Building a Capable Organization: The eight levers of Strategic Implementation

Strategy Formulation Implementation Performance Cycle

According to Johnson (2005) 60% of the strategy is

never implemented. Companies attribute this to fact that 95% of the employees do not understand the companys strategy. Faulty strategy or Poor implementation or both leads to a strategy performance gap. Cues from current poor strategy execution influences the future strategy formulation leading to a vicious cycle.

Reasons of poor Strategy implementation

Beer and Eisenstat identify six killers of Strategy

implementation:

1. 2. 3. 4. 5. 6.

Top-down or Laissez-Fair Senior Management Style Unclear Strategy and conflicting priorities. An Ineffective senior management team. Poor vertical communication. Poor coordination across functions, businesses or borders. Inadequate down-the-line leadership skills and development

Strategic Implementation as an ally

Critical Structural & Managerial levers are necessary

to build a capable organization. The identification of these 8 critical levers allows companies to identify their strong and weak points that could impact implementation process. Structural Levers: Constitute the configuration or framework in which the companies operate effectively. Managerial levers: The managerial skills or managerial tasks that arise in executing strategy.

Structural levers

Actions: Who, what and when of cross functional integration. 2. Programs: Instilling organizational learning and continuous improvement practices 3. Systems: Installing strategic support systems 4. Policies: Establishing Strategy Supportive policies
1.

Structural levers: 1. Actions: Fostering cross functional integration and company collaboration

Input and Collaboration of all the members at all the levels of strategy

Eg: Lack of support from pilots was one of the roadblocks to the cost cutting strategy of AI

Cross Functional Integration

Integration between the all the activities of the value chain

Eg: At ICICI bank aggressive sales pitch is backed by streamlined operations.

2. Programs: Instilling organizational learning & continuous improvement practices

Organizational learning & continuous improvement must incorporate innovation into the implementation lever

Eg: Practiced by Japanese Auto giants pioneered by Toyota

Creation of Innovation Chain to include global partners in the innovation effort

Eg: Partnership between Reva Motors and General Motors for producing small passenger cars

3. Systems
Importance of systems as a lever is simply illustrated by the fact that

companies managing their IT systems successfully generate a 40% higher returns than others The purpose of systems is to provide timely access to both qualitative and quantitative data for effective decision making, both strategic and tactical Floral Farms successfully utilized this systems lever to develop a decision support model Lufthansa wanted to increase its utilization and flexibility of Pilots, but had issues with its pilot training schedule, communication and resulting stress levels. They therefore introduced mobile computing which helped the Pilots to be updated regarding training, scheduling and other communication from a remote location and thus increased utilization and satisfaction levels

4. Policies
Strategy supportive policies MUST necessarily envelope a COLLECTIVE

pattern of day-to-day decisions and actions There might be a tendency to formulate policies based on particular incidents rather than a pattern of incidents which in totality may not support the companys overall objective A good example is of the Powrtron company which tended to react quickly to an unprecedented problem by forming a policy. From a larger perspective, these served to defeat strategic objectives and decisions Policies also tend to change with change in management resulting in inconsistencies Communication and percolation of these Policies top-down to all ranks is imperative for effective implementation of strategic goals

Managerial levers
Interacting: The exercising of strategic leadership 2. Allocating: Understanding when and where to allocate resources. 3. Monitoring: Tying rewards to achievements. 4. Organizing: The strategic shaping of corporate culture.
1.

INTERACTING: Exercising of strategic leadership

Strategic Leadership is a critical implementation lever

for building a capable organization.

Responsibilities under strategic leadership

Direction Protection Orientation Motivation Managing conflict

Interacting Continued
Five levels of Leadership hierarchy: Level 1- Highly capable individuals(contributions

through talent, knowledge ,skills etc.) Level 2-Contributing team member(works effectively in a group) Level 3-Competent manager(organizes people & resources) Level 4-Effective leader(vision) Level 5 Executive(enduring greatness through personal humility and professional will)

ALLOCATING: Understanding when and where to allocate resources

Encompasses the use of major resources such as

money ,people and capabilities.

In addition to financial resources; Physical capital(plant, equipment, geo. Location) Human capital(training ,experience ,judgment etc.) Organizational capital(formal reporting systems,

firm and its environment etc.

Eg: OMED Medical Supplies

Monitoring: Tying Rewards to Achievements

Outcome

Favourable

Unfavourable

Incentives/ Rewards

Tackling/ Corrective Actions

Non Monetary

Monetary
Promotions, perks, stock options, etc.)

(Salary Increases, Bonuses,

(Praise, recognition, job security, responsibility, etc.)

One of the most prevalent technique for tying reward to achievements is linking executive pay to organization's overall ROE The lever suggests using multiple type of awards for motivating and encouraging employees E.g. Genpact has the system of awarding - Gold, Silver and Bronze Recognition Certificates to their employees along with the commensurate performance bonuses

Organizing Shaping of Corporate Culture

Organization Culture is a powerful strategic implementation tool for business Culture is a system of shared values and norms in an organization

Culture

Internal (operational)

Engineering Culture (Core technology)

Executive Culture (A Model to follow)

Shaping of Organizational Culture requires:

Clarity Consistency Comprehensiveness

The Strategy formulation performance gap can only be removed if the

organization culture is ready to adapt to higher standards and develop appropriate attitude and behaviour in the long run

Established Firms v/s Start-ups

The established firms have the advantage of compensating

with another lever to overcome the weaknesses in one lever and reduce its impact The start-ups do not have this luxury and the entrepreneur needs to understand the impact of each of the levers and its strengths and weaknesses It was observed through the OMED case that the weaklinks in a start-ups implementation efforts rest within the structural levers

Conclusion
Use of Levers as a managerial tool allowed identification

of: Efforts that facilitated formulation and implementation of strategies Forces of resistance that inhibit the implementation. Unless weak levers were identified and overcome, they would constrain future strategy formulation efforts

Although the use of all Eight Levers is not necessary while

building and organization, a clear understanding of each levers role and its impact on the ability to succeed is necessary

Thank You !!