Mastering Strategy Implementation - Verbatim

* 1. © 2013 STRATEGOS CONSULTING Λ 1 This article presents the strategy execution framework – a com-prehensive management model that allows managers to master one of the greatest management challenges – successfully imple-menting strategies. Mastering Strategy Implementation Dr. Arnoud van der Maas a.vandermaas@strategos.nl linkedin.com/in/avandermaas February 2013 The ability to develop and implement new strategies quickly and effectively is crucial for any organization. Despite its strategic importance many organiza-tions fail at strategy implementation. Because of its high failure rate, achiev-ing successful strategy implementation remains a continuing challenge for man-agers. This article presents the strategy execution framework – a comprehensive management model that allows manag-ers to master one of the greatest man-agement challenges – successfully im-plementing strategies. The powerful framework incorporates 18 success fac-tors that are related to the process, content and context of strategy imple-mentation. Collectively, these tools help organizations plan and implement and manage their strategies but also moni-tor, learn and adapt their strategy im-plementations to achieve sustainable organizational success. THE IMPORTANCE OF STRATEGY IMPLEMENTATION Strategy implementation has a substan-tial impact on organizational perfor-mance (Hrebiniak and Joyce, 1984), is crucial to organizational effectiveness (Sproull and Hofmeister, 1986) and is essential for the success of any organi-zation (Noble, 1999). The successful implementation of strong and robust strategies gives any organization a sig-nificant competitive edge. Strategy implementation is even more important in current turbulent organiza-tional environments. The environment of public and private organizations is in-creasingly dynamic (Volberda, 1996; D’Aveni, 1994). Developments such as the globalization of markets, rapid tech-nological change, deregulation of indus-tries, a shift of organizations from the public to the private sector and the in-creasing aggressiveness of competition
* 2. STRATEGY SERIES © 2014 STRATEGOS CONSULTING Λ 2 have radically altered the competitive rules (Volberda, 1996). These environ-mental developments have resulted in strong pressures for frequent strategic change (Baden-Fuller and Volberda, 1997; Thomas, 2002) to maintain a ‘fit’ with these changing environments. In turbulent environments, the ability to develop and implement new strategies quickly and effectively may well mean the difference between success and failure for organizations (Drazin and Howard, 1984; Hauc and Kovac, 2000). Well-formulated strategies only produce superior performance for organizations when they are successfully implemented (Bonoma, 1984). Even the best-made strategies are worthless if they cannot be successfully implemented (Schilit, 1987). Strategic success requires an ap-propriate strategy but also requires that the strategy is implemented successfully (Hussey, 1996), and timely. MOST STRATEGY IMPLEMENTATIONS FAIL Organizations often fail at strategy im-plementation. Few intended strategies are successfully realized (Mintzberg, 1990), despite its strategic importance to any organization. Survey after survey reveals that strategy implementation is a top priority for executives (Harvard Business Review, 2006). However, fewer than 15 percent of organizations around the world report that they are successful at strategy implementation (ibid). Vari-ous studies have reported implementa-tion failure rates at 60 to 90 percent (Kaplan & Norton, 2005). The majority of strategies fail in the strategy implementation phase (Noble, 1999). After a comprehensive strategy or single strategic decision has been formu-lated, significant difficulties are often encountered during the following strat-egy implementation process (Alexander, 1985). A widely shared experience is that all too often plans do not work out as intended (Wernham, 1984; Nutt, 1999). Many organizations have a fundamen-tal disconnect between the formulation of their strategy and the implementation of that strategy into useful action (Kaplan, 1995). This is the strategy im-plementation problem: ‘the all too fre-quent failure to create change after seemingly viable plans have been devel-oped’ (Nutt, 1983). Achieving successful implementation remains a continuing challenge for managers responsible for executing strategies (Cravens, 1998). Strategy implementation is a multifacet-ed and highly complex organizational phenomenon (Wernham, 1985; Noble, 1999). The process tends to be messy, ambiguous and often involves many departments in the organization (Noble, 1999b, Schofield, 2004). Part of this complexity arises from the social and political aspects of strategy implementa-tion, which need to be taken into ac-count. Hence, there is a growing recog-nition that the most important challeng-es in strategic management are in strat-egy implementation (Flood et al., 2000). The Strategy Execution Framework To contribute to the understanding of strategy implementation, we developed a comprehensive framework for strategy implementation. The Strategy Execution Framework emerged from a qualitative survey of 55 executives within 44 public and private organizations (see Figure 1). Using Pettigrew’s (1985) process, con-tent, and context framework, 18 success factors for strategy implementation were identified and categorized into three groups: factors related to the con-text in which a strategy implementation takes place, the process by which the strategy is implemented and the content of the strategy implementation. This framework allows for a holistic view of strategy implementation. The strategy execution framework is a comprehensive management model that allows executive and managers to mas-ter one of the greatest management challenges – successfully implementing strategies. This powerful framework incorporates 18 ‘hard’ and ‘soft’ success factors or tools related to the process, content and context of a strategy im-plementation. Collectively, these tools help organizations plan and execute their strategies but also monitor, learn and adapt their strategy to achieve sus-tainable organizational success. STRATEGY IMPLEMENTATION CONTENT The content of strategy implementation refers to the product or ‘what’ of the strategy process. The following three practices increase strategy implementa-tion success.
* 3. STRATEGY SERIES © 2014 STRATEGOS CONSULTING Λ 3 CONTENT Strategic Vision Strategic Plan Implementation Plan Strategy Implementation Success 1 Formulate a Strategic Vision Successful strategy formulation and implementation begins with the formula-tion of a sound and clear strategic vision by top management. A strategic vision describes the desired future state of the organization. The strategic vision helps clarify the direction in which an organi-zation is to move (Kotter, 1995). A clear and well-formulated strategic vision is a key requirement for effective organiza-tional redesign (Miles et al., 1995). The strategic vision needs to be clearly de-fined and well formulated (Hussey, 1996). The strategic vision needs to be at-tractive and easy to communicate to-ward organizational members, custom-ers, shareholders, and other relevant stakeholders. The simpler the strategic vision is, the easier it is to understand and execute for organizational members. A clear and attractive strategic vision increases the confidence of employees in a successful outcome of a strategy implementation effort. An attractive and ambitious new strategic vision can help to attract and unite organizational members and stimulate them to increase their effort (Trice & Beyer, 1991). Howev-er, the vision must also realistic and fea-sible. An unrealistic strategic vision re-duces the motivation and commitment of organizational members. CONTEXT Competent Management Align Strategy and Structure Change the Organization Culture Empower Employees Secure Strategy commitment Take Political Interests into Account Reward Performance 2 Develop the Strategy After formulating the strategic vision top management needs to develop a strate-gy that is able to achieve the strategic vision. A strategy is ‘a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there’ (Porter, 1980: xvi). A strategy serves as a roadmap to get where a company wants to go. In order to guide the strategy implementation effectively, the strategy needs to be realistic, based on a sound idea and be well thought out. No imple-mentation can save a strategy, which is not feasible or sound to begin with. After the strategy is developed, it needs to be discussed with those who have to execute it, such as middle man-agers and key employees to assess whether the strategy is sound, realistic and feasible. Not only needs a strategy be sound and feasible it needs to be clear also. Organizational members who have to implement the strategy need to have a clear understanding of the strategy. They need to understand what the (op-erational) objectives of the strategy implementation are and what the conse-quences are for them as individuals. Furthermore, organizational members need to know what to do to make the strategy a success. Consequently, a strategy needs to be simple and focus on the essence of the strategy. When a PROCESS Implementation Leadership Communicate the Strategy Involve Stakeholders People-oriented Management Monitor and Learn Achieve Visible Results Hire and Retain Train and Educate
* 4. STRATEGY SERIES © 2014 STRATEGOS CONSULTING Λ 4 strategy is clear and simple, it is easier to understand for organizational members. However, the need to develop a clear strategy goes against the reality of poli-cymaking processes in the public sector. Strategies and policies are often devel-oped in a way that reduces the level of clarity of the strategy or policy and makes implementation problematic (Baier et al., 1986). Unlike private firms, public organizations tend to be govern-ment by controlling bodies which consist of multiple and competing interests (Ring & Perry, 1981). The controlling body tends to consists of policy makers who often have different agendas, which are designed to benefit their own con-stituents, but not necessarily those of others in the controlling group (Nutt, 1979). Therefore, there is a need to cre-ate coalitions with multiple and often competing objectives in order to agree on a certain policy (Baumer, 1978) or strategy. A common method for secur-ing policy support is to increase the am-biguity of a proposed policy (Page, 1976). A usual observation of policymak-ing processes is that ‘difficult issues are often ‘settled’ by leaving them unre-solved or specifying them in a form re-quiring subsequent interpretation’ (Baier et al., 1986: 206). ‘Policy ambiguity al-lows different groups and individuals to support the same policy for different reasons and with different expectations, including different expectations about the administrative consequences of the policy’ (1986: 206). ‘Thus, official policy is likely to be vague, contradictory, or adopted without generally shared ex-pectations about its meaning or imple-mentation’ (1986: 206). The lack of clari-ty allows policy makers to show their constituents that they have successfully represented their interests (Nutt, 1979). ‘In this way, the ambiguity or a policy increases the chance of its adoption, but at the cost of creating administrative complications’ (Baier et al., 1986: 207). Thus, policy ambiguity is less the result of deficiencies of policy makers than a natural consequence of gaining the re-quired support for the policy and of changing preferences over time (ibid). 3 Translate the Strategy After the strategy is developed, it needs to be translated into a well worked out strategy implementation plan. Even the best strategy is worthless when manag-ers cannot translate the strategy into operational reality. The strategy imple-mentation plan specifies the processes, activities and operational objectives that are required to achieve the goals of the strategy. The strategic objectives need to be translated into measurable opera-tional implementation sub-objectives (Reid, 1989) and linked to departmental and individual goals (Kaplan, 1995). In addition, progress measurement points or ‘milestones’ need to be established (Owen, 1982). Measurable objectives provide an effective basis for manage-ment control of the implementation (ibid). Without concrete objectives and milestones, it is impossible to measure the progress of the strategy implemen-tation. This makes managing and im-proving the strategy implementation impossible. Therefore, the implementa-tion plan needs to contain clear and measurable objectives or targets. Clear and specific tasks need to be defined which are required to achieve these tar-gets. Everyone with strategy implemen-tation responsibilities needs to know what to do in order to implement the strategy and what concrete objectives they have to attain. Unclear objectives leave room for differential interpretation and discretion and may thus contribute to implementation failure (Barrett, 2004). Research has shown that specific and ambitious but realistic goals, which are accepted by organizational members lead to the best task performance (Erez & Kanfer, 1983). People need realistic challenges to perform well. When organ-izational members have decided that it is impossible to reach a goal they will stop trying to reach that goal (ibid). Furthermore, effective strategy im-plementation requires clear implementa-tion tasks, activities and responsibilities. Implementation can only be successful when there is a clear and shared under-standing of who does what, when, at what cost (Allio, 2005). Not only should the necessary actions to implement the strategy be identified and planned, re-sponsibility for these actions should be allocated as well (Owen, 1982). By allo-cating clear responsibilities for the exe-cution of the implementation activities, progress can be measured and con-trolled (Reid, 1989).
* 5. STRATEGY SERIES © 2014 STRATEGOS CONSULTING Λ 5 STRATEGY IMPLEMENTATION PROCESS The process of strategy implementation refers to manner in which a strategy is implemented. These are the activities leading to and supporting a strategy implementation effort or ‘how’ the strat-egy is implemented (Ketchen et al., 1996). The following eight practices in-crease strategy implementation success. 1 Appoint a Strategy Implementation Leader During the strategy implementation ef-fort there needs to be one clear leader who is responsible for the outcome of the strategy implementation. The strate-gy implementation leader serves as pro-ject manager and problem owner of the strategy implementation. The implemen-tation leader needs to be board member, especially for strategic implementations. The implementation leader is responsible for articulating and communicating an attractive strategic vision that guides the strategy implementation. A successful leader inspires followers through the communication of a captivating vision designed to motivate followers to ambi-tious goals (Huy, 1999). Effective leaders have the ability to inspire confidence and enthusiasm of the new direction (Tushman et al., 1986). Implementation leaders need to be decisive during the strategy implemen-tation effort. Taking decisions may be considered to be is the primary task of management. When taking these deci-sions a manager needs to be steadfast, resolved and not allow him or her to be influenced by others. Managers who want to execute ambitious and innova-tive plans need to be persistent in stick-ing the course through thick and thin (Gersick, 1994). During reorganizations in which employees can lose their job or when established power positions are threatened, considerable resistance to change can arise. In such instances of considerable resistance to change, man-agement has to be decisive and stead-fast in taking decisions. Managers need to be able to take tough decisions when organizational members are not per-forming well. Strategy implementation leaders need to take decisions, which are per-ceived by organizational members to be fair. Research has found that organiza-tional members are more committed to decisions, decision-makers and the or-ganization when the procedures, which were used to arrive at the decision, are perceived as fair (Brockner et al., 2000). As Brockner et al state: ‘It’s not only what you do, but how you do it’. Finally, when leaders practice moral virtues such as fairness, integrity, hones-ty, loyalty, determination, courage and responsibility this increases the willing-ness of followers to follow a leader (Guil-lén & González, 2001). 2 Communicate the Strategy After the strategy is formulated, it needs to be communicated to the rest of the organization, and especially to organiza-tional participants who are directly influ-enced by it. However, no less than 95 percent of organizational members do not understand the strategy of their own organization (Kaplan & Norton, 2000). A strategy cannot be executed if organiza-tional members do not know what it is. The objective is to make organizational members understand what the strategy is all about and what its goals are. Fur-thermore, employees need to know how the strategy influences their daily work. Communicating the strategy in a very simple way makes it easier to under-stand for organizational participants. An important part of the communica-tion of the strategy is the explaining and convincing of the strategy to employees. Not only needs the content of strategy to be clearly communicated, it also needs to be clearly explained in a way that employees understand and may become convinced that the strategy is sound and effective. This can be done by explaining the advantages of the new strategy in a clear and practical way. Organizational members are more will-ing to accept undesirable decisions when they have received clear and ade-quate explanations for those decisions (Brockner et al., 1990). It is important that organizational members understand why the imple-mentation or the new strategy is neces-sary. It is especially beneficial if organi-zational members see in their daily activ-ities that something needs to be changed. Furthermore, a perceived crisis may also be beneficial in establishing the need for change to organizational mem-bers. When organizational participants
* 6. STRATEGY SERIES © 2014 STRATEGOS CONSULTING Λ 6 understand the need for the strategy implementation, they are more likely to be supportive of it. Communication of the strategy can be done through a wide range of com-munication means, such as magazines, email, leaflets, information, and publicity meetings. However, two-way communi-cation sessions with organizational members appear to be most effective. In these sessions, the strategy is explained and employees get the opportunity to voice their views on the strategy and its implementation. It is not only important to communicate the strategy to the people but it is also important to listen to their reactions to the strategy. Exten-sive listening to comments from em-ployees can take considerable time but builds commitment to the strategy. 3 Involve Stakeholders Relevant stakeholders need to be in-volved in the strategy formulation and implementation process. Involving stakeholders such as middle managers, employees, customers, unions and inves-tors may increase their commitment to the strategy. By sitting down with em-ployees and explaining the strategy and asking for comments increases their understanding of the strategy and their commitment to it. When employees feel that they have significant input in the strategy and see that certain ideas of their own are part of the strategy they tend to be very committed to that strat-egy. Participation allows management to tap into the specialized knowledge of lower-level employees. This can improve the strategy and the way in which im-plementation tasks are performed. Fur-thermore, by allowing employees to participate their self-confidence can be increased. Finally, management can find out where there is support for the strat-egy and where resistance can be ex-pected. 4 Use a People-oriented Management Style Having a people-oriented management style is a key practice for successful im-plementation. As individuals go to work for both instrumental and social reasons, managers need to pay attention to both task performance and social relation-ships (Henderson & Argyle, 1986). Or-ganizational members have the need to be treated with the dignity of a human being – one with knowledge and free will (Guillén & Gonzalez, 2001). A relationship-oriented manager lis-tens, provides support and encourage-ment, coaching and counseling, develops social relations with subordinates, cele-brates social activities and empowers organizational members during a strate-gy implementation effort. Relationship-oriented management consists of four main aspects. A first aspect is coaching and counsel-ing employees during the strategy im-plementation effort. Employees eventu-ally have to internalize the new activities, which are required to implement the strategy. Therefore, management must guide and coach the employees but they have to perform the implementation tasks themselves. Moreover, organiza-tional members are often quite capable of performing certain implementation tasks but need help doing it. By coach-ing employees, they can become more confident of their abilities and can be-come more involved and less passive. In addition, managers can reduce re-sistance to change by being facilitative and supportive (Kotter and Schlesinger, 1979). This may involve giving employ-ees time off after a demanding period and providing emotional support (ibid). A second part of relationship-oriented management is to develop and maintain personal relationships with subordinates. Better social relations have a positive influence on the cooperation, motivation and effectiveness of organizational members (Henderson & Argyle, 1986). Celebrating social activities with or-ganizational members is a third aspect of relationship-oriented management. Organizing social activities are a good way to develop close and personal rela-tionships among organizational mem-bers, can create a positive atmosphere within the organization, create more unity within the organization, reduce the distance between management and subordinates, and increase organization-al commitment. Empowering organizational members is a final aspect of relationship-oriented management. Organizational members can be empowered by making them independent, delegating responsibilities, allowing participation, giving them more
* 7. STRATEGY SERIES © 2014 STRATEGOS CONSULTING Λ 7 control over their work, giving them information about the strategy and its implementation, and giving training and leadership courses. Self-responsibility and self-empowerment of organizational participants makes them more motivat-ed, more self-confident and more willing to take initiative, which is beneficial to the strategy implementation effort. In addition, empowerment or delegation has potential benefits such as improves speed and quality of decisions, reduced managerial overload, enrichment of sub-ordinates’ job, increased motivation of subordinates and provides opportunities for the development of leadership skills of subordinates (Yukl & Fu, 1999). In addition, empowerment increases work performance (Cotton et al., 1988; Leana, 1986) and innovative behavior (Kanter, 1983). This in turn increases the motiva-tion of organizational members by mak-ing them feel more powerful (Conger & Kanungo, 1988). Moreover, empowerment increases self-determination, which increases the self-confidence of employees. Further-more, by giving employees more control over their work they feel more proud, important, and involved. A final reason for the delegation of authority to em-ployees is that they are the ones who encounter the problems during their work and are thus the ones who are most suited to solve these problems. 5 Monitor and Learn During the strategy implementation, it is important to monitor whether the goals of the implementation are being met and whether adjustments need to be made. The strategic goals translated into oper-ational goals with performance indica-tors need to be monitored to assess whether the objectives are being achieved. Without concrete objectives and milestones it is impossible to assess the progress of the execution. As strate-gy implementation plans are destined to change, implementation teams need to regularly meet in well-structured, punc-tuated sessions to share information, reconfirm priorities (Allio, 2005) and make decisions. This way, management can make adjustments when needed and thus control the strategy implementation effort. To make these adjustments it is required to assign clear responsibilities for the achievement of those targets. When objectives are not being met, the person or persons responsible need to be held accountable. Many organizations have accountabil-ity problems, which may be the result of a lack of planning, the absence of a func-tional management information system, or the existence of cultural values which do not encourage holding persons, es-pecially in high positions, accountable (Kiggundu, 1996). When objectives are not being it is possible that the assumptions underlying the strategy are flawed or obsolete. When this happens it needs to be decid-ed whether incremental improvements will suffice or that a fundamentally new strategy is required. When a strategy implementation is finished it needs to be evaluated. This way, an organization may learn from the implementation, which can benefit future strategy implementations. Furthermore, it is important to conclude and evaluate a project so that employees see what they worked for, creating a sense of closure. 6 Achieve Visible Results Achieving visible improvements in per-formance, especially in the beginning of the strategy implementation (quick wins) increases the motivation and commitment of organizational members. When employees see that a strategy leads to visible results, they get more confidence in the strategy. Furthermore, people are more inclined to accept new things when they see that these things work and lead to results. There is often a significant fear for novelty. Consequent-ly, strategy implementation is often per-ceived by employees as threatening. However, when the strategy leads to results, this fear of change can be over-come. During the strategy implementation it is important to make change visible to the organization. By making change visible (such as new logo, uniforms and offices) management can show the or-ganization that they are committed to the strategy and that things are really changing. It is especially important to achieve results in the beginning of a strategy implementation, in order to gain the confidence of the employees that the strategy might work. This is even more important when the company is in crisis
* 8. STRATEGY SERIES © 2014 STRATEGOS CONSULTING Λ 8 and short-term results are needed to let employees regain confidence. Another reason for achieving results is that it motivates people. If they see that the changes really lead to results then they become more motivated. Conversely, if employees get the feeling that the strat-egy implementation effort does not yield any results, they may even sabotage the effort. Finally, a strategy implementation project can rundown when the people see little results. 7 Hire and Retain Competent Management and Employees Recruitment, selection, promotion and demotion should provide the managers and employees who have the required skills and attitude to implement the new strategy successfully (Kotter, 1995; Pinto & Slevin, 1987). Especially when an or-ganization aims for radical change, new organizational members and especially managers are required to achieve it (Stoddard & Jarvenpaa, 1995). Newly hired managers are three times more likely to initiate revolutionary change than existing management teams (Tushman et al., 1986). In addition, out-siders may provide new cognitive per-spectives, fresh awareness of the envi-ronment and an energizing assurance (Gersick, 1991). Existing organizational members are often comfortable with the status quo and may fear losing control, opportunities, power and their ability to accomplish the new tasks (Stoddard & Jarvenpaa, 1995). Selection and hiring of employees is especially important if the existing em-ployees lack the knowledge and skills to implement the strategy. Another ad-vantage of hiring new employees is that they tend to be more dynamic and can serve as an example for the existing employees, who are then expected to perform better. It can be necessary to demote or lay off employees who do not have the re-quired skills and attitude to implement the strategy. In addition, some organiza-tional members may have to be re-moved to show that resistance to change is not tolerated (Stoddard & Jarvenpaa, 1995). However, letting em-ployees go needs to be done with great hesitation and prudence as it can have a very negative influence on survivors. When employees perceive future job loss possible, this can result in negative emotions resulting in reduced work mo-tivation and task performance. When layoffs are inevitable it is crucial that they are clearly communicated and are done in a way, which is perceived fair by employees. Otherwise layoffs can have a very negative influence on the motiva-tion and performance of survivors. 8 Train and Educate Organizational members Training and education of organizational members is another important lever for strategy implementation. Adequately trained staff is one of the most critical steps top management can take to en-sure successful strategy implementation (Edwards & Sharkansy, 1978). Highly educated organizational members are more likely to adapt to intellectual de-mands, such as the use of information technology (Fuerst & Cheney, 1982), to be early adopters of innovations (Berry et al., 1998), are more receptive to inno-vation and strategic change (Wiersema & Bantel, 1992) which has a positive in-fluence on receptivity to change. Training and education can consist of courses, collective classes, (on-the-job) training, and individual guidance and coaching. Implementing a new strategy often requires new activities and ways of thinking, which can be learned by train-ing and educating employees. The quali-ty of a strategy implementation effort depends on the quality of the people who have to implement it. Thus, the quality of organizational members may need to be improved by educating them. Training and education can improve employee knowledge and skills and make them perform better. Training and education may allow employees to exe-cute their tasks in a professional and skillful way. In addition, educating and training employees can increase the self-confidence of employees and thus in-crease their performance. STRATEGY IMPLEMENTATION CONTEXT The context of a strategy implementa-tion refers to the circumstances under which both the strategy implementation process and content are determined. It refers to the ‘where’ of strategy imple-mentation. The following seven strategy
* 9. STRATEGY SERIES © 2014 STRATEGOS CONSULTING Λ 9 implementation practices increase strat-egy implementation success. 1 Appoint Competent Management The presence of competent employees and especially management is the most important success factor for strategy implementation. Inadequate capabilities of managers are a common cause of strategy implementation failure (e.g. Beer & Eisenstat, 2000; Pinto & Slevin, 1987; Alexander, 1985). Without compe-tent organizational members, imple-menting a strategy successfully be-comes very difficult if not impossible. Organizational members with implemen-tation responsibilities need to have suffi-cient skills and knowledge to implement the strategy. Eventually organizational members are the ones who have to per-form the implementation activities to make the strategy a success. Especially, having competent man-agement is important. When top man-agement is incompetent, the whole or-ganization is affected and thus the strat-egy implementation effort as well. Fur-thermore, when employees have little confidence in the ability of management to execute the strategy then their com-mitment to the strategy will be low. Having incompetent members within a team has a negative influence on the performance of other organizational members. Well-performing organiza-tional members have their motivation reduced when they have to work with or are dependent on poor performing col-leagues. Especially the presence of in-competent managers has a very nega-tive influence on the performance of subordinates. If a person is competent and that person’s manager is not, this is likely to have a negative influence on the level of motivation and implementation performance. Successful organizational members tend to leave an organization when they have to work for incompetent managers and feel that their perfor-mance is not appreciated or even worked against. To increase the level of competence of organizational members several prac-tices can be used such as training and education, coaching and counseling, giving feedback about performance, addressing poor performance, hiring and firing of organizational members and bringing in external expertise. 2 Align Structure and Strategy Successful strategy implementation re-quires a clear organization structure that is aligned to the strategy. It needs to be clear whom the authority has to make decisions. When possible, management must ensure that the organization struc-ture is clear, relatively decentralized and relatively formalized. When the existing structure does not meet these require-ments, it may represent a hindrance to strategy implementation and needs to be changed. The main advantage of a relatively decentralized organization structure is that it increases the commitment of or-ganizational members to decision-making; decisions can be made more quickly, and may improve the quality of decisions as it makes more use of spe-cialized knowledge of organizational members at lower levels in the organiza-tion. Centralized decision-making, one-way top-down communication and lack of input from lower levels of the organiza-tion may inhibit strategy formulation and implementation (Kiggundu, 1996). A centralized organizational structure with rigid organizational policies combined with a perceived lack of control is relat-ed to maladaptive behavior in organiza-tions (Martinko & Garnder, 1982). Indi-viduals working in centralized organiza-tions, tend to feel that management does not trust their skills and abilities resulting in a sense of incompetence (Lawler, 1992). Centralized control re-duces self-determination (Spreitzer, 1996), which in turn reduces the intrinsic motivation of organizational members (Conger and Kanungo, 1988; Lawler, 1992). An explanation for this is that individuals tend to have a desire for per-sonal control (Greenberger and Strasser, 1986). In addition, an authoritarian man-agement style can remove control and discretion from employees, which in- Competent management is the most important success factor for strategy implemen-tation.
* 10. STRATEGY SERIES © 2014 STRATEGOS CONSULTING Λ 10 creases their sense of powerlessness (Conger and Kanungo, 1988). Contrary, decentralized control helps organiza-tional members feel that they are con-tributing to the operations of the organi-zation, which promotes their sense of having impact (Martinko and Gardner, 1982). Furthermore, it may increase the motivation of organizational members. A moderately formalized organization structure creates clarity for organiza-tional members. Clear procedures, rules and responsibilities give employees cer-tainty during the implementation. When problems arise and responsibilities are not clear, organizational members may blame each other. A highly level of formalization reduces the propensity to change (e.g. Hage & Aiken, 1970; Bonoma & Zaltman, 1981). The greater the number of rules and regulations, the greater the rigidity and inflexibility within an organization. A high level of formalization discourages new ways of doing things and reinforces the status quo (Hage and Aiken, 1970). However, when formalization is low, organizational members have few rules or procedures to fall back on during the strategy implementation. Thus, organiza-tions must not be too formalized and become rigid but also not become too informal and become chaotic and uncon-trollable (Volberda, 1996). 3 Change the Organization Culture A new strategy often requires changes in the way of thinking and habits of or-ganizational members. Old habits and ways of thinking can prove to be an obstacle to strategy implementation. Fundamental organizational change often involves major uncertainty and can trigger intense emotions, such as anxiety (Huy, 2002) and a fear for job security. As a new strategy can be accompanied by layoffs, organizational members may perceive it as a threat to job security. Job insecurity is related to a variety of negative responses such as lower job satisfaction, lower organizational com-mitment, lower job involvement, in-creased psychological withdrawal, greater resistance to change, greater propensity to leave the organization, lower trust in management (Borg & Dov, 1992) and withdrawal cognitions and behaviors including reduced work effort, increased absenteeism, and theft (Davy et al., 1997). An existing organization culture can be characterized by fear for making mistakes, responsibility, participation, and change, acting as major barriers to strategy implementation success. When managers act in authoritarian and puni-tive ways, subordinates may become reluctant to make mistakes and engage in learning behaviors (Edmondson, 1999). Employees may become shaped by organizations with high levels of cen-tralization, formalization, and rigid rules and may become passive and unable to be creative or exercise initiative on the rare occasions that it is encouraged and rewarded (Martinko & Gardner, 1982). To implement a strategy successfully, proactive organizational members are needed who participate in strategy for-mulation and implementation. In order to participate, organizational members need to dare to take initiative, voice their opinion, and not be afraid to make mistakes. Therefore, an empowering and fearless organization culture needs to be created in which organizational mem-bers are able to make mistakes without being punished for it. When organiza-tional member believe that well-intentioned interpersonal risks will not be punished, this fosters learning behav-ior (Edmondson, 1999). To change an existing organizational culture several strategies and tactics can be used. First, a very clear vision of the new organizational culture is needed. The vision must clearly describe the new culture and how it differs from the old culture what its advantages are. This needs to be communicated very clearly to the employees. Cultural change in-volves a lot of communication. Another tactic is to individually coach and council employees. This includes having open conversations with employees. Involve employees and give them information about their performance and the new A fearless culture needs to be created in which organiza-tional members are able to make mistakes without being punished for it.
* 11. STRATEGY SERIES © 2014 STRATEGOS CONSULTING Λ 11 culture. Providing training and educa-tion, especially motivational courses, can also be used to change the culture. Fur-thermore, visible changes, such as new uniforms and a new corporate logo can be used to make the culture change more visible and tangible to organiza-tional members. In addition, hiring em-ployees who have a better fit with the new culture and demoting or letting go of employees who not able to fit in the new culture are another tactic that can be used. Finally, leadership from top management is crucial in culture change. Top management need to serve as an example of the norms and values it wishes to convey to organization. However, changing a culture is a dif-ficult and time-consuming process. It may take years to successfully change an existing organizational culture. Changing habits, which have been the same for a very long time is not easy. 4 Empower Employees When organizational members have a high sense of implementation self-efficacy and believe that they can per-form the new strategy implementation tasks successfully, they are more likely to perform well. Contrary, organizational members with low self-efficacy have little ambition to perform new tasks, especially more complex and unfamiliar tasks. As strategy implementation often entails new and unfamiliar tasks, this negatively influences the implementa-tion effort. Even when organizational members do have the required capabili-ties they can be afraid to take on a job with more responsibility, which entails more risk. Another result of low self-efficacy may be that, organizational members can become afraid to make mistakes, take initiative, and participate in decision-making. They are not confi-dent that their endeavors will be suc-cessful. A low implementation self-efficacy may stem from a lack of self-confidence and self-esteem. An authoritarian man-agement style may be another source of low self-efficacy. Being in a subordinate position with little power has a negative influence on the level of self-efficacy of organizational members. In addition, when organizational members are not rewarded when they perform well but do get criticism when mistakes are made this may lower their implementation self-efficacy as well. Finally, organizational members may have low implementation self-efficacy because they have seen many things fail (including past imple-mentations). When they see others fail, they are more likely to expect that they will fail as well. Managers can increase the level of self-efficacy of employees through coaching and counseling, rewarding performance, a people-oriented man-agement style and by creating an organ-izational culture in which people are able to make mistakes and learn from them. 5 Secure Strategy Commitment A lack of commitment to the strategy implementation can result in implemen-tation failure (Alexander, 1985; MacMil-lan, 1986). When organizational partici-pants are committed to a strategy and its implementation, they are more moti-vated to implement the strategy and achieve its goals. Especially managers need to be very committed to the strat-egy and be resolved to implement it. Explicit management commitment is needed because management provides leadership and rewards to organizational members. However, not only is managerial commitment to the strategy required for strategy implementation success but also employee commitment. Without employee commitment, the strategy implementation is likely to fail. Employ-ees who are not committed to a strategy will not be very motivated to implement that strategy. Organizational members may become uncommitted to the strat-egy implementation because of poor past implementation and organizational performance. Employees are likely to be cynical about organizational change because of the following reasons: feeling uninformed, lack of communication and respect from managers, negative dispo-sition and lacking participation in deci-sion- making (Reichers et al., 1997). Employee commitment can be se-cured by involving employees in the strategy formulation and implementation process. When employees think that it is (partly) their plan, they are more com-mitted and supportive of the plan. An-other way of increasing employee com-mitment is by clearly communicating the strategy to employees.
* 12. STRATEGY SERIES © 2014 STRATEGOS CONSULTING Λ 12 6 Take Political Interests into Account Politics and struggles over power and leadership are just a few obstacles that may undermine an implementation effort (De Kluyver and Pearce, 2003). Strategy formulation and implementation inevita-bly raise questions of power within an organization (Pettigrew and Whipp, 1991). The existence of conflicts, and the use of individual and group power needs to be taken into consideration (Bergadaà, 1999). The very prospect of change confronts established positions (ibid), which may lead to resistance to change. Resistance to change may lead to passivity toward the strategy or even sabotage. Managers can overcome re-sistance to change by involving potential opponents in decision-making, taking their interests seriously and clearly communicating the new strategy and its advantages to them. 7 Reward Implementation Performance Organizations need a reward system that monitors the progress toward full implementation and demonstrates top management’s interest and investment in attaining the goals of the strategy (Stonich, 1981). Reward systems are es-sential for motivating staff and ensuring appropriate behavior in relation to the strategy (Hrebiniak & Joyce, 1984). Rewarding good implementation per-formance and addressing poor imple-mentation performance has a positive influence on strategy implementation performance, due to the following rea-sons. First, rewarding performance in-creases the level of motivation of organ-izational members. When organizational members perform well during a strategy implementation effort, they want to be rewarded for it. When persons are not rewarded based on their performance they are not likely to be motivated to make an extra effort and achieve results. Second, when organizational mem-bers see that another organizational member performs well and is rewarded for that, they may want those rewards as well. Consequently, they can become motivated to perform better as well. Conversely, organizational members are not motivated to work hard when their badly performing colleague gets the same salary. Finally, when organizational members are rewarded for their implementation performance their implementation self-efficacy may be increased. When they perform well and receive rewards such as compliments from management, they may be become more self-confident and more motivated to perform well during the strategy implementation. The following reward best practices have a positive influence on strategy implementation performance. First, feedback is one of the most effective methods of increasing individual and group performance (Moss & Martinko, 1998). ‘Feedback allows employees to assess their performance accurately, learn from errors, see how they are per-ceived by others, replace unproductive work habits, examine alternative modes of behavior, and increase self-awareness’ (Vinton, 1987). Second, informal rewards (pats on the back, a sense of pride, enthusiasm) are a very effective even more so than finan-cial rewards. Giving compliments, praise, and recognition is really appreciated by organizational participants. By giving compliments to organizational partici-pants when they perform well during the strategy implementation effort, man-agement can increase their level of mo-tivation and self-confidence. However, employees often do not receive compli-ments when they perform well but do get criticisms when they make mistakes. This has a very negative influence on the motivation, self-confidence, self-efficacy and performance of organizational members. Third, the use of collective rewards (such as profit sharing or bonuses with which an organization or a department as a whole is rewarded for its collective performance) has a positive influence on strategy implementation performance. Rewarding collective performance in-creases the level of motivation of organ-izational members with strategy imple-mentation responsibilities. Collective rewards can give organizational mem-bers the feeling that they partly own the company increasing their commitment to the organization. When organizational members are partially rewarded for their collective performance they have more incentive to make their department and the or-
* 13. STRATEGY SERIES © 2014 STRATEGOS CONSULTING Λ 13 ganization as a whole perform better. The aim is to convey that an organiza-tion is an interdependent system – indi-vidual performance is linked to organiza-tional performance. Dr. Arnoud van der Maas (a.vandermaas@ strategos.nl) is a consultant in strategy & finance to public and private organizations. Arnoud received a PhD in Strategic Man-agement from Rotterdam School of Man-agement, Erasmus University. One of the top 5 business schools in Europe. This arti-cle is based on this PhD thesis on strategy implementation in an international context, which can be found here.
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1. ↑ Van der Maas, A. (2014, February 9). Mastering Strategy Implementation. Retrieved April 2, 2015, from http://www.slideshare.net/ArnoudvanderMaas/article-mastering-strategy-implementation?qid=b01c4138-0a9a-4ea6-a495-1aee7eabb4be&v=default&b=&from\_search=5