Strategy implementation refers to various activities involved in executing the strategies of an organization. In simpler words, strategy implementation puts an organization’s strategies into action through various procedures, plans and programs. Strategy implementation involves actions and tasks that are needed to be performed after the formulation of strategies.
It is influenced by management’s perspective, as management sets the strategies that are executed in the implementation stage. An effective implementation of strategy is significant for an organization’s growth, whereas failure in effective strategy implementation may have negative consequences for an organization.
Learn about: 1. What is Strategy Implementation 2. Definition and Concept of Strategy Implementation 3. Need 4. Features 5. Aspects 6. Categories 7. Types 8. Activities Involved 9. Factors to be Considered 10. Role of Managers
11. Implementing Kaizen 12. Approaches 13. Techniques Used 14. Strategy Implementation in Projects 15. Relationship between Strategy Formulation and Implementation 16. Difference between Strategy Formulation and Strategy Implementation 17. Behavioural Issues 18. Issues Involved 19. Feedback Control System.
Strategy Implementation: What is, Definition, Process, Issues, Activities, Formulation, Factors, Approaches, Techniques and More…
What is Strategy Implementation
Strategy implementation is a procedure through which a chosen strategy is put into action. Strategies are only a means to an end i.e., achievement of organization’s objectives which have to be activated through implementation. This is because both strategic formulation and strategic implementation process are intervened into each other.
Strategy formulation and implementation are interconnected though skills and levels of skills are dissimilar. The relationship between the two can be better understood in terms of forward and backward linkages. Forward linkage means elements in strategy formulation influence strategy implementation.
Even formulation process is influenced by factors influencing implementation. This interdependence is termed as backward linkage. Forward linkages are more and stronger as compare to backward linkages. The linkage between formulation and implementation.
Again strategy formulation is merely though while strategy implementation is an action oriented one. Both are different in many respects but closely interlinked into each other.
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. In a simple way, strategy implementation can be defined as a process through which a chosen strategy is put into action.
Strategy Implementation – Definitions and Concept
According to Glueck, “Strategy implementation is the assignment or reassignment of corporate and Strategic Business Unit leaders to match the strategy. The leaders will communicate the strategy to the employees. Implementation also involves the development of functional policies about the organization structure and climate to support the strategy and help achieve organizational objectives”.
Steiner, Miner and Gray have defined strategic implementation as “Implementation of strategies is concerned with the design and management of systems to achieve the best integration of people, structure, processes and resources in reaching organizational purposes”.
Implementation of strategy is the process of activating the chosen strategy. You may have a vehicle which you have put in neutral gear after “kick-start” or “push button-start”. It is good that you have put the vehicle in neutral gear from its inactive position. However, you cannot continue to go ahead longer with neutral gear unless you put into gear one, then two and so on to give movement or locomotion to the vehicle.
This is called as activisation or implementation, put in simple terms. According to George A. Steiner, John B. Miner and Edward R. Gracy, “The implementation of policies and strategies is concerned with the design and management of systems to achieve the best integration of people, structures, processes, and resources, in reaching organisational purposes.”
Charles W.L. Hill and Gareth R. J ones define strategy implementation 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.” In the words of Allex Miller and Gregory G. Dess, “Strategy implementation involves a broad range of efforts aimed at transforming strategic intentions into action. The resulting stream of actions constitutes the firm’s realised strategy.”
Daniel J. McCarthy, Robert J. Minichiello and Joseph R. Curran define strategy implementation as “It may be said to consist of securing resources, organising these resources, and directing the use of these resources within and outside the organisation.”
Put in other words, strategy implementation impounds in its compound, all those actions essential to put a strategy into practice. In depth, implementation calls for the identification of the key tasks to be performed, allocation of these tasks to individuals, coordinating of bifurcated tasks, the design and the installation of an appropriate MIS, configuring specific action program including a time-schedule close to the level of operating budgets or standards, setting up of a system for performance evaluation and the design of a system of incentives, controls and penalties matching to the individual concerned and the tasks that are to be performed.
Concept of Strategy Implementation:
Strategy implementation refers to various activities involved in executing the strategies of an organization. In simpler words, strategy implementation puts an organization’s strategies into action through various procedures, plans and programs. Strategy implementation involves actions and tasks that are needed to be performed after the formulation of strategies.
It is influenced by management’s perspective, as management sets the strategies that are executed in the implementation stage. An effective implementation of strategy is significant for an organization’s growth, whereas failure in effective strategy implementation may have negative consequences for an organization.
Need for Strategy Implementation
As we know,the concept of the 7-S framework, popularly known as the Mckinsey 7-S model. The seven key factors, viz., strategy, structure, systems, staff, skills, style and shared value must be compatible with each other in order to ensure that the organisation implements its strategy effectively, and in the process achieves the excellence needed to survive and grow. Each of these seven factors influence the choice of the other, thereby affecting the overall organisational effectiveness.
There is, thus, a need to find the optimum mix of strategy and the other six factors to ensure the smooth implementation of strategy. It must be remembered that there is nothing like the ‘best’ strategy in absolute terms. Rather, whenever there is a need to reposition a firm, the emphasis has to be on developing a new combination of strategy and the other six factors. The new combination enables the firm to respond properly to the emerging compulsions of the environment and also helps it to maximise the total value created by the firm.
From this perspective, strategy implementation is necessarily concerned with:
1. Determining the right organisational structure;
2. Designing appropriate management systems for planning and control, capital expenditure, information and reporting, review and follow-up, training and development, rewards and punishment, career progression, delegation of power, procedures, rules, etc.;
3. Choosing a right mix of employees;
4. Choosing a right mix of skills and competencies;
5. Adopting a right style of management in both strategic and operating areas;
6. Inculcating right values and culture within the organisation.
Needless to say, action in each of the above areas should be taken after duly considering the requirement of the strategy being pursued, and the compatibility of all the seven factors (including strategy) with each other.
Top 5 Features of Strategy Implementation
Features of strategy implementation are explained in the following points:
1. Action Oriented:
It implies that a strategy should be actionable. A strategy is made actionable with the help of different management processes, such as – planning and organizing. The role of management is not just restricted to formulating the plans, but also extends to converting these plans into actions.
2. Varied Skills:
It implies that strategy implementation involves wide-ranging skills. In an organization, vast knowledge, attitude, and abilities are required to implement a strategy. These skills help in allocating resources, designing structures, and formulating policies.
3. Wide Involvement:
It means that strategy implementation requires the participation of the top, middle, and lower level management. The top management must clearly communicate the strategy, which needs to be implemented, to the middle management. You should note that the middle management plays an active role in strategy implementation.
4. Wide Scope:
It involves a range of managerial and administrative activities. In simpler words, any managerial action can be a part of the strategy implementation process because of its wide scope. For example, implementing a marketing strategy may involve preparing marketing budget, conducting market research, developing advertising and promotional plan, conducting test marketing, launching product, and collecting customers’ feedback.
5. Integrated Process:
It refers to the fact that different activities in the strategy implementation process are interdependent. Therefore strategy implementation is an integrated and holistic process. For example, different activities of a promotional strategy of an organization are interrelated; therefore one needs to be executed in accordance with other activities.
Different Aspects Involved in Strategy Implementation
The different aspects involved in strategy implementation cover practically everything that is included in the discipline of management studies. A strategist, therefore, has to bring to his or her task a wide range of knowledge, skills, attitudes, and abilities. The implementation tasks put to test the strategists’, abilities to allocate resources, design structures and systems, formulate functional policies, take into account the leadership style required, and plan for operational effectiveness, besides, dealing with various other issues.
The strategic plan devised by the organisation proposes the manner in which the strategies could be put into action. Strategies, by themselves, do not lead to action. There are, in a sense, statements of intent- implementation tasks are meant to realise the intent. Strategies, therefore, have to be activated through implementation. Strategies lead to several plans, each plan leads to several programmers. Each programme results in several projects. Projects are supported by funds through budgets.
The administrative mechanisms of policies, procedures, rules and regulations support the working of the organisation while it implements the projects, programmes, plans, and strategies.
First of all, strategies should lead to plans. For instance, if stability strategies have been formulated, they may lead to the formulation of various plans. One such plan could be a modernization plan. If expansion strategies have been adopted, various types of expansion plans will have to be formulated.
An expansion plan could be designed to set up an additional plant to manufacture the same products. Similarly, diversification strategies could lead to new product development plans. Plans result in different kinds of programmes. A programmes is a broad term which includes goals, policies, procedures, rules and steps to be taken in putting a plan into action. Programmes are usually supported by funds allocated for plan implementation.
Programmes lead to the formulation of projects. A project is a highly specific programme for which the time schedule and costs are predetermined. It requires the allocation of funds based on capital budgeting by organisation. Thus, R&D programmes may consists of several projects, each of which is intended to achieve specific and limited objective, requires separate allocation of funds, and is to be completed within a set time schedule.
Project creates the needed infrastructure for the day-to-day operations in an organisation. They may be used for setting up new or additional plans, modernizing the existing facilities, installation of newer systems, and for several other activities that are needed for the implementation strategies.
In practice companies may not make such a fine distinction among plans, programmes, and projects as we have done here. But as students of management we have to understand the difference and learn to distinguish between the different terms used in strategic management. Implementation of strategies is not limited to the formulation of plans, programmes, and projects.
Categories of Strategy Implementation: 3 Categories – Structural, Behavioural and Functional & Operational Implementation
A. Structural Implementation:
Structures and Strategy Implementation:
The strategies remain useless academic exercises unless they are effectively implemented. This requires proper communication of plans, strategies and policies to various functional/divisional units; enlisting the support of people involved in the process; proper guidelines and support of top management; an appropriate structure and climate suitable to carry out the assigned tasks; allocation of resources over competing alternatives with a view to maximize return and establishment of appropriate control points to see that what has been planned is achieved effectively and efficiently.
Strategy implementation, thus, includes the various management activities that are necessary to put the strategy in motion, institute strategic, controls; that monitor progress, and ultimately achieve organizational goals.
Of course, no single structure is appropriate for implementing all strategies. Each firm, therefore, has to choose a suitable structure that best fits and accommodates its own strategy. Structural choices have to be made carefully because switching from one structure to another is a time-consuming and costly exercise.
Successful implementation demands cooperation from all functional and divisional managers in an organization. To this end, they must exchange notes freely, share resources in a spirit of give and take, take all people with them, monitor progress continuously, put everything on track and achieve results in a smooth way. All this calls for exceptional communication and motivational skills that help leaders to unite various powerful coalitions in an organization effectively.
Leadership is the process of influencing others towards the accomplishment of goals. According to Koontz and O’Donnell, “Leadership is the ability of a manager to induce subordinates to work with zeal and confidence”. In short, it is the activity of influencing people to strive willingness for group objectives.
Leadership is the relationship in which one person influences others to work together willingly on a related task to attain goals devised by the leader and/or group. Leadership is the key factor in strategy implementation. Some people equate leadership with management. But these two concepts are not the same. In fact, leadership is a part of management. Leaders require and use three different skills in influencing and interacting with people to attain goals. They are technical skills, human relations skills and conceptual skills.
Transactional leadership determines what subordinates need to do to achieve their own and organizational objectives, classify those requirements, and help subordinates become confident that they can reach their objectives by expending the necessary efforts.
Transformational leadership implies a process whereby an individual attempts to elevate his or her consciousness so that varied common place conflicts and dualities begin at higher levels of synthesis. In other words, transformational leadership attempts to change the whole organization from one ‘style’ or ‘culture’ to another. Transformational leadership has the ultimate aim of raising the level of human conduct and ethical aspiration of both the leader and the led. The leader’s main thrust is to elevate, inspire, and evangelize his followers to higher things in life.
1. Corporate Culture:
By culture, we mean that complex whole which includes knowledge, belief, art, morals, law, custom, and other capabilities and habits acquired by man in a society. Two terms are keys to the concept culture; history and shared phenomenon. With regard to first, it may be stated that cultural moves of a society are passed on from generation to generation. The second key term which is basic to culture implies that the cultural ethos is shared among members of a society.
Corporate Culture refers to the values and patterns of beliefs and behaviour that are accepted and practiced by the members of a company. Companies within the same industry and companies within the same city exhibit distinctly different ways of operating and working as each company develops its own company culture.
Every company has its own history, own methods of solving problems, organizing activities, composition of managerial personalities and styles. An organization’s culture may be weak and fragmented, if most of the employees have no deeply felt sense of company purpose, view their jobs as a source of income and have divided loyalties.
Culture of some companies may be strong and cohesive in the sense that most of the people understand the company’s objectives and strategy, and know what their individual roles are. A strong culture is powerful level for channelling behaviour and helping employees in doing their jobs in a more strategy supporting manner.
This occurs in the following ways:
i. Employees in strong culture companies are provided with a system of informal rules and peer pressure regarding how to behave or do the work most of the time. The absence of strong company identity and purposeful work climate in Weak culture companies, results in substantial employee confusion and wasted effort.
ii. A strong culture provides structure, standards, and a value system and provides strong company identification among employees. Thus, a strong culture turns a job into a way of life and motivates the employees to contribute effectively to the company.
2. Organization Culture:
Organization culture (or its system term corporate culture) has been defined as “the philosophies, ideologies, values, assumptions, beliefs, expectations, attitudes and norms that knit an organization together and are shared by its employees”. Organization members tend to internalize cultural practices and like to teach newcomers into such mores.
Some of these practices are so thoroughly internalized that no one questions them, they are taken for granted, and that is, they get institutionalized. According to Mintzberg, one of the basic building blocks of organizational design is the ideology of culture of the organization. This consists of the values, beliefs, and taken-for- granted assumptions. It is essential to study the culture of the organization in order to design in organizational structure that functions properly.
The strategic decision is taken by the Governing Board. The strategy decided upon has then to be implemented by the functionaries of the organization. Management cannot be conceived of just in terms of the manipulation of techniques or tools of analysis; it is also about the application of experience build up over years, often within the same organization or industry. This is rooted not only in individual experience, but also in group and organizational experience accumulated over time.
There are fundamental constraints to the implementation of different strategy and policy options. These influences need to be understood when deciding on strategy. Ethics, social factors and cultural factors will influence the way in which the organization works and the priorities which actually emerge in practice.
To bring about change and to implement strategies successfully, organizations are now pinning hopes on the unique capabilities of transformational leaders. Transformational leadership is used to signify leadership that goes beyond ordinary expectations by transmitting a sense of mission, stimulating learning experiences and inspiring new ways of thinking.
To bring about the change within an organization, leaders must benchmark their performance against their competitors and try to switch gears when the organization is successful by focusing attention on measures such as new product innovations, customer satisfaction, and product quality as compared with competitors.
To be successful, the firm’s culture must be appropriate to and supportive of that firm. The culture must invariably have certain values that can help the firm adapt to environmental change. Changes in strategy should be accompanied by corresponding alterations in the firm’s culture.
Once corporate level and business unit strategies are developed, management must turn its attention to formulating strategies for each business unit’s functional areas. A Functional Strategy is the short-term game plan for an important functional strategy within a firm. Such strategies clarify the grand strategy by providing more specific details about key functional areas such as production/operations, finance, marketing and personnel are to be managed in the near future.
The manager, however, should not view the strategy of one functional area in isolation as all these areas are interrelated. Each functional area must smoothly relate its activities with the activities of other functional departments to avoid friction, duplication of effort and effectively support strategies that have formulated. Even the most creative strategies have no value if they cannot be translated into action.
Functional strategies have important uses in strategy implementation which are shown below:
Functional strategies are required to ensure that:
i. The strategic decisions are smoothly implemented by all departments of an organization.
ii. The various parts are uniformly regulated and bound by a set of policies.
iii. The functional heads decide things quickly, using their discretion within the framework laid down by functional plans and policies.
iv. The work at various levels is coordinated smoothly without any friction.
Functional Strategies deal with the relative and restricted function for allocation of resources and enabling coordination for optimal contribution. An organization needs both vertical fit and horizontal fit. Vertical fit includes various functions like finance, marketing, human resource (HR), etc., which have their own set of strategy are coordinated to integrate. On the other hand, Horizontal fit looks at the process of strategy, which involves various functions in the value chain, which must be coordinated.
Types of Strategy Implementation – Procedural and Functional Implementation
1. Procedural Implementation:
A procedure refers to a sequence of related task which make-up a chronological series. It is an established way of performing the work to get accomplished. Procedural implementation level concerned with completion of all statutory and other formalities which have been prescribed by the Government may at country or regional or local level.
Based on strategy, certain procedures are needed to incorporate in the process of strategic implementation such as, licensing requirements, Foreign Exchange Management Act requirements, collaboration procedures, import and export requirements, incentives and benefits, requirements of Labour Laws and other Legislations. These procedural issues differ from country to country.
The major procedural requirements involved from Indian business point of view are discussed in brief as under:
i. The licensing provisions have been given under the Industries (Development and Regulation) Act, 1951. In many industries industrial license is required particularly in those industries which are perceived to be harmful to public health.
ii. Under the provisions of FEMA, all companies registered under the Companies Act, 1956 having foreign shareholding in excess of 50% and all foreign companies are required to obtain authorization from Reserve Bank of India, regarding any financial decisions.
iii. In case of agreements with foreign companies, Indian companies has to take prior approval from Central Government.
iv. Under the provisions of Securities Exchange and Board of India Act, 1992, SEBI exercises some powers over capital issues to the public in the form of disclosure norms. For this purpose, SEBI scrutinizes the prospectus of the company planning to enter the capital market to ensure that relevant information has been provided in the prospectus on the basis of which the public can analyse the worth of issue of shares or debentures. For raising funds from prior permission of the Central Government is also required.
v. Import and Export requirements differ in two categories of goods that is which are under the list of open general license and those under restrictive list. There is less requirements for items falling under open general license barring that the companies going for import/exports have to inform the Reserve Bank of India. However, import and export license is required to be sought from the Ministry of Commerce in the case of items falling under restrictive list.
2. Functional Implementation:
The implementation of strategy also needs development of functional policies which provide the direction to middle management on how to make the optimal use of allocated resources. Functional policies guide the middle level executives in framing operational plans and tactics to make strategy implementable. Policies are basically general principles to help executives to make certain choices.
They are developed in order to guarantee that strategic decisions are implemented. Functional implementation deals with the development of policies and plans in different areas of functions which an organisation undertakes. Functional approach of organisational analysis takes into account various functional areas and evaluates these for identifying strengths and weaknesses.
Strategies necessitate linkage at both dimensions that is vertically and horizontally. Vertical linkages establish coordination and support amongst corporate level, business unit level, divisional level and functional level plans.
A divisional strategy calling for development of a new product should be driven by a corporate objective that is growth and on a knowledge of available resources, capital resources available from corporate as well as human and technological resources in the R&D function.
Linkages which are horizontally transverses through departments, divisions and functional areas of the organization should go hand in hand with each other. For example, a strategy calling for introduction of a new product needs the combined efforts of and coordination and cooperation among R&D, marketing, and the manufacturing departments.
Activities Involved in Strategy Implementation
Strategy implementation is the process that turns strategy or strategies into action in order to accomplish organisational objectives. Strategy implementation involves activities that effectively put the strategy into work.
It is fundamentally an administration activity and includes the following activities:
1. Building an Organisation Capable of Carrying out the Strategy Successfully:
This is done by:
i. Creating a strategy-supportive organisation structure,
ii. Developing the skills and distinctive competence upon which strategy is grounded, and
iii. Selecting people for key positions.
2. Establishing a Strategy-Supportive Budget:
Strategy supporting budget is the budget that is:
i. Ensuring that each organisational unit has the budget to carry out its part of the strategic plan, and
ii. Ensuring that resources are used efficiently to get “the biggest bang for the buck”.
3. Installing Internal Administrative Support Systems:
Administrative support system is very important for strategy implementation and it is installed by:
i. Establishing and administering strategy-facilitating policies and procedures,
ii. Developing administrative and operating systems to give the organisation strategy-critical capabilities, and
iii. Generating the right strategic information on a timely basis.
4. Devising Rewards and Incentives that are Linked to Objectives and Strategy:
Designing rewards and incentives are essential for motivating individuals.
i. Designing rewards and incentives that induce the desired employee performance,
ii. Promoting results orientation.
5. Shaping the Corporate Culture to Fit the Strategy:
Generally existing culture does not help in implementing strategy.
Thus, there is a need to shape supportive corporate culture by:
i. Established shared values,
ii. Setting ethical standards,
iii. Creating a strategy-supportive work environment,
iv. Building a spirit of high performance into the culture.
6. Exercising Strategic Leadership:
For creating and effective use of above five issues we need a leader who can lead:
i. The process of shaping values, moulding culture and energizing strategy accomplishment,
ii. Keeping the organisation innovative, responsive and opportunistic,
iii. Dealing with the politics of strategy, coping with power struggles, and building consensus,
iv. Enforcing ethical standards and behaviour, and
v. Initiating corrective actions to improve strategy execution.
Thus, the specific activities in strategy implementation include- establishing annual objectives, devising policies, allocating resources, altering an existing organisational structure, restructuring and reengineering, revising reward and incentive plans, managing change, developing a strategy supportive culture, adopting production and operations processes, developing an effective human resource function, and if necessary downsizing.
What is the organisational arrangement for strategy execution? The answer is that strategy implementer needs a separate set of people different from those who formulate it. Generally in most large, multi-divisions or businesses organisation’s every employee participates in strategy implementation. The employees are Vice Presidents of functional areas (personnel, finance, production, marketing and R&D), directors of different divisions or business units with their subordinates implement plans.
At the same time unit heads, plant managers, and project managers are also involved in strategy implementation. It indicates that every operational manager down to first line supervisors directly and other employees indirectly involve themselves in strategy implementation.
Proper communication of strategy benefits to all operational managers and all employees of organisation is very important because it helps in getting their support for smooth strategy implementation. By communicating the benefits of strategy to employees one can make them feel that they are a part of the company, thereby make them committed the organisation.
Factors to be Considered in Strategy Implementation
The following factors to be considered in strategic implementation are:
Factor # 1. Allocation of Resources:
For effective implementation of the strategy, sufficient resources like financial, human, material, technology etc., are to be available in time. The resource configuration of the organization identifies and reflects the potential to strengthen existing competencies and develop new ones.
Resource allocation is concerned with both the identification of resource requirements and how those resources will be deployed to create the competencies needed to undertake the particular strategies. These competencies are usually created through allocating a mixture of resources to a particular activity and processes which link these activities together.
The task of resource allocation in an organization is particularly challenging because most large companies are active not in one line of business but in several. In addition, beneath the surface of most organizations are three kinds of core processes – a customer relationship process, a product innovation process and an infrastructure or operational process.
Customer relationship process is to find customers and build relationships with them. Product innovative process is to conceive of attractive new products and services and figure out how best to bring them to market. The role of infrastructure process is to build and manage facilities for high volume, repetitive operational tasks such as logistics and storage, manufacturing, communication etc.
Factor # 2. Communication of Strategy:
Strategic implementation is concerned with a number of people at various 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 organization should know what are the future plans for the organization, what changes are affecting the organization, why these changes or strategy, what are the objectives and implications etc.
It is essential to instill a feeling of belongingness to the organization. Absence of such communication would create a feeling of division in the employees causing morale and reduce in motivation and would also cause resistance to the strategy.
Proper communication of the strategy is an important requirement for successful implementation of the strategy. A clear understanding of the strategy gives purpose to the activities of each organization member. It allows the individual to link whatever task is at hand to the overall organizational 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 towards activities that count.
Factor # 3. Information System:
Information is the raw material and the input which are used to make decisions. Organizations gain a competitive advantage from information by providing the right information to the right person at the time. In the past decade, there have been significant advances in communications, software and computers.
These have opened entirely new possibilities of sharing knowledge and information rapidly and efficiently. Those organizations that have made investments in information technology, to provide its employees information useful to their jobs, for the most part have found that their investments have paid off handsomely.
Information technology has an extremely important role in implementation strategy. Data interpretation for implementation involves assessing whether an organization has missed milestones thresholds. The performance targets and identified critical success factors are set earlier in the strategic plan. While deciding if any negative variances have occurred may be relatively simple task, deciding what this data might mean may not be so simple.
Decision-makers must assess the extent and criticality of exceptions, an interpretational process heavily dependent on what they might consider justifying circumstances. The information system is not only restricted to the implementation but also in formulation of strategy. Information system provides required information to the managers at the right time in the right form for the relevant use which helps him in understanding and stimulating his actions.
i. Organizational Design:
Organizational design deals with structural aspects of organization. It aims at analyzing roles and relationships so that collective effort can be explicitly organized to achieve specific ends. The Design process leads to development of an organization. Structure consists of units and positions.
These are relationships involving exercise of authority and exchange of information between these units and positions. Thus, organization design may lead to the definition and description of a more or less formal structure. Organization design is a process of systematic and logical grouping of activities of the organization.
ii. Organization Change:
The true organization change implies the creation of imbalances in the extent pattern or situation. Adjustment among people, technology and structural setup is established when an organization operates for a long time. People adjust with their jobs, working conditions, colleagues, superiors etc.
Change can be reactive or proactive. A proactive change is necessarily to be planned to attempt to prepare anticipated future challenges. A reactive change may be an automatic response or a planned response to change taking place in the environment.
a. Analysis of present and future circumstances and environmental factors.
b. Analysis of company’s mission, business and strategic plans, objectives, goals and strategies.
c. Activities – Assessment of work being done and what needs to be done, if the company is to achieve its objective.
d. Decision to be taken across horizontal and vertical dimensions.
e. Relationships from the communications’ point of view, span of management, management levels etc.
f. Organization structure which includes grouping of activities, description, specification etc.
g. Job Structure – Job design, job analysis, description, specification etc.
h. Organization Climate – Working atmosphere of the company.
i. Management style which includes availability of human resource skills, knowledge and commitment.
Factor # 5. Organizational Structure:
Organizational structure not only affects strategy. It affects other factors too, i.e., environmental stability, workflow, technology, sire and life cycle, and corporate culture. Therefore, it is not surprising that there is an overriding importance given to the structure in the implementation strategy. With a structural framework in place, people working within a firm know how to interrelate their actions with the actions of others to support and execute the organization’s strategy.
Organizations are social entities that are goal directed, with deliberately structured activity systems, and with a link to the external environment. They create value for owners, customers, and employees by their activities. They bring together resources to accomplish specific goals, whether those goals are to put a man on the moon, sell lottery tickets, produce goods and services, or provide value to its customers. They organize the activities of the people to meet organizational objectives.
The structure of the organization determines three key components pertaining to organizing the activities of the people in the organization and their relationships with each other –
i. Designation of formal reporting relationships including number of levels of the hierarchy and span of control of managers and supervisors;
ii. Grouping of individuals into departments and of departments into the total organization; and
iii. Design of systems to ensure effective communication, coordination and integration across departments.
Organizational structure has become important because of the size, global spread, and complexity of the modern business firm. Expanding markets, new competitors, a proliferation of products, instant communications, and a fierce focus of asset values have made the old industrial corporation obsolete in many instances. Even in the case of a midsize company, management can’t oversee every employee. Authority and accountability must be distributed, systems of control and inspection implemented with incentives to encourage desired behaviour.
The main issue in designing organization structure is how to group tasks, functions and divisions; how to allocate authority and responsibility; and how to use integrating mechanisms to improve coordination between functions. Above all, the organization must infuse the corporation’s work with meaning, for thousands of its employees. It must be understood that the most important resource of an organization is its people. It is people who implement strategy.
Factor # 6. Organizational Systems:
Organizational structure provides the mechanisms for the fixing of authority and responsibility within the organization. The result is a framework organizational unit, such as departments and divisions that consists of many positions of authority. A structure is a means of subdividing the total authority and responsibility among different organizational units and positions.
Since the organization has to perform a set of tasks framed to achieve its objectives, a need arises to evolve systems that would bind the different units and positions so that the performance of activities takes place in a coordinated manner. These systems are called as Organizational Systems.
The major functional areas are production/operations, marketing, finance and accounting, and human resources. Each of these major areas is divided into subareas, for example, marketing is divided into sales promotion, physical distribution, sales volume, and so on. Similar is the case with other functional areas. Besides these functional areas, organisation’s general management factors are also taken into, consideration. Thus, in functional approach of organisational analysis, following factors are evaluated to identify strengths and weaknesses-
D. Human resources, and
E. General management.
Production / Operations processes are the mediating factors for converting raw materials into finished products. There are various factors which affect the internal operations of the organisation and these factors should be taken into account while appraising the organisation’s capabilities in these areas.
1. Allocation and Use of Resources:
The degree of an organisation’s success or failure depends on the degree of effective allocation and use of resources. Resources do not mean only money, building, and plant but also the scarce resources of management talent, capability, and technical skills. An organisation making well-balanced allocation and use of its resources is in a better position to face challenges from the environment.
The allocation and use of resources can be balanced by taking into account the need for various activities contributing to the objectives, their criticality, and resource requirements.
2. Rationalisation of Resources:
Another important aspect of using resources is their rationalisation. This problem is more important in the context of multiunit organisations. For example, a multiunit organisation may have many plants and offices with duplication of various efforts. The extent to which the duplication is avoided, the company becomes strong as cost of duplication is a burden on the organisation.
3. Locational Pattern:
Though locational pattern is affected by a large number of factors, both economic and noneconomic, it affects the operational efficiency of the organisation. Such locational pattern can be analysed both for plants as well as for administrative offices. The extent to which organisation’s plants and offices are located at favourable places, it stands to benefits and that is a strength for it.
For example, opening of plants in backward areas may offer various advantages because of incentives from the government, but opening of administrative offices may not offer the similar advantages. This is the reason why many companies go for backward areas for establishing production facilities but open offices in well-developed areas, for example, Fort area in Mumbai or Chowranghee area in Kolkata.
4. Production Capacity and Its Use:
The use of production capacity affects the profitability of the organisation. High use of production capacity is strength but a low use of this is a weakness because the organisation’s cost of production in this case may be very high.
5. Cost Structure:
The cost structure of the product affects the organisation’s profitability. If the cost of product is high, it is a weakness. Moreover, the extent to which cost cannot be controlled is also weakness of the organisation. Thus, low cost with high level of controllability is a strength and high cost with low level of controllability is weakness.
6. Cost Volume Profit Relationship:
While cost structure gives the general idea of high or low cost, cost volume profit relationship suggests the profitability of the organisation at various levels of production. If the relationship is such that it gives break even at high level of production with low margin of safety, it is weakness for the organisation, On the other hand, if break-even point is low with high margin of safety, it is strength for the organisation.
7. Operation Procedures:
Efficient and effective operation procedures like production design, scheduling, output, and quality control affect the internal efficiency of the organisation. As such, these are the strengths for the organisation, and opposite of these will be weakness because these will affect organisational efficiency adversely.
8. Raw Materials Availability:
The extent to which the raw materials are critical and scarce and are supplied from a very limited sources, the organisational functioning is adversely affected. In such a case, the organisation does not have any control or has very limited control over the supply of raw materials.
Hence, its dependence on the limited sources of supply of raw materials is a weakness. If the company is procuring its materials from well diversified sources and the materials are easily available indigenously, its dependence is less which is a strength for it.
9. Inventory Control System:
An efficient inventory control system which pinpoints on the various aspects of materials provides strength to the organisation because it can control and regulate the procurement of materials in such a way that its cost is minimum and there is no unnecessary hindrance in the production. A defective and non-existent inventory control system is a weakness.
10. Research and Development:
Research and development is an important area where management should concentrate because of two reasons. First technical collaboration with any foreign organisation lasts up to five years with an extension of three years in exceptional cases. The government stipulates that local organisations, should develop its R&D during this period.
Second, there are special tax benefits on the expenditure of R&D and products developed out of the organisation’s R&D efforts. In order to take the advantages, the organisation must take R&D activities and must evaluate as how these are contributing to the organisational product development.
R&D activities can be evaluated in terms of amount spent on them, number of products developed, or number of patents registered by inside R&D. A high score on these items is strength of the organisation.
11. Patent Rights:
Organisations holding certain patent rights under which they can use some well established brand names have certain advantages because they have not to incur any extra expenditure for promoting the brand.
Marketing factors are of prime importance for a business organisation as it relates itself to its environment through marketing functions. The managers should appraise the organisation in the light of various marketing factors taking into account how these factors are contributing or not contributing to the achievement of organisational objectives and how long they will continue to do so if the same position continues.
Prominent marketing factors taken for evaluation are as follows.
1. Competitive Competence:
Business organisations have to operate in a competitive field, except in the case of protective markets where markets are not defined by individual company or market factors but by nonmarket factors.
The organisation’s competitive competence can be appraised on the basis of trends in market shares for which the information can be made available from various outside sources as well as through the organisation’s own marketing research department. Apart from market shares, many other factors also go in determining the competitive competence as described below.
2. Product Mix:
Product mix decides the various sources of revenue to the organisation. This is true not only for a diversified organisation but even for a single class. If the revenue is coming from a single product or from very limited number of products for a diversified company, this may be its weakness.
3. Product Life Cycle:
Product life cycle is an attempt to recognise distinct stages in the sales history of the product. Corresponding to these stages are the various marketing opportunities and threats. Normally every product and brand has to pass through a life cycle: introduction stage, growth stage, maturity stage, and declining stage. Products at declining stage are the weak point for the organisation and adequate precaution must be taken.
4. Marketing Research:
Marketing research offers the information for taking various marketing decisions in the light of the environmental demand. The efficient and effective marketing research system is a strength for the organisation because it will enable to relate the organisation with its environment through suitable strategy.
5. Channel of Distribution:
An effective channel of distribution is a strength of the organisation because it not only distributes the products at the points where these are needed but also provides the feedback regarding the changes in the market forces.
6. Sales Force:
An effective and efficient sales force closed with key customers is a strength for the organisation because it may withstand any threat posed by the environment. However, sales force concentrating sales efforts to a few customers may be weakness.
Pricing is a factor which affects both sales as well as revenue to the organisation, particularly in price sensitive markets. Though there can be different pricing strategies in different markets and at different product life stages, these must match with the product and market.
8. Promotional Efforts:
Various promotional efforts affect the positioning of the products in the market. They also affect the brand images as well as the general image of the organization. Effective promotional efforts are a strength for the organisation and their absence a weakness.
Finance area deals primarily with raising, administering, and distributing financial resources to various activities so that a proper balance is maintained and the organisation achieves its objectives. Since the objective achievement is often expressed in monetary terms, the areas of finance and accounting have assumed added importance.
The extent to which the organisation has effective financial management and accounting system, it is strong.
The strengths and weaknesses in the areas of finance and accounting can be ascertained in the following ways:
1. Capital Cost:
The various sources through which the organisation raises its financial funds determine the capital cost. A proper balancing of various sources of financing ensures that the overall cost of capital for the organisation is low. While determining the sources for funds, various factors can be taken into account, such as debt/equity norm, capital market position, profitability of organisation, and various conditions attached with funds. A low capital cost is a strength and high capital cost is weakness.
2. Capital Structure:
Capital structure of an organisation determines the scope for flexibility in raising additional capital needed, maintaining financial leverage, and maintaining minimum capital cost. An effective capital structure is strength which provides for greater flexibility for raising funds and appropriating various sources of funds so as to take advantages of trading on equity.
3. Financial Planning:
Financial planning is the determination, in advance, of the quantum of capital requirement and its forms. Thus, it determines what types of assets will be required to run the business and how much capital will be required for this, time when the capital is required, and from where the necessary capital will be available. If the organisation plans all these things well in advance, it stands to benefit and thus, it is its strength.
4. Tax Benefits:
Tax benefits are partly the result of efficient financial planning and partly the result of environmental variables, particularly government policy. If the organisation is planning its investment pattern properly, it takes the advantages of tax benefits under various provisions.
5. Relationship with Shareholders and Financiers:
The type of relationship between the company and its shareholders and financiers determines the type of risk that the company can take. If such relationship is cordial, the company can go for smooth working even in case of adversity and can undertake major policy changes. The role of shareholders and financiers is quite important in formulating and implementing these policies because such actions can be taken only after their approval.
6. Accounting Procedures:
Efficient accounting procedures and systems for costing, budgeting, profit planning, and auditing not only determine that there Is no. misappropriation of funds but also provide feedback for further course of action.
D. Human Resources:
In organisational analysis, often, human resources are not given adequate importance because of the perception that these resources do not contribute to organisational success. This perception was valid in pre-liberalised era, when most of the organisations were operating in protected markets. However, post liberalisation, the competitive scenario has changed from sellers’ market to buyers’ market in which organisations are using human .resources as a means for developing competitive advantage.
In analysing human resources, following factors are taken into consideration:
1. Quality of Personnel:
Quality of personnel employed by an organisation is a key determinant of its success. The quality of personnel includes their knowledge, skills, attitudes, and motivation to work. If all these characteristics are favourable, these are strengths as these can be used as a means for translating physical and financial resources into outputs in a better way.
2. Personnel Turnover and Absenteeism:
Personnel turnover, particularly at managerial and technical levels, is a big problem for organisations in today’s context. In knowledge based industries like information technology, consultancy, etc., this problem is even more acute. Since organisations build their strategies around the personnel available at present or available in future, retention of personnel is a significant issue. To the extent, an organisation is able to retain its key personnel, it has strength. Coupled with personnel turnover is personnel absenteeism.
3. Industrial Relations:
Industrial relations is a basic element for the success of the organisation particularly in the age of frequent industrial relations problems. Better industrial relations is strength for the organisation. The state of industrial relations can be measured taking into account the breakdown in work because of employee agitation or noncooperation, number of industrial disputes, number of grievances from the employees, employee absenteeism and turnover, and their willingness to accept change in the organisation.
E. General Management:
Various factors discussed above are, no doubt, important but they cannot work welI without the support of suitable leadership and various management practices. These are the integrating force of an organisation. Therefore, strategists should analyse these factors to identify strengths and weaknesses.
Following factors are relevant in this category:
Leadership is the process of winning enthusiastic support of personnel in an organisation. It is one of the major determinants of organisational success. Most of the organisations which have achieved high success are characterised by good leadership, and they place emphasis on transformational leadership as against transactional leadership.
A transformational leader inspires his followers through high vision and energy. A transactional leader determines what subordinates need to do to achieve objectives, classifies those requirements, and helps the subordinates become confident that they can reach objectives.
2. Top Management Constitution and Philosophy:
Top management contributes the lifeblood for the total organisation. Its constitution and philosophy are strong determinants of organisational success. Organisation characterised by age old and traditional management is less likely to succeed in the environment of growing competition. Enterprising approach of top management is also an important factor determining the growth of the organisation.
3. Organisational Image and Prestige:
Organisational image and prestige affect the organisational working by providing it various facilities and constraints better image and prestige providing facilities and low image and prestige providing constraints. The measurement of corporate image and prestige, however, is quite difficult because of the absence of any quantitative criteria
4. Organisational Climate:
Organisational climate is the internal set of attributes specific to an organisation that may be induced from the way the organisation deals with its members. Thus, organisation members relationship is built upon the basis of how the former treats the latter. Organisational climate can be measured by taking into account how its members react to various actions, how willingly they cooperate with it in achieving its objectives, and how satisfied they are with the organisation.
5. Management Practices:
The extent to which the organisation follows various management practices affects its success. High scores on managerial practices in respect to strategic planning, objective control and evaluation system, management information system, and manpower planning and succession plan are strengths of the organisation.
6. Organisation Structure:
Organisation structure is network of internal relationship through which individuals interact among themselves in the context of organisational matters. A suitable organisation structure is strength for the organisation. The suitability of organisation structure is not universal phenomenon but is determined by the organisation’s environment, technology, size, and people. Thus, a suitable organisation structure is one, which meets the demands of all these factors.
7. Organisational External Relationships:
The organisation has to work in environment where large number of factors exist. These factors affect the organisational operations by offering facilities and constraints to it. The extent to which the organisation builds relationships with the factors offering such facilities and constraints, including government and other regulatory bodies, its success or failure is determined.
Role of Manager in Strategy Implementation
Managers have a major role to play in deciding what strategies are to be adopted as well as their mode of implementation by exerting their power and influence. They can also use such power and influence to manage successfully the change required as part of new strategic initiatives.
Prof. Miller and Prof. Dess have listed the following five factors that influence the day-today working of an organisation and its outcome (be it in relation to development of strategy or the implementation of the same):
a. Acts of authority (which are based on position-related power) actions having ‘political’ implications.
b. Acts requiring negotiation.
c. Nature of the communication made.
d. Acting as a role model.
All of the above five act as a powerful lever for formulating and implementing strategy, including management of change. It is important to understand the role of each individual manager from this perspective because, even though the team and organisation are critical to the survival and growth of a company, it is the actions taken by each individual manager which ultimately determine the final outcome. These actions are not limited just to the development of a bold vision or a grand plan; rather, there are numerous managerial acts and deeds that have to be taken routinely and followed up relentlessly in order to sustain an interest and a momentum, and also nurture new initiatives.
The power and influence of managers are central to strategy implementation since through these they influence others’ behaviour, change the course of action and overcome resistance. Though there is a general tendency to disdain power, it is essential for implementing change and making progress. Conversely, organisations suffer in many cases just because the people in powerful positions fail to exercise the power required to initiate and sustain actions and translate intentions to reality. In other words, power-which really acts as energy-is an important requisite for successful implementation.
Managers derive power from institutional sources as well as from their individual characteristics.
Three key sources of power can be classified as:
i. Formal authority vested by the organisation;
ii. Personal competence of the manager;
iii. Attractiveness of manager’s personality, enabling him to do negotiation, political maneuvering and communication in a manner that influences others to abide by his ways.
The above sources of power can be used either explicitly or implicitly by a manager depending on the context and also on his style of working. Miller and Dess have provided the following typology which connects the sources of power (viz., institutional and individual) with the two approaches available to use the power (viz., explicit or implicit):
(a) Source institutional, use explicit-called ‘commanding’, this gets expressed through the instructions given or the changes made in the structure and systems.
(b) Source institutional; use implicit-called ‘shaping’, this gets expressed through efforts in changing culture, modifying the agenda, etc.
(c) Source individual; use explicit-called ‘persuading’, this involves negotiation and communication, using personal expertise:
(d) Source individual; use implicit-called ‘inducing’, it gets manifested through personal charisma, role modeling and the way organizational politics is dealt with.
Two important factors of the expertise of any manager in successfully formulating and implementing strategy are his negotiation and communication skills. Both these skills are constantly in demand. In negotiation, a successful manager’s principal objective is always to achieve a win-win situation based on a fair outcome that is beneficial to both sides (can be a supplier or customer, or union representatives or even own officers or staff) and that helps improve relationships.
Some key considerations for any result-oriented, relationship-based negotiations are:
(i) Emphasis on problems, and not on personalities;
(i) Avoid negotiating on the basis of zero-sum game (called position based negotiation) and instead focus on collaborative problem solving;
(iii) The thrust should be on creating advantages for both parties;
(iv) Be aware of cost of failure to come to an agreed settlement or for not having any agreement at all.
Like negotiation, the ability to communicate is an important managerial skill for the successful formulation and implementation of strategy. To be successful in communication and also use the same as a source of power, two important requirements are-what a manager says and how he listens Of the two, listening is extremely critical since only through this process can the listener have an understanding of what the other persons are feeling or thinking. Listening has to be engaged, involved and sincere and should not be evaluative or judgemental.
Any tendency to find flaws while listening to others hampers free communication and leads to debate, argument and hardened feelings. If a manager learns to avoid doing evaluation while listening, he will be able to see the other person’s viewpoint and feelings and also understand the latter’s perspective.
Implementing Kaizen (Ten Ground Rules of Kaizen)
Kaizen is yet another tool that can come in handy for operationalizing strategy in an organization.
It demonstrates the dimensions of human efforts to achieve perfection which is always elusive and changing. This idea has been enshrined in the concept of Kaizen, which means ‘continuous improvement’ in Japanese. Kaizen is a challenge which always emphasizes that there is room for improvement in any activity, be it operation, process, or system.
The ten ground rules of Kaizen philosophy are as follows:
1. Don’t try to justify the past—challenge fixed ideas.
2. Be positive—think how things CAN be done not why they CAN’T be done.
3. Use data, not pet theories.
4. Use wisdom not money.
5. Work smarter not harder.
6. Set high standards.
7. Correct failures immediately—70 per cent now is better than 100 per cent never.
8. Lead by example.
9. A team is better than one expert—involve people.
10. Identify the root cause.
Modern Kaizen developments were tried out in Toyota Motor Corporation (Toyota) in a systematic manner. The Toyota production system, in a sense, is applicable to a shop floor function and not to business processes. However, these principles have been adopted when people deal with multiple products simultaneously. Most processes can be identified as a ‘knowledge work job shop’ with multiple activity centres and integrated network of queues.
Customer focus is always at the centre where value addition is determined on the basis of customers’ perspective and how much every process adds value to the customer. Any activity or component or anything that does not add value to the customer is considered a waste. Such non-value adding activity is reduced or eliminated. Manipulation of redundant systems through inspection and approval can be rationalized also.
These improvements can be sequentially performed by following these standardized steps:
1. Identify the boundaries of the business process.
2. Who is the customer?
3. What is the value added to the customer?
4. Identify improvements required.
5. Collect data and measure objectives.
6. Identify process steps.
7. Identify process flow.
8. Map current status.
9. Identify value adding and non-value adding activities.
10. Eliminate non-value adding activities.
11. Track results of improvements.
Typical results from business process Kaizen workshops indicates a 40-60 per cent reduction in lead time, 10-15 per cent productivity improvement, 10-20 per cent reduction in works, and improved customer satisfaction.
Optimization of a total title time of operation in any factory has been one of the great successes of Kaizen concept. Total cycle time has been broken up into setup time, process time, move time and delay time. All these activities are then scanned for improvements either through elimination of non-value adding activities or application of new technology or improving skills. As there is no particular limit to improvement in these areas and evolution of new technologies continuous, improvements are always possible.
In addition, Kaizen should involve living in the present as an improvement on the past, which summarizes the concept as a functional strategy that has been of immense value.
The process of strategy formulation is referred to in current literature ‘strategic planning’ and is distinguished from ‘Management Planning’ and control for strategy implementation. Strategic planning is defined as “the process of deciding on the objectives of the organization on the changes in the objectives on the resources used to attain there objectives, and on the policies that are to govern the acquisition use and disposition of these resources”.
It involves matching of the external economic, political and social environments to corporate capabilities and setting the long term objectives and goals of the organization as well as the policies and strategies to achieve the objectives.
As Anthony has put it, “Strategic planning is a process having to do with the formulation of long range strategic plans and policies that determine or change the character or direction of the organization. In an industrial company, this process includes planning that affects the objectives of the company, the acquisition and disposition of major facilities, divisions or subsidiaries, policies of all types including policies as to management control and other processes, the markets they serve and distribution channels for survey them, the organization structure, research and development of new product times, sources of new permanent capital and divided policy and so on.”
As distinguished from strategic planning the system of management planning and control is associated with the ongoing administration of an enterprise. It is the process by which managers assume that resources are obtained and used effectively and efficiently in the accomplishment of the organization’s objectives.
It accepts the corporate objectives evolved by strategic planning as ‘given’ and attempts to relate the organizational resources to the objectives in order to arrive at a time phased statement of the corporate goals and objectives and operational plans.
Thus, the management planning and control system may be regarded as the medium through which the strategic objectives, policies and meaningful goals and plans are translated into more specific, measurable, attainable and meaningful goals and plans. Conceptually, it is a part of the total concept of strategies – a segment of the strategy implementation phase.
The management planning system involves the preparation of annual plans formalizing the overall corporate goals and objectives in terms of sales, costs, margins, profits, and return on capital, broken up as necessary, in relation to products, operations, and geographic location of the activities.
It may also involve the development of longer term (say- five-yearly) ‘action’ plans defining the possible ranges of sales and market share, costs, profits, capital expenditure expected returns on investment, and the operational plans in terms of money, men and materials which would be required over the time span in order to achieve the pre-determined corporate objectives.
The formal planning system should ensure that the executives with participation from managers at lower levels, break down the institutional objectives into functional and divisional objectives, thus translating strategy consideration into management consideration for specific time periods. The planning and control system to be effective requires the organization structure to be such that it defining authority and responsibility in terms of jobs to be accomplished.
For effective implementation of strategy, the essentially elements of the planning and control system should consist of:
(a) An appropriate organization structure that defines authority and responsibility in terms of the job to be accomplished.
(b) Goals and targets of organizational units based on the input- output relationship in the relevant operations.
(c) A reporting system that can quickly diagnose deviation from the desired results particularly in those areas which represents key variables in operations.
(d) A follow-up mechanism to ensure prompt remedial action by proper analysis review and coordinated action
(e) Participation and support of all levels of management and supervisory personnel.
The planning device commonly used to implement strategy is the budget. As an instrument for putting plans and policies into effect the budget enables management to formalize goals and targets in quantitative/financial terms. Moreover, budgeting requires the participation of managers at different levels in the development of plans and policies.
A motivational force is this built into the process of planning and control, which is a vital necessity for successful, implementation of the strategy. Its usefulness not withstanding budgeting has also its inherent limitations. But on balance many of the limitations may be found to lie not in the budget or the process of budgeting but in the lack of management awareness of the limitation, or the improper use of budgets.
Top 5 Approaches of Strategy Implementation
Effective implementation of strategy needs, first of all, a clear and appropriate approach to the implementation. It should be based on such factors as an assessment of change, structure, and culture variables.
Based on their research on management practices in a number of companies, Brodwin and Bourgeois have identified five fundamental approaches to implementing strategies. These five approaches are the Commander approach, the Organisational Change approach, the Collaborative approach, the Cultural approach, and the Crescive approach. These approaches range from simply asking the subordinates to implement the strategy that has been formulated to empowering the subordinates to formulate and implement sound strategies on their own.
1. Commander Approach:
The Commander approach, as the term suggests, is a top-down approach. The strategy is developed by the top management and it is passed along to subordinates with instructions to execute it. The top management takes a back seat in implementing the strategy but oversees it.
An important limitation of this approach is that as those who implement the strategy are not involved in the development of the strategy. They may not have the required emotional commitment to see the strategy successful. This lack of self-motivation would affect the utilisation of their full potential and the realisation of the strategic objectives. The Commander approach considers only the economic factors and ignores the political, social and behavioural dimensions of strategy development and implementation.
This approach, however, is very common, particularly in small companies and companies within stable industries. It is suggested that this approach works best when the strategy to be implemented requires relatively little change.
Further, this approach is suitable when the strategy is to be formulated confidentially or quickly or when the behavioural aspects do not favour other approaches.
2. Organisational Change Approach:
Under the Organisational Change approach (or simply the Change approach), strategy formulation resembles the Commander approach but differs substantially in the approach to implementation of the strategy.
The Organisational Change approach, as the term indicates, emphasises on bringing about the required organisational change to implement a strategy.
Many strategies which are substantially different from the old one require significant changes in the organisational structure and staffing to focus attention on the organisation’s new priorities, planning and control systems, etc. This underscores the importance of the Organisational Change approach to strategy implementation.
It is pointed out that as the Change approach employs powerful behavioural tools, it is often more effective than the Commander approach, and it can implement more difficult strategies.
The Change approach, however, has several limitations. This approach considers the economic and political factors but does not pay enough attention to the social and behavioural aspects. It has the same motivational problems as under the Commander approach as the strategy is dictated top down. Further, sometimes, organisational changes take time and this approach can backfire in uncertain or rapidly changing conditions.
3. Collaborative Approach:
The Collaborative approach views strategy development as a collective endeavour that should consider the views of all the managers in the organisation who can contribute to this vital task.
Under this approach, brainstorming sessions are usually employed to formulate strategy and implementation tactics. Many companies have found this a very useful approach.
The Collaborative approach has several advantages. This approach, in which the goals and strategies are negotiated among the top team, overcomes two key limitations of the Commander and Change approaches. By providing a forum to share and evaluate information and views contributed by various managers closer to operations, it presents a better strategy development process. It involves economic, social and political dimensions. The involvement of different sections in the strategy formulation enhances the commitment to its implementation.
The Collaborative approach, however, has several limitations. This approach is often time- consuming. If some of those who participated in the strategy negotiation feel that there views were not heeded, they may become emotionally detached with the strategy. A negotiated strategy may sometimes turn out to be a compromise rather than the best strategy.
In some other cases, vested interests of the dominant members or the majority of the team may give rise to a skewed strategy, sacrificing the proper strategic perspective. It is pointed out that sometimes a negotiated strategy is likely to be less visionary and more conservative than one developed by a Commander approach.
4. Cultural Approach:
The Cultural approach extends the democratic element of the Collaborative approach further to include lower levels in the organisation.
In this approach, the organisational vision and mission are well communicated to the employees so that they become the guideposts to develop strategies. The employees are empowered and encouraged to design their own work activities in pursuit of the mission. Once the strategy is formulated, the manager plays the role of coach, giving general directions but encouraging individual decision-making on the operating details of executing the strategy.
For the implementation of the strategy, the Cultural approach uses what may be called third order control techniques, i.e., it seeks to influence behaviour by shaping the norms, values, symbols, and beliefs on which managers and employees base day-to-day decisions. (First-order control is direct supervision whereas second-order control involves using rules, procedures, and organisational structure to guide behaviour). The third-order control is regarded as more subtle and, potentially, more powerful.
“The Cultural approach appears to work best in organisations that have sufficient resources to absorb the cost of building and maintaining supportive value systems. Often, these are high- growth firms in high-technology industries.”
The Cultural approach has several advantages. “It partially breaks down the barriers between the thinkers and doers, because each member of the organisation can be involved to some degree” in both formulation and implementation of strategy. As people at different levels are involved in the development of the strategy, they should be expected to be dedicated to the implementation of the strategy.
The Cultural approach too has its share of limitations. People at lower levels may not have the perspective vision, knowledge and expertise to develop strategies. Developing these qualities is time-consuming and very difficult.
Further, “companies with excessively strong cultures often suppress deviance, discourage attempts to change, and foster homogeneity and inbred thinking. To handle this conformist tendency, some companies (such as – IBM, Xerox, and GM) have segregated their on-going research units and their new product development efforts, sometimes placing them in physical locations far enough from other units to shield them from the corporation’s dominant culture.”
5. Crescive Approach:
The Crescive approach addresses strategy formulation and strategy implementation simultaneously. (Crescive means increasing or growing.)
The Crescive approach is a bottom-up approach — instead of pushing the strategy downward from top management or a strategy group, it moves upward from the doers (salespeople, engineers, production workers, etc.,) and lower middle-level managers and supervisors. Thus, under this approach, instead of the top management taking on itself the entire task of developing the strategy, the subordinates are empowered to develop and implement sound strategies on their own.
Goals are stated loosely from top and refined from bottom. “The top management team shapes the employees’ premises, that is, the employees’ notions of what would constitute supportable strategic projects and functions more as a judge evaluating the proposals rather than as a master strategist.”
Of all the approaches, the Crescive approach considers the broadest set of factors – economic, social, political and behavioural.
According to Brodwin and Bourgeois, the Crescive approach is suitable for large, complex, diversified organisations where the CEO cannot know and understand all the strategic and operating forces that affect each division.
The Crescive approach has certain merits. It has a down-to-earth orientation. Equally important is the fact that because of their involvement in the formulation of the strategy, the employees will be committed to implement the strategy very earnestly. Further, this approach would help increase the motivation and morale and to realise the potentials of people at different levels.
Commonly Used Strategy Implementation Techniques
The process of implementing strategic change and doing so in such a way that it endures is one that calls for intense, persistent and dedicated effort in the context of close collaboration between company personnel and any external consultants involved.
The actual business of redrawing organization charts rewriting jobs description drawing up a new incentive scheme or redesigning the performance appraisal forms is a relatively small, albeit vital part of the process. The greater part lies in bringing about change in people’s actual behavior and in the values, beliefs and attitudes underlie the behavior.
The following are some of the most commonly used implementation techniques:
1. Direct face to face communication involving, where feasible the entire workforce, but in groups of manageable size so as to facilitate exchange of viewpoints and provide opportunities for feedback.
2. Role modeling here, again, leadership comes in, as top management sets an example by behaving in ways that are consistent with the changed standards, practices and behaviors that the new strategy call for such phrases as ‘putting customers first’ come to life if the top team are seen to be doing so themselves.
3. Written communication – a whole arsenal of newsletter, posters, stickers, badges etc., all carrying the messages associated with the reasons for change, help to reinforce motivation to accept the need and act accordingly.
4. Appropriate human resources policies, which support the desired changes – there can include-
i. Revised performance criteria and methods of performance appraisal
ii. Revised remuneration systems
iii. Special schemes for rewarding and recognizing appropriate behavior
iv. Investment in training – there will almost always need to be a very substantial investment in training, not simply to import new skills but also to influence attitudes and values.
The importance of symbolism lies in the way it provides a clear message of a break with the past, such action as moving to open – plan offices, abolishing reserved parking places, moving to single states catering arrangements a abolishing such traditional job titles as ‘supervisor’ can have a disproportionate impact in creating a climate that is receptive to change. In recent years a number of companies have gone so far as to make a name change although not always successfully as in the case of consignees.
Strategy Implementation in Projects
Projects in themselves are unique and time-bound. As such, strategy implementation in each project differs in content but the core approach remains the same.
A project can be defined as a ‘non-repetitive activity’. This needs augmenting by other characteristics.
i. It is goal oriented – it is being pursued with a particular and or goal in mind;
ii. It has particular set of constraints – usually centered around time and resource;
iii. The output of the product is measurable;
iv. Something has been changed through the project being carried out.
For example, purchasing machinery is a project, the machinery is purchased for manufacturing products at less cost and at high quality, the output of machinery is measurable in units. But purchasing and installing huge machinery requires huge investment and time consuming.
Project management begins with project planning phase, and ends with project review and monitoring phase. Goals or objectives of a project are developed at the project planning stages that are based on the strategies to be adopted. Generally, any new project management involves five standard phases’ viz., planning, analysis, selection, financing, implementation and review. Project implementation stage involves setting up of manufacturing facilities; like project and engineering design, negotiations and contracting, construction, training and plant commissioning.
For example, a company is diversifying into unrelated area of business, then it has to follow project management stages. Project implementation is complex, time consuming and risky when compared to formulation of project. Whatever level of complexity and risk involved in a project implementation, firm should not delay implementation process that would lead to substantial cost over runs.
The best examples for this are government projects, are government sanctions a project which is supposed to be completed in a five years period and at a cost of some lakhs or crores. Due to political problems most of government projects do not complete within a given period, leading to cost over runs. Only effective formulation of project with the help of network techniques and use of principle responsibility accounting project implementation can be done at a reasonable cost.
Project implementation is putting project plan which is there on paper into action. It cannot be done just having plans, programmes, projects, budgets unless they are approved by the concerned government agency, whether it may be state government or central government, sometimes permission is required from both. Procedural framework comprises of a good number of legislative enactments, and administrative orders apart from policy guidelines released by the concerned government from time to time.
The prime and common regulatory elements of procedures implementation are:
i. Formation of company.
ii. Licensing procedures (if it is coming under licensing category of companies).
iii. Fulfillment of SEBI guidelines and requirements.
iv. Fulfillment of FEMA requirements (if dealing in foreign exchange).
v. Import and export requirements.
vi. Obtaining patents and trademarks (if developed any new product and producing products under another company licence respectively).
vii. Fulfillment of labour legislation requirements.
viii. Obtaining permission from Environmental Protection and Pollution Control Board.
The above listed are the prime rules/regulations/procedures to be followed. Due to liberalisation, privatisation and globalisation many procedures are liberalised (simplified), but still there are some procedures need to be approved by government. Let us discuss them in brief.
i. Formation of Company:
It is governed by the provisions of the Companies Act, 1956. Promotion of company involves, promotion, registration of company with registrar of companies (ROCs) and flotation of required capital.
ii. Licensing Procedures:
License is a written permission from the government to a company to manufacture a specified products included in the schedule. A firm need to be applied to Industries (Development and Regulation) Act, 1951 (IDRA) for licence. Government grants license under Sec.30 of the IDRA. In the past 1991 liberalisation licensing requirements abolished for many categories of companies, except a few (security, defence, environmental concern etc.).
iii. SEBI Requirements:
The Security Exchange Board of India, 1992, replaces the Capital Issues Control Act, 1956, and it is dealing with capital markets. SEBI is promoted to protect the interests of investors and to promote the development of securities market and to regulate securities market. SEBI has comprehensive powers in Indian Capital market. For example, IPOs, mergers, takeover, acquisition and almost all regulatory activities in security market. Any manager who is taking a decision needs to get approval from SEBI.
iv. FEMA Requirements:
Any firm which is planning to deal with foreign supplier or consumer need to fulfill certain procedures under Foreign Exchange Management Act, 1999 (replaced FERA Act, 1973). The main objective of FEMA is to consolidate and amend the law relating to foreign exchange with a view to facilitate external trade. Put in simple words any firm that is dealing with foreigners it has to fulfill the FEMA provisions concerned to the transaction.
v. EXIM Policy Requirements:
Export and import requirements need to be fulfilled in strategy implementation phase. Any firm which is planning to import raw materials or input, or fixed assets and planning export goods or provides services to foreigners, it is under the Exim policy regulations. So firm has to complete any such procedures are need to be fulfilled for exporting or importing assets or products.
vi. Patents and Trademark Requirements:
LPG increased competition. In the competitive era patents, trademarks, copyright places a crucial role in market share. Any company which has developed any innovative product or process can obtain patents against it under Patents Act, 1970, and the Patents Rules, 1972. Section 47 of the Act confers patents to the patentee if eligible.
Any firm that is planning produce products or provides services under some foreign company brand name, it has to get trademarks. Thus, any business strategy that involves in any of patent, copyright, trademark and design need to be obtained permission.
Another important aspect of strategy implementation is resource allocation. However good a strategy is, its effectiveness is proven only when it is implemented. Implementation requires actionable agenda which in turn require allocation of resources. A resource is a physical or virtual entity of limited availability, which needs to be consumed to produce a product or service for the benefit of the customer. The types of resources are natural resources, human resources, and process resources.
i. Natural Resources:
These can be renewable as well as non-renewable resources. The non-renewable ones include minerals and fossils which form the raw materials for manufacturing industry. Depletion of these resources looms large and allocation of these resources becomes very important to conserve the available resources over a longer period.
ii. Human Resources:
Human beings are also considered resources because they have the capacity to convert raw materials into valuable products. Human resources can also be said to include the skills, energies, talents, abilities, and knowledge that are utilized in the conversion of raw materials into goods or for offering services.
iii. Process Resources:
These are both tangible and intangible. The tangible resources include plant and machinery, infrastructure such as power, and information technology equipment, intangible resources encompass technical know-how, brands and patents. As these resources may not always be consumed in the original form, they may have to be processed and developed. Again the resources are not available at a single source and are spread randomly over the globe. They also are subject to depletion and obsolescence in the case of intangible resources. Human resource allocation also becomes extremely important in aiding strategy implementation.
Resources need to be identified and acquired at the outset before being allocated to various functions to achieve the organization’s purpose. Resource allocation, therefore, should be such as to create a sustainable competitive advantage for the organization.
Relationship between Strategy Formulation and Implementation
The relationship between strategy formulation and implementation can best be described by their interdependence. These have been divided primarily from the point of view of orderly study as well as the skill requirements for these two aspects of strategic management.
The requirement of strategy formulation is primarily conceptual and analytical skills while that of implementation is administrative skills. But in real life, the processes of formulation and implementation are intertwined. Both can be thought of reiterative in the sense that both are affected by each other. For example, the strategy is formulated in a particular environment which is dynamic.
The feedback from the operations, a result of strategy implementations, gives notices of the changing environmental factors to which strategy should be adjusted. Thus this is on-going process which should be seen in continuity rather than in discrete form. The formulation of strategy does not end where its implementation begins; both should be taken as a continuous process.
The interdependence of formulation and implementation of strategy does not, however, mean that managers should not distinguish between the two. While interdependence helps management to take corrective action in the light of the feedback given by the implementation, the distinction between the two helps in putting right perspective on organisational resources, both human and physical.
Strategy formulation should not be assigned to management below certain level because of its dependence on contingent factors; implementation can be assigned to this level of management. This is possible because once the overall strategic decisions are made, detailed implementation plans can be developed for the various functional areas of operations. Thus various levels of management come into the picture of strategic management.
When the strategy is put into action through the process of development of internal plans, the feedback mechanism emphasises the need to continually assess implementation of strategy and organisational performance in order to determine any change required in the strategy. Thus, those who are responsible for strategy formulation cannot be relieved from the task of its implementation.
Difference between Strategy Formulation and Strategy Implementation
Strategy implementation is considered as a more difficult process as compared to strategy formulation. The points of differences between strategy formulation and strategy implementation.
Difference between Strategy Formulation and Strategy Implementation:
1. Involves strategic planning about organizational goals
2. Refers to an intellectual process
3. Requires analytical and intuitive skills
4. Involves coordination among the top management; thus, requires few individuals.
1. Involves the execution of strategic planning
2. Refers to an operational process
3. Requires motivational and leadership skills
4. Involves the coordination among the top, middle, and lower management, thus; requires many individuals.
6 Behavioural Issues for Strategy Implementation
Behavioural implementation deals with those aspects of strategy implementation that have impact on the people in an organization. Since an organization is a deliberate and purposive entity of human beings, the activities and behaviour of its members need to be directed in a specified way. Any departure from this way leads to inefficiency in the organization and, consequent, failure of strategy.
There are six behavioural issues relevant for strategy implementation:
2. Organizational culture.
3. Values, ideologies, and ethics.
4. Social responsibility.
5. Corporate governance.
6. Organizational politics.
However, our objective will not be to elaborate underlying theories in these issues but how these are relevant for strategy implementation.
Leadership is basically the ability to persuade others to seek defined objectives willingly and enthusiastically. A manager can get an intended work accomplished by his subordinates in the organization in two ways- by exercising authority vested in him or by winning support of his subordinates. Out of these, the second approach is better because it brings people to work enthusiastically and their contributions would be more than the first approach in which people use about 60-70 per cent of their ability in performing work.
That is why Stephen Covey, a management consultant, has observed that “while producers and managers are important, but leaders are vital to lasting organizational success.” Thus, every forward- looking organization needs leadership, more particularly strategic leadership. Before going through the details of role of leadership in strategy implementation, it is desirable to see what strategic leadership is.
2. Organizational Culture:
Organizational culture is another element which affects strategy implementation as it provides a framework within which the behaviour of organizational members takes place. Though there have been differing views about exact concept of organizational culture, a consensus has emerged in the form that it is a system of shared meaning. O’Reilly has defined organizational culture in a precise manner. Accordingly, “Organizational culture is the set of assumptions, beliefs, values, and norms that are shared by an organization’s members.”
Thus, organizational culture is a set of characteristics that are commonly shared by people in the organization. Such characteristics may be in the form of assumptions, beliefs, values, and norms which are known as abstract elements of the culture; or externally-oriented characteristics like products, buildings, dress, etc. which are known as material elements of the culture.
3. Values, Ideologies, and Ethics:
Values, ideologies, and ethics affect the way in which a strategy will be implemented by an organization. These three elements are the major determinants of individual behaviour, and since an organization is a collectivity of individuals, hence total organizational behaviour.
Values are convictions and a framework of philosophy of an individual on the basis of which he judges what is good or bad. Rokeach, a noted socio-psychologist, has defined values as “global beliefs that guide actions and judgements across a variety of situations.” He further says, “Values represent basic convictions that a-specific mode of conduct (for end-state of existence) is personally or socially preferable to an opposite mode of conduct (or end-state of existence).”
He has classified values into two categories- terminal and instrumental. Terminal values, also known as end values, reflect what a person is ultimately striving to achieve, e.g., comfortable life, family security, self-respect, achievement, etc. Instrumental values, also known as means values, relate to means for achieving ends, e.g., courage, honesty, imagination, etc. Individuals differ in holding terminal values, at least in the context of degrees.
Similarly, they may differ in respect of instrumental values for achieving a particular terminal value. Though values are generally of enduring nature, an individual adapts new values and refines the old ones in the light of new knowledge and experience as he grows.
In a simple way, an ideology is an organised collection of ideas. The American Heritage Dictionary has defined ideology as “the body of ideas reflecting the social needs and aspirations of an individual, a group, a class, a culture.” In organizational context, Collins and Porras state that a core ideology is made up of a set of core values and a purpose that drive an individual or organization forward, a set of principles that guide them to succeed through tough times.
Core values are an organization’s essential and enduring tenets—a small set of general guiding principles not to be compromised for financial gain or short-term expediency. Purpose is an organization’s fundamental reasons for existence beyond just making money. The core ideologies of an organization have some sort of permanency and are not subject to change even in adverse situations. Thus, the connotation of ideologies is broader than that of values though values provide foundation for ideologies.
Ethics may be thought of in terms of a mass moral principles or set of values about what conduct ought to be. Thus, it specifies what is good or bad, right or wrong from social point of view. Business ethics relates to the behaviour of businessmen in business situation. Business ethics operates as a system of values and “is concerned primarily with the relationship of business goals and techniques to satisfy human ends.”
Business ethics generates from – (a) value-forming institutions, (b) organizational values and goals, (c) peers and colleagues, (d) work and career, and (e) professional code of conduct.
Present-day managers are increasingly concerned with social issues that they and their organizations are facing. This is happening throughout the world, and India is no exception. Though there have been arguments in the past against social responsibility of business organizations as well as in its favour, a consensus has emerged that it is essential for long-term survival of organizations.
Organizations exist within a society. Since the society is a broader framework within which organizations operate, there are many social issues which impinge on the operation of the organizations. This is the reason why most of the organizations include social issues in their objectives. Social responsibility refers to an organization’s decisions and actions taken to reasons at least partially beyond its direct economic interest. Thus, an organization has to look at fulfilling the requirements of various interest groups – shareholders, workers, customers, suppliers, government, and society.
While implementing a strategy, an organization has two options. First, it may overlook social issues involved in strategy. However, this is likely to be counter-productive in the long run. Second, the organization may operationalise social responsibility while implementing its strategy. This latter option is more desirable. Therefore, let us discuss how an organization may operationalise social responsibility.
Once the organization accepts that it has social responsibility to discharge, the issues come-what social activities the organization should undertake, how much to do, and how to inject social view into decision-making process.
5. Corporate Governance:
Corporate governance has very high relevance in strategy implementation as every organization has to follow certain management practices in accordance to its own prescriptions or imposed externally. Corporate governance is a newly introduced system for managing a company in the best interest of all its stakeholders. It is a system by which companies are directed and controlled based on code of good corporate practices. While describing corporate governance, World Bank says, “Corporate governance is about promoting fairness, transparency, and accountability.”
Adrian Cadbury, Chairman of Cadbury, has elaborated corporate governance by saying, “Corporate governance is concerned with holding the balance between economic and social goals between individual and communal goals. The corporate framework is there to encourage the efficient use of resources and equally requires accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations, and society.”
Strategic choice is governed by organizational politics. Same is the case with strategy implementation too. Organizational politics and power relationship are closely interlinked and each power center tries to get the things done in its favour. For example, Pfiffner and Sherwood have observed as “The ‘who gets what’ (politics) is endemic to every organization, regardless of size, function, or character of ownership. Furthermore, it is to be found in every level of the hierarchy; and it intensifies as the stakes become more important and the area of decision possibilities greater.”
It can be observed that everyone plays some kind of politics at some point of time in the organization. We can find references that define politics as one or more of the following self- serving behaviour – acquisition of power, protection of one’s own domain, building of support through group formation, or influence manoeuvring. In all these cases, politics involves acquisition of power or be around power and engage in self-serving behaviour.
Therefore, politics can be referred to as actions for seizing, holding, extracting, and executing of power by individuals and groups for achieving personal goals. Because of organizational politics, organizational decisions are affected in such a way that they contribute to personal goals rather than organizational goals.
Since no organization is free from politics—it is only the question of degree and its consequences, strategists may have two approaches for utilising politics and power structure in beneficial way to the organization. The first approach is in regard to understanding and managing politics and the second approach is in regard to elimination of dysfunctional consequences of politics.
In the first approach, the strategists require strategy implementation through consensus building, managing coalitions, and creating commitments. They must understand how the organization’s power structure works, who has real power and influence, and who are individuals and groups whose opinions carry weight and cannot be disregarded. Based on the understanding of power structure, the strategists can gather support for acceptable proposals and let the unacceptable ideas die a natural death.
In reality, “most strategic decisions and strategic thrusts in large enterprises emerge as part of an evolving continuous political consensus-building with no precise beginning or end.” The political skills of the strategists are quite relevant for handling such types of situations.
13 Major Issues Involved in Strategy Implementation
The strategy formulation and the relationship between strategy formulation and strategic implementation should be studied. This is because the formulation and implementation process are intertwined in real life. The two linkages existing between strategy formulation and strategy implementation are – (i) forward linkage, and (ii) backward linkage. The forward linkage deals with preparing the organisational activities including organisational structure, leadership, culture etc., necessary for the strategic implementation.
The backward linkage deals with the influence of implementation on strategy formulation. In other words, once the strategy is selected and implemented, it is found in the reality that there are certain deviations due to the different ground realities. These deviations force the strategist to reformulate the strategy based on the ground realities. Therefore, the past strategic actions and experiences should be taken into consideration in formulating strategies.
A number of issues are normally involved in strategy implementation. The important issues are project, procedural, organisational, structural, behaviour considerations, production/ operations, human resources, financial and marketing.
1. Project Implementation:
Project is defined by the Project Management Institute of the US as, “a one-shot, time limited, goal- oriented, major undertaking, requiring the commitment of varied skills and resources.” Thus, a project is a highly specific programme for which the time schedule and specific costs are determined in advance. Projects create all necessary conditions and facilities for the strategy implementation, the discipline of project management. The goals for a project are devised/derived from the plans and programmes which are based on the strategies adopted.
A project passes through various phases before a set of task can be accomplished:
(i) Detailed planning related to different aspects of the projects such as infrastructure engineering designs, schedules and budgets, finance etc., has to be completed.
(ii) The phase is an extension of strategic formulation phase of the strategic management. Ideas generated during the process of strategic alternatives and choice consideration from the core of the future projects that may be undertaken by the organisation.
(iii) After a set of projects have identified and arranged according to the priority they have to be subjected to a preliminary project analysis which examines the marketing, technical, financial and economic aspects. This analysis is done to find out whether it would stand the scrutiny of the financial institutions, banks and investors. After this screening the viable projects are taken up and feasibility studies conducted.
(iv) The detailed engineering, material, awarding contracts, civil and other types of construction, etc., have to be undertaken during the implementation phase leading to the testing, trail and commissioning of the plant.
(v) The final phase deals with disbanding the project.
2. Procedural Implementation:
Strategy implementation also requires executing the strategy, based on the rules, regulations and procedures formulated by the government. Though, many procedures are simplified with the liberalisation, privatisation and globalisation of Indian economy, certain procedures are still applicable in the process of strategy implementation. Therefore, the strategists should study the following procedural aspects before implementing the strategy.
They are – licensing procedures, foreign collaboration procedures, Foreign Exchange and Regulation Act requirements, environmental requirements Monopolies and Restrictive Trade Practices requirements, import and export requirements, incentives and benefits, requirements of labour laws and other legislations.
3. Organisational Structures and Strategies:
Companies build structures for their organisations based on their strategies. There are a number of methods/ways that the organisations can be structured. The simple strategies require simple structure whereas the growth strategies require flexible structure and complex strategies necessarily influence to build matrix structures. In fact, the stable strategies require a mechanistic organisation and a growth strategy require an organic structure.
4. Organisational Growth:
Organisational structure is a means to an end of achieving organisational mission and objectives. Thus, it is an important means for strategic implementation. Organisational structure refers to the methods of allocating duties and responsibilities to individuals, and the ways what individuals are grouped together into units, departments and divisions.
The formal organisational structure represents the relationships between people and functions as designated by management and conveyed in the organisation chart. It also defines the number of levies in the organisational hierarchy. The informal organisational structure represents the web of social relationships among various members of a company.
5. Entrepreneurial Structure:
Generally, the small businesses and the businesses when they are started consist of an owner- manager and few employees. These types of organisations do not require an organisational chart and formal assignment of responsibilities. Organisation structure is fluid with each employee often knowing how to perform more than one task and with owner- manager involved in all aspects/areas of business.
The small firms, if, they are successful during the first years of crucial period, it would be due to the increased demand for products or services. The entrepreneurs develop the business and increase the size of the firm to meet the increased demand. The business begins to evolve from fluidity to a status of more permanent division of labour due to the growth.
The owner-manager, who was performing all functions in the initial stage now finds that he has to perform more managerial activities than operational activities. The growth demands the owner to employ new candidates and this results in assignment of specialised functions to these employees.
The business growth results in expansion of organisational structure both vertically and horizontally.
The entrepreneurial structure is simple and it offers some advantages like – timely decision-making, sensitive to environment demands and operational flexibility. But, this structure results in excessive depending on owner-manager who is normally not a professional manager. This structure cannot respond to the increasing demand beyond a point. Thus, this structure is mostly suitable to the strategy catering to the needs of a local market by being small.
6. Vertical/Tall Organisations:
Vertical/Tall organisations refer to increase in the length of the organisation’s hierarchy chain of command. The hierarchical chain of command represents the company’s authority – accountability relationship between superiors and subordinates. Authority and responsibility flows from the top to the bottom through all the levels of the hierarchy, accountability from the lowest level to the highest level. Employees at each level should report to their superior, who in turn should report to his boss. Thus, the activities are reported to the top. Authority is more centralised in tall organisation.
The advantage of tall organisation include – effective analysis of factors and efficient decision making are possible as a number of managers at different levels supervised and check the activities. The organisation can formulate effective policies, programmes and control mechanisms. Further, it provides promotional avenues to the employees.
But, too many hierarchical levels results in bureaucratic characteristics rather than commercial characteristics to the business firm. Tight operational control delays the decision making process. This process makes the organisation incompetent. Too many controls may reduce the cost of operation.
Tall and centralised organisations allow for better communication of company’s mission, goals and objectives to all employees. It also enhances coordination of functional areas to ensure that each area will work closely with the other functions. Since, all employees are centrally directed, coordination become possible.
Tall organisational structure is appropriate for the firms having bleak growth opportunities, problem children and dogs. Further, firms with cost minimisation strategy and firms in maturity stage can adopt tall organisations. Thus, this type of structures are well suited for environments that area relatively stable and predictable.
7. Horizontal/Flat Organisations:
Horizontal/flat organisations refer to an increase in breadth of an organisation’s structure. The number of levels in the organisational hierarchy are a few. The span of control is relatively large.
The increasing bio-professionalisation and multi- professionalisation and wide acceptance for empowerment allowed even the large business firms to reduce the number of hierarchical levels of their organisations. Consequently, large sized firm also started adopting horizontal/flat organisation by delayering. In fact, this structure is well suited for the small size business firms.
Authority is more decentralised in relatively flat structures. Managers with broad span of the control must grant more authority to his subordinates. Decisions are more likely to be made by the employees who are at the helm of affairs and more familiar with the situations and ground realities. Organisational activities are mostly performed informally. Professional managers are treated as real profession lists.
The major advantage of flat structure is quick decision-making. Thus, it enables the management to take decisions in right time. Other advantages of this structure include – low administrative costs, freedom and autonomy to the managers to operate, decision making by the managers who are at helm of affairs and empowerment of managers. These benefits motivate the managers to accept responsibility and commit themselves towards organisational objectives. Further, these characteristics enable the organisation to be duly sensitive to the environmental demands. The employees also become innovative and creative.
The horizontal/flat organisational structure are appropriate for the organisations with horizontal and vertical growth strategies, stars and cash cows. Thus, these structures are useful for competitive and dynamic business firms.
8. Resources Allocation:
Resource allocation is the process of allocating organisational resources to various divisions, department and strategic business units (SBUs). Resource allocation deals with the procurement and commitment of financial, physical and human resources to strategic tasks for the achievement of organisational objectives.
Resource allocation is a powerful means of communicating the strategy of the organisation as it gives the desired signals to all concerned. It will demonstrate what strategy really is in operation. If the resource shift is not in line with the official strategy, the latter will remain only as a paper strategy.
Resource allocation decisions are linked to the objectives. Several questions have to be dealt with in resource allocation. What sources can be tapped for resources? What fact affect resource allocation? What different approaches could be adopted?
How does resource allocation take place? Decision about dividend is important in relation to objectives and long-term ability of the company to attract capital. How to distribute the expected profits among investors, employees and the company’s own needs is an important resource allocation decision from the viewpoint of long- term implementation of the strategy.
Methods for resource allocation are (i) B.C. G. Matrix, (ii) Budgeting systems.
9. Functional Policies:
Functional policies provide guidelines to operating managers, so that (a) coordination across functional units take place. Once the strategy of the company is decided, modification functional policies may become necessary to meet the demands of the new business, (b) similar situations are handled consistently, (c) strategies are implemented, and (d) executive time in decision making is reduced.
10. Communication of Strategy:
Communication of strategy covering the mission objectives market scope, technology and all the issues relating to implementation, to different level in organisation is very important for its success. This is so because strategy is implemented through people who ought to be clear about the roles they have to play in relation to each other.
Developing appropriate leaderships is one of the most important elements in the implementation of a strategy. Appropriate leadership is necessary, though not a sufficient condition for developing effective structure and systems for the success of strategy. Leadership is the key factor for developing and maintaining right culture and climate.
There are several aspects of leadership styles and skills, some of them appropriate to the context, content of strategy, while others are desirable attributes in general for the success of an organisation. The challenges of leaderships is in implementation are the gravest as leadership in most scare resources.
12. Challenge of Change:
The strategy implementation process generally involves a change. The change can be minor or major. If it affected a large number of people, cuts into deeper issues like beliefs, values etc., it is major change. The process of change has three stages namely freezing, moving and refreezing.
13. Pre-Implementation Evaluation of Strategy:
Before the implementation of strategy it is advisable to go for a final scrutiny so as to avoid failure due to weaknesses in the analysis, if any and to ensure that strategy decided for the organisation is optimal. It is something like checking all the electrical connections before switching on the circuit. There are several check-points that may be used for evaluation.
The process of strategy formulation is referred to in current literature as ‘Strategic planning’ and is distinguishable from Management Planning and Control for strategy implementation. Strategic planning is defined as the process of deciding on the objectives of the organisation, on the changes in the objectives, on the resources used to attain these objectives, and on the policies that are to govern the acquisition, use and disposition of these resources.
It involves matching of the external economic, political and social environments to corporate capabilities and setting the long-term objectives and goals of the organisation as well as the policies and strategies to achieve the objectives.
As Anthony has put it. “Strategic planning is a process having to do with the formulation of long-range strategic plans and policies that determine or change the character or direction of the organisation. In an industrial company, this process includes planning that effects the objectives of the company; the acquisition and disposition of major facilities, divisions, or subsidiaries; policies of all types, including policies as to management control and other processes, the markets they serve and distribution channels for serving them, the organisation structure, research and development of new product lines, sources of new permanent capital, and dividend policy; and so on.”
As distinguished from strategic planning, the system of ‘management planning and control’ is associated with the ongoing administration of an enterprise. It is the process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of the organisation’s objectives.
It accepts the corporate objectives evolved by strategic planning as ‘givens’ and attempts to relate the organisational resources to the objectives in order to arrive at a time-phased statement of the corporate goals and objectives and operational plans. Thus, the management planning and control system may be regarded as the medium through which the strategic objective, policies and plans are translated into more specific, measurable, attainable and meaningful goals and plans. Conceptually, it is a part of the total concept of strategy – a segment of the strategy implementation phase.
The management planning system involves the preparation of annual plans formalising the overall corporate goals and objectives in terms of sales, costs, margins, profits and return on capital, broken up, as necessary, in relation to products, operations, and geographic location of the activities.
It may also involve the development of longer term (say, five-yearly) ‘action’ plans defining the possible ranges of sales and market share, cost, profits, capital expenditure, expected return on investment, and the operational plans in terms of money, men and materials which would be required over the time span in order to achieve the pre-determined corporate objectives.
The formal planning system should ensure that the executives, with participation from managers at lower levels, break down the institutional objectives into functional and divisional objectives, thus translating strategic considerations into management considerations for specific time periods. The planning and control system to be effective requires the organisation structure to be such that it defines authority and responsibility in terms of jobs to be accomplished.
For effective implementation of strategy, the essential elements of the planning and control system should consist of:
(a) An appropriate organisation structure that defines authority and responsibility in terms of the job to be accomplished;
(b) A reporting system that can quickly diagnose deviations from the desired results, particularly in those areas which represent key variables in operations;
(c) Goals and targets of organisational units based on the input- output relationship in the relevant operations;
(d) Participation and support of all levels of management and supervisory personnel;
(e) A follow-up mechanism to ensure prompt remedial action by proper analysis, review and coordinated action.
The planning device commonly used to implement strategy is the budget. As an instrument for putting plans and policies into effect. The budget enables management to formalise goals and targets in quantitative/financial terms. Moreover, budgeting requires the participation of managers at different levels in the development of plans and policies.
A motivational force is thus built into the process of planning and control, which is a vital necessity for successful implementation of the strategy. Its usefulness, notwithstanding budgeting has also its inherent limitations. But on balance many of the limitations may be found to lie not in the budget or the process of budgeting but in the lack of management awareness of the limitations, or the improper use of budgets.
Feedback Control System
The implementation of formulated strategy at various levels of an organization requires not only monitoring but also creating a system whereby any deviation from the control standard is detected, measured and feedback into the control loop for regulating further activities.
This pre-supposes the following:
i. Laying Down Control Standards for Monitoring Purposes:
Responsibility accounting assumes adherence to targets or standards that are laid down on the basis of consensus of mutual agreement. These standards are applicable to a particular period as well as to a situation, say a year, under a resource allocation budget citing objectives/sub-objectives and identifying responsibility centres.
ii. Detection of Deviation from Standards:
This is possible due to the difference in the specification of inputs from the accepted standards or due to the difference in actual parameters from accepted parameters from the processes or due to the inefficiency in performance of men, machinery and materials. Deviation takes place in the results. These can be identified either post facto or in real-time. With the necessity for concurrent corrections, real time applications have come into existence.
iii. Measure Deviation from Standards:
The deviations which take place are only as good as they are measured. The enormity of the impact due to deviation cannot be understood without actual measurement. The measurement of deviation from the accepted standard also gives room for the necessary allowance for deviation which is acceptable. The measurement again has to be made precisely and concurrently so that the necessary correction through regulation feedback mechanism can be effected.
iv. Regulate through Feedback Mechanism:
Automatic control and monitoring of a process can be done as per a feedback control loop.
After establishing a system or subsystem in which an input goes through and produces an output, the need to monitor quality and quantity of output in relation to the inputs provided becomes essential both from the management point of view as well as conservation of the resources put into the system. If this control mechanism can be made automatic, then the system becomes self-correcting and the information is concurrent. In such a case, it also becomes the necessary data for future revision or change of the process itself. This change can be in the form of resource allocation of the standards or the methodology.