Business Policy and Strategic Management 1 (439 - 510) (4!4!2011)

8/7/2019 Business Policy and Strategic Management 1 (439 - 510) (4!4!2011)

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Behavioural Implementation


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O verview

Role of various stakeholders in strategicmanagementContribution of strategic management tocorporate governanceReview task, styles and roles of strategic leadersConstituents of corporate culture and its impacton corporate lifeRelationship of corporate culture and strategy of an organisationUnderstanding of how corporate politics and useof power can be made use of in strategicmanagement of an organisationSocial responsibility and social responsiveness.


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Stakeholder

Individuals and groups who can affect andare affected by ,the strategic outcomesachieved and who have enforceable claimson a firms performance


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Strategic Behaviour

B ehaviour of strategist (individual as well asin groups) crucial for guiding the organisation.Individuals and groups implement strategyand drive an organisation to its objectivesLeadership style, personal ethics and politicalbehaviour as well as social responsibility areimportant aspects.Stakeholders affect, are affected and supportthe effective strategic management as alsowithhold participation


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Stakeholders and Strategic Management

Stakeholders relationship ManagementStakeholders Analysis

Enagagement Tactics for stakeholders


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External Stakeholders

CustomersSuppliers

Govt.Regulators

B ank CreditorsTrade Unions

EmployersUnionMass Media

NGOs ActivitiesLocal Communities

General Public

Organisation

InternalStakeholders

ShareholdersEmployeesManagersDirectors

Contributors/Support

Meet ExpectationsHonour claims

ORGAN ISAT ION STAKE HOLDER RELAT IONSH IP


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R elationship Management

Two way mutually supporting and contributoryrelationship to meet diverse expectations andclaims (monetary and non monetary)

All stakeholders not equally important Also interests expectations and claims vary over timeStakeholders analysis to determine the relativeimportance of stakeholders so that appropriate totake appropriate engagement tactics to managestakeholder- organisation relationship.


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Stakeholders Analysis

IdentifyIdentify expectations, concerns and interests

Identify claims they can make on theorganisationIdentify who are most important for organisationIdentify strategic challenges involved inmanaging the stakeholders relationship.


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Stake Holder Engagement

Direct and indirect support in organisationalaffairs, participation in strategy formulation,implementation and evaluation.If organisation doing well, challenge islessenedIf average returns, capability and flexibilityreduced aim to satisfy each stakeholder minimally or prioritise and engage moreimportant ones.If not doing well attempt to minimise losses


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Engagement Tactics

Specific departments and personnel - corporatecommunications or PR.Range of activities to disseminate information website, newsletters, posters, public events,exhibitions, seminars, conferencesUse Relationship management software for complexities and taking decisions e.g W IPRO doctor patient relationship software for health careorganisations.Open ,honest and transparent communication,building trust and cooperation essential for success

no tall claims on PR exercise or websites


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R ole of Top Management

Case of Dhirubhai Ambani and involvement of small shareholders addressing in open stadia repsof 1.8 million shareholders resulted in capability toraise funds at low costNGOs stakeholder management is crucial asfunding and grants from external sources are crucialand hence relationship with donors based on trustand transparency.

Generating trust by open communications,participation and feed back as also effective projectimplementation


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Corporate Governance

Deals with the management of relationshipsbetween the Directors, managers, and other stakeholders of the organisation.

Two different perspectives Agency andStewardship TheoryCorporate governance is related to allaspects of strategic management includingdetermination of strategic intent, strategyformulation, strategy implementation andstrategy evaluation


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Agency Theory

Agency Theory delegating decision makingauthority by the Principals ( Investors /owners/shareholders) to another (agent) is called Agency

Theory. Owners provide risk capital to agents anddelegate the authority to manage that capital.If managers do not act in the interest of owners,conflict of interest can arise called agency problem.

Assumes managers to be self centered andirresponsible to act against the interest of owners


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Stewardship Theory

Takes a positive view of managers,considering them as stewards whoseinterests are aligned with that of the owners

Managers identity with their organisation andderive satisfaction from behaviours thatsupport the organisational interests rather than their ownIn contrast to agency theory, proposescorporate governance mechanisms thatsupport and empower managers behaviours


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Involves a set of relationships amongst thecompanys management, its board of directors ,shareholders and other stakeholders


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These relationships, involving various rolesand incentives, provide the structure throughwhich the objectives of the company are setand the means of attaining those objectivesand monitoring performance are determined.


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The extent to which companies are run in anopen and honest manner


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K ey Aspects

Transparency of corporate structures andoperations

Accountability of managers and boards toshareholdersCorporate responsibility towards employees,creditors, suppliers and local communities


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Measuring

ICRA ( Investment Information and CreditRating Agency ) provides ratings oncorporate governance of Indian CompaniesB SE is planning to introduce a corporategovernance index


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R atings

Shareholding structuresExecutive management processes

Stakeholder relationshipTransparencyDisclosures

Financial Discipline


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Mechanisms for Good Corporate

GovernanceEffective board of directorsFostering transparency through disclosure of financial and operational informationFraming a code of governance andcommitting the organisation to itsimplementation

Designing sound internal control systems


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Corporate Governance Best Practices

Instituting effective auditing and evaluationsystems within organisationsProper risk management proceduresEncouraging whistle blowing policies withinorganisations.Designing fair compensations policies for managers.


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Steps to Improve

Rahul B ajaj Committee 1997Kumarmanagalam Committee 1999Naresh Chandra Committee on Corporate Audit andGovernance (2002)Narayan Murthy SE BI Committee on CorporateGovernanceNational Foundation for Corporate Governance(NFCG) set up Min of Company Affairs inpartnership with C II and ICS I and ICA I


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O ther Issues

Not only a corporate matter Other stakeholder have a role to play

Govt Policies and procedures for ethicalbahaviour Shareholders conscious of rights andresponsibilitiesMass media report issues of general interestto the public.


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Corporate Governance and Strategy

Clear link to stakeholder and strategicmanagementLink between owners/stakeholders, directorson the board and the managersB ehaviour of the three towards each othersas well as to the affairs of the organisation.


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Linkages Strategy and Corporate

GovernanceStrategic Intent There should be mutualunderstanding and compromise on theVision, mission (aspiration and purpose) ,business definition, biz model and objectivesbetween the stakeholders, directors andmanagers.

Differing perception of the future can lead todifficulties


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Corporate Governance and Strategy

FormulationDecision on specific corporate and businessstrategies is responsibility of topmanagement. Reconcile conflicting goalsFollow guidance of B oard of Directors as wellas keep strategies and objectives in mind.Strategies should reflect shareholders desire

for higher returns whereas managers wouldlike greater say in decision making, jobsatisfaction, stable employment environment.


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Strategy Implementation and Corporate

GovernanceUnder the control of managersB oard cannot directly intervene inimplementationLevel of success determined by successfulimplementationThus there can be deviation inimplementation from strategy formulationCorporate Governance has to havemechanism to ensure this does not occur.


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Strategy Evaluation and Corporate

GovernanceShareholders and directors have direct rolein evaluating effectivenessUse of operational and strategic controlsOrganisation objectives are achieved ismeasured by results

Annual performance reporting helpsshareholders evaluate performanceB oard of Directors continually evaluate,monitor and review performance.


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R ole of Board of Directors

Ultimate legal authority accountable to all Appointment owners- shareholders,controlling agencies, government, holdingcompany or parent companyProvide guidance and directives for managersExercise authority as per memorandum andarticles of association of the organisation. Inaccordance with Companies Act 1956 andfollow the policies of the organisation


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Committees

Can appoint committees and delegateauthority to take decisions audit,renumeration,nomination,grievance - shareholders and investors,ethics and compliance andrisk management


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Boards R ole

Determine Cos purpose and ethicsDecide the direction and strategy

PlanMonitor and control managers and the CEOReport and make recommendations toshareholdersRole vary with nature of co ownership- public,private, family managed ,family owned


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Major tasks

DirectionTechnical collaborations

New product developmentSenior management appointmentsReview and screen executive decisions in thelight of the environmental, business andorganisational implicationsLink between environment and organisation


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Strategic Leaders

Provide leadership to achieve objectivesRun the strategic management process atcorporate (CEOs,MDs, EDs,PresidentCOO,CFOs,C IO)business(GMs,VPs)functional(mktg Mgr,Operational manager)and operational levels(deputy

manager/Assistant manager)Leadership of Organisation rather thanleadership in organisation


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Tasks

Determining strategic DirectionEffectively managing the OrganisationalResource PortfolioSustaining an Effective OrganisationalCultureEmphasising Ethical practicesEstablishing B alanced OrganisationalControls


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Style

Consistent with competencies requiredCharacteristics of leader will decide the wayto make change and the type of changePersonality characteristics of leaders linkedto business outcomes innovativeness leadsto differentiation

Personality and background causeimplementation actions


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Managing Change

Match type of change to strategy larger change chose unilateral and small change participative implementation.Strategic changes are transformational (big)

redesign organisational structure,redesigning systems and processes and

changing culture Use top down method tostart and build support by participative styles.


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Style

Indian leadership more nurturant-taskoriented (concern for task and for subordinates) or entreprenuerial style thanparticipativeContingency approach dictated byenvironment

Cultural /national contextConsultative with limited participation


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K ey Provisions

Companies Act 1956Securities Contract (Regulations) Act, 1956Securities Contracts (Regulation) Amendment Act2007.Securities and Exchange B oard of India Act 1992Depositories Act, 1996.Listing Agreement with stock exchanges rules,processes and disclosures for companies to remainlisted Clause 49 (corporate governance practicesthat listed co must follow)


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Board of Directors

Highest body in an organisation responsiblefor corporate governance.Directors play a strategic role of directing,guiding, approving and reviewing strategicdecisions made by be the strategic leaders of an organisation


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R ole of CEO

Chief architect of organisation - missionvision goals and objectives, purpose,strategist or planner, implementationOrganisation leader, organiser, organisationbuilder Chief Administrator,implementor or

coordinator Communicator of organisationalpurpose,motivator,personal leader or mentor


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R ole of CEO

Time managementPersonal qualities and style

Communication stylesDemographic characteristicsE I

Managerial valuesManagerial stylesEnvironment in which operating


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Strategic leaders

Responsible for the strategic management of anorgansation.Operate at corporate, business, functional andoperational levels

Task include strategic direction, effectivelymanaging the organisational resources portfolio,sustaining an effective organisational culture,employing ethical practices and establishingbalanced organisational controls.

CEOs ,senior managers, business level executivesand operational managers play different roles instrategic management


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R oles

Senior Managers -B elow Chief executive are functional or profit centreheads involved in strategic management.Sometimes can act as Directors for their function onrotational basisServe on top level committeesProject management modernisation, technologyup gradation, plan implementation

AssistB

oard and CEO in formulation,implementation and evaluation of strategyMade more effective through committees, taskforces, work groups and think tanks


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Functional level and O perational LevelManagers

Are the primary method of evolving departmentaland operational plans and implement the decisionstaken at the corporate and business levels.

Implement functional and operational strategiesHelp in idea formulation, development of strategicalternatives, refinement of business functional anddevelopment plans, target setting at departmental

levels. Are the reservoirs of talent and expertise.


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Developing Strategic leaders

Choice of Future Strategists Govt. (Central Services) /NonGovt. (Tata Administrative Service). Selection by strategicleaders from subordinates informal and giving responsibilities.

Also done by systematic career planning. Alternatives are Hirelaterally, succession planning and combination approaches of thetwo.Present challenges,exposure to quality thinking,scope for intellectual development andprovide empowermentLeadership training instituteExecutive Assistant to CEO

Courses in Mgt Institute like IIMsSuccession Planning contingency plans to replace top leaders


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Strategy and Style

Chosen strategy has a significant impact onthe leadership style and strategists have toadopt their style to suit the requirements of aparticular strategy.Development of strategists is responsibility of top management and they do it through

exercising a choice of strategists and their career planning and development andsuccession planning.


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Corporate Culture

Composed of beliefs (assumptions of reality)and values (assumptions about ideals) thatare desirable that the members of anorganisation share in common.Impact corporate strategy implementationand culture should be strategy supportive.

B y relating strategy to culture a strategistcan evolve a meaningful approach to creatinga good strategy culture fitOpposes or supports change


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Impact

Culture affects not only the way managers behavewithin an organisation but also the decisions theymake about the organisations relationship with its

environment and its strategy.Facilitates communication, decision making andcontrol as well as create cooperation andcommitment

Strong -Explicit set of principles and valuescommunicated to employees which should beshared widely.


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W eak Culture

Weakness If sub cultures exist within, or fewvalues and behavioural norms are shared andtraditions are rare.

Low sense of commitment, loyalty and identityPoliticised organisational environmentHostility to changePromoting bureaucracy vs creativity andentrepreneurshipUnwillingness to look outside the organisation for best practices.


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Strong Culture - R easons

Founder or influential leader who establishedvalues.Sincere and dedicated commitment tooperate the business as per values.Genuine concern for the organisationsstakeholders.


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Behaviour and Attitude

B ehaviour the way one conducts oneself,way one reacts in a specified way, treatmentof others, moral conduct. Theory is thatbehaviour is determined by conditioningrather than by thought or feelings. Attitude- a settled opinion or way of thinking

and the behaviour reflecting this.


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Composition of Corporate Culture

Shared thingsShared sayingsShared actionsShared feelings


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Strategy Culture relationship

Gives capability and acts as a source of sustainable competitive advantageStrategic options can be limited by cultureDefines the boundary of the organisationfacilitating individual interactionLimiting the scope of information processing

to appropriate levels


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Strategy Implementation - Culture

Widely shared relationships and strongly heldvalues enable managers to predict employeereactions to certain strategic alternatives sounintended consequences can be minimised.Managerial behaviour can facilitate or obstruct the smooth implementation of

strategy.Creation of a strategy supportive culture isthe role of strategic leadership


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Strategy Supportive Culture Fit

Ignore corporate culture not possible tochange it

Adapt strategy implementation to suit

corporate culture structure systemsprocesses adaptedChange corporate culture to suit the strategicrequirements manage cultural transitions byassessing risks and removing roadblocksChange strategy to fit the corporate culture while formulating strategy itself


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Power and Politics

Use of politics and power in a positive sense ishelpful in strategy implementation.Strategists should understand corporate politics andhow power should be used for facilitating strategyimplementation.

Affect a number of elements in the strategicmanagement process.Strategy implementation requires consensusbuilding ,managing coalitions and creatingcommitment.Needs conflict resolution and balancing of interests.


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Corporate Politics

Carrying out of activities not prescribed by policiesfor the purpose of influencing the distribution of advantages within the organisation

Power derived by managers within an organisationfrom reward/ coercive, legitimate/referant/expertpower Nature and structure lead to conflicts, coalitions,

drives and ambitions among people.Jockeying for power due to pyramid structure


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Corporate Politics

Negative domination, manipulation andsubjugation. Self serving , deceptive anddishonest for achieving personal or groupinterests leading to conflict and disharmony


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Behavioural Implementation

Personal values and business ethics seek toprevent an indiscriminate use of power politics within organisation.

Moral component that is often realised but itis found difficult to operationalise. All managerial and strategic decisions areultimately subjective so purity of mind isimportant so that subjectivity is not allowedto harm the strategic interests if theorganisation.


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Model of Managerial Effectiveness(Psycho- Philosophical Thoughts )

Concept of self and realityDisidentificationTheory of GunasTheory of SamskarasDoctrine of KarmaTheory and method of workGiving model of motivation


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Values and Ethics- Indian Thoughts

Concept of man embrace spiritual dimensionbeyond the physical ,social and economic dimensionCreative energies are derived for Supreme creative

IntelligenceManagerial decision making requires interplay of both analytic and holistic facultiesFinal resolution of managerial conflicts lies in the de

egoistaion of the self Key to cooperation and team work lies in realisingthat the same atman dwells in all


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Values and Ethics Indian Thought

Quality of managerial decision making and skills canbe improved through an understanding andinternalisation of the law of karmaMotivational strategies need to be based on the

giving model rather than the needing model of man Ability for developing effective leadership stylesrequires and understanding of te three qualities of man - satwa(self righteousness), rajas(selfishness0and tamas (laziness)

All managerial decisions are subjective in theultimate analysis and the effectiveness of suchdecsions depends critically on the purity of mind of the decsion maker


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Business Policy and Strategic Management 1 (439 - 510) (4!4!2011)

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