chapter 8: strategy formulation and implementation

In many cases, implementing a new strategy requires making changes in
organizational structure, such as adding or changing positions, reorganizing
to teams, redesigning jobs, or shifting managers’ responsibility and accountability.
For example, a cereal manufacturing company that wanted to reduce
costs and improve efficiency to pursue a low-cost leadership strategy revised
task design by combining several packing positions into one job and crosstraining
employees to operate all of the packing line’s equipment. This
reduced the number of workers needed during peak times and avoided leaving
some workers idle during slow periods. The structural changes cut overall
plant costs and manufacturing expenses while significantly increasing the
factory’s productivity and yield, thus helping to implement the new strategy.
69 At Limited Inc., a chain of specialty stores including Express and
Victoria’s Secret, founder and chairman Leslie Wexner decided to shift to a
centralized organizational structure to implement a differentiation strategy.
Limited was losing its fashion direction and customer insight, with many different
stores pursuing their own goals and ideas. The new centralized structure,
which includes a “corporate brain trust” of executives who oversee
design, marketing, and distribution across the company’s nearly 5,000 stores,
has gotten the company refocused. 70
Information and Control Systems
Information and control systems include reward systems, pay incentives, budgets
for allocating resources, information technology systems, and the organization’s
rules, policies, and procedures. Changes in these systems represent
major tools for putting strategy into action. For example, managers can reassign
resources from research and development to marketing if a new strategy
requires increased advertising but no product innovations. Managers and
employees must also be rewarded for adhering to the new strategy and making
it a success. 71
At ConAgra, maker of Healthy Choice and Banquet brands, top executives
instituted top-down cost controls in the corporation’s operating units and developed
new systems for pooling resources to reduce purchasing, warehousing, and
transportation costs. To ensure that managers embraced the new strategy of
cooperation and efficiency, leaders tied 25 percent of their bonuses directly to
savings targets. Division heads saved $100 million in the first fiscal year. Top
leaders also made changes in information systems by introducing a computerized
network to track how much suppliers charge each ConAgra unit. 72
Human Resources
The organization’s human resources are its employees. The human resource
function recruits, selects, trains, transfers, promotes, and lays off employees
to achieve strategic goals. For example, training employees can help them
understand the purpose and importance of a new strategy or help them
develop the necessary specific skills and behaviors. Sometimes employees
may have to be let go and replaced. One newspaper shifted its strategy from
an evening to a morning paper to compete with a large newspaper from a
nearby city. The new strategy fostered resentment and resistance among
department heads. In order to implement it, 80 percent of the department
heads had to be let go because they refused to cooperate. New people were
recruited and placed in those positions, and the morning newspaper strategy
was a resounding success. 73
Strategy Implementation and Control 25