MNG3702_stratagy_implementation_&_control summary

STUDY UNIT 1 – INTRODUCTION TO STRATEGY IMPLEMENTATION 1.3 INTRODUCTION In strategy implementation we consider the entire organisation – not only divisional or functional segments. The approach to strategy implementation considers the impact of strategy implementation decisions for the entire organisation, at all managerial levels and across all functional areas. The organisation’s strategic plans therefore can succeed only if properly supported, coordinated and implemented by middle and lower management. Effective strategy implementation, therefore, requires consideration of all the essential components of the strategy implementation process as illustrated in Figure and discussed below. • Change Management (Unit 2) - Strategy is not about conducting business as usual, it is about managing change, and change initiatives. • Organisational Learning (Unit 3) - Organisations cannot change if they are unable to learn and adapt • Culture in strategy implementation (Unit 4) - Change is often about changing the culture of an organisation and for that reason the role of leadership. • Adapt to the selected Strategy (Unit 5) - The organisational structure of the organisation has to adapt to the selected strategy. • Strategy deployment (Unit 6) - Strategy deployment is the process of managing the strategy implementation process and the strategic initiatives that form a vital part of it through programmes and projects. • Strategic control and performance management frameworks (Unit 7) - Managers need to ensure that appropriate strategy review, evaluation and control mechanisms. The four broad approaches to or perspectives on strategy implementation are: 1. Organisational architecture. This perspective views the organisation as an interrelated set of sub-systems, which must all be aligned, in balance and consistent if a strategy is to be implemented successfully. 2. Organisational Change - there is a perspective that strategy implementation is about managing planned change. 3. Strategy deployment - Strategy implementation can be viewed as a process of that collectively contribute towards the achievement of strategic objectives. 4. The learning organisation - Strategy implementation as organisational adaptation suggests that organisations learn and adapt organically rather than as part of a formal process. MNG3702_stratagy_implementation_&_control summary Page 2 1.4 TRANSLATING LONG-TERM OBJECTIVES INTO ANNUAL OBJECTIVES Strategy has both long-term and short-term implications. • Long-term objectives are attained by achieving successive, year-on-year short-term objectives. • Annual objectives are derived from long-term objectives and cascaded down to middle or functional management levels, where action plans are implemented in order to achieve such objectives in the respective divisions or functional departments (finance, R&D, marketing, operations, human resources and purchasing). Short-term objectives are defined as “measurable outcomes achievable or intended to be achieved in one year or less” Formulating short-term objectives aid strategy implementation in at least three ways: 1. Operationalises long-term objectives, i.e. makes strategy part of the day-to-day jobs of everyone. 2. Motivational force and a means of avoiding conflict and disagreement. 3. Standards for measuring progress and outcomes, providing opportunity for timeous corrective action where needed and to ensure that strategy implementation stays on track. Short-term objectives in particular should comply with the SMART requirements, i.e. specific, measurable, achievable, realistic and timely. 1.5 FUNCTIONAL STRATEGIES AND TACTICS IN STRATEGY IMPLEMENTATION Functional strategies or tactics are key routine activities that need to be executed in each of an organisation’s functional Areas, defined as follows: “Detailed statements of the ‘means’ or activities that will be used by an organisation to achieve short-term objectives and establish competitive advantage” We must draw a clear distinction between business strategies and functional strategies or tactics to appreciate the importance for effective strategy implementation. Functional strategies or tactics differ from business strategies with regard to the following three dimensions: 1. Time horizon - strategies are based on a vision and mission, strategic intent and long-term objectives that extend a number of years. Functional strategies have to achieve objectives in the immediate future through short-term action plans because they: a. focus the attention of functional managers on what is critical and needs to be accomplished to ensure successful strategy implementation, and b. allow functional managers to adjust to changing conditions. 2. Specificity - Specific strategies or tactics and the related action plans for each functional area identify how managers in each of these areas can accomplish their tasks in the short term 3. Participants – Business strategies are developed by top management in conjunction with managers at all the organisational levels, but remain the ultimate responsibility and accountability of top management. Functional strategies are generally delegated by top management to managers at the functional levels. 1.6 ORGANISATIONAL CULTURE AND LEADERSHIP IN STRATEGY IMPLEMENTATION 1.6.2 ORGANISATIONAL CULTURE Every organisation has its own unique culture that influences the behavior of individuals. Strategic leaders need to accept that they act as primary transmitters of and shape organisational culture. It is defined as: “a pattern of shared basic assumptions learned by a group as it solved its problems of external adaptation and internal integration, which has worked well enough to be considered as valid and, therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems”. High satisfaction levels make a significant contribution to exceptional employee performance and increased profitability. Conflict in terms of beliefs, values and assumptions between individuals and the organisation has a negative impact which in turn has an adverse effect on organizational performance and profitability. Organisational culture serves important functions in an organisation that include serving 1. The vision and strategy of the organisation 2. The means through which to attain strategic objectives 3. An individual’s role orientation 4. Quality assurance 5. Common language and effective communication 6. The means for corrective actions and interventions. Page 3 1.6.3 STRATEGIC LEADERSHIP Strategic leadership and organisational culture are closely aligned and could significantly enhance factors that accommodate change and therefore strategy implementation. Leaders play a critical role in ensuring that their organisations pre-emptively and successfully adapt to dynamic and changing environments. It is top-level executives who are responsible for the success and sustainability of the organisation. Ultimately leadership is about influencing the behaviour of other people. To be successful, top-level executives need to demonstrate strategic leadership, they must • Be able to think strategically • They need to be emotionally intelligent • Have a range of behaviours at their disposal • Have the wisdom to apply the right combination of behaviours at the right time • Possess the ability to apply both transactional and transformational leadership. These competencies are prerequisites for executives to perform their strategic leadership roles effectively by, among others; • Setting organisational direction • Driving the strategy • Staffing the organisation • Building and using organisational competencies • Creating a supportive organisational culture • Ensuring alignment between structure and strategy • Leading and managing change 1.7 ORGANISATIONAL STRUCTURE AND STRATEGY IMPLEMENTATION Strategy implementation involves the use of organisational design, which is the process of deciding how an organisation should create, use and combine organisational structure, control systems and organisational culture to pursue its business model and long-term objectives. It can be defined as “the means through which a company assigns employees to specific tasks and roles and specifies how these tasks and roles are linked together to increase efficiency, quality, innovation and responsiveness to customers − the distinctive competencies that build competitive advantage”. The purpose of organisational structure is to coordinate and integrate the efforts of employees at all levels − corporate, business and functional – and across an organisation’s functions and business units so that all levels will work together in a way that allows the organisation to achieve its long-term objectives. According to conventional wisdom, the choice of strategy plays a critical role in informing the nature of organisational structure, which basically reflects the “structure follows strategy” approach. Many modern strategists contend that strategy and structure are interlinked; and it may not be desirable for an organisation to develop its structure after it has developed its strategy, since the relationship is much more complex. Here we briefly outline the following structures traditionally adopted by organisations, depending on their specific requirements: • The simple organisational structure - usually includes an owner and a few employees, in which management tasks, responsibilities and communication are highly informal. • Functional organisation structure - In slightly larger organisations it becomes necessary to have different people handling different tasks. Functional groups which are more formal and require formal planning, organisation, coordination and control. • Divisional structures − occur when an organisation diversifies its product or service lines, and serves a number of geographic areas and heterogeneous customer groups, resulting in functional structures becoming inadequate. It is clear that planning, organisation, coordination and control for divisional structures pose greater managerial challenges. Where divisions become more autonomous, they are often referred to as strategic business units (SBUs). • Matrix organisational structures - These are characterised by dual channels of authority, performance responsibility, evaluation and control, and are largely adopted by large, project-oriented organisations. Functional and staff personnel are assigned to both a functional area and a project manager. While easy to design, matrix organizational structures are difficult to implement and manage owing to the potential for conflict.