What is Strategy Implementation?
Strategy implementation is the process by which objectives, strategies, and policies are put into action through the development of programs, budgets, and procedures. It is the sum total of the activities and choices required for the execution of a strategic plan.
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.
When it comes to strategy implementation, there are several major problems firms need to be considering.
They are (1) implementation took more time than originally planned, (2) unanticipated major problems arose, (3) activities were ineffectively coordinated, (4) competing activities and crises took attention away from implementation, (5) involved employees had insufficient capabilities to perform their jobs, (6) lower-level employees were inadequately trained, (7) uncontrollable external environmental factors created problems, (8) departmental managers provided inadequate leadership and direction, (9) key implementation tasks and activities were poorly defined, and (10) information system inadequately monitored activities.
The begin the implementation process, management must consider these questions: (1) who are the people who will carry out the strategic plan? (2) what must be done to align the company operations in the new intended direction? And (3) how is everyone going to work together to do what is needed?
These questions must have been addressed initially when the pros and cons of strategic alternatives were analyzed. They must have also been addressed again before implementation plans can be made.
Who Implements Strategy?
All employees of the organization, in one way or another, are involved in the implementation of corporate, business, and functional strategies.
A top-down flow of communication is essential for developing bottom-up support.
Vice presidents of functional areas and directors of divisions or strategic business units work with their subordinates to put together large-scale implementation plans.
Their role in strategy implementation should build upon prior involvement in strategy formulation activities.
Plant managers, project managers, and unit heads put together plans for their specific plants, departments, and units.
Managers and employees throughout an organization should participate early and directly in strategy implementation decisions.
In all but the smallest organizations, the transition from strategy formulation to strategy implementation requires a shift in responsibility from top management to divisional and functional management.
Implementation problems can arise because of this shift in responsibility, especially if strategy formulation decisions come as a surprise to middle and lower-level managers.
Many of the managers who are crucial to the success of strategy implementation have little to do with the development of corporate and business strategies. Because of this, they may ignore the vast amount of data and work that goes into the formulation process.
Managers and employees are motivated more by perceived self-interests than by organizational interests unless the two coincide.
Therefore, it is essential that divisional and functional managers be involved as much as possible in strategy formulation activities. Of equal importance, top management should be involved as much as possible in strategy implementation activities
The rationale for objectives and strategies should be understood and clearly communicated throughout an organization.
Depending on how a corporation is organized, those who implement the strategy will probably be a much more diverse set of people than those who formulate it.
Unless changes in mission, objectives, strategies, and policies are clearly communicated, there can be a lot of resistance. Managers might hope to influence top management into abandoning plans and returning to their old ways.
Major competitors’ accomplishments, products, plans, actions, and performance should be apparent to all organizational members.
Major external opportunities and threats should be clear, and managers’ and employees’ questions should be answered.
Firms need to develop a competitor focus at all hierarchical levels by gathering and widely distributing competitive intelligence. Every employee should be able to benchmark her or his efforts against best-in-class competitors so that the challenge becomes personal.
The involvement of people from all organizational levels in the process of formulation and implementation of strategy tends to result in better organizational performance.
Management issues central to strategy implementation include establishing annual objectives, devising policies, allocating resources, altering an existing organizational structure, restructuring and reengineering, revising reward and incentive plans, minimizing resistance to change, matching managers with strategy, developing a strategy supportive culture, adapting production/operations processes, developing an effective human resources function, and, if necessary, downsizing.
Divisional/Functional Objectives
Establishing divisional/functional objectives is a decentralized activity that directly involves all managers in an organization.
There are 6 purposes of divisional/functional objectives.
They are: (1) serve as guidelines for action, directing and channeling efforts and activities of organization members; (2) provide a source of legitimacy in an enterprise by justifying activities to stakeholders; (3) serve as standards of performance; (4) serve as an important source of employee motivation and identification; (5) give incentives for managers and employees to perform; and (6) provide a basis for organizational design.
The characteristics of divisional/functional objectives are as follows.
Divisional/functional objectives should be consistent across hierarchical levels and form a network of supportive aims. Horizontal consistency of objectives is as important as vertical consistency of objectives.
Divisional/functional objectives should be stated in terms of profitability, growth, and market share by business segment, geographic area, customer groups, and product.
Divisional/functional objectives should be measurable, consistent, reasonable, challenging, clear, communicated throughout the organization, characterized by an appropriate time dimension, and accompanied by commensurate rewards and sanctions. Too often, objectives are stated in generalities, with little operational usefulness. Objectives should state quantity, quality, cost, and time, and be verifiable. Terms and phrases such as maximize, minimize, as soon as possible, and adequate should be avoided.
Divisional/functional objectives should be well conceived, consistent with long-term objectives, and supportive of strategies to be implemented. Clearly stated and communicated objectives are critical to success in all types and sizes of firms.
Clear 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.
Divisional/functional objectives should be compatible with employees’ and managers’ values and should be supported by clearly stated policies. Active participation in establishing divisional/functional objectives can lead to acceptance and commitment.
Divisional/functional objectives should be tied to rewards and sanctions so that employees and managers understand that achieving objectives is critical to successful strategy implementation.
In strategy implementation, divisional/function objectives are essentials for several reasons.
These objectives: (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.
Developing Programs, Budgets, and Procedures
The management of divisions and functional areas works with other employees to develop programs, budgets, and procedures for the implementation of the strategy.
This also includes the work to achieve synergy and alignment among the divisions and functional areas in order to establish and maintain the company’s distinctive competence.
Programs
Programs are to make a strategy action-oriented.
One way to examine the likely impact new programs will have on an existing organization is to compare proposed programs and activities with current programs and activities.
Most corporate headquarters have around 10 to 30 programs in effect at any one time.
Budgets
Budgets are to be the last real check a corporation has on the feasibility of its selected strategy.
An ideal strategy might be found to be completely impractical only after specific implementation programs are costed in detail.
Procedures
Procedures are often called Standard Operating Procedures, which typically detail the various activities that must be carried out to complete a corporation program.
After the program, divisional, and corporate budgets are approved, these procedures must be initiated.
Procedures are also known as organizational routines, which are the primary means by which organizations accomplish much of what they do.
Once in place, procedures must be updated to reflect any changes that affect them. Properly planned procedures can help eliminate poor service by making sure that employees do not use excuses to justify poor behavior toward customers.
Matrix of Change
Matrix of change is a practice that helps management decide how quickly change should proceed, in what order changes should take place, and whether the proposed systems are stable and coherent.
The matrix is a useful guideline on where, when, and how fast to implement change.
New programs are presented on the vertical axis while current programs are presented on the horizontal axis. A new strategy usually consists of a sequence of new programs and activities.
Any one of these may conflict with existing practices and activities, which would create implementation problems.
The matrix of change can be used to address the following types of questions.
The first type is feasibility.
Do the proposed programs and activities constitute a stable system? Are the current activities coherent? Is the transition likely to be difficult?
The second type is a sequence of execution.
Where should the change begin? How does the sequence affect success? Are there reasonable stopping points?
The third type is location.
Are we better off instituting the new programs at a new site, or can we reorganize the existing facilities at a reasonable cost?
The fourth type is pace and nature of change.
Should the change be slow or fast, incremental or radical? Which blocks of current activities must be changed at the same time?
The fifth type is stakeholder evaluations.
Have we overlooked any important activities or interactions? Should we get further input from interested stakeholders?
Achieving Synergy for Better Strategy Implementation
The synergy between and among functions and business units is important to achieve strategy implementation.
Synergy exists for a divisional corporation if the return on investment of each division is greater than what the return would be if each division were an independent business unit.
Synergy can take place in one of the 6 following forms.
The first one is shared know-how.
Combined units often benefit from sharing knowledge and skills. This is a leveraging of core competencies.
The second one is coordinated strategies.
Aligning the business strategies of two or more business units may provide a corporation advantage by reducing inter-unit competition and developing a coordinated response to common competitors.
The third one is shared tangible resources.
Combined units can sometimes save money by sharing resources, such as a common manufacturing facility or R&D lab.
The fourth one is economies of scale or scope.
Coordinating the flow of products or services of one unit with that of another unit can reduce inventory, increase capacity utilization, and improve market access.
The fifth one is pooled negotiating power.
Combined units can combine their purchasing to gain bargaining power over common suppliers to reduce costs and improve quality. The same can be done with common distributors.
The sixth one is new business creation.
Exchanging knowledge and skills can facilitate new products or services by extracting discrete activities from various units and combining them in a new unit or by establishing joint ventures among internal business units.
Managing Conflict in Establishing Objectives
Conflict can be defined as a disagreement between two or more parties on one or more issues.
Conflict is unavoidable in organizations, so it is important that conflict be managed and resolved before dysfunctional consequences affect organizational performance.
Conflict is not always bad. An absence of conflict can signal indifference and apathy. Conflict can serve to energize opposing groups into action and may help managers identify problems.
Interdependency of objectives and competition for limited resources often leads to conflict.
Establishing objectives can lead to conflict because individuals have different expectations and perceptions, schedules create pressure, personalities are incompatible, and misunderstandings between line managers and staff managers occur.
Establishing objectives can lead to conflict because management must make trade-offs, such as whether to emphasize short-term profits or long-term growth, profit margin or market share, market penetration or market development, growth or stability, high risk or low risk, and social responsiveness or profit maximization. Trade-offs are necessary because no firm has sufficient resources to pursue all strategies to would benefit the firm.
Various approaches for managing and resolving conflict can be classified into 3 categories: avoidance, defusion, and confrontation.
Approach 1
Avoidance includes such actions as ignoring the problem in hopes that the conflict will resolve itself or physically separating the conflicting individuals (or groups).
Approach 2
Defusion can include playing down differences between conflicting parties while accentuating similarities and common interests, compromising so that there is neither a clear winner nor loser, resorting to majority rule, appealing to a higher authority, or redesigning present positions.
Approach 3
Confrontation 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.
Resource Allocation in Strategy Implementation
Resource allocation is a central management activity that allows for strategy implementation.
The strategic implementation enables resources to be allocated according to priorities established by divisional/functional objectives.
In organizations that do not use a strategic management approach to decision-making, resource allocation is often based on political or personal factors.
The real value of any resource allocation program lies in the resulting accomplishment of divisional/functional objectives.
Nothing could be more detrimental to strategic management and to organizational success than for resources to be allocated in ways not consistent with priorities indicated by objectives.
Allocating resources to divisions and departments does not mean that strategies will be successfully implemented.
Programs, personnel, controls, and commitment must breathe life into the resources provided. Otherwise, resources alone cannot fuel the implementation process of a strategy.
Overprotection of resources, too great an emphasis on short-run financial criteria, organizational politics, vague strategy targets, a reluctance to take risks, and a lack of sufficient knowledge are several factors that commonly prohibit effective resource allocation.
Below the corporate level, there often exists an absence of systematic thinking about resources allocated and strategies of the firm. Strategy formulation and implementation activities often get deferred due to daily tasks by managers and employees.
All organizations have at least 4 types of resources that can be used to achieve desired objectives: (1) financial resources, (2) physical resources, (3) human resources, and (4) technological resources.
Resources
Further Reading
- Essential Steps to a Successful Strategy Implementation Process (cleverism.com)
- Strategy Implementation: The 6 Step Process (cascade.app)
- Three Cs of Implementing Strategy (forbes.com)
- Strategic Implementation (onstrategyhq.com)
- Disciplines Essential to Strategy Implementation (focusedmomentum.com)
- Strategy Execution: 10 Critical Components for Successful Strategy Implementation (prnewswire.com)
- The 5 factors you need to successfully implement your strategy (bizjournals.com)
- Strategy Implementation – Meaning and Steps in Implementing a Strategy (managementstudyguide.com)
- Strategy Implementation: The Complete Guide For Small Businesses (getsling.com)
Even More Reading
- What are the Key Success Factors for Effective Strategy Implementation? (hec.edu)
- Strategy Implementation (referenceforbusiness.com)
- Implementing Strategy (managers.org.uk)
- The Nature Of Strategy Implementation (strategy-implementation.24xls.com)
- Strategy Implementation Roadmap (SIR) (strategyimplementationinstitute.org)
- Strategy Implementation (hahuzone.com)
Related Concepts
- Functional Strategy Implementation
- Organizational Structure in Strategy Implementation
- Staffing in Strategy Implementation
- Leadership in Strategic Implementation
- Organizational Culture in Strategy Implementation
- Strategy Implementation Programs
References
- Hitt, M. A., Ireland, D. R., & Hoskisson, R. E. (2016). Strategic Management: Concepts: Competitiveness and Globalization (12th ed.). Cengage Learning.
- Hitt, M. A., Ireland, D. R., & Hoskisson, R. E. (2019). Strategic Management: Concepts and Cases: Competitiveness and Globalization (MindTap Course List) (13th ed.). Cengage Learning.
- Hill, C. W. L., & Jones, G. R. (2011). Essentials of Strategic Management (Available Titles CourseMate) (3rd ed.). Cengage Learning.anagement-Available-CourseMate/dp/1111525196
- Mastering Strategic Management. (2016, January 18). Open Textbooks for Hong Kong.
- Wheelen, T. L. (2021). Strategic Management and Business Policy: Toward Global Sustainability 13th (thirteenth) edition Text Only. Prentice Hall.