Business Management 3B

STRATEGY IMPLEMENTATION
Discussion class
Presented by: Annemarie Davis Tel: 012-429 8688 Email: davisa@unisa.ac.za

Programme
Administrative Matters myUnisa orientation Overview strategic management process Topic 1: What is strategy implementation? Topic 2: The drivers of strategy implementation Topic 3: The structural drivers of strategy implementation Topic 4: The instruments of strategy implementation Topic 5: Strategic control and evaluation Exam preparation

Admin matters
Assignments:
Compulsory assignments Self-assessment

Tutorial matter
Study guide Prescribed book Other sources

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MNG 302B: Learning outcomes

1. Explain the challenge of strategy implementation in the contemporary business environment Defend the choice of strategy implementation drivers and instruments in the light of the chosen strategies Interpret strategy control decisions to ensure that strategic planning and strategy implementation decisions remain on track and achieve the desired results

2.

3.

Strategic management process

Comprises three phases: Strategic planning (MNG301A) Strategy implementation (MNG302B) Strategic control (MNG302B)

Key concepts
Strategic management Strategic management process Stakeholders Competitive advantage Strategies Strategic planning Top management Survival in strategic management terms

Strategic direction Internal analysis Long-term goals & strategies Grand strategies External analysis

Strategic analysis and choice Drivers for strategy implementation Structural drivers and instruments Strategic control

MNG302B

 The number one challenge facing managers in the 21st century is strategy implementation

20

What is strategy implementation?

From thinking to doing Different from strategic planning Problems and barriers Drivers for strategy implementation: leadership, culture, reward systems, structure, resource allocation Instruments: short-term objectives, functional tactics, policies Corporate governance

Strategy formulation versus strategy implementation

Formulation Positioning forces before the action Focuses on effectiveness An intellectual process Requires good intuitive and analytical skills Requires co-ordination among a few individuals

Implementation Managing forces during the action Focuses on efficiency An operational process Requires special motivational and leadership skills Requires co-ordination among many individuals

(Ehlers & Lazenby, 2010:261-262)

Why is strategy implementation so challenging?

Lack of resources The strategy is poorly communicated As the strategy is cascaded down the organisation, critical issues become lost in translation Actions required for implementation are not clearly defined Organisational culture is not aligned to the strategy Reward and incentive systems are not aligned to strategic goals Poor leadership
23 (Pienaar, Muell & Cronje, 2008:13)

Barriers to strategy implementation

Refer to SG page 13 and myUnisa discussion Vision barrier Management barrier Resource barrier People barrier

(Ehlers & Lazenby, 2010:262-263)

Learning outcomes activity

1. Explain what strategy implementation entails. 2. Comment on the importance of strategy implementation as a component of the strategic management process 3. Distinguish between strategic planning and strategy implementation 4. Discuss the strategy implementation challenges and problems that organisations face in the contemporary business environment 5. Comment briefly on the importance of corporate governance in strategy implementation

Strategic change and types of change Strategic change = all the efforts and actions that are taking place to move an organisation from its present state toward the desired future state to increase its competitive position and its profitability
Section 1.5 on pg 7 in SG

Types of strategic change Adaptation only adapt to new situation, organisation can handle it Reconstruction a sudden alteration in the market conditions; reconstruct processes and policies Evolution fundamental changes over time Revolution fundamental changes as a result of sudden and fast-changing conditions

Issues to consider during change

Time how quickly the change is needed Scope is it dramatic revolutionary change or moderate change? Diversity what is the level of homogeneity in the organisation?

Issues to consider during change

Capacity does the organisation have the capacity in terms of the resources needed to change? Readiness are the employees ready for the change? Refers to the level of resistance to change. Capability - do the organisations employees and managers have the capabilities to implement the change?

Causes of strategic change

Environment Technology Regulation Business relationships Strategic awareness and skills of managers and employees

Learning organisation
Learning must be a continuous process Employees work and learn as a team Management development and personal growth Shared visions of the future Employees skills are most important asset in the organisation Reconsider organisational habits Systems approach

The strategic change process

Identify the areas of change Manage resistance to change Power and influence The learning organisation

Section 1.7 on pg 9 in SG

Identify the areas of change

New technology Administrative changes People

Manage resistance to change

Education and communication Participation and involvement Facilitation and support Negotiation and agreement Manipulation and cooptation Giving clear direction Explicit and implicit coercion

Power and influence Managers must have power to implement the decisions that will bring about change Influence to change perceptions

Learning outcomes activity

1. Explain the different types of strategic change and the issues involved 2. Comment on the strategic change process 3. Provide guidelines on overcoming resistance to change

Strategy implementation approaches

Refer to SG page 20 McKinsey 7-S framework Modified McKinsey 7-S framework

(MNG302B Study Guide, 2010:23)

(MNG302B Study Guide, 2010:23)

Learning outcomes activity

1. Diagrammatically depict the modified McKinsey 7S framework 2. Discuss the components of the modified McKinsey 7S framework 3. Described the drivers of strategy implementation 4. Describe the instruments of strategy implementation

The role of leadership in strategy implementation

The role of leadership in strategy implementation: strategies cannot be implemented by itself someone needs to lead and coordinate this process

Leadership drives strategic change

Leadership
Very important for successful implementation Leaders vs. managers table 2.1 on page 38 in SG Various responsibilities

(MNG302B Study Guide, 2010:28)

The role of leadership in strategy implementation

Emotional intelligence
Self-awareness - refers to the extent to which an individual is aware of his or her emotions, strengths and weaknesses. Self-regulation - refers to the extent that people are in control of their emotions Motivation - one trait common to almost all effective leaders is motivation Empathy - refers to the extent that a leader can thoughtfully consider employees feelings in the process of making decision. Social skills - leading people in a desired direction, capable of managing teams and build relationship throughout the entire organisation
(MNG302B Study Guide, 2010:28) & (Ehlers & Lazenby, 2010:284-285)

Risk taker

Undertaker Surgeon

Caretaker

Birth

Rapid growth

Maturity

Decline

Leadership styles and the organisational life cycle

(Ehlers & Lazenby, 2010:290)

Learning outcomes activity

1. Give reasons why leadership is an important driver of strategy implementation. 2. Discuss the attributes of emotional intelligence. 3. Indicate the differences between management and leadership 4. Distinguish between visionary leaders and managerial leaders 5. Comment on the vehicles that leaders can use to shape the organisational culture 6. Explain why different strategies require different leadership styles 7. Interpret decisions made by top management regarding leadership in strategy implementation 8. Discuss corporate governance and leadership in light of the King Reports

Activity
Answer question B1 on page 147 in the study guide The strategy implementation process can be very challenging, and organisations often find it difficult to implement strategies. Various approaches exist that organisations can follow to ensure that strategy implementation is successful. In the light of the above statement, answer the following questions: 1. Discuss the strategy implementation challenges and problems that organisations face in the contemporary business environment (10). 2. Comment briefly on the importance of corporate governance in strategy implementation (5). 3. Discuss the components of the modified McKinsey 7-s framework (10).

Organisational culture
Organisational culture as a driver of strategy implementation What is culture? Why important? Origin of culture Types of culture: Role Power Task Person
(MNG302B Study Guide, 2010:52) & (Ehlers & Lazenby, 2010:292)

Adaptive, weak, strong and unhealthy cultures

An adaptive organisational culture comprises members who share a feeling of confidence that the organisation can neutralise threats and exploit opportunities that cross its path. There is a receptiveness to risk taking, innovation and experimentation and follows a pro-active approach to strategic change.

A weak culture is fragmented and there are very few traditions, few values and beliefs that are shared. Subcultures exist and there is very little cohesion and no sense of a corporate identity. Strong organisational culture the values are norms are deeply ingrained and difficult to eliminate. It can be a valuable asset if a tight fit exists between the chosen strategy and a strong culture. An unhealthy culture has a politicised internal environmental where influential managers operate in autonomous kingdoms. It is characterised by hostile resistance to change and people who advocate new things.

(Ehlers & Lazenby, 2010:295-296)

Types of culture (Charles Handy)

A power culture is frequently found in entrepreneurial organisations. It can be compared to a spider (power and influence source) and a web (functional areas). The power culture depends on trust and empathy for effectiveness and personal communication. Typically, within a power culture few rules and procedures exist and individuals employed tend to be poweroriented. Power cultures are strong and have the ability to move quickly. A role culture is often stereotyped as a bureaucracy where logic, rationality, rules and procedures dominate. Within this type of culture, the role, or job description, is considered more important than the individual who fills it. Performance over and above job description or role is not required. Role cultures offer individuals security, predictability and opportunity to acquire specialist expertise. It is a frustrating environment for power-orientated and ambitious individuals. This type of culture can succeed as long as it operates in a stable environment. It is often found in organisations where economies of scale are more important than flexibility and innovation.

Types of culture (Charles Handy)

Organisations with a task culture are project-oriented and this type of culture is often found in organisations with matrix structures. It seeks to bring together the right people, functional expertise and resources. Groups, project teams and task forces are formed for a specific purpose and can be reformed, abandoned or ended. It offers a team culture where the project outcomes are more important than the individual objectives. Influence is widely dispersed and individuals have a high degree of control over their work. The task culture is appropriate where flexibility, speed of reaction and sensitivity to the market or environment is important. Organisations with a person culture have the individual as the central point and the organisation only exists to serve the individuals within it. This type of culture is formed if a group of individuals decide to band together in order to serve their own interests better through, for example, sharing office space, secretarial services and equipment. Examples include partnerships of architects, doctors, lawyers and even social groups. Few organisations can exist with this type of culture since organisations tend to have objectives over and above those of the individual.

Cultural dimensions of Hofstede

power distance - the extent to which people accept that power is distributed unequally uncertainty avoidance - the extent to which people feel uncomfortable with uncertainty and ambiguity individualism/collectivism - the extent to which there is a preference for belonging to a tightly knit collective rather than a more loosely knit society masculinity/femininity - the extent to which gender roles are clearly distinct confusion dynamism - the extent to which longtermism or short-termism tends to predominate

(MNG302B Study Guide, 2010:61)

Activity

Read Googles Magic Formula: Company Culture Plus Innovation on pages 53-56 in SG

Google
"Googleplex" headquarters today is crammed with conference rooms, hallway buzz sessions, sandy volleyball courts, youngsters whizzing around on motorised scooters, and an 'anything goes' spirit. In addition The 17 legendary cafes on Google's main campus offers 20 cuisines and fantastic (and free) food (e.g., lobster gets served for lunch). Google engineers spend 20 per cent of their time pursuing and developing their own ideas. Google's organisational hierarchy is flat. Google holds 64 per cent of the market share in its category in the U.S. In its 10-year history, Google has created more investor wealth in less time than any other company in history-US$10.6 billion in revenue earned. Sheryl Sandberg, a 37-year-old VP, made a mistake that cost Google several million dollars. When she informed founder Larry Page, he replied, "I'm so glad you made this mistake."

Aspects of culture
Refer to SG page 58

Artefacts and symbols Values Underlying assumptions Behaviours People Leadership and management style Communications Power Structural issues Politics

Strong
Match between change required and existing culture

Link changes to mission and organisational 1 norms

Focus on synergy and reinforce current culture Manage around the culture

Reformulate strategy or change Weak culture

4 3

Many Few Key factors that need to be changed In order to implement new strategy
(Ehlers & Lazenby, 2010:297)

Learning outcomes activity

1. Explain what organisational culture encompasses. 2. Discuss the aspects and levels of culture, 3. Explain why culture is an important driver for strategy implementation. 4. Differentiate between a power, role, task and person culture. 5. Differentiate between adaptive, weak, strong and unhealthy cultures. 6. Explain Hofstedes five value dimensions. 7. Comment on the link between leadership and organisational culture. 8. Recommend a framework for managing the strategyculture relationship

Activity Answer question B2.2 in on page 152 in the Study Guide Distinguish between Handys four different types of organisational cultures.

(Tutorial letter MNG302B/103

Reward systems
Role of reward systems Types of reward systems: Share options Restricted share plan Golden handcuffs Golden parachutes Cash Strategy and reward systems Executive compensation and King II Report

(MNG302B Study Guide, 2010:69) & (Ehlers & Lazenby, 2010:298)

The role of recognition in reward systems

Existential recognition Recognition of the way work is performed Recognition of dedication to a job Recognition of results
Refer to table 11.3 on pg 303 in prescribed book

Role of reward systems

Role of rewards is to motivate managers and employees to give their commitment to the implementation of the chosen strategy Reward systems should be created in such a way that they are tightly linked to the strategy, encourage a change in behaviour to support strategy implementation and reward managers for performance over the long term

(MNG302B Study Guide, 2010:72) & (Ehlers & Lazenby, 2010:298-299)

Aligning the reward system with the chosen strategy

The start-up phase. Organisations that pursue growth strategies should incorporate large salaries and equity into their reward systems. The rapid growth phase. Reward systems should include a salary plus large bonuses for growth targets, plus equity for key people. The maturity phase. Link reward systems to efficiency and profit-margin performance. The decline phase. Reward systems should be linked to cost savings.

Learning outcomes activity

1. Explain the importance of reward systems in strategy implementation. 2. Describe the major executive bonus compensation plans. 3. Discuss recognition as a component of reward systems. 4. Match an organisations compensation plan to its chosen strategies. 5. Provide guidelines for structuring effective reward systems. 6. Discuss corporate governance and reward systems in light of the King Report.

The role of organisational design in the strategy implementation process

organisational design can be a source of competitive advantage if it ensures that organisational structures are aligned with the chosen strategy functional difficult to copy make it easy for customers to do business with the organisation

Building blocks of organisational design Five basic parts of an organisation strategic apex middle line operating core technostructure support staff

Six coordinating mechanisms

mutual adjustment direct supervision standardisation of work processes standardisation of outputs standardisation of skills and knowledge standardisation of norms

Essential parameters of design

job specialisation behaviour formalisation training socialisation unit size unit grouping planning and control systems liaison devices centralisation/decentralisation

Different types of organisational structure

entrepreneurial structures functional structures divisional structures strategic business units (SBUs) matrix structures network structures

(MNG302B Study Guide, 2010:87) & (Ehlers & Lazenby, 2010:324-333)

Matching structures with strategy

Chandlers Strategy-Structure Relationship

(MNG302B Study Guide, 2010:88)

Matching structures with strategies

Single-product or dominant product organisations: functional structure Organisations with several business lines: divisional structure Large, diverse organisations with unrelated business divisions: SBU Product development and innovation oriented organisations: matrix structure

Activity Answer question B3.1 on page 156 in the study guide Provide guidelines for matching structures with strategies (4).

Learning outcomes activity

1. Comment on the statement structure follows strategy. 2. Explain what the structure encompasses. 3. Expound on the role that structure plays in implementing the chosen strategy. 4. Briefly explain structure as one of the components of the McKinsey 7S framework. 5. Explain how structures evolve over time. 6. Discuss the building blocks of organisational design. 7. Explain what organisational architecture entails. 8. Describe the components of organisational architecture. 9. Discuss the role of structure in organisational architecture.

Resource allocation
Role of resource allocation Types of resources tangible and intangible resources Human resources Financial resources Technological resources Information resources Physical resources Change in strategy = change in resource plan

(MNG302B Study Guide, 2010:93) & (Ehlers & Lazenby, 2010:334)

The role of budgets A budget is a resource plan, a guideline, a summary of what is available, planned expenditure or a list of priorities.

Budgets support strategy implementation and should be based on the organisations short-term objectives and operating results.

Role of HR in strategy implementation

Pretend that every single person you meet has a sign around his or her neck that says: Make me feel important. Mary Kay Ash

77

Activity Answer question B3.2 on page 156 in the study guide Explain the role of resource allocation in strategy implementation with specific reference to the importance of human resources (8).

Learning outcomes activity

1. Identify the different resources of an organisation. 2. Explain how the chosen strategy could be implemented through resource allocation. 3. Match an organisations resource allocation plan to its chosen strategy. 4. Explain the role of the master budget in strategy implementation. 5. Defend the importance of resource allocation in strategy implementation and control. 6. Comment on the link between short-term objectives, functional tactics and resource allocation. 7. Differentiate between strategic funds and operational funds.

Implementing strategy through short-term objectives, functional tactics and policies

To become Africas leading cellular network with the best customer service and to be the best company to work for in Southern Africa

(MNG302B Study Guide, 2010:102-116) & (Ehlers & Lazenby, 2010:338-344)

Long-term goal
To have 12 million cellular phone users in South Africa by 2016.

The long-term goal is translated into short-term goals

Finance To obtain financing of R 15 million by the end of 2011

Human Resources Employ ten additional expert radio engineers by November 2011

Marketing To develop two advertising campaigns in the next six months

Production To roll out 10 new base stations in each quarter of the year

Functional tactics are action plans that help achieve the short-term objectives Finance -Obtain one shortterm loan -Sell debentures Human Resources -Headhunt candidates from competition -Advertise abroad Marketing Buy one contract, get second one free for family member for 1st year promotion Production Outbid competition for contractors responsible for building towers

Policies guide thinking, decisions and action of managers and employees

Finance -Debt equity ratio may not exceed 60% Human Resources -All engineers must have at least 3 years industry experience -Candidates from previously disadvantaged backgrounds receive preference Production -All contractors must adhere to ISO standards -All tower locations must be approved by relevant City councils -Preference will be given to BEE contractors

Marketing - Certified copy of ID to accompany applications

Short-term goals
Helps with strategy implementation: Operationalises long-term objectives Agreement about conflict that may arise Identifies measurable outcomes of action plans Different from long-term goals (breadth, specificity) Qualities of well formulated short-term objectives (measurable, linked to long-term goals)

(MNG302B Study Guide, 2010:102) & (Ehlers & Lazenby, 2010:338)

Using the balanced scorecard to set short-term goals

Creates framework for setting of:

Long-term (strategic) goals Measures Targets (Short-term objectives) Initiatives (Functional tactics) Links strategy formulation and implementation

FINANCIAL To succeed financially, how should we appear to our shareholders? Goals Measures Targets Initiatives CUSTOMER To achieve our vision, how should we appear to our customers? Goals Measures Targets Initiatives INTERNAL BUSINESS To satisfy our shareholders and customers, what business process should we excel at? Goals Measures Targets Initiatives

Vision & Strategy

LEARNING & GROWTH To achieve our vision, how will we sustain the ability to change and improve? Goals Measures Targets Initiatives

Learning outcomes activity

1. Distinguish between the different levels of goals 2. Explain what a short-term goal is 3. Describe the position of short-term goals in the strategic management process 4. Explain how long-term goals are translated into shortterm goals 5. Differentiate between a well-formulated and badly formulated short-term goal 6. Interpret short-term goals in the light of the chosen strategy

Functional tactics and policies

Functional tactics
Different from corporate and business strategies (time horizon, specificity, developers) Specific guidance in functional areas

Policies
Standard operating procedure Policies that empower

(MNG302B Study Guide, 2010:108-116) & (Ehlers & Lazenby, 2010:342-344)

Learning outcomes activity

1. Explain what a functional tactic is 2. Explain how functional tactics differ from corporate and business strategies 3. Depict the position of functional tactics in the strategic management process 4. Suggest key concerns that functional tactics in human resources, finance, R&D, operations management and marketing have to deal with 5. Interpret the functional tactics of an organisation in the light of the chosen strategy 6. Describe the relationship between functional tactics, short-term goals, long-term goals and the mission of an organisation

Learning outcomes activity

1. Explain what a policy is 2. Expound on the importance of having sound policies in place in strategy implementation 3. Interpret a set of organisational policies in light of the chosen strategy

Strategic control
Strategic control as a component of the strategic management process Types of strategic control Operational control Continuous improvement and TQM The Balanced Scorecard

(MNG302B Study Guide, 2010:118) & (Ehlers & Lazenby, 2010:357)

Types of Strategic Control

Premise control Strategic surveillance Special alert control Implementation control

(MNG302B Study Guide, 2010:120-124) & (Ehlers & Lazenby, 2010:359-361)

Dynamic control systems

In addition to the different types of strategic control, there are also four levers of control that should be taken into consideration in designing strategic control systems. These four levers are diagnostic control systems belief systems boundary systems interactive control systems

Activity Answer question B3.4 on page 156 in study guide Differentiate between different types of strategic control.

Balanced Scorecard
Creates framework for setting of: Long-term (strategic) goals Measures Targets (Short-term objectives) Initiatives (Functional tactics) Links strategy formulation and implementation

(MNG302B Study Guide, 2010:128) & (Ehlers & Lazenby, 2010:363)

FINANCIAL To succeed financially, how should we appear to our shareholders? Goals Measures Targets Initiatives CUSTOMER To achieve our vision, how should we appear to our customers? Goals Measures Targets Initiatives INTERNAL BUSINESS To satisfy our shareholders and customers, what business process should we excel at? Goals Measures Targets Initiatives

Vision & Strategy

LEARNING & GROWTH To achieve our vision, how will we sustain the ability to change and improve? Goals Measures Targets Initiatives

Sustaining competitive advantage

(MNG302B Study Guide, 2010:131) & (Ehlers & Lazenby, 2010:369)

Evaluating strategic success Table 13.1 on page 368 in textbook Appropriateness is the strategy in line with the mission? Feasibility can it be carried out? Desirability stakeholder preferences? Has the strategy produces adequate results in the short term?

Learning outcomes activity

1. Indicate the position of strategic control in the strategic management process 2. Explain what strategic control entails 3. Differentiate between the different types of strategic control 4. Explain how strategic control can alter an organisations chosen strategy 5. Diagrammatically depict the components of an operational control system 6. Diagrammatically depict and explain the four dimension of the balanced scorecard 7. Comment on the criteria used to evaluate strategies during the strategic control phase

Learning outcomes activity

1. Comment on the approaches to sustaining competitive advantage through continuous improvement.

Final Questions?

Format of the exam paper Learning outcome standards Activities in the study guide Study guide, tutorial letters and prescribed book Self-assessment assignments Previous exam paper Start preparing today! Use diagram of strategic management process for context Do section B first

Examination matters
Students need to be seated 15 minutes before the examination starts; doors will be locked and students who arrive late will forfeit the opportunity to write the exam and will need to re-register Students need to provide their identity documents and students cards Candidates may make no notes on any part of the body (eg. the hands) or clothing either before or during the examination. Examination scripts containing illegible writing will not be marked, and no marks will be awarded to illegible answers or answers written in pencil

Examination matters
Candidates who, without authorization, take any book, document or object (such as tissues, rulers or pocket calculators with notes on it) that may help them in the examination into the examination venue and neglect to hand such unauthorised material to the invigilator before the first answer book or question paper is made available to candidates, are guilty of contravening the examination regulations of the University and expose themselves to disciplinary measures as determined by the University Council. The examination answer book is the property of the University and under no circumstances may a candidate retain it, remove it from the examination venue or remove pages from it. In addition, certain question papers, as determined by the University, may not be retained and must be returned to the invigilator. Under no circumstances will an incorrect interpretation of examination dates and times be considered a reason for admittance to a supplementary examination