Everything you need to know about the process of strategy implementation. Strategy implementation is the second phase in the strategic management process.
It is concerned with putting the strategy into operation or translating the chosen strategy into strategic action. In other words, it is the strategic management process of activating the chosen strategy through structure, leadership, and culture.
It necessitates three interrelated activities of (i) Determination of annul objectives, (ii) Development of specific functional strategies, and (iii) Development of policies. For the successful implementation, the strategy must also be institutionalised through structure, leadership, and culture.
The steps of strategy implementation do not necessarily follow the sequential order. The sequences may vary depending on the nature of the company, nature of the strategy, approach to implementation, etc. Further, sometimes several steps have to be taken simultaneously.
The process of strategy implementation includes various steps and sub-steps:-
A: Operationalising the Strategy:- 1. Developing Annual Objectives 2. Developing Functional Strategies 3. Developing and Communicating Policies.
B: Institutionalising the Strategy:- 1. Organisational structure 2. Leadership 3. Culture.
C: Leadership Implementation of Strategy:- 1. Communicating the Strategy 2. Formulation of SBU Strategy 3. Annual Operating Objectives 4. Functional Strategies 5. Resource Allocation 6. Development of Policies.
D: Organisational Implementation of Strategy:- 1. Evaluation and Control 2. Reward System.
Strategy Implementation Process in Strategic Management: Process, Steps and Sub-Steps
Process of Strategy Implementation – Steps and Sub-Steps: With Advantages and Disadvantages
Strategy implementation is the second phase in the strategic management process. It is concerned with putting the strategy into operation or translating the chosen strategy into strategic action. In other words, it is the strategic management process of activating the chosen strategy through structure, leadership, and culture.
It necessitates three interrelated activities of (i) Determination of annul objectives, (ii) Development of specific functional strategies, and (iii) Development of policies. For the successful implementation, the strategy must also be institutionalised through structure, leadership, and culture.
Strategy implementation involves certain steps and sub-steps.
They are broadly classified into three namely:
1. Operationalising the strategy,
2. Institutionalising the strategy, and
3. Evaluation and control of the strategy.
The explanation of these three strategy are given below:
Step # 1. Operationalising the Strategy:
Operationalising the strategy is the first step or phase in the implementation of a grand strategy. It is concerned with the process of putting the chosen strategy into operation throughout the organisation by developing annual objectives, developing functional strategies, and developing and communicating policies.
It involves certain sub-steps as given below:
Developing or setting an annual objective is a sub-step in operationalising a grand strategy. Annual objective is an important tool or vehicle through which a grand strategy of an organisation is implemented to achieve the long-term objectives. Annual objectives guide implementation of a strategy by translating long-term objectives into current targets. They lay down the specific goals and targets to be achieved for the business and functional areas within the specific time frame.
Annual objectives must be specific, consistent, measurable, and prioritised. For example, the long-term objective of a company is to achieve 25 percent market share in the next five years. The present market share is 10 percent. The company wants to achieve this long- term objective by choosing market penetration strategy of increasing the sales of existing product in the existing market with the existing technology.
The company wants to develop the annual objective of achieving a minimum 3 percent market share in each year for the next five years. For annual objectives to be effective in strategy implementation, they must be integrated and coordinated through various operating units by communicating them clearly.
Developing a clear, specific, consistent, and measurable annual objectives would be helpful to operationalise the strategy successfully in the following ways:
a. Annual objectives enable the operating managers and personnel a better understanding of their role in the implementation of the chosen strategy to achieve the long-term objectives and mission of the business.
b. Annual objectives serve as milestones to be accomplished in each year for the long-term budget period.
c. Annual objectives help objective resource allocation.
d. Effective annual objectives become the essential link between strategic intentions and operating reality.
e. Annual objectives serve as basis for monitoring the progress towards achieving the long -term objectives.
f. They help the functional managers to formulate functional strategies for how to achieve these annual objectives.
Developing each functional strategy in an organisation is another sub-step in operationalising a grand strategy. A functional strategy is the short-term game plan for a key functional area within a company. Functional strategies are short-term decisions formulated at different functional areas of production, finance, personnel, marketing etc., in order to implement a part of the long-term objectives in a year by selecting a grand strategy through the tool of annual objectives.
Functional strategies must be developed in the key areas of marketing, finance, production/operations, R&D, and personnel. They must be consistent with long-term objectives and grand strategies. They help in the implementation of a grand strategy by organising and activating specific functional units. In short, functional strategies translate a grand strategy into strategic action designed to achieve specific annual objective.
The process of developing functional strategies is explained below:
Marketing is an important but a difficult and challenging task than production. Business concern cannot succeed without marketing success. Developing right marketing strategies are essential for operationalising the corporate strategy. Marketing strategies are short-term marketing decisions formulated by marketing manager regarding 4 P’s namely product, price, place and promotion for how to achieve the annual objective.
For example, an intensive advertisement campaign by 2 percent, increase the number of dealers by 10 percent, increase the sales force by 5 percent etc., in the next year are marketing strategies to implement the long-term objective of 25 percent market share in the next five years by choosing the master strategy of market penetration by increasing the sales of existing product in the existing market with the existing technology through the annual objective of a minimum 3 percent market share in each year for the next five years.
Finance is the life blood of any business concern. A business concern cannot perform other functions without adequate finance. Developing right financial strategies are essential for operationalising the corporate strategy. Functional strategies in finance are short-term financial decisions formulated by financial manager regarding working capital requirements and funds required for initiating other functional strategies, for how to achieve the annual objective.
For example, a bank loan (short-term) or cash credits from SBI to the extent of Rs.60, 00,000. for the next year may be functional strategy in finance to implement a part of the long-term objective of 25 percent market share in the next five years by choosing the master strategy of market penetration by increasing the sales of existing product in the existing market with the existing technology through the annual objective of a minimum 3 percent market share in each year for the next five years.
Research and development (R& D) has assumed a key functional role in many business organisations because of the increasing rate of technological change in most competitive industries. Functional strategies in R&D are product development strategies for how to achieve the annual objective.
For example, development of one new product and improvement of features of product Y in the next year are functional strategies in research and development to implement a part of the long-term objective of 25 percent market share in the next five years by choosing the master strategy of product development by modifying the existing products or developing new but related products for sale in the existing market through the annual objective of a minimum 3 percent market share in each year for the next five years.
Production is the most important function of manufacturing business concerns. Successful production is one that sells. Successful production cannot achieve without right production strategies. Developing right production strategies are essential for operationalising the corporate strategy. Production strategies are short-term production decisions formulated by production manager regarding production facilities and equipment, purchasing of raw materials, and planning and control of operations for how to achieve the annual objective.
For example, a company plans to (i) increase the productivity by 10 percent , and (ii) increase the production by 20 percent in the next year are functional strategies in production/operations to implement a part of the long-term objective of 25 percent market share in the next five years by choosing the master strategy of market penetration by increasing the sales of existing product in the existing market with the existing technology through the annual objective of a minimum 3 percent market share in each year for the next five years.
Right man for the right job is the famous management parlance. Developing right personnel strategies are-essential for operationalising the corporate strategy. Functional strategies in personnel are human resource decisions formulated by personnel manager regarding determination of key human resource needs, recruitment, selection, and training and development of employees to support a chosen strategy and for how to achieve the annual objective.
For example, reduction of the number of casual workers by 250 and organisation of 3 employees development programme in the next year are functional strategies in personnel to support the functional strategies in production of increasing the productivity by 10 percent and increasing the production by 20 percent to implement a part of the long-term objective of 25 percent market share in the next five years by choosing the master strategy of market penetration by increasing the sales of existing product in the existing market with the existing technology through the annual objective of a minimum 3 percent market share in each year for the next five years.
Developing good Policies in an organisation is yet another sub-step in operationalising a grand strategy. A policy is a definite course or a principle of action followed by an organisation. Policies are referred to as standard procedures or practices adopted by an organisation in performing its various activities or functions such as purchase of raw materials , production , finance, marketing, personnel, and investment.
They are directives formulated to guide the thinking, decisions and actions of managers and their subordinates in implementing the organisation’s strategy. Policies facilitate quick achievement of objectives.
Developing sound policies and communicating them to the persons who have to implement it would be helpful to operationalise the strategy successfully.
The important benefits of policies are given below:
a. Sound policies serve as a guide to managers at various functional levels for making correct and quick decision as well as its implementation.
b. Policies permit delegation of authority without which implementation of policies is difficult. They enable to carry out the work independently.
c. Policies ensure cordial relationship among managers and subordinates as they guide the managers how to discharge smoothly the main functions of production, finance, marketing, and personnel.
d. Sound policies enable a business concern to build up goodwill and image among suppliers, customers, and people.
e. Sound policies enable a business concern to achieve the objectives easily and quickly.
f. Sound policies enable a business concern to enhance the profit earning capacity as they help the performance of various departments such as production, finance, marketing, and personnel.
Institutionalising the strategy is the final step or phase in the implementation of a chosen strategy.
It is concerned with the process of permeating the chosen strategy throughout the organisation through:
i. Organisational structure,
ii. Leadership, and
A chosen strategy cannot be implemented successfully without a suitable structure. Organisational structure is one of the organisational elements through which a chosen strategy has been institutionalised in an organisation. An organisational structure is a structure of relationships through which the division of tasks for efficiency and clarity of purpose and coordination between the interdependent parts of the-organisation are ensured to accomplish the objectives.
Structure is rightly defined by Henry Mintzberg as –”the sum total of the ways in which (the organisation) divides its labour into distinct tasks and then achieves coordination between them”.
For institutionalising the strategy, there is a need to match the chosen strategy with the right organisational structure. So, the best suited organisational structure has to be selected. There are five types currently used by most of business concerns.
a. Simple organisational structure,
b. Functional organisational structure,
c. Divisional organisational structure,
d. Strategic business unit organisational structure, and
e. Matrix organisational structure.
A simple organisational structure is the most widely used structure in very small business enterprises. Under it, all strategic and operating decisions are vested in the hands of owner- manager. The owner- manager directly supervises all the activities under this organisational structure. In short, the survival, growth, and development of the business greatly depend upon the owner-manager.
The following are the advantages of simple organisational structure:
(a) It is very simple, easy to establish and is easily understood by workers as there are no complications in defining the working relationships.
(b) Quick decision- making is possible in this organisational structure as the owner-manager takes all strategic and operating decisions himself without consulting others.
(c) A subordinate under this organisational structure can carry out the order promptly with more clarity from one superior i.e., the owner-manager.
(d) It ensures cordial and intimate relationship with everyone in the organisation as there is one superior i.e., the owner-manager instead of multiple commands.
(e) It encourages employee’s involvement in more than one activity as the owner -manager himself guides, motivates, and supervises the employees.
(f) It is suitable for small businesses that serve a localised, simple product/ market.
The following are the disadvantages of simple organisational structure:
(a) The owner-manager is overburdened with strategic and operating decision-making as well as supervising all activities. So, he cannot perform any activity efficiently.
(b) The simple structure becomes inadequate and unsuitable when the business grows.
(c) It does not allow the development of employees for future managerial positions.
(d) It is unsuitable for big businesses that have more product lines/markets
b. Functional Structure:
Functional structure is a structure designed on the basis of key functions in an organisation namely production, marketing, finance/accounting, and personnel. The functional structure groups similar tasks and activities as separate specialised functional units within the organisation. Each functional unit is managed by an expert in that area. This structure is suitable for organisations which have a single or a few narrow related products/markets.
The following are the advantages of functional structure:
(a) It promotes specialisation in an organisation by dividing the total tasks or activities on the basis of functional specialisation.
(b) It reduces the burden of top executives as every functional manager looks after his function only.
(c) It allows rapid decision-making since strategic decisions are centralised in the domain of the chief executive.
(d) It minimises the need for an elaborate control system and thereby ensures effective control as the day-to-day operating decisions are delegated to the functional managers.
(e) It ensures higher efficiency in an organisation as every employee in each functional area receives expert guidance from specialist and performs his work efficiently.
(f) It is suitable for all kinds of businesses- small or medium or big that has a single or a few narrow product lines/markets.
The following are the disadvantages of functional structure:
(a) It results in low employee morale due to lack of decentralisation of authority to the lowest level in the organisation.
(b) It may lead to interdepartmental conflicts as one functional manager may not understand the problems in other functional areas.
(c) It does not permit effective coordination between departments due to lack of unity of command.
(d) It is unsuitable for businesses that have a wide range of product lines.
(e) It is unsuitable for very small businesses that serve a localised, simple product/market.
c. Divisional Structure:
Divisional structure is an organisational structure divided into a number of self – contained business units, each deals in a separate product/market. There is dispersal of decision-making authority from top level to the lowest level under this structure. In this decentralised structure, a number of important decisions will be made at the lower levels without being subject to prior approval of higher authorities.
The divisional structure can be designed in one of the four ways namely by geographic area, by product or service, by customer, and by process.
The following are the advantages of divisional structure:
(a) It retains functional specialisation within each division in the organisation.
(b) It allows the top management/CEO to concentrate on corporate strategic decisions due to extensive delegation of authority.
(c) It helps to formulate business level strategy for each business and implement it effectively.
(d) It facilitates quick decision because sufficient authority has been delegated to the subordinates to take decisions immediately without consulting superiors.
(e) It ensures higher efficiency in the organisation as there is extensive delegation of authority coupled with clear definition of accountability and managers are made responsible for sales and profit levels in each division.
(f) It helps to maintain cordial relationships and, thus, discipline throughout the organisation due to delegation of authority and responsibility.
(g) It permits effective coordination of various activities in each division.
(h) It results in high employee morale and motivation due to decentralisation of authority to the lowest level in the organisation.
(i) It enables employees of each business/division to develop their capabilities to undertake new and more challenging jobs.
(j) It provides career development opportunities for managers.
The following are the disadvantages of divisional structure:
(a) The divisional structure is costly in comparison to other organisational structures as it requires highly paid, well qualified functional specialists in each division, and an elaborate headquarters-driven control system.
(b) It develops potentially dysfunctional competition for corporate level resources.
(c) It may result in policy inconsistencies between divisions.
(d) It may create problem with the extent of authority given to divisional managers.
d. Strategic Business Unit (SBU) Structure:
Strategic business unit is a structure in which a large number of similar divisions in a multi- business organisation are grouped or regrouped into a few group of divisions. The regrouped divisions are called strategic business units. They are formed on the basis of some common characteristics such as competing in the same industry, being located in the same area or having the same customers, under the control of a vice president/a senior executive for each SBU.
The following are the advantages of SBU structure:
(a) It provides an optimum span of control as a large number of divisions are regrouped into a few groups of manageable divisions under the control of a senior executive for each SBU.
(b) It offers a tool to some firms for managing their increased number, size and diversity of divisions.
(c) It ensures effective control and supervision as another layer of management has been added in between divisions and corporate management.
(d) It facilitates effective coordination between divisions within a SBU as similar divisions are formed or grouped on the basis of some common characteristics under the control of a senior executive for each SBU.
(e) It helps to formulate appropriate strategies at corporate and business levels and implement them effectively.
(f) It helps to improve level of profits as a large number of divisions are regrouped into a few groups of manageable divisions.
The following are the disadvantages of SBU structure:
(a) It requires an additional layer of management in between divisions and the chief executive which increases the salary expenses and other establishment expenses.
(b) It may increase dysfunctional competition for corporate resources.
(c) Under this structure, the role of the chief executive is difficult to define and often ambiguous.
(d) It may create problems in defining the degree of autonomy for group vice president and divisional managers
Matrix structure is an array of vertical and horizontal working relationships of subordinates between functional managers and project managers to achieve the objectives of projects. It is described as a project organisation super-imposed on functional structure. It has been defined by Stanley Davis and Paul Lawrence, as “Any organisation that employs a multiple command system that includes not only the multiple command structure, but also related support mechanism and an associated organisational culture and behaviour pattern”.
In matrix structure, there are two command systems namely a permanent functional set up and a temporary project group. As and when the organisation undertakes to complete a project(s), personnel are drawn from functional departments. Their activities are coordinated and controlled by the project manager.
After the completion of the project, the team is disbanded and the personnel return to their original departments. During his assignment to a project, an employee has two bosses namely his functional head and the project manager.
The following are the advantages of matrix structure:
(a) It is more flexible than the functional organisational structure since a wide variety of project oriented business activities can be accommodated to this structure.
(b) It ensures quality of decision-making as there are conflicts of interests in this structure.
(c) It focuses on the efficient utilisation of organisational resources for the successful completion of the project(s) in time because of the multiple command system.
(d) It ensures effective control and supervision of subordinates and thereby improves the efficiency of performance as there is a multiple command system.
(e) It helps to implement the strategy successfully as there is an associated organisational culture and behaviour pattern.
(f) It provides opportunities for career development of managers through greater involvement in decision-making.
The following are the disadvantages of SBU structure:
(a) It violates the principle of unity of command as an employee receives orders from both functional manager and project manager.
(b) In this structure, an employee cannot work properly and efficiently under two masters.
(c) Decision may be delayed unnecessarily and it hampers the progress of the organisation as there are conflicts of interests under this structure.
(d) Dual accountability in this structure may create confusion and contradictory polices.
A right structure is not only sufficient but also a right leadership for the successful implementation of a chosen strategy. Leadership is another organisational element through which the chosen strategy has been institutionalised in an organisation. A leader is one who guides and directs other people. Leadership is the quality of behaviour of a person by which he is able to persuade others to achieve the goals enthusiastically.
It is a style or an approach of a person by which he influences other’s behaviour towards the accomplishment of some goals. It has been defined by Koontz and O’Donnel as, “the ability of a manager to induce subordinates to work with confidence and zeal.”
For institutionalising the strategy, there is a need to match the right leadership with the right strategy. This involves matching the “preferred” managerial characteristics with the right grand strategies. This can be done by assigning managerial position, to a person who is a good builder for implementing an “invest to grow” strategy and to a person who is a good harvester for implementing a “harvest” strategy.
The CEO plays a critical role in this regard. The right managers can be chosen either from inside the organisation or outside depending upon the strategy which requires major or minor changes. Assignment of key managers within top management team has become an important aspect of organisational leadership.
a. A New Strategy which Requires Major Changes, for Implementation:
A company’s turnover has been ineffective for several years. The top management wants to overcome this situation. It has formulated a new strategy which requires many major changes. In this situation, right managers from outside should be brought to implement the new strategy effectively. Such managerial assignment has many advantages and disadvantages.
They are as follows:
(a) Key managerial assignment to outsiders is the most suitable one to implement the new strategy particularly when the required managerial qualities are ineffective or unavailable inside.
(b) Key managerial assignment to outsiders is a new source of energy, motivation, zeal and expectations like a stream for the existing employees in the organisation.
(c) Outsiders can send powerful signals throughout the organisation that a change is expected.
(d) Outsiders will change the poor turnover situation by implementing the new strategy as they have new skills, experiences, and commitments.
(a) Managerial assignment to outsiders is a costly affair.
(b) Suitable candidates in all respects for key managerial position may not be available.
(c) Selecting a right person from outside for key managerial position is uncertain.
A company’s turnover has been effective for several years. But the top management wants to implement a new strategy, which requires major changes, in order to cope with the changing market, competitive, and technological or other environmental factors. In this situation, current executives via promotion or transfer should be used when skills match new roles. Otherwise select the required skills and experience from outside. Managerial assignment to insiders has many advantages and disadvantages.
They are as follows:
(a) Key managerial assignment to insiders is the most suitable one to implement the new strategy particularly when the company’s performance has been effective for several years.
(b) Key managerial assignment to insiders is economical when compared to the assignment to outsiders.
(c) Current executives can very well execute the new strategy as they familiar with workplace, people, practices, conditions, and the ways to get things done.
(d) Key managerial assignment to insiders reinforces company’s commitment to individual careers and facilitates executive development.
(a) Current executives face problem in implementing a new strategy which involves hard decisions.
(b) Current executives lack adaptability to major strategic changes.
(c) Current executives’ skills, Knowledge and experience sometimes may mismatch the new roles.
A company’s performance has been ineffective through the management has formulated a sound strategy. This is due to ineffective implementation of the strategy because of lack of adequate skills or capabilities of the management team. The company’s new strategy is an attempt to refocus on its old strategy by making a few organisational changes. In this situation, outsiders could play a key role in reorienting organisational efforts.
A company’s performance has been effective. But the top management wants to implement a new strategy which requires minor changes. In this situation, key managerial assignment should be given to current executives via promotion or transfer in order to reward, retain and develop managerial talents inside. Such managerial assignment has many advantages and disadvantages. In this situation, key managerial assignment to a few junior-level managers inside is possible because the changes are minor.
A sound structure and a right leadership are not only sufficient but also right culture for the successful implementation of a chosen strategy. Culture is another organisational element through which the chosen strategy has been institutionalised in an organisation. Culture is the behavioural regularities and norms prevailing in an organisation among the members. It gives employees a sense of how to behave, what they should do and where to place priorities in getting the job done.
“Organisational culture is the set of important assumptions (often unstated) that members of an organisation share in common”. The impact of culture on the organisational life is realised or noticed through the commitments of employees, understanding and co-operation between members, communication and decision-making styles, response to consumer grievances and employees grievance redressal.
For institutionalising the strategy, there is a need to match the right strategy with the culture. This involves matching the “changes” in key organisational factors that are necessary to implement the new strategy with the culture. In other words, it involves managing strategy-culture imbalance by fitting the changes required to implement the new strategy with the culture.
The useful framework for managing strategy-culture relationships in four basic situations is explained below:
A company wants to implement a new strategy which requires many changes in structure, systems, managerial assignment, operating procedures or other fundamental aspects of the organisation. There is high potential compatibility of changes with existing culture. In this situation, the company reinforces the culture.
For this, emphasis should be given to the following considerations:
(a) Key changes must be linked to the basic mission.
(b) Key managerial assignment should be given to insiders.
(c) Strengthen the reward system.
(d) Key attention should be given to changes that are least compatible with current culture.
A company wants to implement a new strategy which requires many changes in the organisational factors. But there is low potential compatibility of changes with existing culture. This will increase resistance from employees.
b. A New Strategy which Requires a Few Changes in Key Organisational Factors, for Implementation:
A company wants to implement a new strategy which requires a few changes in the organisational factors. There is high potential compatibility of changes with existing culture. In this situation, the company should maximise the synergetic effect of the strategy and culture consistent.
For this, emphasis should be given to the following considerations:
(a) Reinforce the culture.
(b) Remove the organisational roadblocks to the desired culture.
A company wants to implement a new strategy which requires only a few changes in the organisational factors. But there is low potential compatibility of changes with existing culture. In this situation, the company need not reformulate strategy but develop alternative changes to implement the same strategy in order to manage strategy-culture relationships around the culture.
For the effective implementation of a strategy, it is essential to have an effective system of evaluation and control. Strategy evaluation and control is the final phase in the strategic management process and the last step in strategy implementation. Strategy evaluation is concerned with examining whether the strategy implemented is working or producing results or accomplishing its objectives or not. Strategic control is concerned with continuous monitoring and tracking the strategy putting the strategy in the right path or direction.
Process of Strategy Implementation – 2 Main Steps Involved: Leadership and Organisational Implementation
The important steps in strategy implementation are described below. The steps given below do not necessarily follow the sequential order. The sequences may vary depending on the nature of the company, nature of the strategy, approach to implementation, etc. Further, sometimes several steps have to be taken simultaneously.
Step # 1. Leadership Implementation:
Leadership implementation refers to ensuring the right people in positions responsible for implementation of the strategy. It encompasses the chief executive officer (CEO) and the key managers.
“The first dimension of leadership implementation is to make sure that the right strategists are in the right positions for the strategy chosen for the SBU or firm.”
The ability, integrity and commitment of the CEO and other top executives are very critical to the successful implementation of the strategy. “Because the very definition of enterprise strategy implies new corporate directions, implementing this strategy requires a leader who can drive an organisation, energise its operations, and inspire its people. This kind of leader must personify the organisation’s purpose – through sheer personal magnetism, vitality and force. There is no substitute for the pronounced personal style and strong interpersonal skills that most effective leaders possess. This style and skill reflect the quality of a leader’s values, thinking and character – all necessary to inspire commitment to the strategy and goals of the leader and to secure the allegiances required to make any bold purpose succeed.”
The critical role of the leader in strategic management is clear from the fact that major changes in strategy are often preceded by or quickly followed by a change in the CEO.
i. Communicating the Strategy:
Strategy implementation involves a number of people at different levels. Many of them might not have taken part in the strategy formulation. This highlights the importance of communicating the strategy. Even those who are not directly involved in strategy implementation need to be informed about the strategy because everybody in the organisation should know what are the future plans for the organisation, what changes are affecting the organisation, why these changes or strategy, what are the objectives and implications, etc.
It is essential to instil a feeling of belongingness to the organisation. Absence of such communication would create a feeling of alienation in the employees causing morale and motivation to dampen and would also cause resistance to the strategy.
In several cases, it would also be desirable to communicate the strategies to people outside the organisation but related to it like marketing intermediaries, consumers, etc. “Through the communication process, the CEO interacts with the various internal and external stakeholders of the corporation – employees, shareholders, suppliers, customers, legislators, advocates, and the public at large. Moreover, the CEO uses communications to formulate, test and disseminate his or her vision for the future of the enterprise.”
Proper communication of the strategy is a pre-requisite for successful implementation of the strategy. “A clear understanding of the strategy gives purpose to the activities of each organisation member. It allows the individual to link whatever task is at hand to the overall organisational direction.” This is mutually enhancing and gives meaning to the task. It also provides the individual with general guidance for making decisions and enables him/her to direct efforts toward activities that count.
It does not, however, mean that all strategies or all the details of the strategy should be or can be communicated. For example – it will be suicidal to allow the competitors to know of certain strategies of the company. “The wider the dissemination of information concerning strategic decisions, competitive moves, or shifting emphasis, the greater the likelihood it will reach a competitor who could subvert the move, decision, or shift. A strategy that will provide or exploit an unpublicised advantage may be kept undisclosed….If the strategy will divulge proprietary information; it should be shared only on a need-to-know basis.”
Communicating certain matters in advance may cause resistance or other problems within the organisation.
ii. Formulation of SBU Strategy:
In multi-SBU companies, the corporate strategy is implemented through SBU strategies, which are formulated to achieve the corporate strategy.
iii. Annual Operating Objectives:
Annual operating objectives designed to contribute to the long-term objectives is a critical step in strategy implementation.
Long-term objectives indicate the planned long-term positioning of the organisation. Short- term objectives like annual objective lay down the specific goals and targets to be achieved within the specific time frame so that the long-term objectives would be achieved.
While long-term objectives are very broadly stated, annual objectives very specifically lay down the annual goals for the business, functional areas or subunits.
“Annual objectives should be measurable, consistent, reasonable, challenging, clear, communicated throughout the organisation, characterised by appropriate time dimension and accompanied by commensurate rewards and sanctions.”
As annual objectives are formulated for a number of functional areas, units, etc., consistency, coordination and integration are very critical factors.
Annual objectives may also need to be prioritised due to timing considerations and relative impact on strategic success.
Annual objectives provide several benefits:
(a) “Systematic development of annual objectives provides a tangible, meaningful focus through which managers can translate long-term objectives and grand strategies into specific action. Annual objectives give operating managers and personnel a better understanding of their roles in the business’s mission. This clarity of purpose can be a major force in effectively mobilising the ‘people assets’ of a business.”
(b) Annual objectives help objective resource allocation.
(c) They become basis for monitoring the progress toward achieving the long-term objectives.
(d) When annual objectives are developed by participation of managers responsible for their accomplishment, “they provide an ‘objective’ basis for addressing and accommodating conflicting political concerns that might interfere with strategic effectiveness. Effective annual objectives become the essential link between strategic intentions and operating reality.”
iv. Functional Strategies:
Functional strategies, which are short-term game plans for the key functional areas, are the means to accomplish the annual plans.
Functional strategies by clearly specifying the various measures to be taken in different functional areas in different time horizons help operationalise the grand strategy. In other words, functional strategies provide the short-term operational details for accomplishing the long-term objectives systematically.
“Functional strategies help in implementation of grand strategy by organising and activating specific subunits of the company (marketing, finance, production, etc.,) to pursue the business strategy in daily activities. In a sense, functional strategies translate thought (grand strategy) into action designed to accomplish specific annual objectives. For every major subunit of a company, functional strategies identify and coordinate actions that support the grand strategy and improve the likelihood of accomplishing annual objectives.”
Operationalising the corporate strategy requires the development of functional strategies in key areas like marketing, production, R&D, finance and human resources.
The annual objective is to increase sales by Rs 86 crores. Strategies for this include, for example, increasing the sale of division A by Rs 38 crores, division B by Rs 30 crores, division C by 18 crores, developing a new product, intensifying promotion by increasing the size of the field sales force, increasing the number of dealers, etc.
The functional strategy for marketing must cover all the factors of the marketing mix. Mutually consistent strategies for each of the factors must be developed to help achieve the annual marketing objective.
R&D strategy may involve improving product or packaging, developing new product, etc.
Similarly, every key functional area must develop strategies to achieve the annual objectives.
v. Resource Allocation:
Making sufficient resources (financial, human, material, technological, facilities, etc.,) available in time is an essential requirement for effective implementation of the strategy.
Top management’s commitment to the strategy will be reflected in the resource allocation. Objectivity is a pre-requisite of efficient resource allocation. Personal whims and fancies shall not affect the allocation of resources to SBUs, divisions, functions or executives. It is well known that one of the major reasons for the failure of implementation of many public sector projects in India is associated with resource allocation.
vi. Development of Policies:
Effective implementation of strategy requires formulation of policies. “A policy is a broad, general guide to action which constrains or directs goal attainment. Thus, policies serve to channel and guide the implementation of strategies.”
“The critical element, the major analytical exercise involved in policy making, is the ability to factor the grand strategy into policies that are compatible, workable. It is not enough for managers to decide to change the strategy. What comes next is at least as important. How do we get there, when and how efficiently? This a manager does by preparing policies to implement the grand strategy.”
The important benefits of policies are the following:
(a) Policies make clear what and how everybody is expected to do and they make coordination, evaluation and control easier. They also help reduce the time managers spend on supervision and decision-making.
(b) Policies are of immense help in conducting the regular activities of an organisation smoothly and efficiently. Policies provide clear guidelines for carrying out activities and thereby avoid confusion and discretionary misuse.
(c) Policies help delegation because the clarity of procedures, etc., enable the work to be carried out independently.
(d) They help to avoid delay in decision-making.
(e) Clear policies help minimise conflicting practices and establish consistent patterns of action because policies clarify what work is to be done by whom.
There are, generally, three types of policies in an organisation.
(a) Corporate Policies that apply throughout the organisation.
(b) Divisional Policies which apply to the division.
(c) Departmental Policies which apply within the department.
Step # 2. Organisational Implementation:
A strategy cannot be effectively implemented unless there is a suitable organisation. It is, therefore, essential to ensure the right organisational structure for the strategy. It is relevant to recall here the well-known conclusion of Alfred Chandler that structure follows strategy.
Many strategies call for changes in the organisational structure. Organisational restructuring is common throughout the world. It has become widespread in India since the liberalisation.
i. Evaluation and Control:
To help implement the strategy effectively, it is essential to have an effective system of evaluation and control. The objective is to examine whether the strategy as implemented is meeting its objectives and if not to take corrective measures.
ii. Reward System:
Effective implementation of the strategy also depends on the motivation of executives and others associated with the implementation. It is, therefore, necessary to have a system to reward superior performances so as to motivate people to perform very well. Reward system may consist of monetary rewards like pay rises, bonuses, promotions, lump sum payments, etc., or nonmonetary rewards like awards, special acknowledgments, etc., or both.
Designing an appropriate reward system is often difficult for various reasons. When strategy implementation involves individuals, groups of individuals and divisions, measuring the exact contribution of each may be difficult. The results of strategy may be spread over a long period. In case of long-term strategy, it normally takes long period to fully realise the effectiveness of implementation and people responsible would have changed in some cases.