Top management is essential to the effective implementation of strategic change. Top Management must also recognize the existing organization culture and learn to work within or change its parameters. Top management is also responsible for the design and control of the organization's reward and incentive systems.
Setting
annual objectives, policies as well as taking certain
management decisions that involves trade-offs can be envisaged in strategy
implementation as discussed below.
a.
Annual Objectives:
Setting the annual objectives deals with what
the firm wants to achieve in the next year are delineated by levels and SBUs
involved.
1. Represent the basis for allocating resources.
2. Are a primary mechanism for evaluating managers.
3. Are the major instrument for monitoring progress toward achieving long-term objectives.
4. Establish organizational, divisional, and departmental priorities.
b.
Policy
Specific guidelines, methods, procedures,
rules, forms, and administrative practices established to support and encourage
work toward stated goals aids strategy
implementation
a.
Policies
Policies set boundaries, constraints, and
limits on the kinds of administrative actions that can be taken to reward and
sanction behavior clarify what can and cannot be done in pursuit of an
organization’s objectives
a.
Some Issues That May Require a
Management Policy
i.
Resource Allocation Resource
allocation
Central management
activity that allows for strategy execution often based on political or
personal factors Strategic management enables resources to be allocated
according to priorities established by annual objectives
Types of Resources
·
Financial
·
Physical
·
Human
·
Technological
ii.
Managing Conflict
Conflict refers to the disagreement
between two or more parties on one or more issues. Establishing annual objectives
can lead to conflict because individuals have different expectations and
perceptions, schedules create pressure, personalities are incompatible, and
misunderstandings occur between line managers and staff managers
i.
Managing Conflict : Avoidance;
Defusion
Managing conflict includes such
actions as ignoring the problem in hopes that the conflict will resolve itself
or physically separating the conflicting individuals Defusion includes playing
down differences between conflicting parties while accentuating similarities
and common interests
ii.
Managing Conflict : Confrontation
It is exemplified by exchanging
members of conflicting parties so that each can gain an appreciation of the
other’s point of view or holding a meeting at which conflicting parties present
their views and work through their differences
b.
Some
Management Trade-Off Decisions Required in Strategy Implementation
Questions and problems will undoubtedly
occur as part of implementation. Decisions pertaining to resource allocations, job
responsibilities, and priorities are just some of the decisions that cannot be
completely planned until implementation begins. Decision processes help the
organization make mid-course adjustments to keep the implementation on target.
1. Matching Structure With Strategy
Organizational structure isthe formal pattern of interactions and coordination developed to link
individuals to their jobs and jobs to departments. It also involves the
interactions between individuals and departments within the organization.
Current research supports the idea that strategies may be more successful when
supported with structure consistent with the new strategic direction. For
example, departmentalizations on the basis of customers will likely help
implement the development and marketing of new products that appeal to a
specific customer segment and could be particularly useful in implementing a
strategy of differentiation or focus. A functional organizational structure
tends to have lower overhead and allows for more efficient utilization of
specialists, and might be more consistent with a low-cost strategy.
Structure largely dictates how objectives
and policies will be established Structure dictates how resources will be
allocated
a.
Symptoms
of an Ineffective Organizational Structure
When an organizational structure isineffective, common indicators will manifest themselves in behavior,
motivation, performance, teamwork and interdepartmental relationships.
·
Poor Employee Behavior
·
Lack of Motivation
·
Low Performance
·
No Teamwork
·
Strained Interdepartmental Relationship
b.
Different type of Organisation structure
i.
The
Functional Structure
Groups tasks and activities by business function, such as
production/operations, marketing, finance/accounting, research and development,
and management information systems
This type of organisation structure has the advatange of specialisation, speed, clarity . At the same time its disadvantages include segregation, weakening of common bonds, lack of co-ordination and territorial disputes.
ii.
The
Divisional Structure
Functional activities are performed both
centrally and in each separate division Geographic area, product or service,
customer, process
iii.
The
Strategic Business Unit (SBU) Structure
Groups similar divisions into strategic
business units and delegates authority and responsibility for each unit to a
senior executive who reports directly to the chief executive officercan
facilitate strategy implementation by improving coordination between similar divisions
and channeling accountability to distinct business units.
Strategic
business units (SBUs) are a subunit of an organization which can act as an
independent business in many ways. This includes their ability to formulate
strategic ideas, develop marketing strategies, and even create their own brand
identity.
The
amount of freedom that is granted within a strategic business unit structure is
based on what the parent organization permits each division. For a large
company, especially those who are multinational, having one brand identity is
impractical. Using the SBU structure allows for diversification, products with
a specific focus, and fewer distractions from within the competitive market.
Structure follows strategy is a business principle coined by A D Chandler in 1962 that states that the divisions, departments, teams, processes and technology of an organization are designed to achieve a firm's strategy. Chandler is the author of the quote: If the structure does not support the strategy, the result is inefficiency. Alfred Chandler study of Du Pont, General Motors, Sears and Standard Oil showed insights into significance of relationship between structure & strategy as follows:
– New
strategy is created
– New
administrative problems emerge
– Economic
performance decline
– New
appropriate structure is invented
– Profit returns to its previous level
1.3.1. Importance
of Organizational Structures to Strategic Implementation
Strategies
do not take place against a characterless background but must take account of
the features of the organization in which they will be implemented.
Organizational structures determine what actions are feasible and most optimal.
The importance of organizational
structures in the implementation of a strategy is hard to overemphasize.
Good strategy involves taking account of where a company finds itself in terms of the external market and its internal organizational structure. Strategy and implementation must cohere.
1.4 Should Structure follow
strategy always?
Ability to adapt is now a fundamental capability modern organisations need. The modern design conundrum is how to enable people, functions and teams to re-orient themselves to new challenges and opportunities as a matter of course, without having to undergo yet another disruptive, value-destroying change to hardwired structure and roles. Some change is inevitable — we can’t always foresee the future.
But we can
hopefully minimise the need for it by setting up adaptive structures,
capabilities, roles and practices. With this kind of flexibility brings a new
level of maturity required to work in these structures, but that is a topic for
another time. Having a structure that is
misaligned with your strategy isn’t a good idea. But the original mantra
suggests a one way flow which isn’t entirely true, something that later
management theorists pointed out. Henry Mintzberg reframed it a little —
“Structure follows strategy… as the left foot follows the right.”
Reward systems or incentive plans include
bonuses and other financial incentives, recognition, and other intangible
rewards such as feelings of accomplishment and challenge. Reward systems can be
effective tools for motivating individuals to support strategy implementation
efforts. Commonly used reward systems include stock options, salary raises,
promotions, praise, recognition, increased job autonomy, and awards based on
successful strategy implementation. These rewards can be made available only to
managers or spread among employees throughout the organization. Profit sharing
and gain sharing are sometimes used at divisional or departmental levels to
more closely link the rewards to performance.
1. Provide full
transparency to all stakeholders
2. Reward long-term
performance with long- term pay, rather than annual incentives
3. Base executive
compensation on actual company performance, rather than on stock price
4. Extend the
time-horizon for bonuses. Replace short-term with long-term incentives
5. Increase equity between workers and
executives; Delete many special perks and benefits for executives
2.1 Linking Performance and Pay to
Strategies – issues to be addressed
1. Does
the plan capture attention?
2. Do employees
understand the plan?
3. Is the plan
improving communication?
4. Does the plan pay
out when it should?
5. Is the company or
unit performing better?
3. Managing
Resistance to Change
Force change strategy
involves giving orders and enforcing those orders
Educative change strategy one
that presents information to convince people of the need for change
Self-interest change strategy one
that attempts to convince individuals that the change is to their personal
advantage
4.
Creating a Strategy-Supportive Culture
The corporate policies and acceptable
behaviors generally start at the top level of management. The leaders
of the company establish procedures and expectations through those policies.
The way the company is run day to day, based on those policies, helps establish
the corporate culture. The top management set the bar for the way managers
treat the staff and relate to each other, which also affect the success of the
company. A culture that encourages creativity, innovation and out-of-the-box
thinking is likely to result in a company that is successful and continually
comes up with new ideas. A stifling corporate culture limits the efforts of the
employees, making it difficult for the company to advance. When employees know
they have the top management team's support, they contribute without holding
back
1. Formal statements of organizational philosophy, charters,
creeds, materials used for recruitment and selection, and socialization
2. Designing of
physical spaces, facades, buildings
3. Deliberate role
modeling, teaching, and coaching by leaders
4. Explicit reward and
status system, promotion criteria
5. Stories, legends,
myths, and parables about key people and events
6. What leaders pay
attention to, measure, and control
7. Leader reactions to
critical incidents and organizational crises
8. How the
organization is designed and structured
9. Organizational
systems and procedures
10. Criteria used for
recruitment, selection, promotion, leveling off, retirement, and
“excommunication” of people
5. Overarching role in Corporate governance
Governance of strategy enables the
board and directors to provide the necessary oversight of the review of the
core purpose and strategic plan. It also subsequently monitors the
achievement of these two critical elements of an organisation.
Corporate governance(CG) deals with the systems,rules, and processes by which corporate activity is directed. Narrow
definitions focus on the relationships between corporate managers, a company’s
board of directors, and its shareholders. Broader descriptions encompass the
relationship of the corporation to all of its stakeholders and society, and
cover the sets of laws, regulations, listing rules, and voluntary
private-sector practices that enable corporations to attract capital, perform
efficiently, generate profit, and meet both legal obligations and general
societal expectations.
Aligning CG compliance and strategic implementation of business objectives help the firm enhance its reputation among stakeholders, more prominently before the Govt. and other important stakeholders.
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