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What can managers do to institutionalize a strategy change?

by Dan Power

Once managers have agreed on a new or altered strategy, then it is necessary to implement the strategy and establish new norms and conventions to support the strategy and its implementation. A variety of mechanisms help institutionalize a revised strategy including: 1) Aligning the organization structure with the strategy; 2) Choosing leaders who support strategy for important roles; 3) Developing supportive cultural stories, myths and attitudes; 4) Revising and enforcing policies; and 5) Linking rewards to desired actions.

Structure is the basic way a firm’s different activities are organized. There are a number of structural patterns including: 1) functional structure; 2) divisional structure; 3) Strategic business unit (SBU) structure; and 4) matrix structure. Management Theorist Peter Drucker advises “The simplest organization structure that will do the job is the best one. What makes an organization structure “good” are the problems it does not create. The simpler the structure, the less that can go wrong…Above all, the architect of (an) organization needs to keep in mind the purpose of the structure he is designing.”

Leadership is a process where one person exerts social influence over the members of a group. Strategy change needs effective leadership to be successful. A leader is a person with power over others who exercises this power for the purpose of influencing their behavior. The Board of Directors and/or senior managers may need to make leadership changes to implement a new or revised strategy. Leadership is essential at all levels in an organization. At lower levels, leadership may be the ability to organize and carry out a complex project, involving and motivating others, and getting the work done well and on time. At higher levels, ability to conceptualize what needs to be done, to articulate the needs persuasively, and to shape a process of deliberation that includes all the necessary constituencies.

Organizational culture refers to the set of important assumption, often unstated, that members of an organization share in common. Corporate culture includes the assumptions, values, traditions, and behaviors that prescribe the actions of individuals within a firm. Culture is often entrenched and hard to change and it can inhibit needed strategic change. Adapting to the environment with strategic change often forces changes in organizational culture.

Some approaches to changing organizational culture include: 1) Encourage key themes or dominant values; 2) Encourage retelling of stories and legends about core values; 3) Institutionalize practices that systematically reinforce desired beliefs and values; and 4) Adapt common cultural themes like customer service in ways meaningful to the organizational members.

Policies are formal statements of a company’s practices, procedures, or intentions. A policy is a broad, precedent-setting decisions that guides or substitutes for repetitive or time-sensitive managerial decision-making. An effective policy guides managerial decision-making and actions to ensure compliance with the corporate strategy.

Policies guide and control decision making. A policy helps establish indirect control over independent action by managers and staff. Good policies promote uniform handling of similar activities and ensure quicker decisions. Policies reduce uncertainty in repetitive and day-to-day decision-making. In general, polices and rules institutionalize basic aspects of organizational behavior and reduce resistance to corporate strategies. It is important that managers thing through the consequences of changing long established policies.

Reward systems monitor individual and group performance and provide positive and negative rewards linked to short-and long-run performance. It is important to link rewards tightly to the strategic plan and revised strategy. Rewards and incentives must be linked to an individual’s job and the outcomes the individual can personally effect. It is especially important that the reward system is fair, accurate, and informative.

Organizational change is complex and may involve alterations in an organization's purpose, culture, structure, and processes in response to identified or anticipated changes in the environment. Institutionalizing a strategy change is about identifying and embedding in an organization changes that will help ensure the long-term survival of the organization.

References

National Defense University, "Strategic Leadership and Decision Making," at URL http://www.au.af.mil/au/awc/awcgate/ndu/strat-ldr-dm/pt4ch19.html



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