Ch.15 Implementing Strategy Flashcards
What are key themes in strategy implementation?
- Hard Elements
- Soft Elements
Both hard and soft elements should be integrated cohesively and should align closely with the original strategy.
What are Hard elements? And what are the 2 key hard elements of organisational design?
Traditional facets of implementation such as organizational structure, hierarchies, planning, and incentives.
These are typically formal and tangible mechanisms used to realize strategic goals.
- Organsiational Structures:
give people formally defines roles, responsibilities and lines of reporting. Who does what in the strategy implementation and how they are accountable for delivery. - Organisational Systems:
support and control people as the carry out structurally defined roles and responsibilities. Muscles of
org giving it movement and coherence.
Seen as hard because key features can be precisely designed, also objective rather than subjective.
Why is organisational structure in strategy implmentation
Crucial to have right organisational structure in strategy implementation.
Ex General motors - almost bankrupt for having wrong structures to implement the strategies, company had become diversified but kept old centralised
structure = operating businesses didn’t have enough autonomy and top managers were overwhelmed by too much detailed info.
Chandler: Structure must fit strategy.
What are the three basic structural types for hard implementation + 1:
- The functional structure
- The divisional structure
- The matrix structure
(4) The agile team structure:
Explain the functional structure
= Divides responsibilities according to the organisation’s primary specialist roles like production, marketing and finance.
Particular relevant to small/start-up orgs or larger orgs whose strategic focus is on narrow rather than diverse, product ranges. But also multidivisional structure where division split themselves according to functional departments.
Poor fit for complex and diversified strategies.
Advantage: gives top management direct hand-on involvement in key activities → greater operational control from the top → can aid consistent implementation of strategy. But direct control from top not good when org become
larger/more diverse.
Explain the the divisional structure
= Built up of separate divisions bases on products, services or geographical areas.
Attempt to overcome problems that functional structures meet with diversification and complexity.
Key principle is decentralisation.
- Under divisionalisation, divisional managers given freedom to respond to the specific requirements of their products and markets, using their own set of functional departments. Top management do typically not
interfere, but monitors results from HQ.
Advantages:
For divisions detachment means less meddling from the top. For HQ means less distraction by
operational details.
= Decentralisation to divisions → good way of implementing diversification or internalisation
strategies.
Disadvantages:
Divisional structures get in the way of cooperation and knowledge-sharing between business units. Division specific targets provide little incentive to collaborate with other divisions.
Where diversification or internalisation strategies require collaboration, simple decentralisation in the form of
divisionalisation is a poor structural fit.
Explain the matrix structure
= Combines different structural dimensions simultaneously, ex. product divisions and geographical territories or product divisions and functional specialisms.
Staff typically report to 2 managers. Dual reporting makes this structure complicated, but can be effective in
complex orgs where collaboration between different parts of the org is important.
Transnational structures: In international businesses, product and geographical matrices, when reinforced by strong collaborative networks between various units.
Can combine the advantages of different dimensions at the same time, but staff can fins themselves pulled two
ways…
Explain the agile team structure
Many orgs overlay their main structural axis with agile teams.
Agile teams are small, entrepreneurial groups given the autonomy to respond quickly to the needs of (internal or external) customers. Diverse skills and perspectives.
Agile teams are relevant for organisations emphasising innovation and speed. But the cosntant dynamism of agile
teams is liable to create confusion and complexity.
What are Systems in strategy implementation?
Structure is a key ingredient in strategy implementation, but can only work if supported by organisational systems,
muscles of org.
Systems like planning and targeting help ensure control over strategy implementation. Larger/more complex orgs need more elaborate systems than just relying on direct supervision.
As with structures, systems should fit the strategies.
Name the three control systems
Organisations usually use a blend of these 3 control systems, but some will dominate according to the nature of strategy challenges.
- Planning system
- Performance targeting systems
- Market systems (or internal markets)
What is planning system?
Govern the allocation of resources (human and financial) and monitor their utilisation.
Tight control over resources often efficient, reducing waste. But planning systems can be rigid, and can reduce flexibility to change.
Three types of planning system operated from corporate centre:
The three strategy styles differ widely among 2 dimensions: 1) the dominant source of planning influence, either top-down (corporate centre to business units) or bottom-up. 2) The degree of performance accountability for the business units (tight vs relaxed).
- The strategic planning style:
Combines both a strong planning influence on strategic direction from the corporate centre with relatively relaxed performance accountability for business units. Centre allocates resources necessary to achieve strategic plan and have tight control over how plan is implemented.
- large, risky and long-range investments, ex oil company decision to invest in 10 R&D - The financial control style:
Very little central planning. Each business units set their own strategic plans, and
held strictly accountable for results. Business unit managers have a lot of autonomy in business formulation and strategy implementation. High bonus for success, dismissal for failure.
- Where investments are small, relatively frequent and well understood, typically mature, non-capital- intensive businesses. - The strategic control style:
In the middle, a more consensual development of strategic plan between corporate centre and business units, moderate levels of business unit accountability. Centre typically act as coach to business unit managers.
Explain the 3 types of planning systems operated from corporate centre
Three types of planning system operated from corporate centre:
The three strategy styles differ widely among 2 dimensions: 1) the dominant source of planning influence, either top-down (corporate centre to business units) or bottom-up. 2) The degree of performance accountability for the business units (tight vs relaxed).
- The strategic planning style:
Combines both a strong planning influence on strategic direction from the corporate centre with relatively relaxed performance accountability for business units. Centre allocates resources necessary to achieve strategic plan and have tight control over how plan is implemented.
- large, risky and long-range investments, ex oil company decision to invest in 10 R&D - The financial control style:
Very little central planning. Each business units set their own strategic plans, and
held strictly accountable for results. Business unit managers have a lot of autonomy in business formulation and strategy implementation. High bonus for success, dismissal for failure.
- Where investments are small, relatively frequent and well understood, typically mature, non-capital- intensive businesses. - The strategic control style:
In the middle, a more consensual development of strategic plan between corporate centre and business units, moderate levels of business unit accountability. Centre typically act as coach to business unit managers.
What is Performance targeting systems?
Focus on outputs (service levels, product quality, profits), often known as KPIs
Targets should measure how well the strategy is being implemented.
Performance targeting can be particularly appropriate in certain situations:
Within large businesses, In regulated markets, In the public services.
What are the 3 potential problems with target in Performance targeting systems?
- Inappropriate measures of performance:
In private sector, focus on short-term profit measure is common, at
the expense of long-run competitive advantage. - Inappropriate target levels:
Too easy or too hard, pessimism. - Excessive internal competition:
Struggle to meet individualistic targets will reduce the exchange of info and the sharing of resources.
What are the 2 techniques designed to to encourage more balanced approach to target setting?
- Balanced scorecard:
Set performance targets according to a range of perspectives, not only financial. - Strategy mapping:
Developing the balanced scorecard idea. Link diff performance targets into mutually supportive causal chain supporting strategic objectives. The causal chain between various targets underlines
the need for balance between them: each depends on the others for achievement. = Helps reducing the
problem of partial measures referred to above, the problems of inappropriate target levels and internalcompetition not so easily resolved.
Explain market systems
Can be brought inside org to guide internal units to actions consistent with the strategy.
Market systems typically involve units contracting for inputs from other parts of an org (like a buyer) and in turn, accepting contracts for providing outputs to other parts of an org (like a supplier).
Internal markets can be used in a variety of ways. Might be competitive bidding, a customer-supplier relationship.
Typically internat markets have considerable regulation, ex corporate centre might set rules for transfer prices to prevent exploitative contract pricing.
Work well where complexity or rapid change makes detailed control through planning impractical.
But market systems can create problems as well:
1) increase bargaining between units, consuming important management
time.
2) may create a new bureaucracy monitoring all the internal transfers or resources between units.
3) over
enthusiastic use of market mechanisms can lead to dysfunctional competition, destroying cultures of collaboration
and relationships.
What are soft elements of strategy implementation?
Soft elements of strategy implementation are harder to design precisely before initiation and control upfront compared to hard elements.
Soft elements of implementations are subjective, qualitative, and challenging to manage.
Despite these challenges, managing soft elements is crucial, as mismanagement can derail the entire implementation process.
Conclusion: Soft implementation, though intangible and challenging to manage, plays a pivotal role in strategy execution. Aligning culture with strategy, ensuring clarity and understanding of strategy, and maintaining fairness in decision-making processes are critical components that determine the success of strategic initiatives.
Name the key themes in soft implementation
- Cultural change
- Sensemaking
- Procedural justice
Cultures, sensemaking, and justice frequently evolve during implementation.
Explain Cultural Change in strategy implementation
Recalls the definition of organizational culture (Ch. 7), the taken for granted assumptions and behaviours of organisational members.
Aligning strategy with culture is vital for success. For instance, a customer-centric strategy can fail if
employees don’t value customer relationships.
Changes in strategy will need matching by changes in culture:
Organizations often attempt cultural change through a five-step approach:
- Determine the desired culture.
- Analyse the gap between current and desired cultures.
- Develop a plan to bridge the gap.
- Implement the plan using the “four Rs”: Recruitment, Retraining, Reward, and Reinforcement.
- Review the change’s success and consistency with strategy. And take action to sustain the change or
adjust it.
Note: Culture is deeply rooted and difficult to change. Leaders play a vital role in shaping and reinforcing
organizational culture through their actions.
Not what senior leader say but what they do that ultimately sets the culture. Cultures are not simply designed upfront; they need continuous reaffirmation. Retail manager angry at complaining customer
Explain Sensemaking in strategy implementation
Emphasizes the importance of understanding strategies at all organizational levels.
Top managers often assume that their strategies are well-understood, but gaps in comprehension are
common.
Sensemaking refers to the process where managers interpret and understand the strategies they implement.
Managers have to make sense of the strategies that they are responsible for implementing.
A successful strategy implementation follows a sequence of sensemaking (and sensebreaking), involving
breaking old understandings, forming differentiated new understandings, and adjusting these understandings for a cohesive approach.
Implication:
Top managers should allow for flexibility in strategy interpretation. The strategy is a guiding framework that evolves based on on-ground realities. The strategic plan is not the last word, but part of a continuous process of sensemaking.
Explain Procedural Justice
Implies that rigid top-sown approaches might be counter-productive
Refers to the perceived fairness of decision-making processes.
Three key dimensions of procedural justice:
- Engagement:
Involving individuals in decisions that affect them. Asking for input and allowing debate. - Explanation:
Providing clarity on decision rationales for everyone affected. - Clarity of Expectations:
Ensuring individuals understand what’s expected of them.
Procedural justice ensures stakeholder commitment and loyalty during strategy implementation.
Investing in procedural justice is essential, especially in organizations that rely on voluntary efforts or key groups of workers. Failing to ensure justice can hinder strategy implementation.
Name the key themes in Integration for implementation
- Strategic alignment
- Strategic configuration
Explain strategic alignment
Aligning strategies means ensuring they’re consistent with the organisational goals and organisational characteristics.
= How strategy and organisation should flow logically from the organsiation’s central goals (or purpose or mission)
Alignment stems from the organization’s core goals, ensuring congruence from overarching purpose down to operational details.
Emphasizes that all functional areas (like HR, IT, marketing) must be in sync with the strategy.
Misalignment in any part can jeopardize the entire strategic implementation. Goals, strategy and/or structure = no longe reinforcing each other positively; counter-productive misfit.
Explain Strategic Configuration
Similarly stresses consistency between elements, but is less linear.
= The set of organisational design elements that fit together in order to support the intended strategy. All
elements are connected and each is important to the effectiveness of the others. → when all elements fit
together, form a circle of superior performance, with each element reinforcing the others.
- This interconnected approach is mor consistent with an emergent than deliberate strategy development process - because it accepts that elements can feedback on each other.
It’s about creating a harmonized setup where each element complements and reinforces the others, forming a cohesive, effective unit.
What framework can be used for Strategic configuration?
The McKinsey 7S framework embodies this concept, emphasizing fit across seven elements: Strategy,
Structure, Systems, Staff, Style, Skills, and Superordinate Goals.
Style:
Refers to leadership behavior. Leadership styles should be consistent with other organizational
facets. Ex highly directive or coercive style is not likely to fit a matrix organisation structure.
Staff:
Concerns the type of people in the organization and their development, including recruitment and training processes. I key criterion for feasibility of any strategy: does the org have the people to match? Common Constraint on structural change: the availability of the right people to head new departments and divisions.
Skills:
While related to staff, it pertains to broader organizational capabilities and how individual talents are
transformed into collective strengths.
Superordinate Goals:
(shared values) Represents the organization’s overarching purpose, mission, or vision, serving as the foundation for all other elements.
