Behavioural Implementation

Overview

Role of various stakeholders in strategic management Contribution of strategic management to corporate governance Review task, styles and roles of strategic leaders Constituents of corporate culture and its impact on corporate life Relationship of corporate culture and strategy of an organisation Understanding of how corporate politics and use of power can be made use of in strategic management of an organisation Social responsibility and social responsiveness.

Stakeholder

Individuals and groups who can affect and are affected by ,the strategic outcomes achieved and who have enforceable claims on a firms performance

Strategic Behaviour

Behaviour of strategist (individual as well as in groups) crucial for guiding the organisation. Individuals and groups implement strategy and drive an organisation to its objectives Leadership style, personal ethics and political behaviour as well as social responsibility are important aspects. Stakeholders affect, are affected and support the effective strategic management as also withhold participation

Stakeholders and Strategic Management

Stakeholders relationship Management Stakeholders Analysis Enagagement Tactics for stakeholders

External Stakeholders Customers Suppliers Govt.Regulators Bank Creditors Trade Unions EmployersUnion Mass Media NGOs Activities Local Communities General Public

Contributors/ Support

Internal Stakeholders Organisation Shareholders Employees Managers Directors

Meet Expectations Honour claims

ORGANISATION STAKE HOLDER RELATIONSHIP

Relationship Management

Two way mutually supporting and contributory relationship to meet diverse expectations and claims (monetary and non monetary) All stakeholders not equally important Also interests expectations and claims vary over time Stakeholders analysis to determine the relative importance of stakeholders so that appropriate to take appropriate engagement tactics to manage stakeholder- organisation relationship.

Stakeholders Analysis

Identify Identify expectations, concerns and interests Identify claims they can make on the organisation Identify who are most important for organisation Identify strategic challenges involved in managing the stakeholders relationship.

Power of Unknown

Stakeholder Little /No Power

Over Strategic Moderate degree of power

Decision Significant Power

Effect of
Strategy On the

Unknown
Little or No Effect Moderate Effect

Stakeholder Significant Effect

Stake Holder Engagement

Direct and indirect support in organisational affairs, participation in strategy formulation, implementation and evaluation. If organisation doing well, challenge is lessened If average returns, capability and flexibility reduced aim to satisfy each stakeholder minimally or prioritise and engage more important ones. If not doing well attempt to minimise losses

Engagement Tactics

Specific departments and personnel - corporate communications or PR. Range of activities to disseminate information website, newsletters, posters, public events, exhibitions, seminars, conferences Use Relationship management software for complexities and taking decisions e.g WIPRO doctor patient relationship software for health care organisations. Open ,honest and transparent communication, building trust and cooperation essential for success no tall claims on PR exercise or websites

Role of Top Management

Case of Dhirubhai Ambani and involvement of small shareholders addressing in open stadia reps of 1.8 million shareholders resulted in capability to raise funds at low cost NGOs stakeholder management is crucial as funding and grants from external sources are crucial and hence relationship with donors based on trust and transparency. Generating trust by open communications, participation and feed back as also effective project implementation

Corporate Governance

Deals with the management of relationships between the Directors, managers, and other stakeholders of the organisation. Two different perspectives Agency and Stewardship Theory Corporate governance is related to all aspects of strategic management including determination of strategic intent, strategy formulation, strategy implementation and strategy evaluation

Agency Theory

Agency Theory delegating decision making authority by the Principals (Investors /owners /shareholders) to another (agent) is called Agency Theory. Owners provide risk capital to agents and delegate the authority to manage that capital. If managers do not act in the interest of owners ,conflict of interest can arise called agency problem. Assumes managers to be self centered and irresponsible to act against the interest of owners

Stewardship Theory

Takes a positive view of managers, considering them as stewards whose interests are aligned with that of the owners Managers identity with their organisation and derive satisfaction from behaviours that support the organisational interests rather than their own In contrast to agency theory, proposes corporate governance mechanisms that support and empower managers behaviours

Corporate Governance

Involves a set of relationships amongst the companys management, its board of directors ,shareholders and other stakeholders

Corporate Governance

These relationships, involving various roles and incentives, provide the structure through which the objectives of the company are set and the means of attaining those objectives and monitoring performance are determined.

Corporate Governance

The extent to which companies are run in an open and honest manner

Key Aspects

Transparency of corporate structures and operations Accountability of managers and boards to shareholders Corporate responsibility towards employees ,creditors, suppliers and local communities

Measuring

ICRA (Investment Information and Credit Rating Agency ) provides ratings on corporate governance of Indian Companies BSE is planning to introduce a corporate governance index

Ratings

Shareholding structures Executive management processes Stakeholder relationship Transparency Disclosures Financial Discipline

Mechanisms for Good Corporate Governance

Effective board of directors Fostering transparency through disclosure of financial and operational information Framing a code of governance and committing the organisation to its implementation Designing sound internal control systems

Corporate Governance Best Practices

Instituting effective auditing and evaluation systems within organisations Proper risk management procedures Encouraging whistle blowing policies within organisations. Designing fair compensations policies for managers.

Steps to Improve

Rahul Bajaj Committee 1997 Kumarmanagalam Committee 1999 Naresh Chandra Committee on Corporate Audit and Governance (2002) Narayan Murthy SEBI Committee on Corporate Governance National Foundation for Corporate Governance (NFCG) set up Min of Company Affairs in partnership with CII and ICSI and ICAI

Other Issues

Not only a corporate matter Other stakeholder have a role to play Govt Policies and procedures for ethical bahaviour Shareholders conscious of rights and responsibilities Mass media report issues of general interest to the public.

Corporate Governance and Strategy

Clear link to stakeholder and strategic management Link between owners/stakeholders, directors on the board and the managers Behaviour of the three towards each others as well as to the affairs of the organisation.

Linkages Strategy and Corporate Governance

Strategic Intent There should be mutual understanding and compromise on the Vision, mission (aspiration and purpose) , business definition, biz model and objectives between the stakeholders, directors and managers. Differing perception of the future can lead to difficulties

Corporate Governance and Strategy Formulation

Decision on specific corporate and business strategies is responsibility of top management. Reconcile conflicting goals Follow guidance of Board of Directors as well as keep strategies and objectives in mind. Strategies should reflect shareholders desire for higher returns whereas managers would like greater say in decision making, job satisfaction, stable employment environment.

Strategy Implementation and Corporate Governance

Under the control of managers Board cannot directly intervene in implementation Level of success determined by successful implementation Thus there can be deviation in implementation from strategy formulation Corporate Governance has to have mechanism to ensure this does not occur.

Strategy Evaluation and Corporate Governance

Shareholders and directors have direct role in evaluating effectiveness Use of operational and strategic controls Organisation objectives are achieved is measured by results Annual performance reporting helps shareholders evaluate performance Board of Directors continually evaluate, monitor and review performance.

Role of Board of Directors

Ultimate legal authority accountable to all Appointment owners- shareholders, controlling agencies, government, holding company or parent company Provide guidance and directives for managers Exercise authority as per memorandum and articles of association of the organisation. In accordance with Companies Act 1956 and follow the policies of the organisation

Committees

Can appoint committees and delegate authority to take decisions audit, renumeration, nomination, grievance - shareholders and investors, ethics and compliance and risk management

Boards Role

Determine Cos purpose and ethics Decide the direction and strategy Plan Monitor and control managers and the CEO Report and make recommendations to shareholders Role vary with nature of co ownership- public, private, family managed ,family owned

Major tasks

Direction Technical collaborations New product development Senior management appointments Review and screen executive decisions in the light of the environmental, business and organisational implications Link between environment and organisation

Strategic Leaders

Provide leadership to achieve objectives Run the strategic management process at corporate (CEOs,MDs, EDs,President COO,CFOs,CIO)business(GMs,VPs) functional(mktg Mgr,Operational manager) and operational levels(deputy manager/Assistant manager) Leadership of Organisation rather than leadership in organisation

Tasks

Determining strategic Direction Effectively managing the Organisational Resource Portfolio Sustaining an Effective Organisational Culture Emphasising Ethical practices Establishing Balanced Organisational Controls

Style

Consistent with competencies required Characteristics of leader will decide the way to make change and the type of change Personality characteristics of leaders linked to business outcomes innovativeness leads to differentiation Personality and background cause implementation actions

Managing Change

Match type of change to strategy larger change chose unilateral and small change participative implementation. Strategic changes are transformational (big) redesign organisational structure, redesigning systems and processes and changing culture Use top down method to start and build support by participative styles.

Style

Indian leadership more nurturant-task oriented (concern for task and for subordinates) or entreprenuerial style than participative Contingency approach dictated by environment Cultural /national context Consultative with limited participation

Key Provisions

Companies Act 1956 Securities Contract (Regulations) Act, 1956 Securities Contracts (Regulation) Amendment Act 2007. Securities and Exchange Board of India Act 1992 Depositories Act, 1996. Listing Agreement with stock exchanges rules ,processes and disclosures for companies to remain listed Clause 49 (corporate governance practices that listed co must follow)

Board of Directors

Highest body in an organisation responsible for corporate governance. Directors play a strategic role of directing ,guiding, approving and reviewing strategic decisions made by be the strategic leaders of an organisation

Role of CEO

Chief architect of organisation - mission vision goals and objectives, purpose, strategist or planner, implementation Organisation leader, organiser, organisation builder Chief Administrator,implementor or coordinator Communicator of organisational purpose,motivator,personal leader or mentor

Role of CEO

Time management Personal qualities and style Communication styles Demographic characteristics EI Managerial values Managerial styles Environment in which operating

Strategic leaders

Responsible for the strategic management of an organsation. Operate at corporate, business, functional and operational levels Task include strategic direction, effectively managing the organisational resources portfolio, sustaining an effective organisational culture, employing ethical practices and establishing balanced organisational controls. CEOs ,senior managers, business level executives and operational managers play different roles in strategic management

Roles

Senior Managers Below Chief executive are functional or profit centre heads involved in strategic management. Sometimes can act as Directors for their function on rotational basis Serve on top level committees Project management modernisation, technology up gradation, plan implementation Assist Board and CEO in formulation, implementation and evaluation of strategy Made more effective through committees, task forces, work groups and think tanks

Business Level Executives

Profit Centre heads or divisional heads are Chief Executives of their specific business unit Based on practice concept adapted to suit traditions, shared facilities, distribution channels and manpower constriants Maintains coordination with other SBUs. Formulate and implement business level strategy

Functional level and Operational Level Managers

Are the primary method of evolving departmental and operational plans and implement the decisions taken at the corporate and business levels. Implement functional and operational strategies Help in idea formulation, development of strategic alternatives, refinement of business functional and development plans, target setting at departmental levels. Are the reservoirs of talent and expertise.

Developing Strategic leaders

Choice of Future Strategists Govt. (Central Services) /Non Govt. (Tata Administrative Service). Selection by strategic leaders from subordinates informal and giving responsibilities. Also done by systematic career planning. Alternatives are Hire laterally, succession planning and combination approaches of the two. Present challenges, exposure to quality thinking, scope for intellectual development and provide empowerment Leadership training institute Executive Assistant to CEO Courses in Mgt Institute like IIMs Succession Planning contingency plans to replace top leaders

Strategy and Style

Chosen strategy has a significant impact on the leadership style and strategists have to adopt their style to suit the requirements of a particular strategy. Development of strategists is responsibility of top management and they do it through exercising a choice of strategists and their career planning and development and succession planning.

Corporate Culture

Composed of beliefs (assumptions of reality) and values (assumptions about ideals) that are desirable that the members of an organisation share in common. Impact corporate strategy implementation and culture should be strategy supportive. By relating strategy to culture a strategist can evolve a meaningful approach to creating a good strategy culture fit Opposes or supports change

Impact

Culture affects not only the way managers behave within an organisation but also the decisions they make about the organisations relationship with its environment and its strategy. Facilitates communication, decision making and control as well as create cooperation and commitment Strong -Explicit set of principles and values communicated to employees which should be shared widely.

Weak Culture

Weakness If sub cultures exist within, or few values and behavioural norms are shared and traditions are rare. Low sense of commitment, loyalty and identity Politicised organisational environment Hostility to change Promoting bureaucracy vs creativity and entrepreneurship Unwillingness to look outside the organisation for best practices.

Strong Culture -Reasons

Founder or influential leader who established values. Sincere and dedicated commitment to operate the business as per values. Genuine concern for the organisations stakeholders.

Impact of Culture on Two Different Types of Organisations

Dimensions of Corporate Culture Mgr Skill and Cap Performance or results achieved Family Bis and NRI Co Prof Qualif and rank Seniority, conformity to values,loyalty,relative fit of behav and posn MNC Subsidiaries and Prof Mgd Co Demo Skills and quality of know Originality of action,thinking ,innovation,update of skills and knowledge Selective info use ,intuitive and quantitative decision making Elegant sophisticated and rational systems Comprehensive and written reporting and rationalisation of failures

Managerial Style of plg/dec Info gathering,beaurocratic mkg mode,risk aversion Management Systems Adopted Management Control Relaince on business sense and no frills systems for quick action Verbal reporting and remedial action

Behaviour and Attitude

Behaviour the way one conducts oneself, way one reacts in a specified way, treatment of others, moral conduct. Theory is that behaviour is determined by conditioning rather than by thought or feelings. Attitude- a settled opinion or way of thinking and the behaviour reflecting this.

Composition of Corporate Culture

Shared things Shared sayings Shared actions Shared feelings

Strategy Culture relationship

Gives capability and acts as a source of sustainable competitive advantage Strategic options can be limited by culture Defines the boundary of the organisation facilitating individual interaction Limiting the scope of information processing to appropriate levels

Strategy Implementation -Culture

Widely shared relationships and strongly held values enable managers to predict employee reactions to certain strategic alternatives so unintended consequences can be minimised. Managerial behaviour can facilitate or obstruct the smooth implementation of strategy. Creation of a strategy supportive culture is the role of strategic leadership

Strategy Supportive Culture Fit

Ignore corporate culture not possible to change it Adapt strategy implementation to suit corporate culture structure systems processes adapted Change corporate culture to suit the strategic requirements manage cultural transitions by assessing risks and removing roadblocks Change strategy to fit the corporate culture while formulating strategy itself

Power and Politics

Use of politics and power in a positive sense is helpful in strategy implementation. Strategists should understand corporate politics and how power should be used for facilitating strategy implementation. Affect a number of elements in the strategic management process. Strategy implementation requires consensus building ,managing coalitions and creating commitment. Needs conflict resolution and balancing of interests.

Power and Politics

Organisation must pull apart before it can pull together again Strategists need to know when to use power and politics to get things done and when to shun politics and use of power to maintain harmony. Power and politics affects the way strategy is implemented e.g vision and mission affected by formation of groups and coalitions influencing direction. Strategy Implementation -

Corporate Politics

Carrying out of activities not prescribed by policies for the purpose of influencing the distribution of advantages within the organisation Power derived by managers within an organisation from reward/ coercive, legitimate/referant/expert power Nature and structure lead to conflicts, coalitions, drives and ambitions among people. Jockeying for power due to pyramid structure

Corporate Politics

Negative domination, manipulation and subjugation. Self serving , deceptive and dishonest for achieving personal or group interests leading to conflict and disharmony

Behavioural Implementation

Personal values and business ethics seek to prevent an indiscriminate use of power politics within organisation. Moral component that is often realised but it is found difficult to operationalise. All managerial and strategic decisions are ultimately subjective so purity of mind is important so that subjectivity is not allowed to harm the strategic interests if the organisation.

Business Ethics Integrate Core Values

Honesty Trust Respect Integrity Fairness Codes of conduct

Values and Ethics in Indian Context (Prof S K Chakraborty IIM C)

Ancient texts of Hinduism give insights into managerial effectiveness. Education vs training Values vs skills Principles vs policies Wisdom vs knowledge Seven psycho philosophical thoughts

Model of Managerial Effectiveness (Psycho- Philosophical Thoughts)

Concept of self and reality Disidentification Theory of Gunas Theory of Samskaras Doctrine of Karma Theory and method of work Giving model of motivation

Values and Ethics- Indian Thoughts

Concept of man embrace spiritual dimension beyond the physical ,social and economic dimension Creative energies are derived for Supreme creative Intelligence Managerial decision making requires interplay of both analytic and holistic faculties Final resolution of managerial conflicts lies in the de egoistaion of the self Key to cooperation and team work lies in realising that the same atman dwells in all

Values and Ethics Indian Thought

Quality of managerial decision making and skills can be improved through an understanding and internalisation of the law of karma Motivational strategies need to be based on the giving model rather than the needing model of man Ability for developing effective leadership styles requires and understanding of te three qualities of man - satwa(self righteousness), rajas(selfishness0 and tamas (laziness) All managerial decisions are subjective in the ultimate analysis and the effectiveness of such decsions depends critically on the purity of mind of the decsion maker

CSR

Possible to modify and reconcile divergent personal values of dominant stakeholders within organisations. Social responsibility is a contentious issue. For Against Creating consistency of between economic goals and social performance Business opinion is gradual acceptance of social responsibility due to combination of internal and external

CSR

Define scope Align social responsibility to process of strategic management Social responsiveness is to be interlinked to all phases of strategic management.