadvantagesEnables geographic growthIncreased responsiveness-closer to the customersReduced transport costsEconomies of scale because the purchasing function remains centralizedClear responsibility for areasTraining of general mangers
The same as for a divisional structure.May not be appropriate for very large companies
Geographic Structure
Determinants of organizational design Age- older organizations tend to be more formal
with established structures Size – as organizations grow, there is usually an
increasing need for formal methods of communication and greater coordination( more formal structures are required)
Environment – rapid changes in the organization’s environment will need a structure that is capable of responding quickly and appropriately
Centralization/decentralization decisions. Will depend on:
need for local service and responsiveness
the nature of the [email protected]
Determinants of organizational design contd. Overall work to be undertaken. Value chain
linkages across the organization will clearly need to be coordinated and controlled
Different tasks in different parts of the organization will require integration and coordination
Culture – the degree to which the organization accepts change, the ambitions of the organization and its desire for experimentation are all elements to be considered
Leadership. The style, background and beliefs of the leader may have an important effect on organization design
Characteristics of effective organizational structures
Organize primarily around processes not task e.g. base performance objectives on customer needs
Flatten the hierarchy by minimizing sub division of processes
Entrust managers with visible leadership skills with processes and performance
Link performance objectives and evaluation of all activities to customer satisfaction
Make teams not individuals the focus of organizational performance and design
Combine managerial and non managerial activities as often as possible
Emphasize that each employee develops several competences – multiskilling
Maximize supplier and customer contact with everyone in the organization.
STRUCTURE
SYSTEM
SKILLS
SHARED VALUES
STRATEGY
STYLE
STAFF
THE MCKINSEY 7-S FRAME WORK(Key elements of successful organizational and administrative implementation)
THE MCKINSEY 7-S FRAME WORK Strategy. First there should be a good strategy that can be
implemented to give a firm a competitive edge Structure. structure follows strategy .the organization should be
organized in such a way showing how different tasks are both divided and integrated
Systems. This refers to processes and work flows that show how an organization gets things done. These include information systems, manufacturing processes, quality control systems, inventory management systems performance measurement systems etc
Style. This refers to the management style. For effective implementation to occur management should have good management practices like open door policy and informal culture where employees feel that their interest are safe with the organization.
Staff. The should always try to attract and maintain high caliber staff Skills. These are both individual and collective competences Shared values. Finally for implementation to work smoothly the
organization should be bound together by the specific collection of norms, standards and values that it cherishes. The sense of mission and destiny that amplifies its strategic thrust.
IMPLEMENTING STRATEGIC CHANGE
In the modern corporation, change rather than stability is the order of the day. Rapid changes in technology, competitive environment, and customer demands have increased the rate at which companies have to alter their strategies to survive the market place.
Consequently companies have to go through rapid structural reorganizations as they out grow their structures.
Strategic change is the pro-active management of change in organizations to achieve clearly identified strategic objectives.
It includes activities that involve the induction of new patterns of action, beliefs and attitudes among substantial sections of the corporation
Types of Strategic Change
Slow organization change – introduced gradually and is likely to meet less resistance, progress more smoothly and have a higher commitment from the people involved
Fast organizational change – introduced suddenly, usually as part of a major strategic initiative, and is likely to encounter significant resistance even if it is handled carefully
Causes of Strategic Change
Environment – shifts in the economy, competitive pressures and legislative changes may call for major strategic change
Business relationships – new alliances, acquisitions, partnerships and other significant developments
Technology shifts People – new entrants may have different
educational or cultural backgrounds or expectations that require change
THE CHANGE PROCESS
Determining the need for changeChange may be inevitable when;
When divisions are fighting Competitor has introduced a superior product There is a gap between desired company
performance and actual performance Divisions have become unprofitable due lack
of innovation Company lacks integrating mechanisms to
enjoy synergy
The change process contd.
Determining the obstacles to change
Obstacles can be found at four levels in the organization. Corporate level change may be difficult because of the
company’s present structure and strategy and its corporate cultures
Change is difficult at division level if divisions are highly interrelated and trade resources because one division’s operations will affect other divisions
Functional level-Like divisions, different functions have different strategic orientations and react differently to the changes management proposes. For example in a decline situation sales will resist attempts to cut down on sale s expenditures in order to reduce costs if it believes the problem stems from inefficiency in manufacturing
At an individual level people are notoriously resistant to change because change implies uncertainty, which breeds insecurity and the fear of the unknown
The change process contd.
Implementing change A company can take two approaches;
top down change or bottom up change. With top down approach, change
implementation comes from the top management team and emphasizes speed of response and management of problems as they occur.
Bottom up is a more gradual approach which emphasizes participation and keeping people informed about the change process.
The change process contd
Evaluating change The last step in change process is
to evaluate the effects of the changes in strategy and structure on organizational performance.
This may be measured by changes in the stock market price, market share or organizational flexibility as a result of changes
Roles in the change process
Change strategists – those responsible for leading strategic change
Change implementers – those who have direct responsibility for change management
Change recipients – those who receive the change programme with varying degrees of anxiety depending on the nature of the change and how it is presented
Developing a Strategic Change Programme
The change programme needs to address four questions: What areas of change are available? What areas to select and why? Will people resist change? If so, how
can this be overcome? How will people use the politics of an
organization to resist or embrace change?
Why people resist change?
Anxiety, e.g. weaknesses revealed or loss of power or position
Pessimism Lack of interest Opposition strategy proposals Different personal ambitions
Overcoming resistance to change
Involving those who resist in the change process itself
Building support networks Communications and discussions Use of managerial authority and status Offering assistance Extra incentives Encouraging and supporting those
involved Use of symbols to signal the new era
