CA Sunil Keswani 1

Chapter – 5
Strategy Implementation And Evaluation

Strategic Management Process

v The process of developing an organisation's strategy is quite methodical.
v The strategic management process is dynamic and continuous and it never
really ends.

Stages in Strategic Management

Strategic management involves the following stages:
• Developing a strategic vision and formulation of statement of mission, goals
and objectives.
• Environmental and organisational analysis.
• Formulation of strategy.
• Implementation of strategy.
• Strategic evaluation and control.

Stage 1: Strategic Vision, Mission and Objectives

Ø First, Co. should develop a Vision i.e., future blueprint.
Ø It answers the question ‘where it wants to land’.
Ø Top management’s views and conclusions about company’s direction and
product, customer, market, technology focus constitute strategic vision of
company.
Ø A strategic vision delineates management’s aspirations for the organization
and highlights a particular direction, or strategic path for it to follow in
preparing for the future, and moulds its identity.
Ø Managers need to be clear about role of the organization and this is often
expressed in terms of a mission statement.
Ø Objectives & goals flows from mission and growth ambition of organization.
Ø They provide a means of performance measurement at each level of
management.

Stage 2: Environmental and Organisational Analysis

This stage is the diagnostic phase of strategic analysis. It entails two types of
analysis:
1. Environmental scanning
[Link] analysis
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[Link] Analysis – It consists of economic, social, technological, market

& other forces which affect its functioning. It is dynamic and uncertain & helps
in determining opportunities and threats.
[Link] Analysis – It consists of analysis of company resources,
technological resources, productive capacity, distribution channel, R&D, HR, etc.
It reveals strength and weakness of Organisation.

Stage 3: Formulating Strategy

• First stage in strategy formulation is developing strategic alternatives in line
with SWOT of organization.
• Second stage involves deep analysis of various alternatives and choosing
appropriate alternative which will serve as strategy of firm.
Examples of strategic alternatives:
a) Should company continue in same business on same level of operation?
b) If it should continue in same business, should it grow by expanding same unit;
establishing new units; or acquiring other units in same Industry?
c) If it should diversify, should it diversify into related or unrelated areas?
d) Should it get out of existing business fully or partially?
e) Combination of any of the above strategies

Stage 4: Implementation of Strategy

►Implementation and execution are an operation- oriented activity.
►Most demanding & time-consuming stage.
Strategy execution process includes following aspects:
a) Developing budget that steer ample resource into critical activities.
b) Staffing organization with needed skills & expertise, to build competitive
capabilities and organizing the work.
c) Motivating people to pursue target energetically
d) Creating a company culture & work climate that support successful strategy
implementation and execution
e) Ensuring policies, procedures and internal operations facilitate effective
execution
f) Exerting internal leadership needed to drive implementation forward and keep
improving strategy execution.
g) Using best-known practices to perform core business activities & pushing for
continuous improvement.
h) Installing information and operating system that enable company personnel to
better carry out their strategic roles day in and day out.

Stage 5: Strategic Evaluation and Control

Final stage of SM process involves
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Ø evaluating Co.’s progress

Ø assessing the impact of new external developments and
Ø making corrective adjustments
- It is the trigger point for deciding whether to continue or change the company’s
vision, objectives, strategy and/or strategy execution methods.
- Successful strategy execution requires searching for:
a) Ways to continuously improve and
b) Corrective adjustments whenever and wherever it is useful to do so.

Strategy Formulation Corporate Strategy

›Planning entails choosing what has to be done in the future and creating action
plans. Planning may be operational or strategic.
›The game plan that really directs the company towards success is called
"corporate strategy".
Strategic Planning Operational Planning
Senior management develops strategic Operational plans are made at
plans for entire organization after functional level management. They
evaluating strengths and weaknesses. provide specifics on how resources are
to be used effectively to achieve goals.
- Shapes the organisation and its - Deals with current deployment of
resources. resources.
- Assesses the impact of - Develops tactics rather than
environmental variables. strategy.
- Takes a holistic view of the - Projects current operations into the
organisation. future.
- Concerned with the long-term - Makes modifications to the business
success of the organisation. functions but not fundamental changes
- Is a senior management - Is the responsibility of functional
responsibility. managers.

Strategic uncertainty and how to deal with it?

Ø Strategic uncertainty refers to the unpredictability of future events and
circumstances that can impact an organization's strategy and goals.
Ø It can be driven by factors such as changes in the market, technology,
competition, regulation, and other external factors.
Ø To minimize impact of strategic uncertainty requires organizations to have
following factors:
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Flexibility Organizations can build flexibility into their strategies to quickly adapt
to changes in the environment.
Diversification Diversifying the organization's product portfolio, markets, and
customer base can reduce the impact of strategic uncertainty.
Monitoring Organizations can regularly monitor key indicators of change and
and Scenario conduct scenario planning to understand how different future scenarios
Planning might impact their strategies.
Building Organizations can invest in building internal resilience, such as
Resilience strengthening their operational processes, increasing their financial
flexibility, and improving their risk management capabilities.
Collaboration Collaborating with other organizations, suppliers, customers, and
and partners can help organizations pool resources, share risk, and gain
Partnerships access to new markets and technologies.

Strategy Implementation
»›Strategic implementation concerns the managerial exercise of putting a freshly
chosen strategy into action.
»›It deals with supervising the ongoing pursuit of strategy, making it work,
improving the competence with which it is executed & showing measurable
progress in achieving the targeted results.

Difference between Strategy Formulation and Implementation

Strategy Formulation Strategy Implementation
It includes planning and decision-making It involves all those means related to
involved in developing organization’s strategic executing the strategic plans.
goals and plans
It is placing the Forces before the action. It is managing forces during the action.

An Entrepreneurial Activity based on An Administrative Task based on

strategic decision-making. strategic and operational decisions
Emphasizes on effectiveness. Emphasizes on efficiency.

Primarily an intellectual and rational process. Primarily an operational process.

Requires co-ordination among few individuals Requires co-ordination among many

at the top level. individuals at the middle and lower levels.
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Requires a great deal of initiative, logical Requires specific motivational and

skills, conceptual intuitive and analytical leadership traits.
skills.
Strategic Formulation precedes Strategy Strategy Implementation follows
Implementation. Strategy Formulation.

Linkages and Issues in Strategy Implementation Linkages

Forward ►The different elements in strategy formulation determine the course
Linkages that an organization adopts for itself.
►With the formulation of new strategies, or reformulation of existing
strategies, many changes have to be affected within the organization.
►Example - The organizational structure has to undergo a change, style of
leadership has to be adapted to the needs of the modified or new
strategies.
Backward ►While dealing with strategic choice, remember that past strategic
Linkages actions also determine the choice of strategy.
►Organizations tend to adopt those strategies which can be implemented
with the help of the present structure of resources combined with some
additional efforts.
►Such incremental changes, over a period of time, take the organization
from where it is to where it wishes to be.

Issues in Strategy Implementation

- The strategic plan proposes the manner in which the strategies could be put
into action. Strategies, by themselves, do not lead to action. They are a statement
of intent. Implementation tasks are meant to realise the intent. Strategies,
therefore, have to be activated through implementation.
- Strategies should lead to formulation of different kinds of programmes. A
programme is a broad term, which includes goals, policies, procedures, rules, and
steps to be taken in putting a plan into action. Programmes are supported by funds
allocated for plan implementation.
- Programmes lead to the formulation of projects. A project is a highly specific
programme for which the time schedule and costs are predetermined. It requires
allocation of funds based on capital budgeting by organizations. Thus, research
and development programme may consist of several projects, each of which is
intended to achieve a specific and limited objective, requires separate allocation
of funds, and is to be completed within a set time schedule.
- Given below in sequential manner the issues in strategy implementation which
are to be considered:
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Project Procedural Resource

implementation implementation allocation

Behavioural Functional Structural

implementation implementation implementation

Strategic Change
- Changes in the environmental forces often require businesses to make
modifications in their existing strategies and bring out new strategies.
- Strategic change is a complex process that involves a corporate strategy
focused on new markets, products, services and new ways of doing business.

For initiating strategic change, three steps can be identified as under:

Recognize the ►It means going for environmental scanning involving appraisal of both
need for internal and external capabilities may be through SWOT analysis and
change then determining where the lacuna lies and scope for change exists.

Create a ►Objective of both organization and individual should coincide and

shared vision there should not be any conflict.
to manage ►Senior managers need to constantly communicate the vision to all the
change organizational members. They have to convince that the change in
business culture is not superficial or cosmetic.
The actions taken have to be credible, highly visible and indicative of
management’s seriousness to new strategic initiatives and associated
changes.
Institutionalis ►It is action stage that requires implementation of changed strategy.
e the change ►Change process should be monitored and in case of any deviation,
corrective action should be taken.

Kurt Lewin's Model of Change: To make the change lasting, Kurt Lewin proposed
three phases of the change process for moving the organization from the present
to the future. These stages are unfreezing, changing and refreezing.
Unfreezing ►Process of unfreezing makes individual aware of necessity for change
the & help prepare for such change.
situation
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►Lewin proposes that change should not come as a surprise as it would

be socially destructive and morale lowering.
►It involves breaking down old attitude & behaviour, custom & tradition
so that they start clean slate and are willing to change.
►This can be achieved by making announcements and holding meetings
throughout the organization.
Changing to - Once the unfreezing process has been completed and the members of
the new the organization recognise the need for change and have been fully
situation prepared to accept such change, their behaviour patterns need to be
redefined.
- H.C. Kellman has proposed three methods for reassigning new patterns
of behaviour. These are compliance, identification and internalization.
►Compliance: It is achieved by strictly enforcing the reward and
punishment strategy for good or bad behaviour. Fear of punishment,
actual punishment or actual reward seems to change behaviour for the
better.
►Identification: Identification occurs when members are
psychologically impressed upon to identify themselves with some given
role models whose behaviour they would like to adopt and try to become
like them.
►Internalization: Internalization involves some internal changing of the
individual’s thought processes in order to adjust to the changes
introduced. They have given freedom to learn and adopt new behaviour in
order to succeed in the new set of circumstances.
Refreezing ►It occurs when new behaviour pattern becomes a normal way of life.
►New behaviour must replace former behaviour completely for
successful and permanent change to take place.
►Change process is not one time process but a continuous one due to
dynamism and ever-changing environment.

Strategic change through Digital Transformation

The use of digital technologies to develop fresh, improved, or entirely new
company procedures, goods, or services is known as "digital transformation." It's
a fundamental adjustment that can be challenging to identify and even more
challenging to implement.
Change management in the digital transition consists of four essential elements:
1. Defining the goals and objectives of the transformation
2 Assessing the current state of the organization and identifying gaps
3. Creating a roadmap for change that outlines the steps needed to reach the
desired state
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4. Implementing and managing the change at every level of the organization

How does change management works?

- Change management is a process or set of tools and best practices used to
manage changes in an organization.
- It assists in making changes in a safe and regulated manner, reducing the
possibility of detrimental effects on the company.
- A properly implemented change management strategy can help an organization
to:
a) Specify the parameters and goals of the digital transformation
b) Determine which procedures and tools need to be modified.
c) Make a plan for implementing the improvements.
d) Involve staff members and parties involved in the transformation process.
e) Track progress and make required course corrections

Change Management Strategies for Digital Transformation

The five best practices for managing change in small and medium-sized businesses
are:
Begin at the ►A focused, invested, united leadership that is on the same page
top about the company's future is reflected in change that begins at the
top.
►The culture that will motivate the rest of the organisation to
accept change can only be generated and promoted in this way.
Ensure that ►The fact that decision-makers are unaware of how to properly
the change is handle a digital transformation and the effects it will have on their
both necessary firm is one of the main causes of this.
and desired ►If a corporation doesn't have a sound strategy in place introducing
too much too fast can frequently become a major issue down the road.
Reduce ►Employee perceptions of what is required or desirable change can
disruption differ by department, rank, or performance history.
►It's crucial to lessen how changes affect staff.
►The introduction of new tactics or technologies intended to improve
management and corporate operations causes employee concern about
change.

It is possible to reduce workplace disruption by:

a. Getting the word out early and preparing for some interruption.
b. Giving staff members the knowledge and tools, they need to adjust
to change.
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c. Creating an environment that encourages transformation or change

d. Empowering change agents to provide context and clarity for
changes, such as project managers or team leaders.
e. Ensuring that IT department is informed of changes in technology
or infrastructure and is prepared to support them.
Encourage ►Create channels so that workers may contact you with queries or
communication complaints.
►Encourage departmental collaboration to propagate ideas and
innovations as new procedures take root.
►Communication promotes efficiency and has the power to influence
culture, just like your vision.
Recognize that ►To stay updated in markets with customers, we need to remember
change is the change is not a project, but rather ongoing process.
norm, not the ►They must prepare for change in advance and expect them.
exception

How to manage change during transformation?

Any organisation may find the work of digital transformation challenging and
overwhelming. To ensure that a digital transition is effective, change management
is essential. Here are some pointers for navigating change during the digital
transformation:
Specify the digital - What are the precise objectives that must be accomplished?
transformation's - If everyone is on the same page and pursuing the same aims
aims and objectives than perusing goals could be easier.
Always - Ensure that you routinely and honestly discuss the objectives
communicate of the digital transformation and how they will affect
stakeholders, including employees, clients, and other parties.
Be Ready for - Even when a change is for the better, it can be challenging for
resistance people to embrace it.
- Have a strategy in place for dealing with any resistance that
may arise.
Implement changes - Changes should ideally be implemented gradually rather than all
gradually at once.
- This will give people time to become used to the new way of
doing things.
Offer assistance - Workers will need guidance in the new procedures, software
and training applications, etc.
In conclusion, effective completion of digital transformation depends on
meticulous planning and change management.
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Organizational Framework
The McKinsey 7S Model refers to a tool that analyses a company’s “organizational
design.”
»›The goal of these tools is to depict how effectiveness can be achieved in an
organization through interaction of hard and soft elements.

The Hard elements are directly controlled by the management.

Strategy The direction of the organization, a blueprint to build on a core competency
and achieve competitive advantage to drive margins and lead the industry
Structure Depending on the availability of resources and the degree of centralisation
or decentralization that the management desires, it choses from the
available alternatives of organizational structures.
Systems The development of daily tasks, operations and teams to execute the goals
and objectives in the most efficient and effective manner.

The Soft elements are difficult to define as they are more governed by the
culture.

Shared The core values which get reflected within the organizational culture or
Values influence the code of ethics of the management.
Style This depicts the leadership style and how it influences the strategic
decisions of the organisation. It also revolves around people motivation and
organizational delivery of goals.
Staff The talent pool of the organisation.
Skills The core competencies or the key skills of the employees play a vital role
in defining the organizational success.

Limitations of McKinsey Model

ü It ignores the importance of the external environment and depicts only the
most crucial elements within the organization.
ü The model does not clearly explain the concept of organizational effectiveness
or performance.
ü The model is considered to be more static and less flexible for decision
making.
ü It is generally criticized for missing out the real gaps in conceptualization and
execution of strategy.
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Organization Structure
›It is the company's formal configuration of its intended roles, procedures,
governance mechanisms, authority, and decision-making processes.
›Company’s structure must be congruent with or fit with the company’s strategy.
›Changes in corporate strategy often requires changes in the way an organization
is structure for two major reasons:
(a) Structure largely dictates how operational objectives and policies will be
established to achieve the strategic objectives
(b) Structure dictates how resources will be allocated to achieve strategic
objectives.
›According to Chandler, changes in strategy lead to changes in organizational
structure i.e. structure should follow strategy.

Types of Organization Structure

• Simple structure
• Functional Structure
• Divisional Structure
• Multi Divisional Structure
• Strategic Business Unit (SBU) Structure
• Matrix Structure
• Network Structure
• Hourglass structure

A. Simple structure

- It is most appropriate for companies that follow a single-business strategy and

offer a line of products in a single geographic market.
- Appropriate for companies implementing focused cost leadership or focused
differentiation strategies.
- In this owner takes all the decisions and monitors all the activities of staff.
- Little specialization of tasks, few rules, little formalization, unsophisticated
information systems and direct involvement of owner-manager in all phases of
day-to-day operations characterise the simple structure.
- In this, communication is fast and new products tend to be introduced very
quickly, which can result in competitive advantage.
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- When the company grows and it wishes to do specialisation, there will be

pressures on owner-managers (often due to a lack of organizational skills or
experience or simply due to lack of time).
- As a result of this growth, the company outgrows the simple structure.

B. Functional Structure

- A widely used structure in business organisations is functional type because of

its simplicity and low cost.
- A functional structure group tasks and activities by business function, such as
production/operations, marketing, finance etc.
- A functional structure also promotes specialization of labour, encourages
efficiency, minimizes the need for an elaborate control system, and allows rapid
decision making
- It consists of a chief executive officer (CEO) or a managing director (MD) and
supported by corporate staff with functional line managers such as production,
financial accounting, marketing, R&D, engineering, and human resources.
- The functional structure enables the company to overcome the growth-related
constraints of the simple structure, enabling communication and coordination.
- Functional specialists often may develop a narrow perspective, losing sight of
the company’s strategic vision and mission. This problem can be overcome by
implementing the multidivisional structure.
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C. Divisional Structure

- As a firm grows and has different products and services in different markets,
it has to bring the divisional structure which can be organized in one of the four
ways: by geographic area, by product or service, by customer, or by process.

- With a divisional structure, functional activities are performed both centrally

and in each division separately.

- A divisional structure has some clear advantages:

(a) Accountability is clear i.e. divisional managers can be held responsible for
sales and profit levels.
(b) Employee morale is generally high
(c) It creates career development opportunities for managers
(d) Allows local control of local situations
(e) Leads to a competitive climate within an organization
(f) Allows new businesses and products to be added easily

- The main limitation of divisional design that it is costly due to:

(a) Each division requires functional specialists who must be paid.
(b) There exists duplication of staff services, facilities, and personnel
(c) Managers must be well qualified because the divisional design forces
delegation of authority better-qualified individuals requires higher salaries.
(d) It requires an elaborate, headquarters-driven control system.
(e) Certain regions, products, or customers may sometimes receive special
treatment, and it may be difficult to maintain consistent, companywide
practices.

A key difference between divisional and functional structure is that functional

departments are not accountable for profits or revenues, whereas divisional
process departments are evaluated on these criteria.
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D. Multi Divisional Structure (M-Form)

- It is composed of operating divisions where each division represents a separate
business to which the top corporate officer delegates responsibility for day-to-
day operations and business unit strategy to division managers.
- By such delegation, the corporate office is responsible for formulating and
implementing overall corporate strategy and manages divisions through strategic
and financial controls.
- Multidivisional structure calls for: (Characteristics)
(a) Creating separate divisions, each representing a distinct business
(b) Each division would house its functional hierarchy;
(c) Division managers would be given responsibility for managing day-to-day
operations;
(d) A small corporate office that would determine the long-term strategic
direction of the firm and exercise overall financial control over the semi-
autonomous divisions.
- It enables the firms: (Advantages)
(a) to more accurately monitor the performance of individual business
(b) simplifying control problems
(c) facilitate comparisons between divisions
(d) improving allocation of resources
(e) stimulate managers of poorly performing divisions to seek ways to improve
them.

E. Strategic Business Unit (SBU) Structure

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- SBU concept is relevant for multiproduct, multi –business enterprise.

- When number of products become huge, it is not practical to provide separate
strategic treatment to each product.
- An SBU is grouping of related business, which is amenable to composite planning
treatment. The purpose is to provide effective strategic planning treatment to
each one of its products/business.
- A strategic business unit (SBU) structure consists of at least three levels, with
a) corporate headquarters at the top,
b) SBU groups at the second level, and
c) divisions grouped by relatedness within each SBU at the third level.

The three most important characteristics of a SBU are:

§ It is a single business or a collection of related businesses which offer scope
for independent planning and which might feasibly standalone from the rest
of the organization.
§ It has its own set of competitors.
§ It has a manager who has responsibility for strategic planning and profit
performance and who has control of profit-influencing factors.

- When strategic planning was carried out treating territories as the units for
planning, it gave rise to two kinds of difficulties:
(a) since a number of territorial units handled the same product, the same
product was getting varied strategic planning treatments;
(b) since a given territorial planning unit carried different and unrelated
products, products with dissimilar characteristics were getting identical
strategic planning treatment.

Attributes of SBUS and the benefits a firm may derive by using SBU
Structure
(a) It is scientific method of grouping multi-business corporation which helps in
strategic planning.
(b) It is improvement over territorial grouping of business based on territorial
units.
(c) Each SBU is can take up strategic planning distinct from the rest of the
business.
(d) Each SBU has CEO, who is responsible for planning and profit
(e) Each SBU as it’s distinct set of competitors and strategy
(f) Unrelated products/businesses in any group are separated.
(g) Grouping based on SBU helps to remove vagueness and confusion.
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(h) Each SBU is a separate business and will be distinct from one another on the
basis of mission, objectives etc.

F. Matrix Structure

- It is used when neither functional nor divisional forms are appropriate for org.
- In matrix structure, functional and product forms are combined simultaneously
at the same level of the organization.
- Employees have two superiors i.e., a product/ project manager and functional
manager.
- It is the most complex of all design because it depends upon both vertical &
horizontal flow of authority and communication (hence the term matrix).
- It has dual sources of reward and punishment, shared authority, dual reporting
channel and need for extensive communication, visible results of work etc.
- It results in higher overhead because it has more management positions.
- It is widely used in many industries, including construction, healthcare, research
and defence.
- Advantages of matrix structure:
(a) project objectives are clear,
(b) there are many channels of communication
(c) workers can see the visible results of their work,
(d) shutting down a project is accomplished relatively easily.

- It is often found in an organization or within an SBU when the following three

conditions exist:
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(a) ideas need to be cross fertilized across projects or products,

(b) resources are scarce, and
(c) abilities to process information and to make decision needs to be improved.

For development of matrix structure Davis and Lawrence, have proposed three
distinct phases:
1. Cross-functional task forces: Temporary cross-functional task forces are
initially used when a new product line is being introduced. A project manager is in
charge as the key horizontal link.
2. Product/brand management: If the cross-functional task forces become more
permanent, the project manager becomes a product or brand manager and a
second phase begins. In this arrangement, function is still the primary
organizational structure, but product or brand managers act as the integrators
of semi-permanent products or brands.
3. Mature matrix: The third and final phase of matrix development involves a
true dual-authority structure. Both the functional and product structures are
permanent. All employees are connected to both a vertical functional superior and
a horizontal product manager. Functional and product managers have equal
authority and must work well together to resolve disagreements over resources
and priorities.

G. Network Structure

►A corporation organized in this manner is often called a virtual organization as

many activities are outsourced.
► It is virtual elimination of inhouse business functions (non-structure).
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►The network structure becomes most useful when the environment of a firm is
unstable and is expected to remain so.
►Under such conditions, there is usually a strong need for innovation & quick
response.
► In this there are less salaried employees, and majority are contract workers
for specific project or time.
► The organization is, in effect, only a shell, with a small headquarters acting as
a “broker”, electronically connected to some completely owned divisions, partially
owned subsidiaries, and other independent organisation.

Advantages Disadvantages
►Allows a company to concentrate on its ►Availability of numerous partners
own competencies & outsourcing of other can be a source of trouble.
functions to experts in their field. ►Outsourcing of functions may keep
►It provides more flexibility and the Firm away from discovering any
adaptability to meet/face rapid change in synergies by combining activities.
technology, taste and preferences. ►If a Firm overspecializes in only few
►Most useful when environment of a functions, there is a risk of choosing
Firm is unstable. the wrong function and thus becoming
non- competitive.
►Low employee morale.

H. Hourglass Structure

►The role played by middle management is diminishing as the tasks performed

by them are increasingly being replaced by the technological tools.
►It consists of three layers with constricted middle layer. The structure has a
short and narrow middle-management level.
►Information technology links the top and bottom levels in the organization
taking away many tasks that are performed by the middle level managers.
►In this middle level manager are generalists and perform wide variety of tasks
such as production, finance, marketing etc.
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Advantages Disadvantages
►Reduced cost due to reduction of a) Since size of middle management is
middle level management posts. reduced, promotion opportunity for
►Enhanced responsiveness by lower-level managers is also reduced.
simplifying decision making. b) Lower employee morale at lower level
►Decision making authority is close due to monotony.
to source of information, so it’s
faster.

Organization Culture
Corporate culture refers to a company’s values, beliefs, business principles,
traditions, ways of operating, and internal work environment.

Where Does Corporate Culture Come From?

It is reflected or manifested:
ü in the values and business principles that management preaches & practices
ü in its ethical standards and official policies
ü in its stakeholder relationships (especially its dealings with employees,
unions, stockholders, vendors, and the communities in which it operates)
ü in the traditions the organization maintains
ü in its supervisory practices
ü in employees’ attitudes and behaviour
ü in the legends people repeat about happenings in the organization
ü in the peer pressures that exist
ü in the organization’s politics that permeate the work environment.

Culture: ally or obstacle to strategy execution?

- An organization's culture is either an important contributor or an obstacle to
successful strategy execution. The beliefs, vision, objectives, and business
approaches and practices underpinning a company's strategy may or may not be
compatible with its culture.
- When they are compatible, the culture becomes a valuable ally.
- When the culture is in conflict than it becomes a blockage.

Role of culture in strategy execution

►Strong culture promotes good strategy execution when there’s fit and impedes
execution when there’s negligible fit.
►A culture grounded in values, practices, and behavioural norms that match what
is needed for good strategy execution helps energize people throughout the
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company to do their jobs in a strategy-supportive manner, adding significantly to

the power and effectiveness of strategy execution.
►Strategy-supportive cultures shape the mood, temperament, and motivation
the workforce, positively affecting organizational energy, work habits and
operating practices, the degree to which organizational units cooperate, and how
customers are treated.

Perils of Strategy-Culture Conflict:

- When a company’s culture is out of sync with what is needed for strategic
success, the culture has to be changed as rapidly as can be managed – this, of
course, presumes that it is one or more aspects of the culture that are out of
whack rather than the strategy.
- While correcting a strategy-culture conflict can occasionally mean revamping
strategy to produce cultural fit, more usually it means revamping the mismatched
cultural features to produce strategy fit.
- The more entrenched the mismatched aspects of the culture, the greater the
difficulty of implementing new or different strategies until better strategy-
culture alignment emerges.

Creating a strong fit between strategy and culture:

- It is the strategy maker’s responsibility to select a strategy compatible with
the “sacred” or unchangeable parts of prevailing corporate culture.
- It is the strategy implementer’s task, once strategy is chosen, to change
whatever facets of the corporate culture hinder effective execution.

Changing a problem culture:

- Changing a problem culture is very difficult because of the heavy anchor of
deeply held values and habits-people cling emotionally to the old and familiar.
- It takes concerted management actions over a point of time to replace unhealthy
culture with healthy culture or remove unwanted aspects of problem culture and
instil ones those which are more strategy-supportive.
- first step - Diagnose which facets of the present culture are strategy
supportive and which are not.
- Second step - Managers have to talk openly and forthrightly to all concerned
about those aspects of the culture that have to be changed.
- Third step - The talk has to be followed swiftly by visible aggressive action to
modify the culture-actions that everyone will understand are intended to
establish a new culture more in tune with the strategy.
- The task of making culture supportive of strategy is not a short-term exercise.
It takes time for a new culture to emerge and prevail; it’s unrealistic to expect
an overnight transformation.
CA Sunil Keswani 21

Strategic Leadership
►Strategic leadership sets the firms direction by
ü developing and communicating vision of future,
ü formulate strategies in the light of internal and external environment,
ü brings about changes required to implement strategies and
ü inspire the staff to contribute to strategy execution.
►A leader has to play various roles like entrepreneur, strategist, culture builder,
visionary, spokesperson, negotiator, motivator, arbitrator, policy maker, policy
enforcer, listener and decision maker.

Five leadership roles to play in pushing for good strategy execution:

(a) Staying on top of what is happening, closely monitoring progress, solving out
issues, and learning what obstacles lie in the path of good execution.
(b) Promoting a culture of esprit de corps (feeling of pride) that mobilizes and
energizes organizational members to execute strategy in a competent
fashion and perform at a high level.
(c) Keeping the Organization responsive to changing conditions, alert for new
opportunities, bubbling with innovative ideas, and ahead of rivals in
developing competitively valuable competencies and capabilities.
(d) Exercising ethical leadership and insisting that the company conduct its
affairs like a model corporate citizen.
(e) Pushing corrective actions to improve strategy execution and overall
strategic performance.

A Strategic leader has several responsibilities, including the following:

►Making strategic decisions.
► Ensuring effective communication in the organisation.
► Managing change in the organisation.
► Sustaining high performance over time.
► Formulating policies and action plans to implement strategic decision.
► Managing human capital (perhaps the most critical of the strategic leader's
skills).
► Creating and sustaining strong corporate culture

Two basic approaches to leadership

Transformational leadership style Transactional leadership style
It uses charisma and enthusiasm to inspire It uses the authority of its office to
people to work for good of Organization. exchange rewards such as pay, status
symbols etc.
CA Sunil Keswani 22

It is appropriate It is more appropriate

►in turbulent/ unsafe environment or ►in static environment, or
►in industries at start or end of PLC or ►in mature industry; or
►In poorly performing organization. ►in organizations that are performing well.
These leaders offer excitement, vision, These leaders try to build on existing
intellectual stimulation and personal culture and enhance current practices.
satisfaction.

They motivates followers to do more than They prefer a more formalized approach to
originally affected to do by stretching motivation, setting clear goals with explicit
their abilities and increasing their self- rewards or penalties for achievement and
confidence, and also promote innovation non-achievement.
throughout the organization.
It focuses more on designing systems and
controlling the organization’s activities.

Strategic Control
► Control is intended to regulate and check i.e. to place restraints and curbs on
undesirable tendencies, to make people conform to certain norms and standards,
to measure progress to keep the system on track.
► Controlling function involves monitoring the activity, measuring results against
predefined standards, analysing & correcting deviation as necessary & adapting
the system.
► The process of control has the following elements:
(a) Objectives of the business system which could be operationalized into
measurable and controllable standards.
(b) A mechanism for monitoring and measuring the performance of the system.
(c) A mechanism (i) for comparing the actual results with reference to the
standards (ii) for detecting deviations from standards and (iii) for learning
new insights on standards themselves.
(d) A mechanism for feeding back corrective and adaptive information and
instructions to the system, for effecting the desired changes to set right
the system to keep it on course.

► Primarily there are three types of organizational control, viz., operational

control, management control and strategic control.

Operational - It is concerned with individual task or transaction as against total

Control management functions.
CA Sunil Keswani 23

- One of the ways to identify operational control area is there should be clear
cut & measurable relationship between input & output which could be
predetermined or estimated with least uncertainty.
- It ensures that processes are regulated within certain ‘tolerances’ limit.

- Examples: Stock control (maintaining stocks between set limits), Production

control (manufacturing to set programmes), Quality control (keeping product
quality between agreed limits), Cost control (maintaining expenditure as per
standards), Budgetary control (keeping performance to budget)

Management - When compared with operational control, management control is more

Control inclusive and more aggregative, in the sense of embracing the integrated
activities of a complete department, division or even organization.
- The basic purpose of management control is the achievement of enterprise
goals – short range and long range – in a most effective and efficient manner.
- The term management control is defined by Robert Anthony as ‘the process
by which managers assure the resources are obtained and used effectively
and efficiently in the accomplishment of the organisation’s objectives’.
- Example: Inventory management

Strategic - According to Schendel and Hofer "Strategic control focuses on the dual
Control questions of whether:
(1) the strategy is being implemented as planned; and
(2) the results produced by the strategy are those intended."

- There is often a time gap between the stages of strategy formulation and
its implementation.
- A strategy might be affected on account of changes in internal and external
environments of organisation.
- It is directed towards identifying problems and changes in premises and
making necessary adjustments.

Types of Strategic Control:

Premise - Strategies are based on certain assumptions & premises with

control related to environment in which they operate. Such premises may
not remain valid over a period of time.
- It is a tool for systematic and continuous monitoring of the
environment to verify the validity and accuracy of the premises on
which the strategy has been built.
CA Sunil Keswani 24

- It primarily involves monitoring two types of factors:

(i) Environmental factors such as economic (inflation, liquidity,
interest rates), technology, social and legal-regulatory.
(ii) Industry factors such as competitors, suppliers, substitutes.
verify the validity & accuracy of the premise based on which
strategy was formed.

- It is neither feasible nor desirable to control all types of premises

in same manner. Different premises may require different amount
of control.

Strategic - It is unfocussed and involves general monitoring of environment &

surveillance various sources of information like financial newspaper business
magazines etc. to uncover unanticipated information which may
affect the strategy.
- Strategic surveillance may be loose form of strategic control but
is capable of uncovering information relevant to the strategy.

Special alert - Unexpected events like natural calamity, terrorist attack, change
control in government & other such events may force an organization to
review & reconsider their strategy.
- To cope up with such crisis, organizations form a crisis team to
handle the situation.

Implementation - It assesses need for change in overall strategy in light of unfolding

control events & results associated with incremental steps and action.
- Strategic implementation control is not a replacement to
operational control. Unlike operational control, it continuously
monitors the basic direction of the strategy.

- The two basic forms of implementation control are:

(i) Monitoring strategic thrusts: It helps managers to determine
whether the overall strategy is progressing as desired or whether
there is need for readjustments.

(ii) Milestone Reviews: All key activities necessary to implement

strategy are segregated in terms of time, events or major resource
allocation. It normally involves a complete reassessment of the
strategy. It also assesses the need to continue or refocus the
direction of an organization.
CA Sunil Keswani 25

Strategic Performance Measures

►SPM is a method that increases line executives' understanding of an
organization's strategic goals and offers a continuous system for tracking
progress towards these objectives using clear-cut performance measurements.
►SPM helps to eliminate silos by establishing a common language among all
divisions of the organisation so they may communicate openly and productively.

Types of Strategic Performance Measures

There are various types of strategic performance measures, including:
Financial Financial measures, such as revenue growth, return on investment
Measures (ROI), and profit margins, provide an understanding of the
organization's financial performance and its ability to generate
profit.

Customer Customer measures, such as customer satisfaction, customer

Satisfaction retention, and customer loyalty, provide insight into the
Measures organization's ability to meet customer needs and provide high-
quality products and services.

Market Market measures, such as market share, customer acquisition, and

Measures customer referrals, provide information about the organization's
competitiveness in the marketplace and its ability to attract and
retain customers.

Employee Employee measures, such as employee satisfaction, turnover rate, and

Measures employee engagement, provide insight into the organization's ability
to attract and retain talented employees and create a positive work
environment.

Innovation Innovation measures, such as research and development (R&D)

Measures spending, patent applications, and new product launches, provide
insight into the organization's ability to innovate and create new
products and services that meet customer needs.

Environmental Environmental measures, such as energy consumption, waste

Measures reduction, and carbon emissions, provide insight into the
organization's impact on the environment and its efforts to operate
in a sustainable manner.
CA Sunil Keswani 26

The Importance of Strategic Performance Measures Strategic performance

measures are essential for organizations for several reasons:
Goal Alignment Strategic performance measures help organizations align their
strategies with their goals and objectives, ensuring that they are on
track to achieve their desired outcomes.

Resource Strategic performance measures provide organizations with the

Allocation information they need to make informed decisions about resource
allocation, enabling them to prioritize their efforts and allocate
resources to the areas that will have the greatest impact on their
performance.

Continuous Strategic performance measures provide organizations with a

Improvement framework for continuous improvement, enabling them to track their
progress and make adjustments to improve their performance over time.

External Strategic performance measures help organizations demonstrate

Accountability accountability to stakeholders, including shareholders, customers, and
regulatory bodies, by providing a clear and transparent picture of their
performance.

Choosing the Right Strategic Performance Measures

Relevance The measure should be relevant to the organization's goals and

objectives and provide information that is actionable and meaningful.

Data The measure should be based on data that is readily available and can
Availability be collected and analysed in a timely manner.

Data The measure should be based on high-quality data that is accurate and
Quality reliable.

Data The measure should be based on data that is current and up-to-date,
Timeliness enabling organizations to make informed decisions in a timely manner.