The Nature of Strategy Implementation
The Nature of Strategy Implementation
The Nature of Strategy Implementation
Learning objective
Strategy in action means strategy implementation. This chapter guides you to understand how to
implement the strategy and what problems an organization faced in order to implement strategy. This
chapter also explains objective and policies.
The Nature of Strategy Implementation
It
is possible to turn strategies and plans into individual actions, necessary to produce a great business
performance. But it's not easy. Many companies repeatedly fail to truly motivate their people
to work with
enthusiasm, all together, towards the corporate aims. Most companies and organizations know their
businesses, and the strategies required for success. However many corporations
- especially large ones struggle to translate the theory into action plans that will enable the strategy to be successfully
implemented and sustained. Here are some leading edge methods for effective strategic corporate
implementation. These advanced principles of strategy realization are provided by the very impressive
Foresight Leadership organization, and this contribution is gratefully acknowledged.
Most companies have strategies, but according to recent studies, between 70% and 90%
of organizations
that have formulated strategies fail to execute them.
A Fortune Magazine study has shown that 7 out of 10 CEOs, who fail, do
so not because of bad strategy,
but because of bad execution.
In another study of Times 1000 companies, 80%
of directors said they had the right strategies but only
14% thought they were implementing them well.
Only 1 in 3 companies, in their own assessment, were achieving significant strategic success.
The message clear - effective strategy realization
is key for achieving strategic success. Successful strategy
formulation does not guarantee successful strategy implementation. It is always more difficult to do
something (strategy implementation) than to say you are going to do
it (strategy formulation)! Although
among divisions, and building a better computer information system. These types of
activities obviously
differ greatly between manufacturing, service, and governmental organizations.
Management Perspectives
In all but the smallest organizations, the transition from strategy formulation to strategy implementatio
n
requires a shift in responsibility from strategists to divisional and functional managers. Implementation
problems can arise because of this shift in responsibility, especially if strategyformulation decisions come
as a surprise to middle- and lower-level managers. Managers and employees are motivated more by
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competitive intelligence; every employee should be able to benchmark her or his efforts against bestinclass competitors so that the challenge becomes personal. This is a challenge for strategists of
the firm.
Firms should provide training for both managers and employees to ensure they have and maintain the
skills necessary to be world-class performers.
Annual Objectives
Introduction
Objectives set out what the business is trying to achieve.
Objectives can be set at two levels:
(1) Corporate level
These are objectives that concern the business or organization as a whole
Examples of "corporate objectives might include:
We aim for a return on investment of at least 15%
We aim to achieve an operating profit of over 10 million on sales of at least 100 million
We aim to increase earnings per share by at least 10% every year for the foreseeable future
(2) Functional level
E.g. specific objectives for marketing activities
Examples of functional marketing objectives" might include:
We aim to build customer database of at least 250,000 households within the next 12 months
We aim to achieve a market share of 10%
We aim to achieve 75% customer awareness of our brand in our target markets
Both corporate and functional objectives need to conform to the commonly used SMART criteria.
The SMART criteria
Specific - the objective should state exactly what is to be achieved.
Measurable - an objective should be capable of measurement so that it
is possible to determine whether
(or how far) it has been achieved
Achievable - the objective should be realistic given the circumstances in which it
is set and the resources
available to the business.
Relevant - objectives should be relevant to the people responsible for achieving them
Time Bound - objectives should be set with a time-frame in mind. These deadlines also need to be
realistic.
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time and also be verifiable. Terms such as "maximize," "minimize," "as soon as possible," and "adequ
ate"
should be avoided.
Annual objectives should be compatible with employees' and managers' values and should be
supported
by clearly stated policies. More of something is not always better! Improved quality or reduced
cost may, for example, be more important than quantity. It is important to tie rewards and sanctions to
annual objectives so that employees and managers understand that achieving objectives is critical to
successful strategy implementation. Clear annual objectives do not guarantee successful strategy
implementation but they do increase the likelihood that personal and organizational aims can be
accomplished. Overemphasis on achieving objectives can result in undesirable conduct, such as fakin
g the
numbers, distorting the records, and letting objectives become ends in themselves. Managers must b
e alert
to these potential problems
Policies
Changes in a firm's strategic direction do not occur automatically. On a day-to-day basis, policies are
needed to make a strategy work. Policies facilitate solving recurring problems and guide the
implementation of strategy. Broadly
defined, policy refers to specific guidelines, methods, procedures, rules,
forms, and administrative practices established to support and encourage work toward stated goals.
Policies are instruments for strategy implementation. Policies set boundaries, constraints, and limits o
n the
kinds of administrative actions that can be taken to reward and sanction behavior;
they clarify what can
and cannot be done in pursuit of
an organization's objectives. For example, Carnival's new Paradise ship
has a no-smoking policy anywhere, anytime aboard ship. It is
the first cruise ship to comprehensively ban
smoking. Another example of corporate policy relates to surfing
the Web while at work. About 40 percent
of companies today do not have a formal policy preventing employees from surfing the Internet, but
software is being marketed now that allows firms to monitor how, when, where, and how long various
employees use the Internet at work.
Policies let both employees and managers know what is expected of them, thereby increasing the
likelihood that strategies will be
implemented successfully. They provide a basis for management control,
allow coordination across organizational units, and reduce the amount of
time managers spend making
decisions. Policies also clarify what work is to be done by whom. They promote delegation of decision
making to
appropriate managerial levels where various problems usually arise. Many organizations have a
policy manual that serves to guide and direct behavior.
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Since full coverage of each management function is beyond the scope of this thesis,
I shall focus only on the factors that are most critical to effective implementation
strategy.