The first concern in the implementation of strategy is to operationalize that strategy in the organization after establishing the strategy in corporate and business level. Annual objectives, functional strategies, policies, resources allocation, and action plans are the important tools to operationalize the strategy. All such tools should be utilized in comprehensive and consistent way.
Following steps are involved operationalizing the strategy;
⦁ Setting annual objectives,
⦁ Formulation of functional strategies,
⦁ Formulation of business policies,
⦁ Resources allocation and action plans.
⦁ Setting annual objectives
Setting the annual objectives guide implementation by translating long-term objectives into current targets. Annual objectives specify the target by determining how it will work or is working on the functional areas. Annual objectives are specific, measurable statements of what an organization's subunit is expected to achieve in contributing to the accomplishment of the corporate strategy.
Setting the annual objectives play following important role in operationalizing the strategy;
⦁ Define the organization's relationship with its environment.
⦁ Help the organization to pursue its vision and mission.
⦁ Provide the basis for strategic decision making.
⦁ Provide the standards for performance appraisal, coordination and control.
⦁ Help the organization to determine functional priority.
⦁ Formulation of functional strategies
Functional strategy refers to the set of strategic initiatives taken in particular department of a business. A functional strategy is the short-term game plan for a major functional area within a company. So, a company needs a functional strategy for every major functional activity. It provides guidance to functional managers as plans, or tactics, for carrying out the business strategy.
Functional strategies must be developed in the following areas:
⦁ Research &Development, and
⦁ Human Resource.
The primary role of a functional strategy is to support the company's overall business strategy. Functional strategies help in implementation of grand strategy by organizing and activating specific subunits of the company to pursue the business strategy in daily activities.
⦁ Formulation of business policies
Policy refers "to specific guidelines, methods, procedures, rules, forms, and administrative practices established to support and encourage work towards stated goals. Various policies in an organization are designed to guide the behavior of managers in relation to the pursuit and achievement of strategies and objectives. Policies exist for any functional areas undertaken by the organization.
Koontz and O'Donnell suggest that the following principles determine the potential effectiveness of policies in relation to strategy implementation:
⦁ Policies should reflect objectives: The existence of a policy can only be justified if it leads to the achievement of the organization's objectives.
⦁ Policies should be consistent: Policies which conflict with each other should be avoided.
⦁ Policies should be flexible: In general policies should neither be ignored nor departed from indiscriminately. The extent, to which a policy is mandatory, as opposed to advisory, should be clear.
⦁ Policies should be communicated, taught and understood: It is important to ensure that employees understand the existence and meaning of policies, and appreciate why they exist.
⦁ Policies should be controlled: Stated policies can be assessed and controlled as part of any formal planning system and strategic review.
Business policies help for operationalizing the strategies in following ways:
⦁ Policy institutionalizes strategy-supportive practices and operating procedures throughout the organization.
⦁ Policy reduces uncertainty in repetitive and day-to-day activities in the direction of efficient strategy execution.
⦁ Policy limits independent action and discretionary decision and behavior. Procedures establish steps how things are to be handled.
⦁ Policy helps to align actions and behaviors with strategy. This minimizes zigzag decisions and conflicting practices and establishes consistent patterns of action in terms of how the organization is attempting to make the strategy work.
⦁ Policy helps to shape the character of the working environment and to translate the corporate philosophy into how things are done, how people are treated, and what corporate beliefs and attitudes mean in terms of everyday activities.
⦁ Policy helps to establish a fit between corporate culture and strategy.
⦁ Resources allocation and action plans
Resource allocation and action plans are the crucial factors for strategy execution. Accomplishment of an organization's objectives depends on real value of resource allocation and the action plans. However, following factors may prohibit effective resource allocation;
⦁ an over-protection of resources,
⦁ too great emphasis on short-run financial criteria,
⦁ organizational politics,
⦁ vague strategy targets,
⦁ a reluctance to take risks, and
⦁ a lack of sufficient knowledge.
Strategists have the authority to decide which divisions, departments, or SBUs are to receive how much money, which facilities, and which executives. The primary tool for making resource allocations is the budget process.
Action plans must be developed to make strategy work as per strategic direction. There must be close interaction between the strategic and operational planning systems.