Role of CEO

CEO is the catalyst in strategic management. This individual is most

closely identified with and ultimately accountable for a strategy’s
success. In most firms, particularly larger ones, CEO’s spend upto 80%
of their time developing and guiding strategy.
Major changes in strategy are often preceded or quickly
followed by a change in CEO : -

1. Provide executive leadership & strategic vision.

2. Manage the strategic planning process.
3. Articulating the strategic vision.
4. CEO presents a role model.
5. Communicating performance standards & implementing them.

Top Management Teams

1. Top management teams are comprised of the key managers who

are responsible for implementing the organization strategies.
2. A heterogeneous top management team with varied expertise and
knowledge can draw on multiple perspectives when evaluating
alternatives strategies & building consumers.
3. A top management team must also be able to function effectively
as a team in order to implement strategies.
A heterogeneous team makes this more difficult.

Effective Org. Leadership

1. Determine strategic direction.

2. Exploits & maintain core competencies.
3. Develops human capital.
4. Sustain an effective org. culture.
5. Emphasis ethical practices.

Developing an ethical org. culture

1. Establish specific goals describing the firm’s ethical standards.

2. Continuously revise and update the code of conduct, based on
inputs from stakeholders.
3. Disseminate a code conduct to all stakeholders to inform themof
the firm’s ethical standards/ practices.
4. Develop and implement methods/procedure to use in achieving the
firm’s ethical standards.
 5. Have explicit rewards to recognise acts of courage.
6. Create work environment in which all people are treated with
dignity.

Strategic responsibilities of top management

1. Managing the company : -

(a) Running the company as a whole rather than one segment.
(b) Guiding the company and overall control.

2. Setting competitive strategy.

3. Establishing major policy: -

(a) Calls for broad judgement
(b) All possible tradeoffs.
(c) Affecting the entire company.

4. Long range planning & timing.

5. Changing org’s structure : -

Reorganization as per the environment demands.
6. Selecting key personnel : -
Identifying & recruiting the key personnel. Success/failure of any strategy
depends on them.
7. Approving large expenditure & contracts.
8. Negotiating merger and major agreements.
9. Officially representing the company.
10. Approving annual budgets.
11. Coordinating & controlling.

Stages of strategic management

Strategic Analysis

Strategic Formulation

Strategic Implementation

Strategic Control
 Strategic control

Strategic
Surveillance

Premise Control

Special alert control

Implementation control

Strategic formulation Strategic Implementation

Time 1 Time 2 Time 3

1. Control is taking measure that synchronise outcomes as closely as

possible with plans.
2. Organization must have effective strategic controls to successfully
implement their strategies.
3. Tracking the strategy as it is being implemented and taking
proactive actions.
 Importance of strategic control

1. Checking performance against expectations.

2. Achieving strategic efficiency.
3. Maintaining focus on targets and objectives.
4. Checking on activities i.e, schedules.
5. Fostering right direction.
6. Matching costs, revenue and cash flows against projection.
7. Insuring responsiveness to deviations.

Types of strategic control

Premise control (assumption itself) : -

- Basis for strategic prediction.
- Check systematically validity of premises.
- Environmental predictions.
- Industry predictions – Porter’s Force model.
- Change variables and their impact.
- Identification of key variables.
- Key strategic area for judgement.

Implementation control

 Implementing control is concerned with reviewing the strategy in

context of events with incremental step and actions.
 Monitoring strategic thrust. CSF (critical success factors in strategy
of the firm).
 Milestone review
Critical events, major resource allocation, time factors.

Special Alert factors

- Need to reconsider the firms basic strategy based on sudden &

unexpected event.
- Immediate & intense reassessment of company’s strategy &
current strategic situation.
- Synonymous with the Contingency Approach .e.g. 9/11 scenario.
Gulf war – energy crisis.
 Strategic surveillance

 Monitor a broad range of events inside and outside the company.

 Multiple information system.
 Reconsideration of the firms strategy based on a sudden and
unexpected event.
 Immediate and intensive reassessment of the company’s strategy
and its strategic situation.
 Companies develop contingency plans to over come crisis.

Operating control system

- Strategic control and operational control.

- Allocation & use of company’s resources.
- Guiding parameters for annual targets & objectives.
- Shorter time period focus.
- Past action control system.
- Set standards of performance .
- Identity deviation from standards.
- Initiate corrective action or adjustment.

Types of Operational control system

 Budget
 Schedules
 Key success factors.

- Budget
 Resource allocation plans.
 Revenue budgets.
 Capital budgets.

- Schedules
 Scheduling time.
 Scheduling sequence.

- Key success factors

 Scheduling time.
 Scheduling sequence.
 Monitoring performance and evaluating deviation
- Identification of key success factors.
- Setting the objectives.
- Setting the targets.
- Performance evaluation.
- Deviation of any – unacceptable, high , trigger point.
Analysis : internal / external.
Action : contingency plans.

Reward system, motivation execution & control

1. Execution key parameter is employee performance.

2. Motivation & reward system to act as input.
3. Positive factors increase & negative factors decrease
performance.
4. Negative factors – compensation, rewards, bonus, incentives.
5. Short term linked rewards – incentives.
6. Cumulative progress reward – career path & incentive.

Mechanism of reward system

 Measure progress towards strategic target separately from results

of established operation.
 Determine incentivesss separately for established operations and
for progress towards strategic targets.
 Devise a long term stock option equivalent to encourage revision
of strategy and entrepreneurial; risk taking.

Characteristics of effective rewards & incentive system

 Objective are clear and widely accepted .

 Rewards are clearly linked to both performance and desired
behaviour.
 Performance measure are clear.
 Feed back is prompt and unambiguous.
 The compensation system is perceived as both fair & equitable.
 The system is adaptable to meet changing circumstances.

Developing and Communicating concise policies

Policies are directives designed to guide the thinking decision, and action
of managers and their subordinates in implementing an org.’s strategy .
Policies provide guide lines for establishing and controlling on going
operation in a manner consistent with the firm’s strategic objective. Often
referred to as “Standard Operating Procedures” policies serve to
increase managerial effectiveness by standardising many routine decision
and controlling the discretion of managers and subordinates in
implementing operational strategies.
Logically policies should be derived from functional strategies
with the key purpose of aiding in strategy execution.

Purpose/Objective/Function of policies

 Policies establish indirect control by making a clear statement

about how things are to be done by limiting discretion. Policies in
effect control decision and the conduct of activities without
intervention by top management.
 Policies promote uniform handling of similar activities : this helps
reduce friction arising from favouritism, discrimination, and
desperate handling of common factors.
 Policies ensure quicker decision by standardising answer to
previously answered question that would other wise recur and be
pushed up the management hierarchy again and again.
 Policies reduce uncertainties in repetitive and day to day decision
making.
 Policies can counter act resistance or rejection of chosen strategies
by org. members.
 Policies offer a predetermined answer to routine problem.