Strategic Implementation and Control PDF

# Chapter 10: Strategic Implementation and Control A good strategy cannot give successful results if it is not implemented properly. Only those firms which have superior ability to implement strategies emerge as winners. After settling down the creative and analytical aspects of strategy formulatio...

# Chapter 10: Strategic Implementation and Control A good strategy cannot give successful results if it is not implemented properly. Only those firms which have superior ability to implement strategies emerge as winners. After settling down the creative and analytical aspects of strategy formulation, these strategies are converted to operate effectively so that they can be put to action. Implementation of strategy involves deciding over who, where and how? A strategy can only be completed even as a formulation, only when it gets commitment of organizations resources and gets embodied in organization activities. Therefore it is very essential to understand the total implication of strategy implementation. Strategy implementation may be set to consist of securing resources, organizing them and directing the use of these resources within and outside the organization. Strategy implementation is the process by which the strategy chosen is put to action to achieve the desired result. It is not easy to implement any strategy. It follows certain steps and it is required to get embodied in organizational activities. According to Steiner, strategy implementation "the implementation of policies and strategies is concerned with the design and management of systems to achieve the best integration of people, structures, processes and sources in reaching organizational purpose". Thus it can be said that strategic implementation deals with determining a system and integrating various organizational resources so as to put strategy chosen into action. ## Issues in Strategy Implementation It is to be noted that from a practical point of view, issues of strategy implementation are the same as those of different functions of management such as organizational planning, directing, motivation, control etc. Since a strategist would like to see that his strategic decisions are implemented effectively, he should not only be skillful but also possess a good deal of experience and knowledge about his decisions. His decisions are rational and can be said to be successfully implemented when he proves his abilities in allotting resources, designing a suitable structure, formulating functional policies etc., bearing in mind the leadership style required to achieve the objects in the best possible manner. The strategic plans should be drawn in such a way that strategic decision could be put into action without any opposition. Strategy can be thought of, but to make these effective, requires skill, knowledge and tact on the part of strategists. In this context, one should see that the strategies are mere statement of what to do and what not to do, but this intention cannot materialize unless they are properly implemented. So, proper implementation is more important than the setting of strategies. Once strategies are formulated, they lead to plans and thus there can be a "modernization plan" or "expansion plan" when expansion strategies are adopted. In the same way, any other issue in strategy implementation such as dissatisfaction cannot be ruled out and as a result, there can be a new product department plan. It is important to note that the pre-determined objectives give rise to issues; issues lead to plans and finally plans result in different programmes. Infact, from a practical point of view, a programme is a broad term that covers all aspects of strategy such as objectives, policies, procedures and steps to be taken in putting a strategic plan into action. Varied programmes can be had, depending on the availability of funds required for implementation. So, the main issue here is that the successful implementation of the strategy is linked with allocation of funds based on capital budgeting. Thus, as per the funds allocation, different projects are conceived and specific programs are to be completed in a stipulated period with cost. Project, under any specific programmes are likely to change the whole infrastructure of the day-to-day operations. Proposed projects may involve in modernizing the prevailing facilities or installation of new or additional plants etc. that are needed for the implementation of strategies. Therefore, one should note that implementation of strategies is not exclusively for formulation of plans but covers a wide field involving modernization, diversification, installation of new plant and machinery and many such other programmes. ## Steps in Strategy Implementation Implementation is the key component of strategic management. One should note that implementation of strategies is not exclusively for formulation of plans but covers a wide field involving modernisation, diversification, installation of new plant and machinery and many other programmes. Below are given the important issues and steps in strategy implementation. The steps may not be in a sequential order because different organisations may implement the strategy differently depending upon its nature and functioning. 1. **Project Implementation** 2. **Procedural Implementation** 3. **Resource Allocation** 4. **Structural Implementation** 5. **Functional Implementation** 6. **Behavioral Implementation** ### **1. Project Implementation** Project is an investment opportunity for making profit or extension of service. The Project Management Institute of U.S. defined project as "a one-shot, time limited, goal oriented, major undertaking requiring the commitment of varied skills and resources". It is a highly specific program for which the time schedule and specific costs are determined in advance. Project creates all necessary conditions and facilities for the strategy implementation. ### **2. Procedural Implementation** Procedure is inevitable for strategy implementation. Without following the procedure, no implementation can be effective. Though many procedures are simplified in this liberalized era, certain procedures are still applicable in the process of strategy implementation. Therefore the strategists should study the following procedural aspect before implementing the strategy. They are licensing procedures, foreign collaboration procedures, FERA requirements, environmental requirements, MRTPC requirements, import and export requirements, incentives and benefit, labour laws and other legislations. ### **3. Resource Allocation** The job of strategic management is mainly confined to three operational areas such as physical, financial and human resources. No business concern whether small or big can efficiently function without the adequate availability of these resources. These resources are obtained by the strategic management through different sources. It should be noted that out of all these resources finance has been considered the most important resources since it enables the company to procure men and materials. Money to different departments is provided through formal budgets. Hence in a business concern there can be capital budget, expense budgets, raw material budgets etc. The funds would be allocated to each department based upon which would make the best use of those funds in achieving the companies objective, while disbursing the funds the strategists should see that money is allocated for capital goods, labor, raw materials and other expenses based on need, efficiency and finally, return on investment. It should, however, be noted that, while allocating the resources, it is presumed that the organisation is a profit making concern and as such how much resources are to be allocated is generally determined on the basis of return on investment. Money and materials can be put into action profitably only when the organization has adequate qualified human resources. Men have their own opinions, way of thinking, willingness to work or not to work etc., Like financial and human resources, physical resources too are playing a dominant role in organizational strategies. . If physical facilities are not provided financial and human resource become waste. Hence proper and timely allocation of physical resources is the need for any business organization. All the three resources are interconnected. ### **4. Structural Implementation** Before actual implementation of strategy a company should be appropriately organised in terms of staffing and activities to achieve objectives. If the present organization structure does not adequately fit the need for structural recognition arises. It may be noted that changes in corporate strategy may result in the change of organisational structure and skill at particular levels. According to Chandler, structure follows strategy, i.e., changes in corporate strategy lead to changes in organizational structure. Many companies have recognised their structure recently because of the various changes in their strategies and actions. #### **Results Approach** Organisational design that focus on results is more effective in those situation where strategy innovation is prime need. The focal point for developing the structure through a result approach involves a few steps: * Defining the business on the basis of potential areas of market opportunities. * Establishing the objectives to be accomplished * Determining the requirements of success and functional skills needed to meet them. * Determine the degree of authority ### **5. Functional Implementation** Functional strategies are the strategies applied in functional areas such as marketing, finance, production etc. The implementation of functional strategies provide short-term plans to accomplish the annual plan. Hence functional implementation deals with the development of policies and plans in different areas of functions which an organisation undertakes. Every business organisation has to produce goods and sell the same to the consumers. To carry out this the organisation assume the function related with finance. Hence implementation of production, marketing and finance strategy are the main types of implementation in functional strategy. The organisation must also frame its R&D and human resource strategies in the bundle of its functional strategies. The functional strategy for marketing must cover all the factors of the marketing mix. Mutually consistent strategies for each of the factors must be developed to help the annual marketing objective. R & D strategy may involve improving product or packaging, developing new products etc. ### **6. Behavioral Implementation** This concerns with those aspects of strategy implementation that have impact on the behaviour of people in the organisation. This deals the following: * Leadership * Corporate culture * Values and ethics * Corporate governance * Organisational politics Developing appropriate leadership is the most important element in the successful implementation of the strategy. This is important since dynamic leaders are the organic elements who help an organisation to cope with changes. For this, strategic leadership is needed. Strategy leadership deals with vision keeping the mission in sight and with effectiveness and results. This also inspires and motivate people to work together with a common vision and purpose. Corporate culture refers to the values and patterns of belief and behaviour that are accepted and practiced by the members of company. To manage human resources of a company effectively and efficiently it is necessary for bringing a close culture strategy match. Culture with a perfect match with the strategy energies employees significantly and helps for effective strategy implementation. Companies keep their values and code of ethics in written documents. An ethical corporate culture has a positive impact on company's long term strategic success. Strong values and high ethical standards keep the corporate culture in a very positive way. Corporate governance is a system by which companies are managed in code. This is for good corporate practices. The Companies Act and other corporate laws prescribes only the procedural matters and penal provisions for its management. They do not prescribe good corporate management practices. But code of corporate governance prescribes such practices. It contain matters of constitution of board of directors, disclosure of information, management practices etc. Organisational politics and power relationships are closely interlinked. Strategic implementation is governed by organisational politics. One play politics in organisation to safeguard his own interest. The strategist in the organisation should see that the politics in organisation should contribute to organisational goals. He should mould a suitable strategy for it. ## Limitations of Strategy Implementation Following are the main limitations of strategy implementation: 1. Different perceptive of strategists may lead to poor implementation of strategy. 2. Sometimes strategists may be unwilling to adopt changes in the strategy. 3. In certain cases strategists may not come forward and put in cold storage. 4. Majority of the people are concerned with current operations and they always give narrow importance for future. 5. Foul in strategic choice is a barrier in accomplishing the organisational objective. ## Approaches to Strategy Implementation The various approaches of strategy implementation are as follows: * **Commander Approach** This is also called as topdown approach. In this case the strategy is developed by the top management and forward the same to the subordinate to execute it. Top management simply occupy the back seat and observe the actions of subordinate. * **Organisational Change Approach** In this case while implementing the strategy the strategist should take into account the change occurred in the organisation. He must focus attention on the organisation's new priorities and techniques. * **Collaborative Approach** The advocates of this approach views strategy development as a collective task that should consider the views of all the managers in the organisation who contribute to the goal. Many companies consider this as a useful approach. * **Cultural Approach** In this approach, the organisational mission and vision are well communicated to the employees so that they become the key persons to develop strategies. Employees are empowered and encouraged to design their own work activities in pursuit of the mission. This system is getting well acceptance from the different corners of the business stream. * **Crescive Approach** This is a bottom up approach. Here instead of pushing the strategy down ward from top management or a strategy group it moves upward from the lower and middle class managers to the top. Under this approach instead of the top management taking and developing the strategy the subordinates are empowered to develop and implement sound strategies of their own. ## Mobilising and Allocating Resources Mobilisation of resources involves procurement of resources that may be required to implement a strategy. This procurement depends upon the nature of strategy and the type and volume of resources required. Resources can be procured though buying, getting on rent or lease. This decision depends upon procurement strategy of organisation. Only those resources are owned and controlled that are economically viable. Otherwise, they are either obtained on either rent or lease. After the required resources are identified and procured, the resources are allocated to various organisational units and sub units as per the requirement. The rationality of resource allocation lies in the commitment principles. The commitment principle implies planning for the future impact of today's decisions. Now, since the futurity of different decisions vary, hence the risk involved in the decision also varies. Applying this principle to resource allocation, when resources are committed to a particular unit or project, the organisation takes a risk and this risk involved depends on the time taken to recover resource cost. Again, the recovery varies for varying periods, For example, recovery cost of debtors, inventory etc. is short term while that for creation of physical asset is long term. Therefore, while allocating resources, commitment principle is taken into consideration. Allocation of resources is done by taking any one of the following steps. (i) Resources can be allocated according to various units and sub units of the organisation, or (ii) resources can be allocated in such a way that their maximum part is allocated to that place where these have their maximum contributions. However, through budgeting and an objective evaluation of the resources required by various units, the above two alternatives may become complementary rather than supplementary to each other. ### Budgeting Budgeting is a method with the help of which the expenditure is planned in advance. Later this concept came to be used not only for monetary expenditure but also in other areas like time, performance etc. In fact, budgeting is a means through which resources are allocated to various organisations and units. While using budgeting as a tool for resource allocation, it ought to be oriented to the objectives of the organisation and the way each unit of the organisation will contribute to the achievement of these objectives. For the purpose of resource allocation, the following types of budgeting are used. (i) Capital budgeting: This shows a plan to deploy financial resources for the purpose of maximising the long term profit ability of the organisation. Here various techniques are used to determine where a rupee put will earn maximum profit. For example, average rate of return, net present value method etc. Capital budgeting method, however, proves to be more useful at the stage where various alternatives project proposals are evaluated and considered. Moreover, the most important aspect i.e., human resource allocation cannot be done with the help of capital budgeting. (ii) Performance budgeting: This includes cost input-output or result budgeting and emphasises on the non-financial measurement of performance. These can be used for evaluating past performance and for planning future activities. (iii) Zero-Base Budgeting. As the name itself suggests, this method requires each manager to justify his entire budget/ plan in detail from scratch (or zero-base). This type of budgeting involves four steps: * (a) Identification of the group of activities and assignments for which a manager is accountable. * (b) Analysis of each such group or decision unit while developing a decision. * (c) Evaluation and ranking each decision unit on the basis of budget requested. * (d) Allocation of resources to each of these decision units based on ranking. Thus, zero-base budgeting is an extremely useful tool to allocate resources. The method can be used effectively to allocate financial as well as non-financial resources and even the human resource. The method saves time of the top management and eradicates unnecessary activities and also helps to focus on organisational objectives. (iv) Strategic Budgeting. This is a new concept that has come to act as a tool to allocate resources among various strategic business units. In this method, the resource need of an SBU is determined by answering the following two questions: * (a) What performance and results are to be generated? * (b) What key activities, tasks and jobs are required to be performed to obtain these results? The answers to the above two questions would clearly bring the expertise, skills, and fund required by that SBU to accomplish goals. To formulate strategic budget, it is required to prepare the position papers first and then prepare the budget. ### Position Papers Position papers are prepared to get a background on strategic budget. Position papers are prepared on the following: * (a) Organisational Constraints Position paper on organisational constraint specifies the availability of resources for achieving the target along with suggesting the likely future constraints faced by the organisation so that suitable deployment of resources can be done. * (b) Environment Position paper on environment is prepared to understand the present and likely future trends of economic, political, financial, competitive marketing, global environmental trends that may affect the organisational performance. * (c) Past Performance Position paper on past performance, indicates the organisational performance in the past based on performance of strategic business unit. * (d) Future Activities Position paper on future activities give account of various targets to be fulfilled as a whole and at different strategic business units. It would also indicate the way the various activities of the organisation would match itself with the environmental requirements. These position papers are prepared at the corporate plan-division and are discussed at length among the functional and operational heads and specialists to identify any lacunae, if any. On the basis of these position papers specific and policy guidelines are prepared and are sent to various levels of management who, keeping in mind these policies, formulate actual budgets. <br> | Corporate Level | SBU Level | | ------------------------------------------------------ | ------------------------------------------ | | Corporate Objectives and Strategy with Assumptions Made | SBU Objectives/Strategies/Changed | | | SBU Objectives and Strategies defined | | | Premises and Forecasts made | | Budgets are called for | Preliminary budgets prepared | | Budgets Requests Reviewed/Accepted | Proposed changes in resource requirements | | | Approved budget received for action | | | Master Budget Prepared SBU budget approved | <br> **Process of Strategic Budgeting** <br> On the basis of the above it can be concluded that allocation of human and financial resources is one of the most important activity in the process of strategy implementation. The resources should be so allocated that they get maximum contributions which are deployed in areas where these are really required. For the purpose of resource allocation, budgeting is used as a tool. Various types of budgeting used for the allocation are, one, capital budgeting; two performance budgeting; three; zero-base budgeting and four, strategic budgeting. Of these, strategic budgeting is comparatively never and more logical method with the help of which financial as well as non-financial resources can be allocated. Strategic budgeting involves preparation of position papers on various issues like environment, organisational resources, organisational constraints, past performance, future direction of activities and so on. These position papers provide guidelines for preparation of budget. On the basis of these position papers, policies are formulated at corporate level which are then communicated to various SBU heads for preparation of actual budgets.