Session 9 Flashcards
What is strategy implementation, and how does it relate to a firm’s goals and strategic plan?
Strategy implementation is the process by which firms execute a strategy by constructing a set of activities that implement the firm’s goals through a strategic plan.
What are key steps for effectively implementing a strategy, and what common measurement trap should companies avoid?
To effectively implement a strategy, companies should:
- Break down goals into measurable targets (e.g., SMART goals: Specific, Measurable, Achievable, Relevant, Time-bound).
- Avoid the measurement trap: The saying “What gets measured gets managed” warns that excessive focus on measurable KPIs can lead to unintended consequences, such as ignoring qualitative factors.
- Create detailed action plans that align strategy across different departments, ensuring smooth coordination and execution.
Note: Strategy implementation is easier said than done.
What was J.C. Penney’s failed strategy under Ron Johnson in 2012, and what lessons can be learned about strategy implementation?
J.C. Penney’s Strategy Under Ron Johnson (2012):
- Eliminated markdowns → Switched to everyday low pricing.
- Introduced “fair and square” pricing → Simplified cost structures.
- Transformed stores into boutique-like destinations.
- Reduced focus on private label brands.
- Outcome: Sales dropped 32%, J.C. Penney lost $1 billion, and Johnson was fired within a year.
Lessons on Strategy Implementation:
- Know Your Customers: Shoppers expected promotions; removing them alienated loyal buyers.
- Implement Gradually: Radical changes should be phased in and tested before full rollout.
- Build on Strengths, Not Just Copy Others: The company ignored its core sales-driven model.
- Execution Matters More Than the Idea: A solid strategy fails without proper execution and adaptation.
Strategy is only as good as its implementation—execution must align with customers, business realities, and a well-planned rollout.
What is McKinsey’s 7S Framework, and why is it important for strategy implementation?
McKinsey’s 7S Model identifies seven interconnected factors crucial for effective strategy execution. Misalignment among them leads to failure.
7S Framework:
- Strategy – Long-term competitive plan.
- Structure – Organizational hierarchy & reporting lines.
- Systems – Processes, workflows, and IT.
- Style – Leadership approach & corporate culture.
- Staff – Talent management & workforce.
- Skills – Employee competencies.
- Shared Values (Core) – Beliefs & culture guiding the organization.
Effective execution requires alignment among all elements.
Why does misalignment cause strategy implementation failure? Provide an example.
Misalignment in strategy execution occurs when key elements are not aligned:
- Outdated structure prevents effective execution.
- System changes (e.g., new technology) without adapting staff skills create inefficiency.
- Leadership style misalignment causes confusion and resistance.
- Example: J.C. Penney’s Failure
- Strategy shift (new pricing model) misaligned with customer expectations.
- Systems & staff were not prepared for the new “boutique” store format.
- Structure failed to support the transition, leading to execution issues.
Successful strategy execution requires alignment across all seven McKinsey 7S factors. If one is out of sync, execution collapses.
Why is alignment crucial for successful strategy implementation?
For strategy implementation to succeed, all elements must work together.
Key areas needing alignment:
- Resources
- Leadership
- Culture
- Performance
- Knowledge management
Without alignment, even the best strategy will struggle to be executed effectively.
Why is resource allocation important for strategy implementation?
Resource allocation ensures that strategic goals are effectively supported by:
- Budgeting – Allocating financial resources efficiently.
- Talent & Skills – Hiring and developing employees with the necessary expertise to execute the strategy.
How do leadership and communication impact strategy implementation?
Strong leadership and communication ensure strategy alignment through:
- Consistent Messaging – Leaders must clearly articulate the strategy for organization-wide understanding.
- Transparency – Open communication from top management fosters trust and alignment at all levels.
How does organizational culture influence decision-making?
Organizational culture guides behavior and decision-making by:
- Consensus → Ensures decisions are similar across people.
- Consistency → Ensures decisions are similar over time.
Culture influences decision-making through:
* Normative Order → Employees follow cultural expectations, maintaining control without formal oversight.
* Cognitive Order → Culture acts as an internal motivator, reducing the need for costly monitoring systems.
What are the risks of a rigid or misaligned organizational culture in strategy execution?
While culture supports strategy, rigidity can create barriers:
- Groupthink → Resistance to new ideas due to excessive agreement.
- Bureaucracy → Over-reliance on traditions slows adaptation.
- Inertia → A rigid culture prevents necessary strategic change.
What is the key takeaway about organizational culture in strategy execution?
- Strong culture aligns employees with strategy for consistent decision-making.
- If misaligned or too rigid, culture can hinder innovation and change.
- Successful strategy implementation requires a flexible culture that supports both stability and adaptability.
How does performance management align employees with strategic goals, and what are the pitfalls of pay-for-performance systems?
Performance Management & Motivation
- Aligns employee behavior with organizational strategic goals.
- Employees need clear goals that align with strategy.
- Extrinsic motivation → Rewards like bonuses & commissions.
- Intrinsic motivation → Driven by personal passion, job satisfaction.
Pitfalls of Pay-for-Performance Systems:
- Short-term focus → Overemphasizes immediate results over long-term value.
- Unintended consequences → Can lead to gaming the system or unethical behavior.
- Neglects intrinsic motivation → Often more sustainable in the long run.
What are the two types of performance metrics, and what are their risks?
Two Types of Performance Metrics
Quantitative Metrics (Objective)
=> Uses numeric indicators (e.g., sales, output, efficiency).
Risks:
- May not capture teamwork or innovation.
- Employees may manipulate results to meet targets.
- Differences in risk-taking behavior can affect long-term organizational benefits.
Subjective Evaluations (Qualitative)
=> Manager or peer reviews assess performance.
Risks:
- Personal relationships may skew evaluations.
- Inconsistent standards across managers.
- Different feedback sources can lead to varying results.
What are the types of risks in performance management, and how does performance measurement scope impact evaluation?
Types of Risks in Performance Management:
- Uncontrollable Risk → Events outside employees’ control (e.g., market shifts). => Employees may demand higher incentives to compensate for uncertainty.
- Controllable Risk → Events employees can influence (e.g., effort, strategy).
Performance Measurement Scope:
- Narrow scope (fewer factors) → Less uncontrollable risk but higher distortion & manipulation.
- Broad scope (more factors) → More uncontrollable risk but more accurate evaluation.
What are common performance measurement issues, and how can they be mitigated?
Performance Measurement Issues:
* Distortion → Employees focus on measured metrics at the expense of actual value. Example: A janitor judged on trash emptying frequency may ignore cost efficiency.
* Manipulation → Employees game the system to boost short-term results. Example: A car salesman prioritizing monthly sales may use misleading tactics, harming long-term trust.
Mitigation Strategies:
- Reduce uncontrollable risk → Use fixed salaries, broad metrics, or adjust targets to external conditions.
- Balance short- & long-term goals → Design incentives that promote long-term success and avoid short-term gaming.
What are the key considerations for measuring performance, and what challenges exist with subjective evaluations?
Measuring Performance:
Quantitative Metrics: Used when compensation is tied to performance.
- Broad (e.g., stock price): Captures overall success but includes uncontrollable factors.
- Narrow (e.g., pounds of trash removed): Focuses on specifics but can lead to distortion.
Best practice: Measures should include controllable factors and exclude uncontrollable ones to prevent unfair incentives.
Challenges with Subjective Evaluations:
* May reduce distortion & manipulation, but many managers struggle with evaluations.
* 360-degree feedback (multiple sources) is prone to bias and inconsistency.
What are the benefits and costs of strong performance incentives?
Benefits of Strong Incentives:
- Efficient sorting – High-skilled employees prefer performance-based pay, aligning pay with productivity.
- Increased effort – Stronger incentives (supposedly) boost effort.
- Risk premium – Employees demand extra compensation for taking on performance-related risk.
Key Takeaways:
- Performance metrics should focus on controllable factors to avoid unfair risks.
- Subjective evaluations can help but are often poorly managed.
- Strong incentives can attract talent and boost effort but require risk compensation.
Why does incentive intensity matter, and when should stronger incentives be used?
Why Incentive Intensity Matters:
- Drives behavior better than salary increases.
- Must align with effort, performance, and company goals.
When to Use Stronger Incentives:
- Weak intrinsic motivation.
- Effort significantly impacts firm value.
- Fair & accurate evaluation.
- More controllable, less uncontrollable risk.
- Low risk of manipulation.
Use strong incentives when effort is critical, risks are manageable, and performance can be fairly measured.
What is knowledge management, and how does experience turn into knowledge?
Knowledge Management: Converts experience into knowledge, retains it within the organization, and transfers it between units.
Sources of Knowledge:
- Task Experience – Learning by doing or observing.
- Technology & Tools – Gained through new equipment, software, or systems.
- Organizational or Environmental Changes – Market shifts, regulations, or structural changes.
How Experience Becomes Knowledge:
- Interpreted by individuals.
- Made generally applicable.
- Stored in a structured way (documents, databases, shared processes).
What are the key ways tasks contribute to knowledge retention?
- Tasks as Organizational Knowledge – Define what needs to be done and how.
- Tasks Exist Beyond Individuals – Less affected by turnover, though tacit knowledge may be lost.
- Tasks Transfer Explicit Knowledge – Document and share structured knowledge for continuity.
Clear documentation ensures smooth operations despite employee turnover.
What causes knowledge decay in individuals, and how can it be mitigated?
Causes of Knowledge Decay:
- Forgetting – If knowledge isn’t used, it fades.
- Member Turnover – Employees take knowledge with them, harming competitive advantage.
Mitigation Strategies:
- Transactive Memory Systems – Shared knowledge networks retain expertise.
- Structured Storage – Embedding knowledge in roles, routines, and systems reduces reliance on individuals.
Organizations should systematize knowledge retention to minimize loss.
How does knowledge decay affect tasks, and how can organizations prevent it?
- Task Decay – Unused tasks lose knowledge about application.
- Decay vs. Irrelevance – Some tasks become obsolete due to environmental or technological changes.
- Tasks Stay Within Organizations – Unlike employees, tasks remain but may decline in effectiveness over time.
Prevention: Regularly use, update, and adapt tasks to maintain relevance.
