Business Ownership, Attitude to
Profit, Ethical Stance, Organisational Culture , Leadership, Strategic position & Resources and Stakeholder
influence are stated to have influence on portfolio
strategy. Some major aspects among these are discussed in detail below:
a.
Changes in Executive
Management
One function of portfolio management is to adjust the
portfolio, as needed, to maximize its overall contribution to achieving the
organization's strategic initiatives and goals. This may require changes in the
mix of Products/Businesses in the portfolio, including potential project
deferrals or terminations. Every CEO must simultaneously develop strategy and
drive execution. Boards assume that CEOs understand that short-term goals and
execution are vital priorities, while new CEOs instead focus on vision and
strategy. We have seen leaders fall into four traps:
- Failing
to diagnose the execution weaknesses of their businesses. New
CEOs might also fail to understand the extent to which their new
organization’s culture can absorb needed changes, which often
implies letting
go of yesterday’s values and beliefs that keep the company stuck in the
past. As a result, they build a strategy that is
not grounded in the competitive, customer, and cultural realities.
- Making
decisions about their teams too quickly. New
CEOs naturally look for people like themselves, and when they don’t see
sufficient strategic thinking ability or openness to change, they rush to
judgment. They can also underestimate the importance of having a team with
strong execution skills, especially early on.
- Neglecting
relationships with the execution side of the business. There
is a tendency to delegate responsibility for ongoing operations and focus
on “the real work” of developing the future. In doing so, new CEOs can
miss out on enlisting key drivers of execution, e.g., sales managers,
customers, suppliers, and country managers, who may dismiss the new leader
as being out of touch with work at the front lines.
- Failing
to develop a coherent, efficient strategy deployment process while
maintaining execution excellence. Many
organizations have some sort of strategy implementation process. But it
doesn’t work because it’s complex, time-consuming, and lacks buy-in from
lower-level leaders who believe it’s not built to help them do their jobs.
As a result, the strategy remains conceptual not operational.
Balancing Strategy
and Execution Through the Transition
The solution is
to have a framework that provides a clear view of key phases of transitionactivity and the associated imperatives for new CEOs to develop strategy
and drive execution. We have developed such a framework consisting of
three distinct phases of roughly 90 days that unfold during the first year of a
leader’s tenure: defending, extending, and transcending
the core.
The well-known fight between
Mystry and Ratan Tata in Tata Sons, Narayana Moorthy and Shikka in TCS , RajeevBajaj and Rahul Bajaj in Bajaj Auto Ltd are examples in this respect.
i.
Managerial Attitude
towards Risk:
Managerial attitude towards
risk is yet another significant factor that affects the’ choice of a strategy.
Basically, risk is a perception. Risk is an attitude or a mind-set. Risk is the
function of likelihood and impact. Risk involves both likelihood and impact.
Risk is a possible loss both financial and non-financial which is subject to
occurrence of an event which may or may not happen.
Risk is, thus, contingent.
Hence, the managerial decision is guided by the attitude of the decision- maker
towards risk. Based on this “attitude towards risk”, decision-makers can be of
three types namely, Risk lover, Risk Averse and Risk neutral.
Then one may distinguish
between the following attitudes reflecting the order of risk preferences-
1. Risk is necessary for
success
2. Risk is a fact of life and
some risk is desirable and
3. High risk destroys
enterprises and needs to be minimised as given by Professor William F.Glueck(1980).
By nature executives who are
risk lovers go in for high returns, high growth, less stable markets as there
is direct relationship between risk and the reward. These people prefer to be
pioneers, innovators, early birds. On the other hand, the risk averse or people
who want to take least risks are those who want to be followers than leaders
and challengers, they prefer stable conditions, low returns and go in for safer
options.
Age factor also plays decisive
role. The old managers tend to take no extra risk unlike young people who are
yet to make mark. Those who deal with risk and uncertainty easily are able to
face successfully the complex problems than those who are risk averse. Risk
prone decision makers limit the amount of information and make decisions
quickly as if it is an impulsive task.
It is worthwhile to note that
attitude toward risk is ever changing. It varies in accordance with the
dynamics of business or environmental conditions. Take a situation of fast
deteriorating business conditions where executives will have to be bold and go
is for risk strategies to make the show to go on.
They may totally forget about
risk when they predict and calculate an opportunity with full optimism. Where
trade-off between risk and return are in their favour.
These attitudes may vary from
risk taking to strong aversion to risk, and they influence the range of
available strategy choices. Pearce and Robinson have suggested that, “where
attitudes favour risk, the range and diversity of strategic choice expand. High
risk strategies are acceptable and desirable. Where management is risk averse,
the diversity of choice is limited, and risky alternatives are eliminated
before strategic choices are made. Risk-oriented managers prefer offensive,
opportunistic strategies. Risk averse managers prefer defensive safe
strategies.”
Those who consider some risk is
desirable, balance high with low risk choices and prefer a combined strategy.
Also, executives may overlook the risks involved if they perceive an
opportunity with optimism, i.e., where the tradeoff between risk and return
weighs heavily in favour of the gains from the potential opportunity.
Research
studies have also thrown some light on the risk preferences of decision maker:
i. Older managers tend to be
less prone to risk taking. (Vroom and Pahl 1971)
ii. Individuals who deal easily
with risk and uncertainty are better able to cope with complex problems than
those who are risk averse. (Sieber and Lanzetto 1964)
iii. Risk-prone decision makers
limit the amount of information they consider and tend to make decisions
rapidly. (Taylor and Dunnette 1974)
ii
Managerial Power Relations:
The in house forces play a
significant role. Let us confine to only decision making process. In a highly
controlled or centralised company, it is the top management which has the total
power to configure the strategic choice.
That is, the decision—strategic
decision—made is by centralised management, is quick and non-diluted, as
against a company which has participative management that results in diluted
strategic decision. The research study proves beyond doubt that lower level
managers suggested strategic choices were likely to be accepted than with-held
suggestions.
The strategic choice has the
tinge of departmental self-interest. Greater the uncertainties of the
environment, larger are the number of criteria developed to make strategic
choice. Another very important variable is that of managerial power relations.
It is normally found that the major decisions are influenced by the power play
among interest groups that differ widely.
Even the strategic choice is
influenced by this variable. In case an influencing chief executive is in
favour of a strategic choice which also benefits other top management members,
it may be endorsed easily by other senior member. This happens when unity
prevails.
However, this can be opposed in
case there is power politics or power game as we find in Indian Parliamentary
affairs. The research findings shown clearly that it is power-politics and
interpersonal relations are responsible for 30 to 50 per cent of the strategic
choices are influenced by this element.
In a nutshell, the decision
makers are to remember that-
(i)
Bargaining is used when power
for making decisions is divided within the organisation
(ii)
Greater is the agreement on
organisational objectives, greater is the availability of documented data and
staff specialists
(iii)
Even if the analysis is based
on various facts, is filtered because of certain variables of attitude
(iv)
The impact of lower level managers
on strategic choice influences the choice of strategy.
Choice of strategy is also
influenced by the power play among different interest groups. William Guth(1986)
found that strategic choice is significantly affected by interpersonal
relations and power relationship among members of the top management team.
Power politics is a crucial factor determining the choice of strategy.
A
few research findings conclude:
i. If the chief executive is in
favour of a strategic option, it may be endorsed by senior managers close to
him, but one or the other managerial clique may oppose it.
ii. Lower level managers can
greatly influence the choice eventually made by the chief executive.
iii. Where a participative
decision-making process is in vogue, the strategic choice eventually made by
top management is quite often the outcome of a lot of filtering that takes
place of die alternatives at lower levels of management. For instance,
strategic choices made by lower level managers may limit the strategic options
considered by top management.
iv.Eugene Carter (1971) showed
that while suggesting a strategic choice, different departments evaluated the
strategic alternatives differently and in their own interest.
v. Ross Stanger(1988) finds that “strategic decisions in business
organisations are frequently settled by power rather than by analytical
maximisation procedures.”
vi. Fahey and Naravan (1982) suggested
that “every organisation is a coalition of many individuals and their groups
and each of them puts some kinds of pulls and pushes depending on the internal
power relationship. These pulls and pushes operate in different phases of
strategic decision-making.”
Power
and dependence is a perspective based on the principles advocated by Marx about
the diversification of interest and goals and the role of power on determining
which interest or goals are to prevail. In the organizational context this
principle advocates that it is the (organized) use of power (or influences)
what determines the success of some organizations over others. One stream
within this perspective focuses on the ―corporate elite‖ or the use of power
for the collective benefit of a group of organizations. Another stream focuses
on the exercise of power within and between organizations. Although these views
refer to organizations, the principles behind broadly regard the capability of
individuals to use resources and capabilities to their advantage.
A
major source of power in most organizations is the chief executive officer
(CEO). In smaller enterprises, the CEO is consistently the dominant force in
strategic choice, and this is also often true in large firms, particularly
those with a strong or dominant CEO. When CEO begins to favor a particular
choice, it is often unanimously selected.
i.
Styles of Decision
Making:
Management
style and decision-making create an organization’s culture and influence its
performance. Decision making styles also play a vital role
in choice of strategy.
i. Systematic and Intuitive
Styles:
Sometimes managers may use
systematic procedure for making decisions. Many times top managers make
strategic decisions on the basis of their intuition. A systematic managers
relies on a systematic plan and process for making decisions. He defines
everything. But an intuitive manager keeps the overall problem in mind, relies
on hunches, jumps from one step to another and explores solution quickly.
Systematic thinkers see
interrelationships, focus on areas of high leverage (best solutions) and avoid
symptomatic solutions. Intuitive thinkers consider a number of alternatives
simultaneously and abandon them quickly. They rely heavily on intuition,
creativity and judgement. Intuitive style is more used in making ill-structured
kinds of decisions.
ii. Centralised or
Decentralised Styles:
Where centralised decisions are
made, only top managers use their wisdom and rationality. This style is found
in large corporations. Top managers can accept or reject the suggestions of
lower level managers in centralised decisions. In a decentralised style lower
level managers suggest their strategic choices. Also, the choices of different
departments are considered.
Oywobi,
et.., al,..(2016) study show that
organisations utilize all types of decision-making styles, but the most
significantly adopted styles are analytical and directive. The study found that
decision-making styles influence organisational performance through competitive
strategies.
a.
Transformation in
Organizational structure
Organizational structure is a formal system wherein employees, with well defined
roles and responsibilities, communicate with other such members/employees for
the achievement of common objectives. The structure
of an organization is
tangible and physical, which means that it is visible to internal as well as
external stakeholders of a company. An organization’s structure is
based on the overall strategy, which drives the policies and procedures of an
organization. Consequently, the policies decide the behavior of managers and
other associates within a company. An organization’s structure also helps in
understanding the existing hierarchical levels and Span of
Control.
Business Strategy is the main driver that decides the
structure an organization. Also, in case the structure of a company is not
synchronized with its strategy, then the company may not be able to achieve the
set targets. For example, a company with a diversified product portfolio and
has a functional structure (organized as per various functions such as
Marketing, Finance and Operations) will not be able to compete effectively
in each of the product categories. As a result, the company may start losing
the market share of its products.
Evidently, structure plays a critical role in the accomplishment
of an organization’s overall strategy. Another notable aspect is
that both business strategy and organizational structure need
to be continuously inter-linked in order to achieve desired results.
While structure helps
an organization in defining objectives, the culture helps in achieving those
objectives in viable manner. Therefore, culture is also critical in the
achievement of the defined objectives. More specifically, culture is a function
of behavior and relationships patterns.
b.
Corporate Culture:
Schein
(2010) defines the culture of a group as “a pattern of shared basic assumptions
learned by a group as it solved its problems of external adaptation and
internal integration, which worked well enough to be considered valid and
therefore to be taught to new members as the correct way to perceive, think,
and feel in relation to those problems”. Organizational culture implies the
existence of values and patterns of beliefs and behavior shared by members of a
particular organization. Ideally, the strategic decisions adopted by the
organization's top management should be in line with the culture of the
organization. Strategies that run counter to cultural norms are hard to
implement (Parnell, 2014). Organizational culture can be a basis for building a
sustainable competitive advantage. In order for this to happen effectively, the
organizational culture (viewed according to the resource-based approach) must
be valuable, rare, difficult to imitate, and the firm must be organized to have
the ability to absorb the value created (Rothaermel, F., 2015). Jay Barney has
identified the conditions under which a particular culture can be the source of
a sustainable competitive advantage. Thus, it is important to have a link
between the values and other elements of the organization's culture and the
value that the company creates for the client. A creative value culture can be
analyzed as any other resource or capability of the firm. When a company that
comes from a national culture that supports performance adopts a
diversification strategy on international markets, it will compete with foreign
firms whose crops may not be so supportive. It is the known case of the Japanese
automobile manufacturers that have penetrated the US market, the success of
such firms as Honda being often attributed to the cultural attributes of
Japanese firms (Besanko et al., 2013). If a company culture is a source of
competitive advantage, a large number of competitors will try to imitate such a
culture. However, there are two reasons why it is difficult to imitate
successful business cultures: causal ambiguity and social complexity. For
companies with dominant cultural uniqueness it is difficult to establish a
causal relationship between values, norms, artifacts and performance.
Organizational culture encompasses an ensemble of complex social relationships
that include not only interactions between members of different hierarchical
levels, but also contacts established with actors of the external environment.
In choosing a strategic
alternative, strategy makers must consider pressures from the corporate
culture. They must assess a strategy’s compatibility with that culture. Every
organisation has its own corporate culture. It is made of a set of shared
values, beliefs, attitudes, customs, norms, etc. The successful functioning of
an organisation depends on ‘strategy-culture fit’.
The strategy choice has to be
compatible with firm’s culture. The strategic choice should not be out of tune
with the cultural framework of the firm. The culture has substantial influence
on the strategic choice. In case of mismatch between strategic choice and the
cultural framework of a company, either one is to be redefined.
The culture of an organization is based on shared values,
norms and individual group & behavior. More specifically, the culture of an
organization is more informal in nature and is based on collective ideas &
values shared by the employees. The ways in which various tasks are performed
at different levels also defines the culture of an organization.
Structure
and culture in organizations exist in close alignment. Structure is one of the
determinants of culture; conversely, culture has been shown to have an
influence on the organizational structure and operational systems in an
organization. Both are mechanisms for the coordination of organizations:
structure as an integrating mechanism for organizational activities, and
culture as an integrating mechanism concerned with behavior and values within
organizations.
The management should decide
to:
i. Take a chance on ignoring
the culture
ii. Manage around the culture
iii. Try to change the culture to fit the
strategy
iv. Change the strategic alternative to fit
the culture.
A key feature of organizational
culture is the founder of the company, which can hold solid beliefs about
business practices (Parnell, 2014). Concepts of success of the founders and top
leaders of the company form the foundation of the company culture (remarkable
are the strong influences on McDonald's and Apple's founders, Ray Kroc and
Steve Jobs, respectively). Sam Walton, Walmart's founder, also embodies the
retailer's cost leadership strategy. The culture originally imprinted by
founders is strengthened by their strong preference to recruit, retain and
promote employees who adhere to the same set of values (Schneider, Goldstein
and Smith, 1995). As employee values and norms become more and more similar,
organizational culture is more powerful and full of elements of
distinctiveness. A side effect of this situation is “groupthink”, when
individuals coalesce around a leader without evaluating or criticizing his
views and assumptions. Cohesive and low-diversification groups will probably be
inclined towards this pattern of thinking, which may lead to deformed
decision-making processes (Rothaermel, 2015).
c.
Personal
Characteristics:
Personal factors like own
perception, views, interests, preferences, needs, aspirations, personal
disposition, ambitions, etc., are important and play a vital role in affecting
strategic choice. Even the most attractive alternative might not be selected if
it is contrary to the attitude, mindset, needs, desires and personality of the
selector/strategist himself.
Thus, personal characteristics
and experience affect a person’s assessment and choice of strategic
alternatives.
For example, one study found
that narcissistic (self-absorbed and arrogant) type of managers favour bold
actions that attract attention.
a.
Execution Capacity
and few others:
Strategy choice must take into
account the firm’s ability to execute the strategy. Without execution, strategy
has no meaning. The strategists must consider the elements like people, skills,
processes, resources, and culture of the firm. The ‘suit must fit.’ Firm’s
limitations must be considered for proper execution. Most important steps in
strategy implementation are :
1.
Commit to a Strategic Plan. Before diving into execution, it's
important to ensure all decision-makers and stakeholders agree on the strategic
plan.
2.
Align Jobs to Strategy.
3.
Communicate Clearly to Empower Employees.
4.
Measure and Monitor Performance.
5. Balance Innovation and
Control.
Alignment, Ability, Architecture and Agility are
the popular four ‘A’s of Execution capability The
4A model of strategic execution is a system of interrelated and interdependent
factors. The executional capability also requires infrastructure, processes,
structure, and systems to make things scalable and repeatable. And the ability
to shift rapidly in response to change. So the Alignment and Ability
needs to be matched with Architecture and Agility.
Alignment
If one is not fully aligned
around the core strategy, the organization is in danger of getting sidetracked,
distracted and diverted. The priorities run the risk of becoming dispersed and
your resources scattered. This can lead to a continual shift in focus and
diffused impact.
Ability
Strategic
execution means not only delivering on today’s priorities, but also building
the capacity to invent the future. So how do organizations nurture that kind of
ability — building effective leadership teams, ensuring a pipeline of key
talent and improving collaborative capability across the enterprise?
The research shows that one can improve execution ability when you do three things:
1. Focus on leadership-
Top management team
members are the ones who initiate the game plan and have responsibilities for
and to others who will ultimately make strategy happen. In order to find
out whether you have the right people in the right roles
to take your company forward? Ask yourself the following questions:
·
In what ways do your leaders exhibit the
breadth and depth of skills, competencies and experience needed for
breakthrough performance?
·
Do you have the right mix of leaders who
bring out the best in one another on behalf of the organization?
·
Do your leaders inspire and empower others
to achieve organizational goals?.
2. Establish a pipeline for Leadership and talentpool
The people that really drive strategy execution are deeper in your organization. The real traction happens with middle-level managers and rank-and-file employees. It is critical, therefore, to build a highly powered talent engine throughout your company.
To assess whether you are building capacity in terms of both the stock and flow of skilled individuals in key roles, ask yourself these questions:
· Have you identified “mission critical” positions and staffed them with your top performers?
· Do you have a robust system for talent assessment to identify, develop and retain high-quality employees?
· Are you investing in a talent pipeline to ensure a continual flow of “next generation” talent, people who are capable of leading your organization into the future?
· Do your managers spend time coaching and developing employees and teams?
3. Build Collaborative capability
Joint decision-making, pooling resources and sequencing actions to drive performance are all contingent on effective collaboration. And that’s not all. Collaborative capability is also a multiplier of talent. In academia, we call this human capital leverage. When senior professionals with experience partner with more junior associates to spread their knowledge, everyone wins. To find out whether your organization is prioritizing its collaborative capability? Ask yourself these questions:
· How well do managers and employees work together to make everyone better?
· Do teams have discretion to make decisions and act using their best judgement?
· Is there a spirit of collaboration that cuts across business units and functions?
Architecture
Things like infrastructure
design, processes, systems and controls directly shape behavior and
performance. In the best of cases, that impact is extremely positive and the
organization architecture aids efficiency, clarity and ease of operations. Poor
form and function, however, can be negative, where bureaucracy, inefficient
processes and cumbersome systems impede performance.
According to engineer W. Edwards
Deming, 94 percent of performance problems are systems — not people — problems.
“A bad system,” he said, “will beat a good person every time.”
Agility
The military use the term “situational
awareness” to convey the importance of staying alert to your surroundings for
potential changes in the environment.
In complex and dynamic environments, we need to be
aware of how elements and events are in play, interacting, reshaping context.
And how our actions may be impacted as a result.
Ask yourself this: is your organization
proactive, versatile, and responsive? Or is it reactive, scrambling, flailing —
and failing — in crisis?
Source: Scott Snell and Ken Carrig’s
forthcoming book, Strategic Execution: Driving Breakthrough Performance in Business,
published by Stanford Business Books (2019)
1. Factors Affecting Portfolio Strategy
2. Factors affecting Portfolio Strategy- External Factors
3. Factors Affecting Portfolio Strategy- Common Factors
No comments:
Post a Comment