Strategic implementation

Module objectives Operationalizing strategy Annual objectives Developing functional strategy Developing and communicating concise policies Institutionalizing the strategy structure, leadership and culture Ethical process and corporate social responsibility

Implementation of strategy
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Implementation of strategy is the process of activising the chosen strategy. It is defined as the way in which a company creates the organisational arrangements that allow it to put its strategic plan into operation most efficiently and to achieve its objectives.

Harvard Business School case services says simply put, the major task of implementing strategy is to create a fit between the companys goals and its other activities. And generally there are two types of fits required and they are: fit between the strategy and functional policies and fit between the strategy and the organisation structure processes and systems.

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Once a strategy or a set of strategies is finalised the next step is to implement the strategy. The implementation of new strategies is for growth and development of an organisation and hence the process may also be called as corporate development or reorientation. The key requirement for implementing the strategies is deployment of resources. The resources can be of any type like man power, money, time, building, etc., These resources might be already existing in the present situation or might be totally new where the firm has to build it.

The corporate development is a very complex task because it involves various aspects like vision, mission, policy, structure, strategy, systems, markets, competition and the total frame work of corporate development demands proper aligning of all these factors. y Slackness or failure in any one of the aspects may prove to be very costly for the firm. y Development is basically a change process and change is the most dreaded and most hated and most resisted in the organisation. y The change also requires people to acquire new skills, adapt to new changes in environment, systems etc.,
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Mckinsey 7s framework

Mckinsey 7s model is used to assist the managers to do away with the difficulties in implementation that are associated with change in the organisation. y Developed in 1970 by Mckinsey consultants.
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Mckinsey 7s model

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The 7S model can be used in a wide variety of situations where an alignment perspective is useful, for example to help you: Improve the performance of a company. Examine the likely effects of future changes within a company. Align departments and processes during a merger or acquisition. Determine how best to implement a proposed strategy.

7s are strategy, structure, systems, shared values, skills, staff, style. y 7s model shows that the change is complex and intricate due to organizational immune systems, and many interconnected variables are involved. y It is a very daunting task for the managers to bring about changes in the organisation as they have to balance the entire 7s.
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Hard Elements Strategy Structure Systems

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Soft Elements Shared Values Skills Style Staff

Strategy: the plan devised to maintain and build competitive advantage over the competition. This component answers the following questions. What is our strategy? How do we intend to achieve our objectives? How do we deal with competitive pressure? How are changes in customer demands dealt with? How is strategy adjusted for environmental issues?

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Structure: is nothing but the skeleton of the whole organisation entity. Structure divides the organizational roles an tasks amongst numerous members and integrates them through reporting relationships. It gives answers to following questions: y How is the company/team divided?
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What is the hierarchy? How do the various departments coordinate activities? How do the team members organize and align themselves? Is decision making and controlling centralized or decentralized? Is this as it should be, given what we're doing? Where are the lines of communication? Explicit and implicit?

Systems: systems signify rules and regulations including procedures that support the organistion structure. Change in strategy is implemented through changes in the system. y What are the main systems that run the organization?
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Where are the controls and how are they monitored and evaluated? What internal rules and processes does the team use to keep on track?

Shared Values: are those set of values and aspirations that are common to the entire organisation. They are essential as they inspire the members of the organisation and provide a definite direction towards the height of success. It answers following questions: y What are the core values?
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What is the corporate/team culture? How strong are the values? What are the fundamental values that the company/team was built on?

Style: it stands for the patterns of actions taken by the top management over a period of time. Style is visible through reporting relationship amongst the three levels of management. How effective is that leadership? Do employees/team members tend to be competitive or cooperative? Are there real teams functioning within the organization or are they just nominal groups? How participative is the management/leadership style? The leadership style has to change with strategy, system and structure, if it does not, strategy fails.

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Staff: is the process that deals with recruiting and selecting matching persons for the posts, training and developing them. Often high performing companies are the best employers as they hire right person for the right job at the right time. y What positions or specializations are represented within the team?
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What positions need to be filled? Are there gaps in required competencies?

Skills: is an ability or proficiency in performing a particular task. It is an acquired or learnt ability to translate knowledge into performance. It is the competence that allows for superior performance in the field in which the employee has acquired the ability. What are the strongest skills represented within the company/team? Are there any skills gaps? What is the company/team known for doing well? Do the current employees/team members have the ability to do the job? How are skills monitored and assessed? Skills are invisible and intangible assets of an organisation and managing change calls for change in skills and improving of existing ones.

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The implementation and operationalising of strategies cannot be viewed as a discrete and separate step. y The process starts rolling as soon as the strategies start taking shape. y The choice of strategy is often constrained by the existing structures, systems, policies etc., and the success depends on how well a company can manage to alter them, if required. y The first and foremost thing that binds the organisation and gives it a purpose for its existence is its OBJECTIVES.
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objectives
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Every company has a vision of its future based on which it develops long term objectives. The long term objectives which a company decides for achieving are accomplished annually in a step-by-step fashion. Long term objectives are broken down into annual objectives which act as stepping stones for attaining the vision of the organisation.

Annual objectives
Annual objectives are detailed objectives which emerge from long range objectives of an organisation and are related to budgets and plans of that specific year. y A clear annual objective helps in implementation of strategies more effectively. y Once annual objectives are achieved, then a part of long range objectives is automatically accomplished. y The non attainment of annual objective triggers off an alert to the top management with regard to chosen strategy.
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Characteristics of annual objective

The following are the important characteristics of annual objectives: 1) Annual objectives are specific and measurable. The objectives are to be attained within a certain period of time and they are also measurable ex. to increase sales by 2% in 6 months time. 2) Long range objectives: the annual objectives should be linked to one or more long range objectives. Long range objectives have a time frame of four to five years whereas annual objectives focus on functional achievement of the company for one year.
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Integrated and coordinated objectives: the annual objectives should be interwoven into the very fabric of organizational working system. Implementation and operationalisation of strategies depends on coordination and integration of objectives of various functional groups such that energy from each of the functional groups is concentrated towards meeting the organizational annual objective. y Consistent objectives: every organisation has many functional groups and each functional groups has managers at various levels. The objectives which these managers must set for their own groups must be consistent with one another.
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Measurable objectives: the non-measurable annual objectives introduce ambiguity and hence an effort should be made to lay down, direct and measure objectives which also helps in implementation. y Prioritized objectives: objectives should be prioritised based on their impact on strategies.
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Advantages of setting annual objectives.

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Provides tangible growth targets Gives focus to growth direction. Give a role clarity to managers at various levels. Help to mobilize people in direction of growth and invite their participation. Unifies the workforce and motivates participation. Provides a basis for strategic control. Provides challenges for functional group Clarifies the role to be played by each employee Acts as a tool to operationalize the strategies.

Functional strategies
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A functional strategy is essentially a strategy confined to a particular functional group of company like marketing, finance, production, sales etc., These translate the grand strategies decided at corporate level into specific action plans for each function within the company. However, these functional strategies are different from business strategies, reasons being as follows:

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Functional strategies: Are for comparatively short period Is more specific, clear, The level of participation is majorly by the managers who are responsible for each function of an organisational unit. Functional managers establish annual objectives.

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Business strategies: Are for longer periods of time. Is not very specific, clear and measurable. The business level strategies are chosen by top management. Top management establishes business level strategies.

Functional strategies in key areas: Marketing

Marketing: the key activities in marketing area are as follows: market research; price, market segment; sales etc., When a customer buys a product, he buys it for a specific reason and if it does not perform that function at the desired level and with desired reliability, it is said to have poor quality. Functional manager in marketing research makes strategies to understand the apparent and intrinsic requirements of the customer and thereby offer products and services. The functional manager also has to identify those attributes because of which his product sells and continuously try to enhance the features by either designing the product at the same cost or offer the product of high and superior quality at a far less price. Also the other things that a marketing manager has to consider are product leadership, cost, profit margin, product attractiveness, warranty, timely availability of his products, etc.

finance
Finance is the blood stream of any firm and the ultimate objective of any firm is to generate profits and create surplus so as to ensure the continuous growth of the company. The company has to decide on how efficiently it has to raise finance to finance its long term and short term objectives. y It also has to decide on how it is going to maintain a balance between internal and external funding. How it is going to distribute dividends, how it is going to allot funds for projects, etc., y The functional manager also has to decide on the dividend policy of the firm as dividends are essential to satisfy the shareholders.
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Research and development

Some companies give top priority to R&D, as in todays world of rapid change, it is becoming increasingly important that firms continuously try to increase their product quality, offer new and innovative products for the customers, introducing the new products to the customers etc., y They also have to think about whether they are going to engage in R&D themselves or enter a JV with another firm. y The functional manager must continuously study the changing requirements of the customers and thereby enhance the product quality and features and thereby try to retain the customers.
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Production
Production is the key function where value is added to the raw materials to create a product. This process in any firm should be cost effective, fast and without quality problems like rejection, reward, defects etc., y The strategy here should be reduce cost and enhance the quality of the product. y The company has to pay attention to following aspects such as location of the plant, facilities design, planning, budgeting etc., y It is necessary that the production and operation strategies are well coordinated with the marketing strategies for a company to succeed.
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Personnel
The firms has to adopt appropriate plans where they are successful to provide right person for the right job at the right time. y This is done through identification and development of required managerial skills and design of proper remuneration system to motivate employees and also retain them. y The personnel function consist of recruiting, selecting, orienting, developing, counseling, evaluating, compensating and maintaining good employee relations, discipline and control etc., y The employees has to be motivated to perform well and surpass the set standards and for this again suitable strategies has to be decided like promotion, hike, incentives etc.,
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Resource allocation
Without resource allocation to various strategic business units, implementation of strategies becomes very difficult. y Here the company might think of growing in some areas and withdraw in some areas and suitable allocation of resources to attain those objectives becomes very important. y The resource allocation should be made with regard to strategies of a company for its future competitive position and growth.
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Communicating policies
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A policy is nothing but a program of actions adopted by a person, group, or government, or the set of principles on which they are based Policies are decisions taken to guide thinking and behaving process and guiding the actions of employees of a company in operationalising and implementing strategies for meeting the set objectives. Policies increase effectiveness of managers. They set standard operating procedures for the people. It is used to optimally utilize the human resources They speed up the decision making process.

Objectives of the policies

Policies performs various functions as follows: y Control: the policies are framed to exercise control over actions of various functional groups. Once policies are set, the top management does not have to bother about day to day decisions. y Uniformity of procedures: they bring about uniformity in handling similar situations in a company. Whenever a conflict arises, policy document is referred to which gives a guideline to action thereby avoiding favoritism. y Quick decision: matters are decided quickly if policies exist. If policies are not made, the matter has to be referred to top management which takes considerable time in resolving whereas if policies are made, a quick decision can be made.
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Organizational behavior: the policies help in defining the code of conduct of employees of a company. Once policies are made on placement, salaries, promotion etc., it serves as a framework and will be followed by the executives thereby establishes consistent behavior in a given situation. y Reduction in uncertainty: in the absence of policies there will be a uncertainty in taking decisions. Policies bring about certainty in decision making. y Ready made solutions to problems: policies lay down answers to the probable problems. These policies can be either written or unwritten. All policies might not have the same strategic significance and some policies might be given top priority in the company.
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Institutionalizing the strategy

Effective institutionalizing the strategy calls for weaving the chosen strategy into the entire organisation. y Organizations are formed for attaining the objectives which calls for joint effort for their accomplishment. y The joint effort is made through various organs of an organisation. y This is where the structure, leadership and culture has to be integrated into the organisation for institutionalising the strategy.
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Structures for strategies

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Basically there are three types of organisation structures like tall structure, flat structure Functional structure Divisional structure Strategic business unit structure and matrix structure.

Flat structure

Board of Directors
Managing Director Senior management Middle level management Senior supervisors First line supervisors employees

Tall structure
Under flat structure, as the number of employees increases, calls for more number of rings in the ladder of the organisational structure. These type of structure has more problems than merits as follows: problems of communication y Bad impact on employee behavior. y More prone to dirty politics y Highest cost of operation
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Flat structure
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A typical flat structure

Flat structure
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Flat structures have minimum number of layers of authorities and responsibilities. As against tall structure, flat structure has more merits as follows: No communication problems Quick and prompt decisions There is no scope for shredding responsibility Reduced cost of operation.

Functional structure
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Functional structure
Under functional structure, there is direct delegation of work and also accountability.The following are the merits and demerits of functional structure: y Merits: benefits of specialization; expert knowledge, reduced pressure of work; encourages large scale operations; guaranteed internal discipline y Demerits: no unity of command; it is complicated in operation; misuse of authority.
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Strategic business unit structure

SBU is any part of business organisation which is treated separately for strategic management purposes. SBU is treated as a profit centre or control point. SBU as a headquarter is to control the divisions coming under its ambit and allocate the resources between them. The corporate head office becomes the controller of SBUs that controls the divisions. The objective of dividing the entire business into SBUs is to guarantee effective control for higher growth prospects and profitability.

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Merits: decentralisation of authority; better coordination; fast formulation and effective implementation of strategies; assured accountability. y Demerits: increase in operating cost; gap between divisions and head office; reduced flexibility; dirty politics and unwanted competition.
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Matrix structure
As the product lines and projects go on multiplying in case of large organisations, there is a need for planning and controlling the resources with easy gliding report system, the structure changes to matrix structure. y Matrix structure comes into being by assigning functional specialists that work in a department in their area of specialisation to work on a special project or a new product or service. y Till the completion of the project these specialist form a group or team coming from different areas reporting to a team leader. y Also they continue to work in their own departments and once the project is over, they move back to their own departments.
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Matrix structure is based on dual channels of authority and accountability. y Vertically the activities are grouped on the basis of functions and horizontally on the basis of products or projects. y Each person who works under matrix structure has two bosses, one a functional boss (the other the head of a given function) and second the project boss.
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Merits: Creation of direct relations; better quality decisions; participative management; integration of merits of different structures y Demerits: possible conflicts and confusions; delayed decisions; costly to manage.
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Synthesizing structures with strategies

There is no single organisation structure which can be called as the best. y As companies grow in size, there may be a need to change structures and form new ones based on the size of the firm. y If the organisation is growing and when it becomes impossible to effectively manage the entire operations, it makes sense when SBUs are formed. y When a company goes for diversification into larger products, services and markets, restructuring the company for more effective business becomes inevitable.
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Thus the choice of structure depends on:

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Size of company Range of products and services and their diversity Nature of competition, core competencies required, volatility of business situations etc., Internal environment of the company Quantum of integration, information flow, coordination etc. required in a company.

Leadership and organisational structures

For effective implementation of strategies, appropriate leadership is also necessary to enable the org. to cope up with the changes that may occur due to adoption of new or changed strategies. y Leadership does the job of mobilizing people and developing structures and systems for effectively implementing the strategies. y Within the framework of organisation are people, groups,and various sections which act as a mechanism for implementation of strategies. y How effectively these teams works defines the level to which the objectives are attained.
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An ineffective leadership may lead to absence of strategic thinking and action. Leadership is a significant factor in developing the right culture and climate for strategic implementation.

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With regards to strategic implementation, leadership can be viewed from four basic dimensions as follows: 1) risk taking which involves making high risk decisions for high rate of returns. 2) optimization which involves a committed planning and scientific methods to take decisions based on technical needs. 3) flexibility which involves adaptability to changing requirement is structures. 4) participation which involves participation at all levels in the decision making process and strategy implementation. It is the leader of the organisation who with his immense capabilities who can steer the organisation towards success.

Specific roles played by management at different levels

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Chief Executive Officer: The CEO has a key role in SM/ He has to play the responsible role of identifying a strategy and is also ultimately accountable for its success. CEO must be a visionary who senses the changes that occur in the environment and adopt them. He must possess interpersonal skills and creativity to mobilize people to accept the ensuing changes. The seriousness and the commitment that the CEO exercises in the formulation and implementation of strategies affects the behavior of managers. Thats why whenever a major change is perceived in the firm, it starts with appointing a new CEO.

Manager
Right manager in correct places in the organisational structure make a lot of difference in strategic implementation. y Managers who occupy key positions enjoy the confidence of CEO and this is closely linked to the expectations of CEO with regards to implementation of strategies. y A CEO before appointing a manager ensures the following distinct characteristics: Proven experience; required education; required personality; acceptance; temperament.
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Some companies prefer to bring in new managers whereas others reorient and train the existing key personnel to enable them to switch over to new strategies as An existing manager is aware of existing system and technology and knows the people around. He is more acceptable when compared to a new person. He has both formal and informal relationships with employees as well as senior staff. He is not costly as against a outsider. The changeover due to a known insider will be smooth. Once shouldered with more responsibilities, he will be more committed.

Culture of organisation
Every organisation has its own culture. y Organisation culture is the sum total culture of individuals which gets reinforced over a period of time and people develop specific values which guide their behavior. y Culture constitutes honest beliefs and values which guide a set of activities, opinions, actions and behaviors. y The common assumptions prevailing in an organisation are the values and beliefs. Beliefs and values develop a period of time and get set into the culture of an organisation.
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However, there is a difference between values and beliefs which are as follows: Values: values are the assumptions for which people have ideals and people in an organisation strive to achieve these values. The values gets inculcated in an individual from childhood due to personal experiences and from the process of identification of an individual who influences the personal growth and development of the individual. Beliefs: these are the assumptions on the behaviour of the world and its working. These beliefs also get influenced by the judgment and expertise of others whom they consider at a comparatively higher pedestal. One becomes aware of values and beliefs only when they are challenged.

Business ethics and strategy

Ethics is the science of moral values dealing with the concepts such as right or wrong, good or bad. y Thus business ethics is the application of general ethical principles and standards to business behavior. y If dishonesty is considered as unethical and immoral, then dishonest behavior in business irrespective of whether it is related to customers, supplier, employees or shareholders is considered unethical and immoral. y In case society feels and looks down upon bribery as unethical, a company paying bribe to government officials to get the work done is an unethical conduct.
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Why ethics in business??????

The business of business is business, not ethics way of thinking: because people tend to think, Im here to do business and I am here not for charity.These companies think that everything is fair in love and war, and they view businesses as wars. y Obsessive pursuit of personal gain wealth and selfish motives: those people who makeup a company are so obsessed with greed, power, status, and wealth accumulation, they push ethical principles aside and indulge in unwanted activities fro selfgain.
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Heavy pressures on company executives to cross the earning limits: In the world of business with fierce competition, the companys performance parameters are to always keep up return on investment, EPS, etc., for which they might take unethical route. Ethics when practiced in business checks all these. y Corporate culture that gives top priority to profitability on ethical behavior. A corporate culture that encourages ethically corrupt or amoral work climate, grants license to ignore its members as to what is right and they might be encouraged to engage in unethical behavior.
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Social responsibility and strategy

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SR stands for objective and subjective concern for the well being of the society of which business unit is a part and parcel. It is the society that provides the inputs to the business units and sets certain limits or norms for the use of these in delivering the societys needs in terms of goods and services. SR signifies the personal obligation of people to ensure that rights and obligations of others that are legitimate are not sacrificed by their behavior or actions. So the essence of socially responsible business behavior is that companies or firms are expected to balance the benefits of strategic actions to benefit the shareholders against any possible adverse impact on other stake holders namely employees, supplier, society, etc.,

CSR and Business strategy

Efforts to employ ethical strategy and observe ethical principles in operating the business. y Making charitable contributions, donating money and time of the companys personnel to community services, supporting a variety of worth and noble causes and bring about improvement in the lives of socially disadvantaged. y Actions to protect or to enhance the environment and to minimize or eliminate any adverse impact on the environment that stem from companys own business activity. y Actions to create a work environment that enhances the quality of life for employees and makes the company a great place to work.
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