Issues in Strategy Implementation

The successful implementation of strategy requires an effective organization. People working within a firm should know how their actions interrelate with the actions of others to support and execute the firm’s strategy. Without a structural framework, the roles of management and employees can’t be drawn up clearly—leading to confusion, duplication of efforts, and chaos at various levels.

Apart from a sound organizational structure, the services of talented and capable leaders are also required to translate corporate vision into a concrete reality. The principal task of leaders then would be to see that the various elements of an organization fit together and make logical sense. In the race to get ahead, they should not sacrifice ethical and social values.

Functional plans and policies must be formulated carefully and implemented with active support from employees at various levels. These should help employees find solutions to several operational issues that need to be resolved on a day-to-day basis.

Issues in Strategy Implementation

The political factors that come in the way of the effective implementation of strategies should also be adequately understood. Every attempt should be made to remove the irritants first before minor problems turn into major emergencies later.

Implementing Strategy

There is no guarantee that a well-designed strategy is likely to be approved and implemented automatically. The strategic leader must, therefore, defend the strategy from every angle, communicate how the strategy when implemented would benefit the whole organization, and secure the wholehearted support of employees working at various levels. To keep things on track, he can list out priorities, program implementation processes, budgets, etc. on paper so that nothing is left to chance.

While giving a concrete shape to the strategy, he should also take note of regulatory mechanisms that govern business activity and see that everything is in order.

Some of the important things to be kept in mind are listed below:

• Formation of a company: This must be in line with provisions of the Companies Act, 1956, covering issues such as the formation of a company, its registration, obtaining suitable licenses before commencing operations, and raising funds from various sources by the provisions of SEBI Act, 1992.
  
  
• Operations of a company: The company must compete fairly and earn profits through legally blessed routes only observing the
  (a) provisions of competition law;
  (b) Import/export restrictions,
  (c) FERA regulations (FEMA Regulations, 2000);
  (d) Patent, trademark, copyright (Indian Patents Act, 1995, the Trade and Merchandise Marks Act, 1958, the Copyrights Act, 1957, etc.) stipulations;
  (e) Labour Laws (regarding employment of women, children, payment of wages, providing welfare amenities, keeping healthy industrial relations, etc.);
  (f) Environmental protection (the Environment Protection Act 1986),
  (g) Pollution control requirements; (h) Consumer protection measures, etc.
  
  
• Winding up operations: Even when the company decides to get out of a venture/business, the rules of the game need to be followed scrupulously (whether in offering a golden handshake to employees or asking all the employees to quit in one go).

After the institutionalization of strategy in the above manner, action plans could be formulated. These are functional-level strategies undertaken at the departmental level and usually deal with operational aspects of a strategy. The action plans, however, must try to translate the overall strategic plan in letter and spirit without any deviations.

Issues like who will do what, what kind of support is required at various stages, what kind of privatize have to be fixed while implementing action plans, how a particular action plan contributes to the broad objectives of the strategy, etc. must also be carefully looked into. Once the action plans are ready, the strategist must resolve issues relating to the allocation of scarce resources over the entire organization.

Resource Allocation

While implementing strategies, the scarce resources of a firm (financial, physical, human, technological) need to be allocated carefully, according to a plan. In this regard, one can follow a top-down or a bottom-up approach. In a top-down, approach resources are allocated through a process of segregation down to the operating levels.

The Board of Directors, Managing Directors, and other members of top management typically decide the requirements of each subunit and distribute resources accordingly. In the bottom-up approach, resources are distributed after a process of aggregation from the operating level. A mix of these two may also find favor in fairly large, multi-plant organizations.

Means of Resource Allocation

There are several ways of allocating resources in a systematic way, namely:

• Strategic budget: Keeping the assumptions made before the formulation of a budget, divisional heads (SBUs) and functional managers focus their efforts on allocating funds, through an interactive exercise—taking the opinions of all those who matter most. The external influences and their likely impact and the internal capabilities of a firm are also kept in mind in this joint budgeting effort (hence, the name strategic budget).
  
  
• Capital budget: The primary purpose of a capital budget is to maximize the long-term profitability of a firm while deploying resources. Various techniques like internal rate of return, payback period, and net present value are used to find where a rupee invested would earn maximum returns.
  
  
• Performance budget: Here the basic purpose is to focus attention on the work to be carried out, services to be rendered rather than things to be spent for or acquired. It concentrates attention on the physical aspects of achievement. Here, there is not only a work plan but also a work plan in terms of work done. It takes a systems view of activities trying to associate the inputs of the expenditure with the output of accomplishment in terms of services, benefits, etc.
  
  
• Zero-based budget: The key element of ZBB is the future-objective orientation of past objectives. Instead of taking the last year’s budgets and adjusting them for finding out the future level of activity and preparation of budget there from, ZBB forces managers to review the current, ongoing objectives and operations. ZBB is, therefore, a type of budget that requires managers to re-justify past objectives, projects, and budgets and to set priorities for the future.
  
  
  The essential idea of the budget that differentiates ZBB from traditional budgeting is that it requires managers to justify their budget request in detail from scratch, without any reference to the level of previous appropriations. It is tantamount to a recalculation of all organizational activities to see which should be eliminated, funded at a reduced level, funded at the current level or increased finances must be provided.
  
  
  ZBB process runs into the following cardinal sequence of steps:
  
  
  • Decision package: Each discrete department activity and program is broken down into a decision package. The decision package summarises the scope of work, requirements, anticipated benefits, schedule, and expected consequences if the element is not performed, etc.
    
    
    Thus, the decision package provides a running commentary of all the activities in a particular project.
    
    
  • Ranking: Each decision package is ranked against packages for other proposed projects or activities, and the projects that are running (operating) currently. Decision packages are ranked according to their benefits to the total organization during the budget period.
    
    
  • Resource allocation: The above ranking leads to an ‘organization-wide’ list of prioritized and priced-out decision packages built from zero-base or ground up. Resources are then allocated to the packages according to the preferential rank in the organization.
    
    When properly executed, zero-base budgeting provides an opportunity for the managers to carefully examine, evaluate and prioritize each organizational activity and see whether modification, continuance, or termination is feasible.

Problems in Resource Allocation

Resource allocation, in actual practice, is not an easy job. Strategists should prioritize tasks that require maximum attention initially taking political relations, overall objections, external influences, etc., into account. Each department may fight for garnering a maximum share of the scarce resources that are available-leading to destructive conflict and bitter personality clashes.

External influences such as government regulations, shareholder preferences for higher dividends, and credit restrictions imposed by financial institutions also affect the process of resource allocation considerably. To avoid trouble at a later stage, strategists need to prioritize everything and decide on budgetary allocations in the initial stages.

Many ‘budget battles’ could be avoided if targets, resource sharing, prioritization, and midway revisions, etc., are decided in an atmosphere of close cooperation and participation, especially at departmental and divisional levels. Allocating resources to specific divisions and departments alone does not mean successful strategy implementation.

There are other troublesome issues to be looked into more closely. After resolving the knotty issues concerning resource allocation, the strategists should look for a suitable organizational structure for implementing strategies.