Lecture 17 Implementing Strategies:

Management Issues

Resource Allocation

Four types of resources –

1. Financial resources2. Physical resources3. Human resources4. Technological resources

Managing Conflict

Conflict –

Disagreement between two or more parties on one or more issues

Managing Conflict

• Conflict is not always “bad”• Absence of conflict

– Signal indifference or apathy• Can energize opposing groups to action• May help managers identify problems

Managing Conflict

Conflict Management and Resolution

– Avoidance– Defusion– Confrontation

Matching Structure with Strategy

Changes in Strategy Changes in Structure

1. Structure largely dictates how objectives and policies will be established.

2. Structure dictates how resources will be allocated

Chandler’s Strategy-StructureRelationship

New administrativeproblems emerge

New strategyIs formulated

Organizationalperformance

declines

Organizational performance

improves

New organizationalstructure is established

Basic Forms of Structure

1. Functional Structure• Groups tasks and activities by business function

2. Divisional Structure• Decentralized and organized by geography,

product, customer, or process

Basic Forms of Structure

3. Strategic Business Unit Structure (SBU)• Groups similar divisions; delegates authority and

responsibility to SBU executive

4. Matrix Structure• Most complex of all designs. Depends upon both

vertical and horizontal flows of authority and communication

Restructuring

Restructuring –

Reducing the size of the firm in terms of number of employees, divisions, or units, and the number of hierarchical levels in the firm’s organizational structure

Restructuring

Also called –

– Downsizing– Rightsizing– Delayering

Restructuring

• Employed when ratios out of line with benchmarked competitors

• Primary benefit sought is cost reduction

Reengineering

Reengineering –

Involves reconfiguring or redesigning work, jobs, and processes to improve cost, quality, service and speed.

Reengineering

Also called –

– Process management– Process innovation– Process redesign

Reengineering

Reengineering –

Concerned more with employee and customer well-being than shareholder well-being

Linking Performance and Payto Strategies

Most companies practicing pay-for-performance

Linking Performance and Payto Strategies

• Dual bonus system becoming more common– Based on both annual objectives and long-term

objectives

• Profit Sharing– Incentive compensation used by 30% of companies

• Gain Sharing– Performance targets set for employees or departments

Tests for Performance-Pay PlansTests 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?

Managing Resistance to Change

Change raises anxiety over fear of:

– Economic loss– Inconvenience– Uncertainty– Break in status-quo

Managing Resistance to Change

Resistance to change –

– Single greatest threat to successful strategy implementation

Change Strategies

• Force Change Strategy• Educative Change Strategy• Rational or Self-Interest Change Strategy

Managing the Natural Environment

• Wide appreciation for firms that conduct operations that “mend” rather than “harm” the environment.

Creating a Strategy-Supportive Culture

Strategists should strive to preserve, emphasize, and build upon aspects of existing culture that support new strategies.

Creating a Strategy-Supportive Culture

Elements linking culture to strategy:

1. Formal statements of philosophy, charters, etc. used for recruitment and selection, and socialization

2. Designing of physical spaces, facades, buildings3. Deliberate role modeling, teaching and coaching4. Explicit reward and status system, promotion criteria5. Stories, legends, myths about key people and events6. What leaders pay attention to, measure and control7. Leader reactions to critical incidents and crises8. How the organization is designed and structured9. Organizational systems and procedures10. Criteria used for recruitment, selection, promotion, retirement

Production/Operations Concerns

• Production processes typically constitute more than 70% of firm’s total assets

• Decisions on:– Plant size– Inventory/inventory control– Quality control– Cost control– Technological innovation

Human Resource Concerns

• Assessing staffing needs and costs• Develop performance incentives• ESOPs• Child-care policies• Work-life balance

Key Terms

• Annual objectives• Avoidance• Benchmarking• Bonus system• Conflict• Confrontation• Culture• Defusion• Delayering

Key Terms

• Decentralized structure• Divisional structure• Downsizing• Educative change strategy• Employee Stock Ownership Plan (ESOP)

Key Terms

• Establishing annual objectives• Force change strategy• Functional structure• Gain sharing• Horizontal consistency of objectives• Just in time• Matrix structure• Policy• Profit sharing

Key Terms

• Rational change strategy• Reengineering• Resistance to change• Resource allocation• Restructuring• Rightsizing• Self-interest change• Triangulation• Vertical consistency of objectives

Thank You