Lesson 1, Topic 1
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5.4 Key concepts in strategy implementation Copy

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Nik Shazana November 1, 2022

Annual Objectives

Establishing annual objectives is a decentralized activity that directly involves all managers in an organization. Active participation in establishing annual objectives can lead to acceptance and commitment. Annual objectives are essential for strategy implementation because they:

 (1) represent the basis for allocating resources

 (2) are a primary mechanism for evaluating managers

 (3) are the major instrument for  monitoring progress toward achieving long-term objectives

 (4) establish organizational, divisional, and departmental priorities

Considerable time and effort should be devoted to ensuring that annual objectives are well conceived, consistent with long-term objectives, and supportive of strategies to be implemented. The purpose of annual objectives can be summarized as follows:

  • Annual objectives serve as guidelinesfor action,
  • Directing and channelling efforts and activities of organization members.
  • They provide a source of legitimacy in an enterprise by justifying activities to stakeholders.
  • They serve as standards of performance.
  • They serve as an important source of employee motivation and identification.
  • They give incentives for managers and employees to perform. They provide a basis for organizational design

Clearly stated and communicated objectives are critical to success in all types and sizes of firms. Annual objectives, stated in terms of profitability, growth, and market share by business segment, geographic area, customer groups, and product, are common in organizations. Annual objectives should be measurable, consistent, reasonable, challenging, clear, communicated throughout the organization, characterized by an appropriate time dimension, and accompanied by commensurate or appropriate rewards and sanctions. Too often, objectives are stated in generalities, with little operational usefulness. Annual objectives, such as “to improve communication” or “to improve performance,” are not clear, specific, or measurable.

Objectives should state quantity, quality, cost, time and also be verifiable. Terms and phrases such as maximize, minimize, as soon as possible, and adequate should be avoided. Clear annual objectives do not guarantee successful strategy implementation, but they do increase the likelihood that personal and organizational aims can be accomplished. Overemphasis on achieving objectives can result in undesirable conduct, such as faking the numbers, distorting the records,and letting objectives become ends in themselves. Managers must be alert to these potential problems that are:

  • Policies

On a day-to-day basis, policies are needed to make a strategy work. Policies facilitate solving recurring problems and guide the implementation of strategy. Broadly defined, policy refers to specific guidelines, methods, procedures, rules, forms, and administrative practices established to support and encourage work toward stated goals. Policies are instruments for strategy implementation. Policies set boundaries, constraints, and limits on the kinds of administrative actions that can be taken to reward and sanction behaviour; they clarify what can and cannot be done in pursuit of an organization’s objectives. Policies also clarify what work is to be done and by whom. They promote delegation of decision making to appropriate managerial levels where various problems usually arise. Many organizations have a policy manual that serves to guide and direct behaviour such as:

  • Resource Allocation

Resource allocation is a central management activity that allows for strategy execution. In organizations that do not use a strategic-management approach to decision making, resource allocation is often based on political or personal factors. Strategic management enables resources to be allocated according to priorities established by annual objectives. Effective resource allocation does not guarantee successful strategy implementation because programs, personnel, controls, and commitment must breathe life into the resources provided. 

  • Managing Conflict

Interdependency of objectives and competition for limited resources often leads to conflict. Conflict can be defined as a disagreement between two or more parties on one or more issues. Establishing annual objectives can lead to conflict because individuals have different expectations and perceptions, schedules create pressure, personalities are incompatible, and misunderstandings between line managers and staff managers occurs.

Establishing objectives can lead to conflict because managers and strategists must make trade-offs, such as whether to emphasize short-term profits or long-term growth, profit margin or market share, market penetration or market development, growth or stability, high risk or low risk, and social responsiveness or profit maximization. Trade-offs is necessary because no firm has sufficient resources pursue all strategies to would benefit the firm. Approaches for managing and resolving conflict can be classified into three categories:

  • Avoidance includes such actions as ignoring the problem in hopes that the conflict will resolve itself or physically separating the conflicting individuals or groups. 
  • Diffusion can include playing down differences between conflicting parties while accentuating/highlighting similarities and common interests, compromising so that there is neither a clear winner nor loser, resorting to majority rule, appealing to a higher authority, or redesigning present positions.
  • Confrontation is exemplified by exchanging members of conflicting parties so that each can gain an appreciation of the other’s point of view or holding a meeting at which conflicting parties present their views and work through their differences.