38 Strategy Implementation in Individual Firm

R. Swaranalatha

Harvard Business School views that, the major task of implementing strategy is to create a fit between the company’s goals and its other activities. Generally, two types of fit needs to be created.

Fit between strategy and functional policies
Fit between the strategy and the organization structure, process and systems. Two views that suggest the relevant framework for strategy implementation are:

I. Mckinsey 7-S framework

This model was developed by the US management consulting firm, Mckinsey and co. and hence known as Mckinsey 7-S framework.

It consists of seven factors to organize a company in a holistic and effective way.

All the seven factors interact and determine the way in which the company operates.

Various components of Mckinsey 7-Sframework are as follows:

Strategy- a means to achieve objectives
Structure- basic framework to designate responsibilities and functions.
Systems- Management tool for planning, decision-making, communication and control.
Staff- human resources of the organization
Skills- organizational and individual capabilities
Style- how managers lead and motivate
Shared values- organizational values which govern behavior of its members.

AT Kearney’s growth drivers:

AT Kearney, another US based consultancy firm, conducted a study and identified five organizational growth drivers for strategy implementation-

Leadership
Strategy
Competencies and resources
Organizational design
Organizational culture and climate

Hence, effective strategy implementation requires managers to consider a number of factors including Organizational Structure, Leadership, Power and Organizational Culture.

These four factors lead to three approaches in strategy implementation.

I. Structural implementation

II. Behavioral implementation III. Functional implementation

I. Structural implementation

Organizational Structure:

It involves arrangement of activities and assignment of personnel to these activities in order to achieve the organizational goals in an efficient manner.

It is the way by which various parts of an organization are tied together in a coordinated manner and it illustrates the various relationships among various levels of hierarchy within the organization as well as horizontal relationships among various functions of organizational operations.

In general, it refers to the way individual and groups are arranged with respect to the task they perform.Organizational design refers to the process of coordinating these structural elements in the most effective and efficient manner.

A good organizational structure is needed so that,

Each individual is assigned with definite role, responsibility and enough authority to perform the job effectively.
The activities of all individuals are coordinated and integrated into a common pattern in order to achieve the organizational objectives. Organization is needed for the purpose of integration of diverse activities in a cohesive manner.
The optimal use of human skill and efforts is achieved. A well-structured organization assigns the right person to the right job and this avoids misapplication.

Strategy and Structure

Strategists should design and implement an appropriate structure to carry out the strategy. The strategy and structure must be consistent with each other in order to successfully implement a given strategy.

The steps in organizational structure are:

Determination, identification and enumeration of activities into sub-activities
Grouping and assigning of similar activities on the basis of divisions/departments based on managerial functions like production, finance, marketing, human resources and so on.
Delegation of authority to execute the operations in the optimal manner and assigning of responsibility and accountability.

Benefits of organizational structure:

A good organizational structure facilitates attainment of objectives through proper coordination of all activities.
In a good organizational structure, the conflicts between individuals over jurisdiction are kept to a minimum.
It eliminates overlapping and duplication of work.
It decreases likelihood of confusion and duplication of work among individuals.
It facilitates promotion of employees.
It helps in wage and salary administration.
Communication is easier at all levels of organizational hierarchy.
A well-structured organization provides a sound basis for effective planning.
It results in increased cooperation and a sense of pride among members of the organization.
It encourages creativity and innovation among employees.

Classification of Organization structure

1. Mechanistic Structure:

This believes in strict adherence to rules, which would make bureaucracy a very efficient form of organization founded on the principles of logic, order and legitimate authority. It is characterized by control structures based on rigid authority, verbal communication from top down, limited distribution of information, decisions from the top and demands of loyalty to organization and management. The main features of this structure are-

Division of labor by functional specialization
A well-defined hierarchy of authority
A system of rules and procedures to deal with employees
Impersonal relations among workers
Selection and promotion of employees based upon technical competence and excellence.

2. Organic Structure:

This type of structure is flexible in order to cope with rapidly changing environments. It encourages autonomy, openness, change, support for creativity and innovation and opportunities to trynew approaches. The main features are:

Tasks and roles are less rigidly defined
Decision making is more decentralized
Friendly work environment
Departmental boundaries are flexible.
Flat organizational structure
Capable of changing to environment

Determinants of Organization Structure

The important determinants of structure include the

Environment,
Technology,
Size of the organization and
Organizational life cycle.

These four factors would determine the philosophy and strategy of central management, which forms the foundation for organizational structure. It is illustrated as

Types of Organizational structure

Organizational structure is classified based on hierarchy, functions, communication flow, interrelationships, divisions, departments and operations as

Simple structure/ Line structure
Functional structure
Divisional structure- Product structure, Customer structure, Geographic structure, etc.
Multidivisional structure
Project structure
Matrix structure
Network organizational structure

Among all these structure, Matrix and network organizational structure are mostly adopted by the companies today.

The optimal organizational structure for any organization involves balancing many different components of the structure.

These components include the degree of decentralization, motivational levels of employees, conflict resolution procedures, communication among various levels of hierarchy and so on.

The strategies and structure must be consistent with each other and both must be flexible enough to respond effectively to changes in the competitive environment.

Peter Drucker has suggested that the focus of the future organizational structures will be converting the creativity and expertise of knowledge workers into achievement of desired goals and objectives.

Information management will be one of the key goals of strategic managers and the idea will be to use information and learning to emphasize on value-adding activities that would give the organization a competitive edge.

II. Behavioral implementation

It deals with those aspects of strategy implementation that have impact on the people in the organization. There are six behavioral issues relevant for strategy implementation.

1. Leadership

2. Organizational culture

3. Values, ideologies and ethics

4. Social responsibility

5. Corporate governance

6. Organizational power and politics

1. Leadership

It is basically the ability to persuade others to seek defined objectives willingly and enthusiastically. Strategic leadership is the process of transforming an organization with the help of its people so as to put it in a unique position. Unique features of this are;

It deals with accomplishment of vision, mission, organizational goals and objectives.
It emphasizes on transformational leadership which focus on the need for vision, need for change and flexibility in operations.
It inspires and motivates people to work together with a common vision and purpose.
It has an external focus and constantly keeps track with changing business environment. The main role of leadership in strategy implementation lies in introducing change, integrating conflicting interests, developing motivational systems, setting organizational climate and leadership development.

2. Organizational culture

It is another element which affects strategy implementation, as it provides the framework within which the behavior of organizational members takes place.

Organizational culture is the set of assumptions, beliefs and norms that are shared by an organization’s members. It includes

abstract elements like assumptions, beliefs, values and norms
material elements like products, buildings, dress code, logo, etc.

There are seven features that forms the base for organizational culture-

i. Innovation and risk taking

ii. Attention to detail

iii. Outcome orientation

iv. Team orientation

v. Aggressiveness

vi. Stability

Organizational culture influences the behavioral pattern of employees in the organization. It creates impact on setting of objectives, work ethics, motivational pattern and organizational process like planning, decision making, controlling, directing and so on.

More and more organizations are becoming culturally diverse. Cultural diversity means that people of different races, gender, ages, religion and capacity are bringing different cultural perspectives to the work place. Therefore, Management must organize cultural diversity training programs to amalgamate such diverse backgrounds and turn it into a strategic advantage. It is more so needed for implementing global strategy. Rhinesmith has suggested six specific guidelines that assist in creating a global culture within organisation.

Create a clear and simple mission statement,
Create system that ensure effective flow of information,
Create a broad mind in the managers to think globally, *Develop global career paths,
Use cultural differences as a major asset and
Implement worldwide education and team development programs.

These guidelines assist organizations to create a global organizational culture. The whole world is shrinking into a global village and global business and social interactions require the integration of various diverse cultures into a unified organization philosophy and coordinated operations while considering to implement a strategy.

3. Values, ideologies and ethics

These elements determine the manner in which strategy is implemented as it influences individual behavior and organizational behavior. A strong corporate culture based on ethical business principles and values is a vital force behind continuous strategic success. Most executives are convinced that a company must incorporate a code of ethics in its internal environment. High moral values and ethical standards nurture the corporate culture in a very positive way. It forges a bonding of mutual dependency between individuals and organizations and thereby promotes the overall success of the employees and the organization.

Values are beliefs that guide actions and judgements across variety of situations in individuals.They are those principles and qualities that shape our thinking and behavior.Ideologies are the organized collection of ideas reflecting social needs and aspirations of an individual, a group, a class, a culture and behavior. It is made up core values and principles that drive organizations to excel and move forward. These principles guide them to succeed at tough business situations and deal critical incidents tactfully, without compromising on value systems.

Ethics are moral principles which guide an individual’s behavior. Business ethics operates as a system of values that enforces discipline, morale, trust, transparency, honesty, integrity and commitment in business dealings.

Values. Ideologies and ethics affect an organization and its employees in the following manner:

The way in which the members perceive situations and problems they face
the decisions and solutions to the problems
the way the members see others
the perception of individual and organizational success as well as achievement and
the extent to which the organization and its members accept or resist external pressures.

Strategy implementation is effected by the pertinent value systems adopted by the employees in the organizations more so from the top level management ranging from the Board of Directors, Chief Executive Officer, Managers etc. to the bottom level management who are the operating staff. It is strongly believed that organizations should develop a dominant and coherent set of shared values. This way, all employees will have a predictable behavior pattern which is consistent with the organizational philosophy and it will also necessitate and encourage group cohesion and such group cohesion will facilitate implementation of corporate strategies.

4. Social responsibility

It is also called corporate conscience, corporate citizenship, social performance or sustainable responsible business. It is a form of company’s self-regulation integrated into a business model/

It is a fact that business firms should be socially responsible. Business enterprise, which makes use of the resources of society and depends on society for its functioning, should discharge its duties and responsibilities in enhancing the welfare of the society. The company must accept its obligation to be socially responsible and to do work for the larger benefit of the community.

Corporate social responsibility (CSR) is defined as ‘actions that appear to further some social good, beyond the interests of the firm, and that which is required by law.’

H.S.Singhania classifies the nature of the social responsibility of business into two categories.

The manner in which a business carries out its own business activity and fulfils a social function.
The welfare activity that it takes upon itself as an additional function to serve the society.

According to the World Business Council for Sustainable Development in 1999, corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce, their families, consumers, stake holders, local community and society at large.

It is the company’s commitment to operate in an economically, socially and environmentally sustainable manner while balancing the interest of diverse stake holders.

Corporate social responsibility has become an integral part of corporate strategy. It stipulates open and transparent business practices that are based on ethical values and respect for employees and the concern. It is designed to deliver the sustainable value to the society at large as well as shareholders. The new Company Bill made it mandatory for the corporate firms to spend two per cent of its profits on social development initiatives. It has prescribed the best practices on how a company should address concerns on human rights violation and follow ethical business practices in dealing with all its stake holders.

The significance of corporate social responsibility in today’s business emphasizes on

building trust and reputation of the company
developing loyal, committed and dedicated workforce
improving operational efficiency by utilizing resource effectively and minimizing wastage
increasing sales through brand image, ethical business practices, innovative and quality products and
conserving energy and protecting the environment.

5. Corporate Governance

It is defined as the determination of the broad uses to which organizational resources will be deployed, and the resolution of conflicts among the participants in organisation.

World Bank says that, the essence of corporate governance is the identification of ways to ensure that strategic decisions are made effectively. It is also about promoting fairness, transparency, accountability and equality of treatment for all its stakeholders.

Corporate governance means that long term strategic objectives and plans are established and that proper management structure is in place to achieve those objectives, while at the same time, making sure that the structure functions to maintain the corporation’s integrity, reputation and responsibility to its various constituents.

The concept of corporate governance rests on complete transparency, integrity and accountability of the management. There is increased focus on investor protection and public interest. It is concerned with values, vision and visibility of the organization in its performance. It is therefore more important to consider corporate governance while implementing the strategy.

Eicher group has a two tier Board. At the top is the Corporate Board consisting of members who are concerned with examining ethics, mission, vision and long term direction.

Below this is the Management Board, comprising the Chief Executive Officer and other business executives, who takes care of day-to-day operations.

Adrian Cadbury, Chairman of Cadbury, has elaborated that corporate governance is aimed at making best use of resources, taking accountability for the company’s performance and safeguarding the interests of individuals, corporations and society.

Code of Corporate Governance prescribes those practices that the organization should follow to achieve their objectives. It includes particulars on Board of Directors, disclosure of information and Management practices.

It is about the value orientation of the organization, ethical norms for its performance, the direction of development, social accomplishment of the organization and the visibility of its performance and practices.

It is concerned with the efficiency of the resource use, value-addition and wealth creation within the broad parameters of corporate philosophy established by corporate governance. As stipulated by the corporate governance practices, the Board of Directors carry out the three basic tasks.

Monitor the developments within and outside the organization
Evaluation of the performance of the organization and
Formulation and implementation of the strategies.

6. Organizational Power and Politics

Power is the reflection of influence that one person may have over others.

The essence of power is control over behavior of others. Accordingly, a manager has to have power, which he can use to implement the strategy.

Sources of power

A person in an organizational setting can have power from two sources.

These are interpersonal sources and organizationally based structural sources.

1. Interpersonal Sources

These sources of power focus on the interpersonal relationships between the manager and the subordinates. The five sources of power dependent on interpersonal relationships are :

Legitimate power
Reward power
Coercive power
Expertise power
Referent power

2. Structural and situational sources of power: This includes the

Knowledge as power
Resources as power
Decision making as power and
Reciprocal relationship as power.

If interpersonal sources of power and structural and situation sources of power are strengthened, the manager has enough power to lead the subordinates’ in the implementation of the strategy.

Organizational politics and power are closely related towards implementing a strategy. Politics is concerned with acquiring the necessary power to make subordinates to work for the change. Adequate balancing of power and politics leads to favorable organizational climate or working condition, necessary for the employees while implementing a strategy.

III. Functional Implementation

Functional implementation of strategies deals with the formulation of various functional strategies. Based on these strategies, functional policies and plans are developed. When these functional policies and plans are put into action, they bring results.

Functional strategies deal with how various business functions of an organization should be performed so that they contribute positively to individual business strategies and overall corporate strategies. They are primarily concerned with effective utilization of various resources, integrating various activities in each functional area like sales, promotion, market research, distribution, etc. and assuring that functional strategies sync with business strategies and overall corporate strategies.

The different types of functional strategies include Production/operation strategy, Marketing strategy, financial strategy, research and development strategy and so on.

Strategy implementation becomes effective if various activities in the functional strategy, are performed in a cohesive and unified way, contributing positively towards accomplishing the organizational goals and objectives.

Conclusion

Strategy implementation can be successful if we could be able to understand the various mode of implementing strategies and understanding clearly the elements like leadership, culture, power, politics, corporate governance and so on, which coordinate with each other to implement the strategies successfully

you can view video on Strategy Implementation in Individual Firm

References:

NitishSengupta and Chandan.J.S. (2003). Strategic Management-Contemporary Concepts and Cases, First Edition, Vision Books, New Delhi, p. 19-28.
AbassF.Alkhafaji, (2008), Strategic Management-Formulation, Implementation and Control in a dynamic environment , First Edition, Jaico Publishing House, Mumbai, p. 3-80.
Prasad.L.M, (2008), “Strategic Management”, Fifth edition, Sultan Chand & Sons, New Delhi.
Jeyarathnam, M. (2012), “Strategic Management”, fourth edition, Himalaya Publishing House, New Delhi.
RyszardBarnat, Strategic Management: Formulation and Implementation.
Vipin Gupta, Kamala Gollakota, Srinivasan, (2005), Business Policy and Strategic Management, Prentice hall of India Pvt.Ltd., New Delhi.
Ghosh.P.K., (2010), “Strategic Planning and management”, Sultan Chand & Sons, NewDelhi.
Boseman, G., Phatak, A., and Schellenberger, R.E. (1986). Strategic Management: Text and Cases. New York: John Wiley and Sons.
Yip, George, S., Total global strategy: Managing for worldwide competitive advantage, Prentice Hall, 1955.
Joe G. Thomas, ‘Strategic Management”, New York: Harper & Row, 1992.

Web links

https://www.sciencedirect.com/science/article/pii/…/pdf?md5…pid=1-s2.0…1
www.referenceforbusiness.com › Encyclopaedia of Management