Chapter 7
Implementing Strategies: Management &
Operations Issues
Strategic
Management:
Concepts & Cases
11th Edition
Fred David
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Ch 7-1
Chapter Outline
The Nature of Strategy Implementation
Annual Objectives
Policies
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Ch 7-2
Chapter Outline (cont’d)
Resource Allocation
Managing Conflict
Matching Structure with Strategy
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Ch 7-3
Chapter Outline (cont’d)
Restructuring, Reengineering & E-Engineering
Linking Performance & Pay to Strategies
Managing Resistance to Change
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Ch 7-4
Chapter Outline (cont’d)
Managing the Natural Environment
Creating a Strategy-Supportive Culture
Production/Operations Concerns When
Implementing Strategies
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Ch 7-5
Chapter Outline (cont’d)
Human Resource Concerns When
Implementing Strategies
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Ch 7-6
Implementing Strategies
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.
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Ch 7-7
The Nature of Strategy
Implementation
-- Successful strategy formulation does not
guarantee successful strategy implementation
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Ch 7-8
Nature of Strategy
Implementation
Formulation vs. Implementation

Formulation positions forces before the action

Implementation manages forces during the
action
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Ch 7-9
Nature of Strategy
Implementation
Formulation vs. Implementation

Formulation focuses on effectiveness

Implementation focuses on efficiency
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Ch 7-10
Nature of Strategy
Implementation
Formulation vs. Implementation

Formulation is primarily an intellectual process

Implementation is primarily an operational
process
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Ch 7-11
Nature of Strategy
Implementation
Formulation vs. Implementation

Formulation requires good intuitive & analytical
skills

Implementation requires special motivational &
leadership skills
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Ch 7-12
Nature of Strategy
Implementation
Formulation vs. Implementation

Formulation requires coordination among a
few individuals

Implementation requires coordination among
many individuals
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Ch 7-13
Nature of Strategy
Implementation
Strategy Implementation

Varies among different types & sizes of
organizations
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Ch 7-14
Nature of Strategy
Implementation
Implementation Activities
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Altering sales territories
Adding new departments
Closing facilities
Hiring new employees
Cost-control procedures
Modifying advertising strategies
Building new facilities
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Ch 7-15
Nature of Strategy
Implementation
Management Perspectives

Shift in responsibility
Strategists
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Division or
Functional
Managers
Ch 7-16
Management Issues
Annual Objectives
Policies
Management
Issues
Resources
Organizational structure
Restructuring
Rewards/Incentives
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Ch 7-17
Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
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Ch 7-18
Management Issues
Annual Objectives --- Decentralized activity
-- Directly involve all managers in the
organization
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Ch 7-19
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, division,
& departmental)
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Ch 7-20
Management Issues
Consistency of Annual Objectives -Across hierarchical levels
Horizontally consistent
Vertically consistent
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Ch 7-21
Management Issues
Requirements of Annual Objectives
Measurable
Consistent
Reasonable
Challenging
Clear
Understood
Timely
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Ch 7-22
Management Issues
Annual Objectives Should State
Quantity
Quality
Cost
Time
Be Verifiable
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Ch 7-23
Management Issues
Annual Objectives
Policies
Management
Issues
Resources
Organizational structure
Restructuring
Rewards/Incentives
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Ch 7-24
Management Issues
Policies --- Facilitate the solving or recurring
problems & guide implementation of
strategy
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Ch 7-25
Management Issues
Policies Establish --
Boundaries
Constraints
Limits
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Ch 7-26
Management Issues
Annual Objectives
Policies
Management
Issues
Resources
Organizational structure
Restructuring
Rewards/Incentives
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Ch 7-27
Management Issues
Resource Allocation
-- Central management activity that
allows for the execution of strategy
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Ch 7-28
Management Issues
4 Types of Resources
1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources
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Ch 7-29
Management Issues
Managing Conflict
-- Disagreement between two more
parties on one or more issues
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Ch 7-30
Management Issues
Managing Conflict
 Conflict not always “bad”
 No conflict may signal apathy
 Can energize opposing groups to
action
 May help managers identify problems
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Ch 7-31
Management Issues
Conflict Management & Resolution
 Avoidance
 Diffusion
 Confrontation
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Ch 7-32
Management Issues
Annual Objectives
Policies
Management
Issues
Resources
Organizational structure
Restructuring
Rewards/Incentives
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Ch 7-33
Management Issues
Matching Structure w/ Strategy
-- Changes in strategy = Changes in
structure
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Ch 7-34
Management Issues
Structure & Strategy
 Structure dictates how objectives &
policies will be established
 Structure dictates how resources will
be allocated
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Ch 7-35
Chandler’s Strategy-Structure
Relationship
New strategy
Is formulated
Organizational
performance
improves
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New administrative
problems emerge
Organizational
performance
declines
New organizational
structure is established
Ch 7-36
Management Issues
Basic Forms of Structure
 Functional Structure
 Divisional Structure
 Strategic Business Unit Structure (SBU)
 Matrix Structure
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Ch 7-37
Functional Structure

Most widely used
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Groups activities by business function
Disadvantages
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Simple and least expensive
Forces accountability to the top
Minimizes career development opportunities
Characterized by low employee morale, line/staff
conflict, poor delegation of authority, inadequate
planning for products and markets
Often leads to short-term and narrow thinking
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Ch 7-38
Divisional Structure

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Second most common type of structure
Can be organized by:

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

Geographic area
Product or service
Customer
Process
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Ch 7-39
Divisional Structure

Advantages
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Clear accountability
Higher employee morale
Creates career development opportunities for
managers
Allows local control of situations
Leads to a competitive climate within an
organization
Allows new businesses and products to be added
easily
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Ch 7-40
Divisional Structure

Disadvantages
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Can be costly to set up
Each division requires functional specialists
Duplication of staff services, facilities, and
personnel
Managers must be well qualified
Requires an elaborate, headquarters-driven
control system
Competition between divisions may become so
intense that it is dysfunctional
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Ch 7-41
Appropriateness of Divisional Structure
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Geographic area – Organizations whose
strategies need to be tailored to fit the needs
and characteristics of customers in different
geographic areas
Product or Service – When specific products
or services need special emphasis
Process – When each process (division) is
responsible for generating revenues and
profits
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Ch 7-42
The Strategic Business Unit (SBU)
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In multidivisional organizations, an SBU
structure can greatly facilitate strategyimplementation efforts.
Advantages of improved coordination and
accountability
Disadvantages

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Requires an additional layer of management
Role of the group vice president is often
ambiguous
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Ch 7-43
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Ch 7-44
The Matrix Structure
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Most complex of all designs – requires both
vertical and horizontal flows of authority and
communication
Disadvantages
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Can result in higher overhead
Dual lines of budget authority
Dual sources of reward and punishment
Shared authority
Dual reporting channels
Need for an extensive and effective
communication system
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Ch 7-45
The Matrix Structure

Advantages
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Project objectives are clear
Many channels of communication
Workers can see visible results of their work
Shutting down a project can be accomplished
relatively easily
Facilitates the use of specialized personnel,
equipment, and facilities
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Ch 7-46
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Ch 7-47
Do’s and Don’ts in Developing
Organizational Charts

Do’s
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Reserve the title CEO for
the top executive
Use the title “chief” or
“VP” or “manager” for
functional business
executives
Directly below the CEO it
is best to have a COO
and other “chief’ officers
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
Don’ts


Use the title president for
the top executive
Use the title president for
functional business
executives
Ch 7-48
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Ch 7-49
Management Issues
Annual Objectives
Policies
Management
Issues
Resources
Organizational structure
Restructuring
Rewards/Incentives
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Ch 7-50
Management Issues
Restructuring
-- Reducing the size of the firm – # of
employees, divisions and/or units, # of
hierarchical levels
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Ch 7-51
Management Issues
Restructuring
Downsizing
Rightsizing
Delayering
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Ch 7-52
Management Issues
Reengineering
-- Reconfiguring or redesigning work,
jobs, & processes to improve cost,
quality, service, & speed
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Ch 7-53
Management Issues
Reengineering
Process management
Process innovation
Process redesign
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Ch 7-54
Management Issues
Annual Objectives
Policies
Management
Issues
Resources
Organizational structure
Restructuring
Rewards/Incentives
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Ch 7-55
Management Issues
Linking Pay/Performance to Strategies
-- Pay for performance systems
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Ch 7-56
Management Issues
Linking Pay/Performance to Strategies
Dual bonus systems
Profit sharing systems
Gain sharing systems
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Ch 7-57
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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Ch 7-58
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Ch 7-59
Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
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Ch 7-60
Management Issues
Resistance to Change
-- Single greatest threat to successful
strategy implementation
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Ch 7-61
Management Issues
Resistance to Change
-- Raises anxiety; fear concerning
Economic loss
Inconvenience
Uncertainty
Break in status-quo
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Ch 7-62
Management Issues
Change Strategies
Force Change Strategy
Educative Change Strategy
Rational or Self-Interest Change
Strategy
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Ch 7-63
Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
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Ch 7-64
Management Issues
Natural Environment
-- Wide appreciation for firms that
“mend” rather than “harm” the
environment
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Ch 7-65
Management Issues
Natural Environment – Environmental
Strategies
Develop/acquire “green” businesses
Divesting environmental-damaging
business
Low-cost producer through waste
minimization & energy conservation
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Ch 7-66
Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
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Ch 7-67
Management Issues
Strategy-Supportive Culture
-- Preserve, emphasize, & build upon
aspects of existing culture that support
new strategies
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Ch 7-68
Management Issues
Elements linking culture to strategy:
•
•
•
•
•
Formal statements of philosophy, charters, etc. used
for recruitment and selection, 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
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Ch 7-69
Management Issues
Elements linking culture to strategy:
•
•
•
•
•
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
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Ch 7-70
Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
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Ch 7-71
Management Issues
Production/Operations Concerns
-- Production processes typically
constitute more than 70% of firm’s total
assets
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Ch 7-72
Management Issues
Production/Operations Decisions
Plant size
Inventory/Inventory control
Quality control
Cost control
Technological innovation
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Ch 7-73
Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
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Ch 7-74
Management Issues
Human Resource Concerns
-- HR manager position has strategic
responsibility & has changed
dramatically as companies continue to
reorganize, outsource, etc.
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Ch 7-75
Management Issues
Human Resource Strategic Responsibilities
Assessing staffing needs/costs
Developing performance incentives
ESOP’s
Child-care policies
Work-life balance issues
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Ch 7-76
Diversity Issues
Women CEO’s in U.S. 2005 (examples)
CEO
Company
Age
Meg Whitman
eBay
49
Andrea Jung
Avon Products
47
Anne Mulcahy
Xerox
52
Marjorie Magner
Citigroup
56
Betsy Holden
Kraft Foods
49
Ann Moore
AOL Time Warner
57
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Ch 7-77
Benefits of a Diverse Workforce
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Improves corporate culture
Improves employee morale
Leads to a higher retention of employees
Leads to easier recruitment of employees
Decreases complaints and litigation
Increases creativity
Decreases interpersonal conflict
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Ch 7-78
Benefits of a Diverse Workforce
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Enables the organization to move into
emerging markets
Improves client relations
Increases productivity
Improves the bottom line
Maximizes brand identity
Reduces training costs
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Ch 7-79
For Review (Chapter 7)
Key Terms & Concepts
Annual Objectives
Conflict
Avoidance
Confrontation
Benchmarking
Culture
Bonus System
Defusion
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Ch 7-80
For Review (Chapter 7)
Key Terms & Concepts
Delayering
Educative Change
Strategy
De-centralized Structure
Employee Stock Ownership
Plans (ESOP’s)
Divisional Structure
Establishing Annual
Objectives
Downsizing
Force Change Strategy
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Ch 7-81
For Review (Chapter 7)
Key Terms & Concepts
Functional Structure
Just in Time (JIT)
Gain Sharing
Matrix Structure
Glass Ceiling
Policy
Horizontal Consistency
of Objectives
Profit Sharing
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Ch 7-82
For Review (Chapter 7)
Key Terms & Concepts
Rational Change
Strategy
Restructuring
Reengineering
Rightsizing
Resistance to Change
Self-Interest Change
Strategy
Resource Allocation
Strategic Business Unit
(SBU)
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Ch 7-83
For Review (Chapter 7)
Key Terms & Concepts
Triangulation
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Vertical Consistency
of Objectives
Ch 7-84