Operationalizing Strategy

Strategy Implementation

Strategy implementation is the sum total of the activities and choices required for the execution of a strategic plan.

It is the process by which objectives, strategies, and policies are put into action through the development of programs, budgets, and procedures.

Though implementation is usually considered after strategy has been formulated, implementation is a key part of strategic management.

Strategy formulation and strategy implementation should thus be considered as two sides of the same coin.

Strategy implementation is concerned with the following points

1. Who are the people who will carry out the strategic plan?

2. What must be done to support the company’s operations in the new intended direction?

3. How is everyone going to work together to do what is needed?

Problems associated with implementation of strategic change1. Implementation may take more time than originally

planned2. Unanticipated major problems may arise3. Activities are ineffectively coordinated4. Competing activities and crises may take attention away

from implementation5. The involved employees may have insufficient capabilities

to perform their jobs.6. Lower level employees may inadequately trained7. Uncontrollable external environmental factors can create

problems8. Departmental managers may provide inadequate

leadership and direction.9. Key implementation tasks and activities may poorly

defined10. The information system may inadequately monitored

activities.

Who Implement Strategy Depending on how a corporation is

organized, those who implement strategy will probably be a much more diverse set of people than those who formulate it.

In most large, multi industry corporations, the implementers are everyone in the organization.

Vice presidents of functional areas and directors of divisions or strategic business units (SBUs) work with their subordinates to put together large scale implementation plans.

Plant managers, project managers, and unit heads put together plans for their specific plants, departments, and units.

Every operational manager down to the first line supervisor and every employee is involved in some way in the implementation of corporate, business and functional strategies.

What must be done? The managers of divisions and functional areas

work with their fellow managers to develop programs, budgets, and procedures for the implementation of strategy.

They also work to achieve synergy tends to result in better organizational performance.

Nature of Strategy Implementation

Successful strategy formulation does not guarantee successful strategy implementation.

1. Requires managerial forces during the action2. Focuses on efficiency3. Primarily is an operational process4. Requires special motivation and leadership

skills5. Requires coordination among many

individuals

Short Term Objectives Short term objectives are measurable

outcomes achievable or intended to be achieved in one year or less.

They are specific, usually quantitative, results operating managers set out to achieve in the immediate future.

For example Objectives 1. More inventory Less inventory2. Frequent short run Long

production runs

3. Fast order processing Cheap order processing

4. Fast delivery Lowest cost routing5. Field warehousing Less warehousing

Plant warehousingImportance of short term objectives

1. Short term objectives operationalize long term objectives.

For example if we commit to a 20 percent gain in revenue over five years, what is our specific target or objective in revenue during the current year, month, or week to indicate we are making appropriate progress.

2. Short term objectives help raise issues and potential conflicts within an organization that usually require coordination to avoid otherwise dysfunctional consequences.

3. Short term objectives assist strategy implementation by identifying measurable outcomes of action plans or functional activities, which can be used to make feedback, correction, and evaluation more relevant and acceptable.

We have to design action plan so as to support short term objectives.

The action plan specify what exactly is to be done inside the organization.

The action plan also clear about time frame for completion i.e. when the effort will begin and when its results will be accomplished.

Moreover the action plan also identify the person who is responsible to perform the task.

The accountability is very much important to ensure actions plans are acted upon.

Qualities of Effective Short Term Objectives

1. Measurable Short term objectives are more consistent and

concerned with 1. What is to be accomplished2. When it will be accomplished3. How its accomplishment will be measured. It is far easier to quantify the objectives of line units

(production) than of certain staff areas (personnel). Difficulties in quantifying objectives often can be

overcome by initially focusing on measurable activity and then identifying measurable outcome.

2. Priorities Short term objectives requires priority

because of a timing consideration or their particular impact on a strategy’s success.

If we are not establishing priorities conflicting assumptions about the relative importance of annual objectives may inhibit progress toward strategic effectiveness.

We can prioritize based on the discussion and negotiation during the planning process.

For example we can rank as primary, secondary and next etc.

3. Linked to long term objectives Short term objectives can add breadth and

specificity in identifying what must be accomplished to achieve long term objectives.

The value added benefits of short term objectives and action plans

1. It provides operating personnel a better understanding of their role in the firm’s mission.

Moreover it also provides clarity of purpose and the use of people assets of the organization.

2. Short term objectives and action plans become the forum for raising and resolving conflicts between strategic intention and operational realities.

3. It provides a basis for strategic control. It provides a clear, measurable basis for developing

budgets, schedules and other mechanisms for controlling the implementation of strategy.

4. It provides the motivational payoff. It clarify the personnel and group roles in a firm’s

strategies and are also measurable, realistic, and challenging can be powerful motivators of managerial performance-particularly when these objectives are linked to the firm’s reward structure.

Long Term ObjectivesThe results that an organization seeks to achieve over a multiyear period is called long term objectivesIt represents the results expected from pursuing certain strategiesStrategies represent the actions to be taken to accomplish long term objectives.The time frame for objectives and strategies should be consistent, usually from two to five years.

Qualities of Long Term Objectives1. Acceptable2. Flexible3. Measurable over time4. Motivating5. Suitable6. Understandable7. Achievable

Acceptable Long term corporate objectives frequently are designed to

be acceptable to groups external to the firm. For example the efforts to decrease air pollution that are

undertaken at the resolve of the Environmental Protection Agency.

Flexible Objectives should be adaptable to unforeseen

or extraordinary changes in the firm’s competitive or environmental forecasts.

For example the personnel department objective of providing managerial developing training for 15 supervisors per year over a next five year period might be adjusted by changing the number of people to be trained.

Measurable Objectives must clearly and concretely state

what will be achieved and when it will be achieved.

For example the objective of substantially improving our return on investment would be better stated as increasing the return on investment on our line of paper products by a minimum of 1% a year and a total of 5% over the next three years.

Motivating The objectives should be productive and have

to set at a motivating level i.e. one high enough to challenge but not so high as to frustrate or so low as to be easily attained.

A broad objective that challenges one group frustrates another and minimally interests a third.

The objectives be tailored to specific groupsSuitable Objectives must be suited to the broad aims

of the firm, which are expressed in its mission statement.

Each objective should be a step toward the attainment of overall goals.

Understandable Strategic managers at all levels must

understand what is to be achieved. Objectives must be clear meaningful and

unambiguous.Achievable Objectives must be possible to achieve However turbulence in the remote and

operating environments affects a firm’s internal operations, creating uncertainty and limiting the accuracy of the objectives set by strategic management.

Areas of long term objectives1. Profitability2. Productivity3. Competitive position4. Employee development5. Employee relations6. Technological leadership7. Public responsibility

Policies Policies are directives designed to guide the

thinking,decisions,and actions of managers and their subordinates in implementing a firm’s strategy.

Policies are also called these standard operating procedures.

Policies increase managerial effectiveness by standardizing many routine decisions and clarifying the direction managers and subordinates can exercise in implementing functional tactics.

Policies are derived from functional tactics with a key purpose of aiding strategy execution.

Policies facilitate solving repetitive problems and guide the implementation of strategy.

Moreover it refers to specific guidelines,methods,procedures,rules,forms,and administrative practices established to support and encourage work toward stated goals.

These are the instruments of strategy implementation.

These are boundaries,constraints,and limits on the kinds of administrative actions that can be taken to reward and sanction behavior.

Policies clarify what can and cannot be done in pursuit of an organization’s objectives.

For example corporate relate to surfing the web while at work.

Carnival paradise ship has no smoking policy anywhere anytime abroad ship.

Importance of policies1.Policies establish indirect control over independent actionIt states how things are to be done and empower employees to conduct activities without direct intervention by top management.2.Policies promote uniform handling of similar activitiesIt facilitates the coordination of work tasks and helps to reduce friction/resistance arising from favoritism, and discrimination

3. Policies ensures quicker decisions It standardizes answers to answers to

previously answered questions that otherwise would recur and be pushed up the management hierarchy again and again.

4. Policies institutionalize basic aspects of organization behavior

It minimizes conflicting practices and establishes consistent patterns of action in attempt to make the strategy work.

It provides freedom to operating personnel to act.

5. Policies reduce uncertainty in repetitive and day to day decision making

It provides necessary foundation for coordination, efficient efforts and freeing operating personnel to act.

6. Policies counteract resistance to or rejection of chosen strategies by organization members.

When major strategic change is undertaken unambiguous operating policies clarify what is expected and facilitate acceptance, particularly when operating managers participate in policy development.

7. Policies offer predetermined answers to routine problems

It provides more time to review previously applied answers for ordinary and extraordinary problems.

8. Policies afford managers a mechanism for avoiding speedy and ill conceived decisions in changing operations.

Policies may be written and formal or unwritten and informal.

Informal unwritten policies are usually associated with a strategic need for competitive secrecy.

Formal written policies have at least following advantages.

1. They require managers to think through the policy’s meaning, content and intended use.

2. They reduce misunderstanding3. They make equitable and consistent

treatment of problems more quickly.

4. They ensure unalterable transmission of policies

5. They communicate the authorization or sanction of policies more clearly

6. The supply of convenient and authoritative reference

7. They systematically enhance indirect control and organization wide coordination of the key purposes of policies.

Functional Tactics to Operationalize Strategy

Functional tactics are the key, routine activities that must be undertaken in each functional areas such as marketing, finance, POM,R&D and HRM to provide the goods and services.

Functional tactics translate grand strategy into action designed to accomplish specific short term objectives.

Every value chain activity in a company executes functional tactics that support the business strategy and help accomplish strategic objectives.

POM Functional Tactic

Typical questions that the functional tactic should answer

Facilities and equipment

One big facilities or several small facilitiesIntegration of separate processesMechanization or automation levelSize and capacity toward peak or normal level

Sourcing Suppliers sourcesSuppliers selection, retention and developmentUse of hedging tools (forward buying)

Operation planning and control

Make to order or make to buyInventory level Inventory used, controlled and replenishedQuality control, labor cost, product useMaintenance of assets or breakdownJob specialization, plant safety, safety standards

Marketing Functional tactic

Typical questions that the functional tactic should answer

Product/ service Products and service emphasizedProducts and service contribution to profitabilityProduct and service image we seek to projectConsumer needs does the product seek to meetChanges in the product and service to influence customer

Price Price base competitionDiscounts Standard pricing or regional controlPrice segments we targetGross profit marginCompetition based pricing or cost/demand based pricing

Place Market coverage, geographic areas, channels of distributionChannel objectives, structure and managementRelationships of marketing managers with distributors, sales reps and direct sellersOrganization we want Sales force organized around territory,market,or product

Promotion Promotion priorities and approachesAdvertising/communication priorities and approaches to products,markets,and territories etc.Best marketing media.

Finance and Accounting Functional tactic

Typical questions that the functional tactics should answer

Capital acquisition

Cost of capitalLong term and short term debt, preferred and common stockInternal and external financingRisk and ownership restrictionsLeasing

Capital allocation

Priorities for capital allocationSelection of projectsOperations manager autonomy for capital allocation

Dividend and working capital management

Dividend payout ratioDividend stability (importance)Cash or stock dividendCash flow requirement, minimum and maximum cash flow Credit policiesLimits, payment terms, and collection proceduresPayment timing and procedure

R&DFunctional tactic

Typical questions that the functional tactics should answer

Basic research versus product and process development

Innovation and breakthrough researchProduct development,refinement,and modification

Time horizon Short term or long termMarketing and production strategy

Organizational fit In build R&D or contracted R&DCentralized or decentralized R&DRelationships of R&D units with product managers, production managers and marketing managers

Basic R&D posture

Offensive posture to lead innovation

HRMFunctional tactic

Typical questions that HRM tactics should answer

Recruitment, selection and orientation

Human resources to chosen strategyRecruitment, selection and socialization

Career development and training

Demand for future human resource needs Training and development

Compensation PayMotivation and retention Payment,incentive,benefits and seniority policy

Evaluation,discpline and control

Evaluation of people formally or informallyDisciplinary actions Control of individual and group behavior

Labor relations and equal opportunity requirements

Labor management cooperationHiring policies

Difference between business strategies and functional tactics

Functional tactics are different from business strategies in three ways

1. Time horizon2. Specificity3. Participants who develop them

1. Time horizonFunctional tactics Functional tactics identify activities to be

undertaken now in or in the immediate future.

Functional tactics focuses on now and it adjusts to changing current situations.

Business strategies Business strategies focus on the firm’s

posture three to five years out.

2. SpecificityFunctional tactics Functional tactics are more specific than business

strategiesBusiness strategies Business strategies are more general than functional

tactics.3. Participants Functional tactics Functional tactics are developed by business

managers and operating managers.Business strategies Business strategies are developed by corporate

managers and business managers

Resource Allocation Strategic management enables resources to

be allocated according to priorities established by annual objectives.

All organizations have at least four types of resources that can be used to achieve desired objectives: financial resources, physical resources, human resources and technological resources.

Allocating resources to particular divisions and departments does not mean that strategies will be successfully implemented.

The following factors may influence in the resource allocation decisions

1. An overprotection of resources2. Too great an emphasis on short-run financial

criteria3. Organizational politics4. Vague strategy targets5. A reluctance to take risks6. A lack of sufficient knowledge The real value of any resource allocation

program lies in the resulting accomplishment of an organizations objectives.

Effective resource allocation does not guarantee successful strategy implementation because programs,personnel,controls,and commitment must breathe life into the resources provided.

Strategic management itself is sometimes referred to as a resource allocation process.

Managing Conflict Interdependency of objectives and competition

for limited resources often leads to conflict. Conflict can be defined as a disagreement

between two or more parties on one or more issues.

Establishing annual objectives can lead to conflict because individuals have different expectations and perceptations,schedules create pressure, personalities are incompatible, and misunderstandings between line managers and staff managers occur.

Establishing objectives can lead to conflict because managers and strategists must make trade offs in the areas of

1. Short term profits or long term profits2. Profit margin or market share3. Market penetration or market development4. Growth or stability5. High risk or low risk6. Social responsiveness or profit maximization

etc.

Conflict is unavoidable in organizations. It should be managed and resolved before

dysfunctional consequences affect organizational performance.

Conflict can serve to energize opposing groups into action and may help managers identify problems.

Approaching to managing conflict

1. Avoidance2. Diffusion3. Confrontation Avoidance Avoidance includes such actions as ignoring

the problem in hopes that the conflict will resolve itself or physically separating the conflicting individuals or groups.

Diffusion Diffusion can include playing down differences

between conflicting parties while emphasizing similarities and common interests, compromising so that there is neither a clear winner nor loser, resorting to majority rule, appealing to a higher authority, or redesigning present positions.

Confrontation It is exemplified by exchanging members of

conflicting parties so that each can gain an appreciation of the other’s point of view, or holding a meeting at which conflicting parties present their views and work through their differences.

Employee empowerment Empowerment is the act of allowing an individual or

team the right and flexibility to make decisions and initiate action.

It is being expanded and widely advocated in many organizations today.

Some of the employee empowerment techniques are training, self managed work groups, eliminating whole layers of hierarchy, and use of automation.

The effort of employee empowerment should have ensure and consistent with mission, strategy and tactics.

The employee should have get considerable latitude to take a decision.

The End