1.

Strategy Implementation

1.1 The nature of strategy implementation

Strategy implementation requires a firm to establish annual objectives, devise policies, motivate
employees, and allocate resources so that formulated strategies can be executed. Strategy
implementation includes developing a strategy-supportive culture, creating an effective
organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing
information systems, and linking employee compensation to organizational performance.

Strategy implementation often is called the “action stage” of strategic management, means
mobilizing employees and managers to put formulated strategies into action. Often considered to
be the most difficult stage in strategic management, strategy implementation requires personal
discipline, commitment, and sacrifice. Successful strategy implementation hinges upon managers’
ability to motivate employees, which is more an art than a science. Strategies formulated but not
implemented serve no useful purpose.

Interpersonal skills are especially critical for successful strategy implementation.

Strategy-implementation activities affect all employees and managers in an organization.

Every division and department must decide on answers to questions, such as “What must we do to
implement our part of the organization’s strategy?” and “How best can we get the job done?” The
challenge of implementation is to stimulate managers and employees throughout an organization
to work with pride and enthusiasm toward achieving stated objectives.

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)!

Even the most technically perfect strategic plan will serve little purpose if it is not implemented.
Many organizations tend to spend an inordinate amount of time, money, and effort on developing
the strategic plan, treating the means and circumstances under which it will be implemented as
afterthoughts!
Change comes through implementation and evaluation, not through the plan. A technically
imperfect plan that is implemented well will achieve more than the perfect plan that never gets off
the paper on which it is typed.

Strategy-formulation concepts and tools do not differ greatly for small, large, for-profit, or nonprofit
organizations. However, strategy implementation varies substantially among different types and sizes of
organizations. Implementing strategies requires such actions as altering sales territories, adding new departments,
closing facilities, hiring new employees, changing an organization’s pricing strategy, developing financial
budgets, developing new employee benefits, establishing cost-control procedures, changing advertising strategies,
building new facilities, training new employees, transferring managers among divisions, and building a better
management information system. These types of activities obviously differ greatly between manufacturing,
service, and governmental organizations.

1.2 Key concepts in strategy implementation

Annual Objectives

Establishing annual objectives is a decentralized activity that directly involves all managers in an organization.
Active participation in establishing annual objectives can lead to acceptance and commitment. Annual objectives
are essential for strategy implementation because they (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; and (4) establish organizational, divisional, and departmental priorities.

Considerable time and effort should be devoted to ensuring that annual objectives are well conceived, consistent
with long-term objectives, and supportive of strategies to be implemented.

The purpose of annual objectives can be summarized as follows:

a. Annual objectives serve as guidelines for action,

b. Directing and channeling efforts and activities of organization members.

c. They provide a source of legitimacy in an enterprise by justifying activities to stakeholders.

d. They serve as standards of performance.

e. They serve as an important source of employee motivation and identification.

f. They give incentives for managers and employees to perform. They provide a basis for organizational
design
Clearly stated and communicated objectives are critical to success in all types and sizes of firms. Annual
objectives, stated in terms of profitability, growth, and market share by business segment, geographic area,
customer groups, and product, are common in organizations.

Annual objectives should be measurable, consistent, reasonable, challenging, clear, communicated throughout
the organization, characterized by an appropriate time dimension, and accompanied by commensurate/appropriate
rewards and sanctions. Too often, objectives are stated in generalities, with little operational usefulness. Annual
objectives, such as “to improve communication” or “to improve performance,” are not clear, specific, or
measurable.

Objectives should state quantity, quality, cost, and time—and also be verifiable.

Terms and phrases such as maximize, minimize, as soon as possible, and adequate should be avoided.

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 faking the numbers, distorting
the records, and letting objectives become ends in themselves.

Managers must be alert to these potential problems.

1.3 Policies

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 on 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.

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 and 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.

1.4 Resource Allocation

Resource allocation is a central management activity that allows for strategy execution. In organizations that do
not use a strategic-management approach to decision making, resource allocation is often based on political or
personal factors. Strategic management enables resources to be allocated according to priorities established by
annual objectives.

Effective resource allocation does not guarantee successful strategy implementation because programs, personnel,
controls, and commitment must breathe life into the resources provided. Strategic management itself is
sometimes referred to as a “resource allocation process.”

1.5 General Framework for Strategy Implementation

The first step in implementation is identifying the activities, decisions, and relationships critical to accomplishing
the activities. There are six principal administrative tasks that shape a manager's action agenda for implementing
strategy. The specific components of each of the six strategy-implementation tasks:

1. Building an Organization Capable of Executing the Strategy. The organization must have the
structure necessary to turn the strategy into reality. Furthermore, the firm's personnel must possess the
skill needed to execute the strategy successfully. Related to this is the need to assign the responsibility
for accomplishing key implementation tasks to the right individuals or groups.

2. Establishing a Strategy-Supportive Budget. If the firm is to accomplish strategic objectives, top

3. Installing Internal Administrative Support Systems. Internal systems are policies and procedures to
establish desired types of behavior, information systems to provide strategy-critical information on a timely
basis, and whatever inventory, materials management, customer service, cost accounting, and other
administrative systems are needed to give the organization important strategy-executing capability. These
internal systems must support the management process, the way the managers in an organization work
together, as well as monitor strategic progress.
 4. Devising Rewards and Incentives that are tightly linked to Objectives and Strategy. People and
departments of the firm must be influenced, through incentives, constraints, control, standards, and
rewards, to accomplish the strategy.

1.6. Leadership and Strategic Implementation

A strategy manager has many different leadership roles to play: visionary, chief entrepreneur and strategist, chief
administrator, culture builder, resource acquirer and allocator, capabilities builder, process integrator,
crisis solver, spokesperson, negotiator, motivator, arbitrator, policy maker, policy enforcer, and head
cheerleader. Sometimes it is useful to be authoritarian and hardnosed/rigid; sometimes it is best to be a perceptive
listener and a compromising decision maker; sometimes a strongly participative, collegial approach works best;
and sometimes being a coach and adviser is the proper role. Many occasions call for a highly visible role and extensive
time commitments, while others entail a brief ceremonial performance with the details delegated to subordinates.

Developing appropriate leadership is one of the most important elements in the implementation of a
strategy. This is important b/c leaders are key organic elements who help an organization cope with changes.
Appropriate leadership is necessary, though not a sufficient condition, for mobilizing people, and for developing
effective structure and systems for the success of strategy.

Failure of leadership may lead to difficulties in achieving goal congruence, communication breakdown, ambiguity
with regard to roles of sub-units, and difficulty in obtaining commitment to a plan, e.g., staff conflicts and lack of
strategic thinking. Leadership is the key factor for developing and maintaining the right culture and climate.