2.2 The Implementation of Strategy in the form of Management Tactics .1 Management Tactics at Engen Refinery
2.2.2 Theory on the Implementation of Strategy
Robbins and Decenzo (2001) state that top management leadership, as well as a motivated group of middle- and lower-level managers are vital ingredients for
successful implementation of strategy as set out by senior management's specific plans or tactics.
Thompson and Strickland (2003) state:
"Executing strategy is an action-oriented, make-things-happen task that tests a manager's ability to direct organisational change, motivate people, develop core competencies, build valuable organisational capabilities, achieve continuous improvement in business processes, create a strategy supportive corporate culture, and meet or beat performance targets"
The general manager of Engen Refinery, Wayne Hartmann, shares a similar view. His philosophy on organisational strategy, and the implementation thereof, as recorded by the Corporate Research Foundation (Jones, 2004) is:
"Organisations aren't hardware; they're a diverse group of people who are perceptive. You have a good organisation only if employees are convinced that you are well intentioned as both a manager and as a human being ... My
management team is instrumental in developing and executing strategies.
Middle management looks after the day-to-day running of the plant. We've also shifted the organisation from one that was risk-averse to one in which everyone will look for opportunities ... People will always come first. .. the best way to compete is through our people. We have a culture that encourages innovation."
Indeed, Thompson and Strickland (2003) affirm that companies don't implement and execute strategy, but that people do. Effective communication from the organisation's
leadership is vital in order to overcome any doubt or disagreement amongst employees when tactics are being implemented. While every manager needs to play an active role in the process of executing the strategic plan in the form of tactics and tasks, all employees are necessary participants in achieving success. The organisational context within which a strategy is to be implemented is just as important as the approach to be used. This is why an understanding of psychological contracts within the organisation, may be a vital link towards successful implementation of management tactics.
Thompson and Strickland (2003) suggest that there are eight key managerial components of implementing strategy, as illustrated in Figure 2.2 (a).
Exercising the strategic leadership
needed to drive implementation
forward
Building a capable organisation
THE STRATEGY IMPLEMENTER'S ACTION AGENDA:
Allocating ample resources to strategy-critical
activities
Shaping the work environment and corporate culture to fit the strategy
• What to do now vs later
• What requires much time and personal attention
• What can be delegated to others
Establishing strategy- supportive
policies
Tying rewards and incentives to the achievement of key strategic targets
Installing information, communication and other operating systems
to enable staff to carry out strategic roles
Figure 2 The Eight Key Components of Implementing Strategy Source: Thompson and Strickland (2003)
Building a capable organisation involves:
Instituting best practices and pushing
for continuous improvement
• Staffing the organisation with a strong management team as well as competent and experienced employees
• Building core competencies and competitive capabilities
• Structuring the organisation and work effort in a manner conducive to successful strategy implementation.
Since this research focuses on the Engen Refinery, the concept of building a capable organisation will not be discussed at length since the current state of the Refinery will be taken as the base case for the study. However, should there be any evidence that
suggests that restructuring may be necessary to make strategy implementation successful, relevant recommendations will be made accordingly.
The allocation of sufficient resources to strategy-critical activities is certainly necessary in order for those activities to have a fair chance of being completed fairly. While this is fundamentally important, it will not be included in this study since it is not directly linked to psychological contracts.
The establishment of strategy-supportive policies is a logical step towards filtering the key elements of the strategy throughout the organisation. This is also true for the process of instituting best practices and pushing for continuous improvement. Staff also need tools such as information, communication and operating systems to help them carry out their strategic roles. These factors can be considered to be the organisational infrastructure required to facilitate the implementation of strategy, but is not directly linked to psychological contracts, and so will not be expanded upon in great detail, except to state that the psychological contracts of individuals may influence their awareness and usage of this infrastructure.
The last three elements illustrated in Figure 2.2 (a), have a more direct association with the concept and influence of psychological contracts. Tying rewards and incentives to the achievement of key strategic targets also influences work performance. Shaping the work environment to fit the strategy will influence and be influenced by psychological contracts. The success of exercising strategic leadership to drive implementation of tactics will be dependent to some extent on psychological contracts. The converse may also be true. The development of psychological contracts may be directly related to the manner in which strategic leadership is exercised in order to drive the implementation of strategic tactics.
Manning (2001) suggests that the key principles related to the implementation of strategy are:
1. Shared ideas lead to shared meaning. The more openly and honestly ideas are shared, the greater the level of trust will be, the more efforts will be aligned, and the
2. People value work that makes them feel valued. When they make strategy, they matter. And they own the results, so effective execution is more likely.
3. Strategic management is conversation. It informs, focuses attention and effort, triggers fresh insights, lights up the imagination, energises people, and inspires performance.
4. Strategic conversation provides a context for personal and group learning. Your message must be compelling, simple, clear, and believable, or you won't sell it. It must also be complex and challenging, or no one will buy it. And it must be repeated with relentless consistency.
These key principles hinge, to some extent, on the psychological contract. The main message is that two-way communication between management and employees is fundamental to the successful development and implementation of strategy. Manning (2001) also alludes to the need for customisation in how his concept of strategic conversation is conveyed to employees, depending on the subjectivity of individuals, and the response that is desired. This customised approach hints at the link between the implementation of strategy or tactics, which may be more generic in nature, and psychological contracts of employees, which are more subjective.
Understanding that people are different, and respond differently to different approaches, can make the difference between their acceptance or rejection of tactics or ideas. Manning (2001) suggests that the more customised the strategic messages are, both in terms of relevant content and appropriate method of communication, the more meaningful they will be to the recipients, and the greater the chance of employees responding in a desirable manner. Such customisation would not be possible without an appreciation for psychological contracts, and the
establishment of interactive relationships between the employer and employees.
Hrebiniak (2005) believes that strategy execution is the key to success, and suggests that there are several reasons why execution often fails. The first of these reasons is that execution of strategy is more difficult than developing the strategy. Organisational factors such as politics, inertia and resistance to change, as well as the fact that the process of execution is not clear or well understood, contribute to the difficulty of execution. The next reason is that managers are trained to plan but not to execute strategy. This follows from an analysis of the content of academic programmes for business management, which tend to focus on strategy formulation but only briefly mention the execution or implementation phase. As a result most managers do not have the integrative view of all disciplines which is required for successful execution of
strategy. Managers, who therefore have some knowledge about how to implement strategy successfully, usually gleaned from years of experience and failures, are very likely to have a competitive advantage over those who don't.
Another reason why strategy fails at the execution stage is that many top level managers believe that the implementation process is below them and is better left to lower-level employees. If management commitment and ownership of strategy stops at the development stage, then implementation can be expected to fail. Execution is an important responsibility for managers, and they should be involved in communicating tactics to the rest of the workforce, visibly showing their commitment and passion for its success and driving initiatives to enable that success.
The next reason suggested by Hrebiniak (2005) for failure, is that planning and execution are interdependent, and that the greater the interaction or overlap between the people involved and the two processes, the higher the probability of execution success. Understanding and
anticipating the potential problems that may be faced during the execution of strategy can help direct the process of formulation to ensure a more realistic and achievable plan. In addition, knowing and seeing the bigger picture of the long-term strategy can help focus the shorter-term execution steps more effectively. It is therefore important for managers to adopt a
"simultaneous view of planning and doing".
The fact that the execution of strategy typically takes longer than its formulation also adds to the difficulty of the process. The longer it takes, the more likely it will be that the original ideals and goals of the strategy are lost, due to a waning focus or changes in environmental conditions. In order to put the strategic goals into perspective, long-term needs must be
distilled into short-term objectives and controls set in place to provide feedback on progress. In addition, due to the dynamic nature of the business environment, the implementation process must have the flexibility to adapt to unforeseen changes. While this creates a challenge to managers, it is the continuous monitoring and adaptation of the execution process which facilitates its success. Psychological contracts in the organisation can influence this process directly, and understanding how relevant they are in ensuring that the feedback, monitoring and adaptation tasks are done accurately, may make the difference between success and failure.
Hrebiniak (2005) emphasises that strategy execution is a process and not a single action or decision:
"Execution is a process ... It is the result of a series of integrated decisions or actions over time. This is why sound execution confers competitive advantage. Firms will try to benchmark a successful execution strategy. However, if execution involves a series of internally consistent, integrated activities, activity systems, or processes, imitation will be extremely difficult, if not impossible"
Since strategy implementation is a long process, it demands attention to detail to make it work and attempts at quick solutions will fail. People involved in the process are the key to its success. According to Cascio (2001), people are in fact the only truly sustainable source of competitive advantage for a firm or nation over the long term.
The importance of people ties in with Hrebiniak's (2005) final reason for the difficulty of strategy execution, viz. that it involves more people than strategy formulation does. As a result, communication across the organisation is a challenge. Strategic messages are not always filtered down the organisation, and people often talk about hearing rumours or some new idea without any understanding of it having a strategic intent, linked to their jobs (Hrebiniak, 2005).
The interpretation of management tactics may also be more varied as it reaches different
people. Further, it is necessary to ensure that incentives throughout the organisation support the process of implementing strategy, in agreement with Thompson and Strickland (2003). Linking strategic targets to the day-to-day objectives of all staff is, however, a challenging task which is more complex with a larger number of people.
2.3 Achieving Optimum Work Performance