Strategy Implementation

HCAD 5390
Strategy Implementation

Good strategic planning is not enough

Process by which strategies are put into action
Process details are unique to each organization
and each strategy
Sub-strategies, programs, action plans,
policies, procedures, resource allocations,
budgets, authority/responsibility delegation,
teams and task forces, reward and control
systems, and individual assignments
Keys to Strategy Implementation

Resources and competencies

Functional area sub-strategies
Specific decisions and actions
Resources and Competencies
Strategy implementation depends on resources and
competencies possessed by the firm
These include:
Money in certain amounts
Physical space of certain dimensions
Particular types of equipment
Specified numbers of people with
Certain skills, capabilities, and competencies
Control and reporting systems
Attitude, intuition, and imagination
Resources and Competencies:
Systems

Collections of policies, procedures, and

protocols, backed by EDP and communications
equipment, and people who work with them
Purpose is to simplify and regularize the
performance of routine, high-volume tasks
Producing results that are as uniform and
predictable as possible
Modern business organizations depend on them
Examples of Organizational Systems

Accounting and budgeting system

Management information system
Manufacturing control system
Compensation and reward system
Planning system
Resources and Competencies:
Human Resources

People possess competencies and carry out

details of strategic plans
Personnel costs are high proportion of operating
budget in health care organizations
Ensure enough people in the right places with
the right competencies
Balance operational and strategic duties
Think of strategic human resource management
Resources and Competencies:
Organizational Structure

Taken for granted and assumed immutable

Formal framework of departments, units, and
groups into which people and the activities they
perform are organized
Some structures are better suited to certain
strategies than other structures
A carefully chosen structure can give an
organization a sustainable competitive
advantage
Organizational Structure

Organizational design
Selecting the structure and control
systems that are most strategically
effective for pursuing sustainable
competitive advantage.
The role of structure and control
To coordinate strategy implementation.
To motivate and provide incentives for superior
performance.
The Role of Organizational
Structure
Building blocks of organizational structure
Differentiation in the allocation of people and resources
to create value.
Vertical differentiation in the
distribution of decision-making
authority.
Horizontal differentiation in
dividing up people and tasks
into functions and divisions.
Integration
The means used in coordinating people and functions to
accomplish organizational tasks.
Differentiation, Integration,
Bureaucratic Costs

Bureaucratic costs and strategy

implementation:
Bureaucratic costs increase with
organizational complexity.
More differentiation = more managers.
More integration = more coordination.
Better strategy implementation = better bottom-line
performance and profitability.
Vertical Differentiation

Span of control (division of authority)

The number of subordinates that a single manager
directly manages.
Organizational hierarchy choices
Flat structures
Few organizational levels
Wide spans of control
Tall structures
Many organizational levels
Narrow spans of control
Tall and Flat Structures
Problems with Tall Structures
Principle of minimum chain of command
Maintaining a hierarchy with the least number of
levels of authority needed to achieve a strategy.
Sources of bureaucratic costs:
Centralization or Decentralization

Authority patterns in organizations:

Centralized
Decision making retained in the
hands of upper-level managers.
Decentralized
Decisions delegated to lower
levels in the organization.
Centralization (Structural) Choice?
Advantages of Advantages of
decentralization centralization
Reduced information Easier coordination of
overload on upper organizational activities.
managers. Decisions fitted to broad
Increased motivation and organizational objectives.
accountability throughout Exercise of strong
organization. leadership in crisis.
Fewer managers; lower Faster decision making and
bureaucratic costs. response.
Horizontal Differentiation

Focus is on division and grouping of tasks to

meet business objectives.
Simple structure:
Characteristic of small entrepreneurial companies.
Entrepreneur takes on most managerial roles.
No formal organization arrangements.
Horizontal differentiation is low.
 Structure Follows Strategy:

Changes in corporate strategy lead to

changes in organizational structure

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 Structure Follows Strategy:
New strategy is created
New administrative problems emerge
Economic performance declines
New appropriate structure is invented
Profit returns to its previous levels

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 Stages of corporate development

Simple Structure
Functional Structure
Divisional Structure
Beyond SBUs

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 Simple Structure:
Stage I:
Entrepreneur
Decision making tightly controlled
Little formal structure
Planning short range/reactive
Flexible and dynamic

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 Functional Structure:
Stage II:
Management team
Functional specialization
Delegation decision making
Concentration/specialization in industry

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 Divisional Structure:
Stage III:
Diverse product lines
Decentralized decision making
SBUs
Almost unlimited resources

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 Beyond SBUs:
Stage IV:
Increasing environmental uncertainty
Technological advances
Size & scope of worldwide businesses
Multi-industry competitive strategy
Better educated personnel

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Functional Structure
Advantages Disadvantages

Task grouping facilitates Functional orientation

specialization and creates communication
productivity. problems.
Better monitoring of work Performance and
processes, reduced costs. profitability measurement
problems.
Greater control over
organizational activities. Location versus function
problems (coordination).
Strategic problems due to
structural (vertical and
horizontal) mismatches.
Functional Structure
Mutlitdivisional Structure
Advantages Disadvantages
Enhanced corporate Establishing the divisional-
control by division corporate authority
Enhanced strategic control relationship
of each SBU in portfolio Distortion of information by
Growth is easier. New units divisions
dont have to be integrated
across organization Competition for resources
Stronger pursuit of internal by divisions
efficiencies. Performance Transfer pricing problems
of individual units is readily between divisions
measurable.
Short-term research and
development focus
Bureaucratic costs
Multidivisional Structure
Matrix Structure
Advantages
Flexibility of the structure and membership
Minimum of direct hierarchical control
Maximizes use of employees skills
Motivates employees;
frees up top management
Disadvantages
High bureaucratic costs
High costs (time and money) for building
relationships
Two-boss employees role conflict
Matrix
Structure
Two-boss employee
 Network Structure:
non structure elimination of in-house
business functions
Termed virtual organization
Useful in unstable environments
Need for innovation and quick response

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 Network Structure

Packagers

Designers Suppliers

Corporate
Headquarters
(Broker)

Manufacturers Distributors

Promotion/
Advertising
Agencies

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 Effective implementation requires:
Leadership
Leading people to use their abilities and skills
most effectively and efficiently to achieve
organizational objectives

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 Staffing follows strategy:
Matching the manager to the strategy
Executive type
Executives with a particular mix of skills and
experiences

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Leadership: Three Interdependent
Activities

Leadership is the process of transforming

organizations from what they are to what the
leader would have them become
Leadership should be
Proactive
Goal-oriented
Focused on the creation and implementation of a
creative vision
 Managing corporate culture:
Corporate culture
Affects firms ability to shift its strategic direction
Strong tendency to resist change
Corporate culture should support the strategy

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 Strategy-Culture Compatibility:
Consider the following:
Is the planned strategy compatible with the firms
current culture?
Can the culture be easily modified to make it more
compatible with new strategy?
Is management willing to make major organizational
changes?
Is management committed to implementing the
strategy?

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 Managing corporate culture:
Communication
Key to effective management of change
Rationale for strategic change should be
communicated to all

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What Is Organizational Culture?
Culture
The collection of values and norms shared by people and
groups in an organization.
Shared values and a common culture increase integration
and improve coordination.
Values
Beliefs and ideas about common goals and proper
behaviors.
Norms
Act as guidelines or expectations that prescribe acceptable
behavior by organizational members.
Organizational Culture

Ways of transmitting organizational culture:

Culture and Strategic Leadership

The influence of the founder

Initial cultural values and management
style is imprinted on the organization
by its founder.
Organizational structure
Structure follows strategy.
Strategic leadership affects
the cultural norms and values
that develop in the organization.
Strategic Reward Systems
Individual reward systems
Piecework plans
Commission systems
Bonus plans
Promotion
Group and organizational
reward systems
Group-based bonus systems
Profit sharing systems
Employee stock option systems
Organization bonus systems
Functional Area Sub-Strategies

Strategies are implemented by front-line

personnel in the functional areas
Functional area managers participate in
corporate strategic planning process
Not enough to just take functional area
concerns into account
Functional Area Strategic Contributions

Provide background to initial thinking about

strategic possibilities
Suggest specific strategies to address
opportunities identified
Perform activities that make chosen strategies a
reality
Marketing Strategy Contributions (I)

Closest contact to market and external

environment
Strategic knowledge inputs:
market segments,
customers preferences,
firms reputation and market position,
competitor intelligence,
market threats and opportunities,
industry and general environment
Marketing Strategy Contributions (II)

Growth strategy recommendations:

new products or services
enhancements of existing products or services
new customers to be served
unmet customers needs
new technologies with market appeal
customer service improvements
new distribution channels
new market segments
Marketing Strategy Contributions (III)

Roles in strategy implementation:

Publicize strategic innovations to customers
Explain value of new product features
Boost demand through aggressive advertising,
price promotions, personal selling, and direct
marketing
Communications link between the business and
its market
Operations Strategic Contributions

Core of the business, creating products and

services sold to customers
If strategic goal is to increase sales
Does operations have the capacity?
If strategy based on new products or features
Can operations manufacture them?
Low-cost leadership or retrenchment strategies
Depend on cost-cutting in operations
R&D Strategic Contributions

May dominate the business (pharma, biotech)

or be non-existent (physician practice)
Pharmaceutical company research pipelines
Shift research into new scientific area or
away from an existing area
Ability to develop new products or features
called for by
Information System
Strategic Contributions (I)

Critical
functional area in health care industry
Perform typical business functions:
Cost accounting
Inventory control
HR and employee benefits
Customer relations
Corporate communications
Information System
Strategic Contributions (II)

Perform unique health care functions:

Tracking services delivered to support claims filed
Claims submission and collection
Carry out physician clinical orders
Maintain record of patient conditions and treatments
Gather and correlate clinical outcomes data
Gather data on treatment costs and efficacy
Evaluate physicians regarding resource utilization and clinical
outcomes
Transmit all these data among organization stakeholders
Information System
Strategic Contributions (III)
Specific strategic roles:
Basis for differentiation from competitors
Capacity to handle increased volume of customers or
sales
Facilitate cost-cutting by streamlining operational
processes and identifying points of cost inefficiency
Reveal value chain points at which differentiated
value added is possible
Human Resources
Strategic Contributions (I)

Supports all other functions in carrying out

operational and strategic responsibilities
Assure that right numbers and types of
personnel are available for strategic initiatives
Hire and develop employees to ensure that
appropriate competencies are available when
needed
Human Resources
Strategic Contributions (II)

Recommend motivational and reward activities

to enhance organizational performance
Propose organizational structures better suited
to new strategies
Oversee workforce reduction during
retrenchment
Creating Functional Area Strategies

Each functional area creates a strategic plan

A plan that supports and meshes with the
organization-wide plan
A plan that is synchronized with plans in other
functional areas
Functional area managers must participate in
organization-wide planning and be in
communication with each other
Strategy Implementation Actions (I)

Overallstrategy broken down into

manageable parts
Scope of each part defined in detail
Goals and deadlines set for accomplishment
Appropriate resources allocated
Strategy Implementation Actions (II)

Right numbers and types of people assigned

Policies and procedures to guide their
actions
One person assigned overall responsibility
for each part
Progress measured and tracked
Changes and adjustments when appropriate
Examples of Strategy Implementation
Actions (I)

Marketing campaigns new, refocus, expand or

contract, discontinue, different media, test pilots
Facilities new, expand, repurpose, close
Products/services new (create, develop,
invent), redesign, add new features, discontinue
Product prices raise, lower, bundle or
unbundle products
Examples of Strategy Implementation
Actions (II)

Operating processes reengineer, tasks (new,

reorder, combine, separate, perform differently
or less expensively)
Departments, offices, teams new, refocus,
discontinue, expand, split up
Employees new, transfer, retrain or develop,
lay off
New systems for monitoring and measuring
operating performance
Delegating Implementation Tasks

Best if implementers involved in planning

Task content must fit expertise and skills of
person assigned
If right person not available?
Temporary stand-in for operational duties
Special training for another employee
Worth hiring a new, trained employee
Involve HR in strategic planning
Delegation Through the
Organizational Hierarchy

Functional area heads work with the managers of

departments, facilities, and units
Together they formulate sub-strategies to carry out
the area strategies
Managers break the work down into bundles of tasks
for assignment to teams, task forces, and work
groups (ad hoc or permanent)
Programs or projects may be set up to implement
specific strategic elements
Tasks are assigned to individual employees
Elements in a Strategy Action Plan

Policies
Procedures
Methods
Rules
Objectives
Time deadlines
Personnel assignments
Allocation of Resources

People, space, equipment, supplies, website

space, agenda time at meetings, authority,
discretion, and money
Money is usually the most critical strategic
resource
Purpose of capital expenditures
Replace existing capital assets
Acquire new non-strategic capital assets
Carry out strategic plans
Choosing Strategic Capital
Expenditures (I)

Identify and describe all capital spending requests

amount
timing
assets acquired
purposes
Describe non-financial benefits of each request
patient satisfaction
less maintenance downtime
lower employee turnover
speedier member enrollment
Choosing Strategic Capital
Expenditures (II)

Set priorities on basis of urgency factors

relevance to current operations
response to legal mandate
response to competitors moves
critical element in strategic plans
Project cash flows for each request
Perform financial analysis of each request
Net present value
Discounted cash flow
Payback period
Choosing Strategic Capital
Expenditures (III)

Compare and evaluate financial and non-

financial benefits of all capital requests
Using standard criteria decided beforehand
Decide which to fund and in what amounts
Strategic Objectives and Deadlines

Long and short-term objectives

Accompanied by dates for achievement
Purposes served:
Guide and motivate employees
Basis for measuring progress and evaluating
employees, particularly managers
Establish priorities for each unit or subunit
Basis for allocating resources
Examples of Strategic Objectives
May be applied to market segments, geographic
areas, products/services, facilities, operating unit
May be stated in terms of sales, profits, market
share, patient volume, employees hired/trained, or
other metrics showing strategic progress
Good objectives are measurable, challenging,
achievable, publicized, consistent, time-based
Potential Implementation Problems (I)

Original plan poorly conceived

Took more time than planned
Unanticipated internal/external problems arose
Poor coordination of activities
Crises or competing activities diverted
attention
Assigned employees lacked necessary skills
Potential Implementation Problems (II)

Assigned employees were inadequately trained

Insufficient allocation of resources
Uncontrollable external environmental factors
Inadequate lower-level leadership and direction
Poorly defined key tasks and activities
Inadequate monitoring of activities and progress