IMPLEMENTATION AND STRATEGIC CHANGE: CONSTRAINING FORCES IN THE IMPLEMENTATION OF STRATEGIC CHANGE (CASE STUDY OF XYZ COMPANY)

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Change Management MGMT625

Lesson # 34

IMPLEMENTATION AND STRATEGIC CHANGE: CONSTRAINING FORCES IN

THE IMPLEMENTATION OF STRATEGIC CHANGE (CASE STUDY OF XYZ

COMPANY)

In this lesson we will continue our discussion about the implementation of strategic change. Again at

strategic formulation, one can get extraordinary type of vision and mission prototypes but at

implementation level the results are often quite otherwise. The recent surveys also exhibit the similar

conclusions about the success pattern of strategy formulation-execution mechanism. Therefore this is an

attempt for analyzing the situation realistically by dealing various scenarios in generic terms. According

to an author, the following variables hamper the execution of strategic change.

Systems

(a) Misdirected reward and evaluation

In organizations, the actions of change in strategies, particularly at operational level, depend on linkage

between performance and reward systems. One thing which happened in most cases is that the

organizations do not have suitable criteria for performance evaluation. It means the organizations do not

have a suitable portfolio of attributes at different hierarchical levels which could measure the

performances. In this scenario, organizations may face inequity and injustice which lead them into

anarchy and conflict. However we see various efforts that have been made to link reward with

performance and to induce managers to make decisions that are in the long-term interest of the

enterprise.

At Ford Company, for example, more emphasis is given to stock grants that reward the achievement of

5-year objectives. These criteria include not only return on equity but also measures such as customer

satisfaction, involvement of employees, and product quality. Furthermore, performance is compared

with that of competitors. For instance, even though quality may have improved at Ford, if more quality

improvements have been made by a competitor, this will be held against Ford's managers if their

quality improvements have not been sufficient.

(b) Oppressive control systems

Oppressive control system means a system which is tightly managed and where element of exploitation

is very high. The control system, in an organization, has several directions. In broad terms we can

divide them into two types; tangible control systems and intangible control systems. Most controls are

designed for specific things: policies, wages and salaries, employee selection and training, research and

development, product quality, costs, pricing, capital expenditures, cash, and other areas where an

organization wishes performance to conform to plans. These controls are tangible or visible in nature

where traditional approaches are to be applied such as budget summaries and other financial analyses.

Many other types of controls are dependent on intra-organizational relationships, leadership styles;

organizational learning and culture based established patterns. These are intangibles or invisible in

nature and where modern attitudinal and behavioral approaches are to be applied. For instance,

decentralization of authority - especially in product or territorial divisions - on the one hand creates

semi-independent units but also empowerment and smooth relationships between various levels in an

organizational hierarchy. The point here is that control should be on invisibles as equal as with visibles

which certainly is an important objective to gauge the success in change implementation. It must do

more than say that a management group has followed "generally accepted standards of management

control."

The concept of the modern organization as it exists today in the United States originated with Pierre S.

Du Pont and Alfred P. Sloan. It was Sloan who structured General Motors with an emphasis on

centralized staff and decentralized operation. Policy-making and operations were distinguished. Control

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was maintained through a number of control techniques and budgets. This kind of organization worked

remarkably well and is still the predominant way large enterprises are organized today. However, new

technology, new demands in the environment and a new work force call for a new kind of organization

based on information.

Budgeting is the formulation of plans for a given future period in numerical terms. As such, budgets are

statements of anticipated results, either in financial terms - as in revenue and expense and capital

budgets or in non-financial terms such as in budgets of direct labor-hours, materials, physical sales

volume, or units of production. It has sometimes been said, for example, that financial budgets

represent the "dollarizing" of plans.

Perhaps inflexibility is the greatest danger in budgets. Even if budgeting is not used to replace

managing, the reduction of plans to numerical terms gives them a kind of misleading definiteness. It is

entirely possible that events will prove that a larger amount should be spent for this kind of labor or that

kind of material and a smaller amount for another or that sale will exceed or fall below the amount

forecast. Such differences may make a budget obsolete almost as soon as it is formulated; if managers

must stay within the straitjacket of their budgets in the face of events like these, the usefulness of

budgets is reduced or nullified. This is especially true when budgets are made for long periods in

advance.

Budgeting is never more perfect than the planning behind it, and plans - especially long-range plans are

subject to the imperfections caused by change and uncertainty. Such uncertainty or sometimes change

in strategy can be incorporated if budgets are inflexible and easily be reorganized. However, this

phenomenon also depends on the degree of centralization.

(d) Arbitrary cost allocation systems

This variable, basically, relates to decision making pattern. The questions here are that whether cost

allocation is based on rational basis or emotional or political or either professional basis. So it is a

decision making phenomena either participative of limited to few organizational political elites. This

definitely leads the strategic change towards failure.

At rational and sometimes professional level we have cost valuation technique for efficient cost

allocation which is called cost-benefit analysis. It seeks the best ratio of benefits and costs; this means,

for example, finding the least costly way of reaching an objective or getting the greatest value for given

expenditures. The major features of cost effectiveness analysis are that it focuses on the results of a

program, helps weigh the potential benefits of each alternative against its potential cost, and involves a

comparison of the alternatives in terms of the overall advantages.

(e) Overly Rigid, formal planning system

Planning involves selecting missions and objectives and the actions to achieve them; it requires

decision making that is choosing from among alternative future courses of action. Plans thus provide a

rational approach to achieving pre-selected objectives. Planning also strongly implies managerial

innovation rather than rigidity and bases our decisions on purpose, knowledge, and considered

estimates.

Planning bridges the gap from where we are to where we want to go. Without plans, the organizations

are at high risk or chance. But without flexible planning system, an organization, if not in slump, is at

stagnation. The second thing is that planning and controlling are inseparable or plans thus furnish the

standards of control. So, efficient control system depends on flexible planning and decentralized

structure.

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Structures

(a) Too many hierarchical levels

Organization levels exist when there is a limit to the number of persons a manager can

supervise effectively, even though this limit varies depending on situations. In every

organization, it must be decided how many subordinates a superior can manage. When an

organization go for a large in size or for empire building, it often no longer be able serves his

target customer or stakeholders but in trying to serve itself. More broadly, there are three

problems associated with large hierarchical levels:

1. It is an expensive option

2. It complicates the communication process

3. Finally, it complicates the planning and control systems

Then what should be the ideals figures? For instance, the prominent British consultant Lyndall

Urwick found that "the ideal number of subordinates for all superior authorities ... to be four,"

while "at the lowest level of organization, where what is delegated is responsibility for the

performance of specific tasks and not for the supervision of others, the number may be eight or

twelve."

While, in a survey of 100 large companies made by the American Management Association,

the number of executives reporting to the presidents varied from one to twenty-four, and only

twenty-six presidents had six or fewer subordinates; the median number was nine. In forty-one

smaller companies surveyed, twenty-five of the presidents supervised seven or more

subordinates, and the most common number was eight. Comparable results were found in other

studies.

In our societal perspective, these figures are different from ideals and also form models of

developed societies. For instance at managerial stage, we have 6 hierarchical levels in our

public sector organizations as compared to 3 or 4 in average western models. And at non-

managerial stage, we have 16 hierarchical levels as contrast with western models that generally

have 6-8 levels. So, what the outcome is: mal-governance and least development. Therefore in

90's, we have seen the trend of rightsizing and downsizing with parallel of cost cuttings.

(b) Overly narrow span of control

According to classical school approach, the term span of management deals with specifying

numbers of subordinates for an effective span. In other words, there is a limit to the number of

subordinates a manager can effectively supervise, but the exact number will depend on the

impact of underlying factors. So, what should be the ideal? It depends upon some essential

factors like:

Vision and Missions

Strategic Change (Rate of Change)

Hierarchical Levels

Organizational Planning

Training

Technology

Delegation of Authority and Responsibility

Communication Practices and Techniques

Organizational Culture, etc.

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We have two schools of thoughts about the optimality of span of control. One is the classical

school of thought which prescribed that at upper and top levels the span is from three to seven

or eight subordinates. However, more recent views come from operational-management

theorists who have beloved on open ended approach that are based many underlying variables

in a management situation. But in a very real sense, none of these studies is truly indicative of

the actual span of management. For one thing, they measure the span only at or near the top of

an enterprise. Secondly, it is probable that spans below the top executive are much narrower.

According to a study of more than 100 companies of all sizes revealed a much narrower span

in the middle levels of management than at the top.

While, in broader term we can divide the management span into two types: one is wide and the

other is narrow. A wide span of management is associated with few organizational levels; a

narrow span, with many levels. The advantages and disadvantage of the both categories are

given in the following table:

Organization with Narrow Span

ADVANTAGES

DISADVANTAGES

� Close supervision

� Many levels of management

� Close control

� High costs due to many levels

� Fast communication between

� Superiors tend to get too involved in

subordinates and superiors

subordinates work

� Excessive distance between lowest

level and top level

Organization with Wide Span

ADVANTAGES

DISADVANTAGES

� Superiors are forced to delegate

� Danger of superior's loss of control

� Clear policies must be made

� Requires exceptional quality of managers

� Subordinates must be carefully selected

� Tendency of overloaded superiors to

become decision bottlenecks

Although research still does not address all key the key managerial activities such as

structuring the organization or clarifying of authority-responsibility relationships because of

person-to-person variability and that require a comprehensive look at what successful and

effective managers really do. But in general, the authority responsibility mismatch has

considered one of biggest hindrance in managerial success. It has normally considered more as

structural phenomena rather than individualistic. For instance, in most of the cases managers

are assumed to be responsible instead of appropriately authoritative. One reason for that is the

geographical dispersion between authority structure and responsibility structure. So, the point

is that there must be equilibrium between manager's functional authority and perceived

responsibility. Some recent research studies have focused this phenomenon under the domain

of total managerial job.

(d) Top down management system

It is the most traditional and oldest style of management where management flows from people

at higher levels to those at lower levels in organizational hierarchy. This kind of management

exists especially in organizations with an authoritarian atmosphere. Therefore in today's

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context, it has been much disliked form of organizational structure. Most of the time, the

strategy, goals, and objectives manipulation is retained at the higher level of organization.

Even middle level managers are working as operators. In fact, it is commonly argued that

effective management has to start with subordinate otherwise problem will develop.

In top down communication, information is often lost or distorted as it came down the chain of

command. Top management issuance of policies and procedures does not ensure prompt

communication. Consequently, an effective feedback system is required for finding out

whether information was perceived as intended by the top management. The possible

consequences are:

Least motivated and least involved employees

Mechanistic organizational environment

Stagnant efficiency

Poor coordination between operation of functional level and higher level etc..

(e) Restricted communication channels

It is generally considered in traditional communication structures that top management is the

most informed segment in an organization. Is this assumption, particularly in modern context,

is a myth or reality? Modern research now argued that middle level and operational level

managers are the more informed people in an organization. Because they are getting

information simultaneously from multiple channels such as backward channels, forward

channels, and also through organizational hierarchical channels. Therefore, the point here is

that, an open ended organization is more intelligent and interactive with the environment.

(f) Lack of accountability

Although employees are empowered to make decisions they believe will benefit the

organization, they must also be held accountable and responsible for results. Accountability

phenomena works at two levels: at extraneous level and at internal level.

At extraneous level, the organization held accountable to individual, to a group or groups of

people, to government, and ultimately to society. This is reactionary and legal way of

accountability. At intra-organizational level, there must be some restraints or checks that can

held accountable to individual level and department's level, at business level and at corporate

level. The objective here is that, morality should be generated form within the organization.

J. O. McKinsey came to the conclusion that a business enterprise should periodically make a

"management audit," an appraisal of the enterprise in all its aspects in the light of its present

and probable future environment. Although McKinsey called this appraisal a management

audit, it is actually an audit of the entire enterprise.

(g) Bloated (over-fed) staff functions

In management literature, still there are number of obstacles which require some deep

extrication like the problem of semantics. The terms such as "organization," "line and staff,"

"authority," "responsibility," and "policies," are exemplified by variety of meanings. And much

confusion also has among managers as to what these terms are. So, what the roles of line and

staff are? This is one of several areas of management that causes more difficulties, more

friction, and more loss of time and effectiveness.

Change Management MGMT625

1One widely held view of line and staff is that line functions are those that have direct impact

on the accomplishment of the objectives of the enterprise. On the other hand, staff functions

are those that help the line persons work most effectively in accomplishing the objectives. The

people who hold to this view almost invariably classify production and sales (and sometimes

finance) as line functions and purchasing, accounting, personnel, plant maintenance, and

quality control as staff functions. According to an another classification, purchase, production,

sales departments are under line authority domain and accounting, finance, personnel, plant

maintenance, and quality control are under staff authority domain.

The point here is that, the organization should go first to differentiate between line authorities

and staff authorities and form an appropriate model so that the problems of overlapping and

over feeding could be avoided.

Strategic Direction

(a) Absence of innovation goals

Usually, innovation means the creation and usage of the ideas. In an organization, this can

mean a new product, a new service, or a new way of doing things as Peter Drucker regards the

two basic business functions as innovation (for example, the creation of new goods or services)

and marketing. A business can scarcely survive without at least one of these functions and

preferably both. On contrary, innovations may be very risky and are, at times, not successful.

Organizations fostering innovation are attributed with the following ways:

Appreciation and rewarding for new ideas

Development of tolerance for failure

Operate with few and simple rules

Hampers to innovation, such as excessive planning or intolerance of mistakes is

eliminated

Information sharing is greatly encouraged

Processes, Procedures, and guidelines foster innovation.

Establish close relationships with customers

Technology sharing with others in the company

Keeping the project alive by allocating time or financial grants

10.

Keeping the divisions small

As James Brian Quinn found in his research that successful large companies are listening

carefully to the needs of their customers. They establish teams that search for creative

alternatives to serve their customers but within a limiting framework and with clear goals in

mind. And Peter Drucker suggests that innovation applies not only to high-tech companies but

equally to low-tech, established businesses. According to him, worthwhile innovation is not a

matter of sheer luck; it requires systematic and rational work, well organized and managed for

results. Following some success stories attribute innovation as a matter of survival.

General Electric's ambitious plans for the "factory of the future" may have been a costly

mistake. These plans may have been based on unrealistic forecasts and GE's unrealistic

expectations to automate industry. The concept of the new factory expressed the wish of the

chairperson, who wanted to promote entrepreneurship in an organization that was known to be

highly structured. At Johnson & Johnson, autonomous operating units are encouraged to

innovate. The organization culture allows failure to occur. Hewlett-Packard encourages re-

searchers to spend 10 percent of their time on their pet projects, and Merck allocates time and

Change Management MGMT625

resources to its researchers for working on high-risk products with a potential for high payouts.

Dow Corning and General Electric engage in joint projects with customers to develop new

products.

(b) No formal strategy for entrepreneurship

Gifford Pinochet makes a distinction between the intrapreneur and the entrepreneur.

Specifically, an intrapreneur is a person who focuses on innovation and creativity and who

transforms a dream or an idea into a profitable venture by operating within the organizational

environment. In contrast, the entrepreneur is a person who does similar things, but outside the

organizational setting. Entrepreneurs have the ability to see an opportunity; to obtain the

necessary capital, labor, and other inputs; and to put together an operation successfully. They

are willing to take the personal risk of success and failure.

Organizations that have entrepreneurial like orgonomics or attributes develop ability to see

an opportunity, willingness to take risk and commitment to systematic innovation are

progressive, dynamic and long lasting structures. For instance, When Steve Wozniak could not

get his dream of building a small computer fulfilled at Hewlett-Packard, he left that prestigious

firm to form - together with another entrepreneur, Steve Jobs - Apple Computer.

Entrepreneurship, in general, is thought to apply to managing small businesses, but some

authors expand the concept so that it applies also to large organizations and to managers

carrying out entrepreneurial roles through which they initiate changes to take advantage of

opportunities. For instance, Progressive companies, such as IBM or 3M, consciously try to

develop an organizational environment that promotes entrepreneurship within the company.

If the top executive of an organization is visionless or retained them on existing level of

achievements then organization suffers immobility, and lacks strategic direction for long term

survival as a very famous English quotation delegate that `fish stings from the head'. An ideal

organization's leaders or top management has known about how to form a plan that constitutes

a standard and ordinate it to vision of the organization. He also has the ability to compare it

with the present structure and execute changes should be made when possible.

(d) Lack of commitment from senior executives

Similarly, senior executives must be committed, meaningful and incorporate with the

objectives, mission, and purpose of the organization. They must also have clear understanding

about their area or intentional structure of roles for better serving in today's highly infiltrated

environment. But we have seen different scenarios in organizations. For instance, one survey

of CEOs in Fortune 500 enterprises indicated that executives spend little time with lower-level

employees. Professor Henry Mintzberg, who previously studied the activities of executives,

interpreted the findings as showing that "management by walking around" is not very prevalent

in these large companies. Managers spend a lot of time with those who are at similar

organizational levels. Yet by wandering around, managers could obtain a great deal of

information not available through formal communication channels.

(e) No entrepreneurial role-model at the top

In a learning environment, employees at the lower level learn from the middle level and from

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the top level management. If there are no such role models in an organization then it suffers

asymmetry, communication gaps, and perhaps leadership vacuum.

Policies and Procedures

(a) Long complex approval cycles

It is a typical area of Office Management Study or OM study in which we analyze day-to-day

procedures and conventions in office environment. For instance, in public sector organizations

we have seen that the approval of a document require dozens of signature and other

complexities. So if an organization has this kind of old and classical system that creates

problem of efficiency, effectiveness and disorder in organizational outcomes.

(b) Extension documentation requirements (even problem with iso-9000)

Over-documentation is other hindering phenomena that affect the efficiency and effectiveness

in an organization. This is even not a local phenomenon in developing countries' business and

organizational environments but at international level too. For instance, ISO certifications

require documentation over documentation that creates an abnormality in organizations. This is

because we are overly relaying on visibles rather than on invisibles that led an organization to

mechanistic and spiritless structure. The point here is that every organization should determine

its own formality and informality levels according to their operational size and industry norms.

It means the over-reliance on past patterns experiences, norms, and conventions. This approach

creates hindrance to value-addition and creativity and makes an organization a stagnant body.

(d) Un-realistic performance criteria

The unachievable or unrealistic performance criteria also create constraint during

implementation of strategic change. This thing creates de-motivation in organizations.

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