Chapter 7 - Implementing Strategies: Management,

Operations, and Human Resource Issues

Overview
Chapter 7 explains how to implement strategies in terms of effectively
managing organizational structure, resistance to change, organizational culture,
corporate wellness, employee and executive compensation, human resource issues,
and restructuring.

Learning Objectives
The Chapter 7 Learning Objectives as presented in the textbook are reiterated below:

1. Describe the transition from formulating to implementing strategies.

2. Discuss five reasons why annual objectives are essential for effective strategy
implementation.
3. Identify and discuss six reasons why policies are essential for effective strategy
implementation.
4. Explain the role of resource allocation and managing conflict in strategy
implementation.
5. Discuss the need to match a firm’s structure with its strategy.
6. Identify, diagram, and discuss seven different types of organizational structure.
7. Identify and discuss fifteen dos and don’ts in constructing organizational charts.
8. Discuss four strategic production/operations issues vital for successful strategy
implementation.
9. Discuss seven strategic human resource issues vital for successful strategy
implementation.

Teaching Tips
1. Chapter 7 starts IMPLEMENTATION, whereas Chapters 1-6 were formulation.
Compare and contrast implementation vs. formulation as done on page 208.

2. Be sure to go to the www.strategyclub.com website and show the author videos in

class as related to Chapter 7.

3. Chapter 7 focuses on management. Ask all management majors to raise their

hand and identify them as experts. Ask who among the management majors have a
concentration/emphasis/interest in Human Resource Management vs.
Operations/Supply Chain.
4. Go over the new Academic Research Capsule 7-1 that reveals a demise in the
COO position among organizations. The Capsules such as 7-1 throughout the 16th
edition were carefully selected and written to be relevant information and to help
bridge the gap between strategic-management theory and practice.

5. The most important part of this chapter is the organizational structure material,
because being well organized yields great competitive advantages for businesses as
it does for individuals. This material starts on page 213. So, make sure students
know the four basic types of structure, and how to diagram each type, as well as the
advantages and disadvantages of each type. In analyzing their own case company,
require students to turn in a “new and improved” organizational structure, as
compared to the “existing structure” provided in the case itself. For their own case
company, students should be on the lookout for a lack of diversity among the top
executives, and correct this problem, and correct any other potential problems
outlined under the “Dos and Don’ts” section of the chapter. Table 7-10 is really
important because it gives fifteen guidelines for developing an organizational chart.

6. The latter half of this chapter provides very important management information
related to implementing strategies. Ask students to be on the lookout when
researching their case company for strengths (to be capitalized upon) and
(weaknesses to be improved upon) in these areas covered, such as linking
performance and pay, organizational culture, diversity, animal welfare, and corporate
wellness.

7. Go over Table 7-15 and Table 7-16 that reveal the importance of and
effectiveness of women both in the corporate world and in politics around the world.
Women’s issues are a strategic issue for every business in the world and this book
better than any other strategic-management textbook showcases this issue. We love
Table 7-16 that provides a color personal picture of the female President or many
countries globally.

8. Go over the new section in this 16th edition titled “Use Caution in Hiring a
Rival’s Employees” on page 229.

9. Go over the new section in this 16th edition titled “Use Caution in Monitoring
Employees’ Social Media” on page 233.

10. Regarding the corporate wellness discussion that begins on page 233, let me
share a personal note with you, that we (Fred and Forest) try hard every day to do
exactly what Table 7-18 says to do, and in our opinion, this may be the most
important page in the book for the well being of your students. Hopefully, students
will personally buy into a healthy lifestyle because the results can be miraculously
wonderful. And, corporations desire a healthy workforce, so having a healthy
lifestyle will enhance their career development. Having a healthy workforce can
yield great competitive advantages for firms and that is why wellness programs are
gaining more and more popularity.

11. At the end of Chapter 7, direct student attention to the “Implications for
Strategists” and “Implications for Students” sections because these provide
important information as student teams prepare and ultimately deliver their oral case
analysis presentation later in the course.

12. Regarding the end-of-chapter review questions, consider assigning them all one
day in class giving each student a question or two, and letting them tell the class the
answer, with you commenting on their answers. We have found this to be a fun day
in class and it goes pretty quickly.

13. Several of the end-of-chapter Assurance of Learning Exercises can be used as

excellent homework or classwork assignments to be completed as an individual or as
a group of students. Several exercises focus on the Hershey Company Cohesion
Case, and several focus on your college/university. Many professors usually select
one from each venue.

Answers to End-of-Chapter 7 Review Questions

7-1. What policy do you recommend for companies regarding employees
spending time on their personal Facebook and other social media accounts?
Could your policy be enforced? How? Why?

Answer: We discourage employees from engaging in social media activity while at

work. In order to protect the company from intentional or unintentional slanderous
communication by employees using social media, we reserve the right to randomly
monitor employees’ social media activity.

7-2. What are some advantages and disadvantages of Nucor’s organizational

structure as discussed under “The Functional Structure” heading?

Answer: Most large companies have abandoned the functional structure in favor of
decentralization and improved accountability. However, a large company that still
operates from a functional type organizational design is Nucor. Headquartered in
Charlotte, North Carolina, Nucor’s executive management team consists of eight,
white, male persons (lack of diversity is not good). A large producer of steel
products, Nucor has no apparent division heads, and John Ferriola is both CEO and
Chairman of the Board (holding those two titles is not good). Table 7-7 provides a
list of the advantages and disadvantages of a functional organizational structure.
7-3. What do you like and dislike about the Crocs’ organizational chart
illustrated in the chapter, in terms of guidelines and dos and don’ts presented in
the chapter.

Answer: The CEO should not also have the title President. There are no females
among the top executives shown in the chart. The regional divisional head persons
should have the title President. The company should consider Australia and Africa,
and if so, then there should be divisional Presidents responsible for those regions as
well.

7-4. List five important benefits of a company or organization having a diverse

workforce.

Answer: Six benefits of having a diverse workforce, listed in the chapter, are as
follows:

1. Women and minorities have different insights, opinions, and perspectives that
should be considered.

2. A diverse workforce portrays a firm committed to non-discrimination.

3. A workforce that mirrors a customer base can help attract customers, build
customer loyalty, and design/offer products/services that meet customer needs/wants.

4. A diverse workforce helps protect the firm against discrimination lawsuits.

5. Women and minorities represent a huge additional pool of qualified applicants.

6. A diverse workforce strengthens a firm’s social responsibility and ethical position.

7-5. Given the list of female Fortune 500 CEOs and the list of 25 countries with
female Presidents, Chancellors, or Prime Ministers, is there any reason why
women cannot perform equally or better than men as top-level strategists in
companies? Discuss.

Answer: There is no valid reason why women cannot perform equally or better than
men as top-level strategists.

7-6. Discuss the “Dos and Don’ts of Poaching Workers” from rival firms.

Answer: A recent article titled “Dos and Don’ts of Poaching Workers” in Investor’s
Business Daily gives guidelines to consider before hiring a rival firm’s employees. 1
The practice of hiring employees from rival firms has a long tradition, but
increasingly in our lawsuit-happy environment, firms must consider whether that
person(s) had access to the “secret sauce formula, customer list, programming
algorithm, or any proprietary or confidential information” of the rival firm. If the
person has that information and joins your firm, lawsuits could follow that hiring,
especially if the person was under contract at the rival firm or had signed a “non-
compete agreement.” The article says to help safeguard the firm from this potential
problem, a “well written employee handbook” addressing the issue is necessary.
The article talks about Hewlett-Packard (HP) recently hiring an IBM general
manager, and IBM suing HP over the hiring, and in that case losing, but this type of
legal action is becoming more commonplace.

1 Sheila Riley, “The Dos and Don’ts of Poaching Workers,” Investor’s Business
Daily, March 31, 2014, A10.

According to Wayne Perrett, human resource manager for ComAp in Roscoe,

Illinois, “a company does not want to become known as one that “steals” employees
from competitors; that is bad for ethics and bad for business.” Thus, it is not illegal
to interview and hire employees from rival firms, and it has been done for centuries,
but increasingly this is becoming a strategic issue to be managed, to avoid litigation.

7-7. Discuss recent trends and facts regarding corporate wellness programs in
the USA.

Answer: Corporate wellness programs have proliferated in recent years due in part
to the Affordable Care Act, which increased the maximum incentives and penalties
employers may use to encourage employee well-being. Most companies therefore
now have both “carrots,” such as giving employee discounts on insurance premiums
or even extra cash, and “sticks,” such as imposing surcharges on premiums for those
who do not make progress toward getting healthy. For example, the state of
Maryland installed penalties up to $450 per person for 2017 on any employee who
fails to undergo certain screenings or treatment plans. Similarly at CVS Health,
employees pay an extra $600 if they do not comply with certain health policies.
Some employers, however, face lawsuits for violating the Americans with
Disabilities Act that forbids employers from requiring medical exams and making
disability-related inquiries. At Caesars, employees may reduce their insurance
premiums by $40 per paycheck if they participate in the firm’s wellness program,
and additionally can obtain a $250 annual bonus if they improve their healthiness
over the year. Companies are increasingly instituting wellness programs to curtail
growing health-care costs.

7-8. What was the impact of the Affordable Care Act on corporate wellness
programs?

Answer: Corporate wellness programs have proliferated in recent years due in part
to the Affordable Care Act, which increased the maximum incentives and penalties
employers may use to encourage employee well-being. Most companies therefore
now have both “carrots,” such as giving employee discounts on insurance premiums
or even extra cash, and “sticks,” such as imposing surcharges on premiums for those
who do not make progress toward getting healthy. For example, the state of
Maryland installed penalties up to $450 per person for 2017 on any employee who
fails to undergo certain screenings or treatment plans.
7-9. Should companies monitor employees’ social media? Why or why not? If
yes, how?

Answer: There are numerous pros and cons of this practice. However, in balance,
companies generally should monitor employee and potential employee’s social
media activities whenever they have a reason to believe the person is engaged in
illegal or unethical conduct – but to systematically investigate every employee and
job candidate’s social media activities is arguably counterproductive. The bottom
line is that companies have the legal right to monitor employees’ conduct, but have
the legal duty to do so only if there is sufficient reason for concern.

7-10. Discuss the glass ceiling in the USA, giving your ideas and suggestions.

Answer: Glass ceiling refers to the set of stereotypical obstacles that prevent women from rising
above a certain hierarchical level in many organizations. Females bring different ideas, opinions,
and demeanor to the decision-making process, so are essential to have in top management.
Situations with few to no women in top management sends the wrong message to a firm’s
stakeholders, and could make the firm more vulnerable to discrimination suits.

7-11. Discuss three ways for linking performance and pay to strategies.

Answer: Methods of linking performance to pay include profit sharing, gain sharing, and bonus
systems. Profit sharing is simply using some formula to pay some profits back to
employees/managers before reinvesting such funds back into the firm. Gain sharing requires
employees or departments to establish performance targets; to the extent that actual results
exceed objectives, employees/managers get bonuses. Bonus systems entail a firm paying a
lump sum of monies to employees/managers, perhaps at year-end, based on annual sales, profit,
production efficiency, quality, and/or safety.

7-12. List the different types of organizational structure. Diagram what you feel is the
most complex of these types of structure and label your chart clearly.

Answer: The types of organizational structure are functional, divisional by geographic area,
divisional by product/service, divisional by customer, divisional by process, strategic business
unit, and matrix. The matrix is the most complex of all designs because it depends upon both
vertical and horizontal flows of authority and communication. For example, construction firms
oftentimes utilize a matrix structure, where three large construction projects, perhaps building
bridges, have functional managers on site, who report both to a corporate executive and to the
on-site project manager. The project managers report to the COO.

CEO

CFO CMO COO HRM CTO CIO

Project 1 X X X X X
Project 2 X X X X X

Project 3 X X X X X

7-13. List the advantages and disadvantages of a functional versus a divisional

organizational structure.

Answer: Functional structures are simple and inexpensive. They promote specialization of
labor, encourage efficiency, minimize the need for elaborate control systems, and allow rapid
decision making. However, this structure forces accountability to the top, minimizes career
development opportunities, and is characterized by low morale, line/staff conflicts, poor
delegation of authority, and inadequate planning for products and markets. In contrast, the
divisional structure is better suited for motivating employees, controlling operations, and
competing successfully in diverse locations. Accountability is clear in divisional structures. It
also creates more career opportunities, allows for local control of local situations, leads to a
competitive climate, and allows new businesses and products to be added easily. The divisional
structure is more costly than a functional structure, but morale is generally higher in the
divisional design.

7-14. Discuss recent trends among women and minorities becoming top executives in the
USA.

Answer: Progress is being made, but slowly. Still only 22 of the Fortune 500 CEOs are women.
Many firms unfortunately still have no women or minorities among their top executives.
Northern European countries lead the world in integrating women into top management and into
boards of directors, but elsewhere in Europe, and throughout Asia, the lack of women and
minorities among top executives is a major problem. This problem is worst among Middle
Eastern countries.

7-15. Discuss recent trends of firms downsizing family-friendly programs.

Answer: Family-friendly programs benefit families, not just women at work. Family-friendly
programs can minimize employee dissatisfaction, turnover, and absenteeism while
differentiating the company from others without such benefits. Consumers increasingly use
family-friendliness as a differentiating factor when choosing what companies to patronize, and
this benefit is important to potential employees/managers. For companies, it oftentimes
becomes a trade-off between short-term costs and long-term benefits, or a trade-off between
offering higher wages or such programs as on-site child care.

7-16. List seven guidelines to follow in developing an organizational chart.

Answer: Some guidelines are as follows:

1. Reserve the title of CEO for the top executive of the firm.
2. Use the title of President for division top managers.
3. Do not use a dual title (like Chairperson and President) for a single executive.
4. Have a COO report to the CEO and division Presidents report to the COO.
5. Avoid having a particular person reporting to more than one supervisor.
6. The CFO, CIO, CSO, and HRM officers should report directly to the CEO.
7. The CEO should not also be Chairperson of the Board.

7-17. Women comprise only 6 percent of corporate board seats in Asia, compared to
17 percent in Europe and 15 percent in the USA. Why is this a problem globally for
1) companies with a low percent and 2) countries with a low percent?

Answer: Woman comprise about 50 percent of customer base for most companies globally,
so anything less than this percentage among a firm’s management team and board of
directors could call into question potential discrimination. Cultural and even religious
factors account for much of this problem globally, but unfounded discrimination is also the
culprit in some companies.

7-18. Some head football coaches get paid millions, presumably because there is so
much money involved in college football the need to win is paramount. However,
head coaches are often fired when a season goes badly, with huge payouts to the coach
by contract. How could a head coach’s compensation package be better structured
for encourage winning, and at the same time not be so potentially costly to a
university?

Answer: Head football coaches’ salaries could be much more closely linked to on-the-field and
off-the-field objectives related to 1) winning games and 2) player graduation rates. Salaries
could be linked to winning conference titles, bowl games, and national rankings, as well as team
GPA and percent of athletes who graduate. Contracts could also be more short-term (3 year)
rather than long-term (5+ years). Base salaries perhaps should be less than $500K annually,
with incentives to reach objectives in place that could raise total compensation to several million
annually to the extent those objectives are reached. Coach Nick Saban at Alabama is one of the
highest paid coaches at $5 million annually, but Urban Myer at Ohio State and Les Miles at
LSU are among many other highly paid coaches.

7-19. Businessweek says firms should “base executive compensation on actual

company performance, rather than on the company’s stock price.” For example,
Target Corp. bases executive pay on same-store sales growth rather than stock price.
Discuss.

Answer: Actual company performance would be much more effective because general stock
market trends can impact a firm’s stock price quite dramatically. Target Corp.’s approach is
excellent. Other similar approaches can be devised based on a combination of actual company
performance measures, rather than stock price.

7-20. Advertising agencies are an example industry transitioning from specialist

Hispanic, African American, and Asian firms to multicultural, generalist agencies.
Why is this occurring? What other industries or institutions may follow suit? Why?
Answer: Leading executives of culturally specialized agencies are defecting in large
numbers to generalist agencies as companies increasingly embrace multicultural marketing
using multicultural ad agencies. An organization can perhaps be most effective when its
workforce mirrors the diversity of its customers. For global companies, this goal can be
optimistic, but it is a worthwhile goal. Churches and colleges (some) are example
organizations that lag behind other institutions in becoming heterogeneous rather than
homogeneous along racial and/or religious lines.

7-21. Describe three conflict situation in which to resolve the problems you would use
1) Avoidance, 2) Defusion, and 3) Confrontation.

Answer:
Avoidance – includes separating the persons involved, which could be done by altering
sales rep territories
Defusion – includes compromising, which could be done in salary negotiations
Confrontation – includes meeting to discuss different viewpoints, which could be done to
determine whether to acquire a new firm or not at a certain price

7-22. The chapter says strategy formulation focuses on effectiveness, whereas strategy
implementation focuses on efficiency. Which is more important, effectiveness or
efficiency? Give an example of each concept.

Answer: Certainly both are important for successful strategic planning. Effectiveness is
associated more with strategy formulation, i.e., doing the right things which means having an
excellent game plan or strategic plan. Efficiency is associated more with strategy
implementation. Efficiency means finding the best means to accomplish something. Because
strategy implementation is usually more difficult to accomplish than formulation, some students
may feel that efficiency is more important. Recall that Vince Lombardi once said “the best
game plan in the world never tackled or blocked anybody.” However, the author actually feels
that effectiveness is more important than efficiency because it is essential to be on the right track,
or digging in the right spot. Otherwise even the hardest working employees likely would be
unsuccessful. Formulation (effectiveness) decisions such as to acquire a firm equal in size to
your firm can make or break the firm.

7-23. In stating objectives, why should terms such as increase, minimize, maximize, as
soon as possible, adequate, and decrease be avoided?

Answer: Terms such as increase, minimize, maximize, as soon as possible, adequate, and
decrease should be avoided when setting objectives because they are too general, are unclear,
lack specificity, and are not measureable. Objectives should state quantity, quality, cost, time,
and should be verifiable. These terms should also be avoided in couching strategies, for
example, in a SWOT matrix, because, for example, increase could mean 1% or 1,000%.

7-24. Considering avoidance, defusion, confrontation, which method of conflict resolution

do you prefer most? Why? Which do you prefer least? Why?
Answer: Preferences will vary based on the levels of conflict that students are comfortable with.
The lowest level of conflict involves avoidance, or ignoring the problem. Defusion can include
playing down differences between conflicting parties. The highest level of conflict is
confrontation, which involves presenting the viewpoints of all conflicting parties to resolve the
issue.

7-25. Explain why Chandler’s strategy-structure relationship commonly exists among

firms.

Answer: In Chandler’s strategy-structure relationship, organizations tend to follow a cycle.

Once a new strategy is formulated, new administrative problems emerge and organizational
performance declines. A new organizational structure is established as a result, and
organizational performance improves. Eventually, the cycle repeats itself. This relationship
commonly exists among firms because structure is designed to facilitate the strategic pursuit of a
firm, and therefore, follow strategy.

7-26. If you owned and opened three restaurants after you graduated, would
you operate from a functional or divisional structure? Why?

Answer: I would probably use a functional structure because it is cheaper and three is
manageable, but for more than three restaurants, I would go with a divisional structure since
morale is higher, accountability is clearer, and it allows local control of local situations.

7-27. Explain how to choose between a divisional-by-product and a divisional-by-region

organizational structure.

Answer: A divisional structure by product is most effective for implementing strategies when
specific products need special emphasis. This type of structure is also widely used when an
organization offers only a few products or when there are major differences among products. A
divisional-by-region structure is appropriate for organizations whose strategies need to be
tailored to fit the particular needs and characteristics of customers in different geographic areas.

7-28. Think of a company that would operate best in your opinion in a division-by-
services organizational structure. Explain your reasoning.

Answer: The division-by-services structure is most effective for implementing strategies when
specific services are offered that independently generate revenue. This type of structure is
widely used when an organization offers only a few services or when an organization’s services
differ substantially. A firm that provides painting, electrical, and plumbing services utilizes this
type design.

7-29. Identify and discuss four reasons why companies are phasing out the
COO position.

Answer: The COO position is increasingly being deleted in U.S. companies.

Twitter recently divided the duties of its COO among all managers. McDonald’s,
Tiffany & Co., and Yahoo recently deleted their COO position. In fact, the
percentage of large companies in the United States with COOs has declined almost
every year for a decade, to about 36 percent today. Health-care and industrial
companies are least likely to have a COO today. A senior executive search firm,
Crist Kolder Associates, reports that the percentage of Fortune 500 and S&P 500
companies with a COO has declined steadily from 48 percent in 2000 to 36 percent
in 2014. An accounting firm, PricewaterhouseCoopers, suggests there are four
reasons why companies are phasing out the COO position: (1) flatten their
structure, (2) eliminate a layer of management, (3) reduce costs, and (4) expand the
CEO’s authority and responsibility. Digital communications and even social media
today enable a CEO oftentimes to perform COO duties. However, three situations
that especially warrant having a COO include (1) whenever the CEO lacks
operational experience, (2) whenever the firm desires to be transparent
about their CEO succession plans, and (3) whenever the CEO needs
to lead a restructuring or transformation of the firm. Although historically a
stepping-stone position to the CEO position, many companies now delegate the
traditional duties of a COO to the CEO or to other positions, such as the CFO or to
the Chief Brand Officer. Deleting the COO position does increase the span of control
of the CEO, spreading him or her thinly, which is not a good idea for many
companies.

7-30. In order of importance in your opinion, list six advantages of a matrix

organizational structure.

Answer: Six advantages of a matrix organizational structure include: (1) objectives are clear,
(2) employees can see results of their work, (3) shutting down a project is easily accomplished,
(4) facilitates the use of personnel, (5) facilitates the use of physical resources, and (6) functional
resources are shared instead of duplicated. Rankings of importance will vary among students.

7-31. Why should division head persons have the title president rather than vice
president?

Answer: The title “vice president” simply does not do justice for the level of accountability and
responsibility that a division head person’s job entails. Division top managers should have the
title “president.” Vice presidents are lower level managers than division head persons.

7-32. Compare and contrast profit sharing with gain sharing as employee performance
incentives.

Answer: Profit sharing provides an incentive for employees to help the company succeed
financially, because they get a return on profit. Critics of profit sharing emphasize that too many
factors affect profits for this to be a good criterion. Gain sharing requires employees or
departments to establish performance targets; if actual results exceed objectives, all members get
bonuses.

7-33. List three resistance to change strategies. Give an example when you would use
each method or approach.
Answer: Three resistance to change strategies are: force change strategy, educative change
strategy, and rational or self-interest change strategy.
 Force change strategy involves giving orders and enforcing those orders, such as when a
manager tells a subordinate to perform a task differently.
 Educative change strategy presents information to present people of the need for change.
Examples include posters used to communicate reasoning for implementing a new company
policy.
 Rational or self-interest change strategy attempts to convince individuals that the change
is to their personal advantage. For example, strategies involving employee wellness have
tremendous benefits to all parties involved.

7-34. In order of importance in your opinion, list six techniques or activities widely used to
alter an organization’s culture.

Answer: Techniques used to alter an organization’s culture include recruitment, training,

transfer, promotion, restructuring, reengineering, role modeling, positive reinforcement,
mentoring, revising vision and/or mission, redesigning physical spaces/facades, altering reward
systems, and altering organizational policies/procedures/practices. Ranking of these activities
will vary among students.

7-35. What are the benefits of establishing an ESOP in a company?

Answer: An employee stock ownership plan (ESOP) is a tax-qualified, defined-contribution,

employee-benefit plan whereby employees purchase stock of the company through borrowed
money or cash contributions. ESOPs empower employees to work as owners. Besides reducing
worker alienation and stimulating productivity, ESOPs also allow for substantial tax savings.

7-36. List reasons why it is important for an organization not to have a “glass ceiling.”

Answer: It is important for an organization not to have a “glass ceiling” because according to
recent studies, companies with more female executives and directors outperform other firms. A
mix of thinking styles is key to management effectiveness. In addition, not having females (and
minorities) in upper management makes the firm vulnerable to discrimination suits, and sends
the wrong message to the firm’s customer base and other stakeholders.

7-37. Allocating resources can be a political and an ad hoc activity in firms that do not use
strategic management. Why is this true? Does adopting strategic management ensure
easy resource allocation? Why?

Answer: Allocating resources can be ad hoc and political in the absence of strategic
management because intuition, halo error, subjectivity, and emotions can then play too great a
role. Strategic management does not assure easy resource allocation, but it generally results in
more effective resource allocation.

7-38. Describe the relationship between annual objectives and policies.

Answer: Interrelationships among organizational objectives, strategies, and policies are
revealed in the strategic-management model. Note that long-term objectives and strategies are
part of the strategy-formulation process, whereas annual objectives and policies are part of
strategy implementation. Clear policies are necessary for attainment of annual objectives.

7-39. Identify and discuss three policies that apply to your present strategic-management
class.

Answer: Policies that may be discussed include grading policies, attendance policies, and honor
code policies.

7-40. Explain the following statement: Horizontal consistency of goals is as important as

vertical consistency.

Answer: This is a true statement. Horizontal consistency of objectives is as important as

vertical consistency. An example of horizontal consistency could be that “there is no need for
the marketing department to plan on doubling sales if the production department cannot produce
the additional units.” An example of vertical consistency could be for the firm to have an ROI
objective of 15%, with each business segment also then having a 15% ROI goal.

7-41. Describe several reasons why conflict may occur during objective-setting activities.

Answer: The objective-setting process can lead to conflict due to competition over scarce
resources, different expectations among individuals, different perceptions among individuals,
miscommunication, time pressure, personality incompatibility, and line and staff
misunderstandings.

7-42. In your opinion, what approaches to conflict resolution would be best for resolving a
disagreement between a personnel manager and a sales manager over the firing of a
particular salesperson? Why?

Answer: Various approaches for minimizing and resolving conflict can be classified in three
ways: avoidance, defusion, and confrontation. Depending on the situation, any of these three
alternative approaches could justifiably be most effective in solving a dispute between a
personnel manager and sales manager.

7-43. Describe the organizational culture of your college or university.

Answer: Every institution has different rituals, values, stories, legends, heroes, ceremonies, and
the like. Some institutions are mostly dorm based whereas some are mostly commuter based,
some are more academic based than others, some are more professional school based rather than
liberal arts based, etc.

7-44. Explain why organizational structure is so important in strategy implementation.

Answer: Organizational structure is important in strategy implementation because a firm’s
design dictates how resources will be allocated and how objectives will be established. In a
geographically structured organization, for example, objectives are stated in geographic terms
and resources are allocated by region. The structure reveals how the firm is organized, and
being well organized can represent a great competitive advantage/disadvantage for firms.

7-45. In your opinion, how many separate divisions could an organization reasonably
have without using an SBU-type organizational structure? Why?

Answer: The answer to this question depends on the size, location, and type of divisions, but,
generally speaking, a firm that has ten or more divisions could benefit from an SBU-type of
organizational structure.

7-46. Identify and discuss three situations in the corporate world that
especially warrant having a COO within the firm.

Answer: As discussed on page 221, three situations that especially warrant having a
COO include (1) whenever the CEO lacks operational experience, (2) whenever the
firm desires to be transparent about their CEO succession plans, and (3) whenever
the CEO needs to lead a restructuring or transformation of the firm.

7-47. Do you believe expenditures for childcare or fitness facilities are warranted from a
cost/benefit perspective? Why or why not?

Answer: Many reports suggest that these expenditures are warranted. Managers and employees
become more committed to the firm when childcare and fitness facilities are provided, or at least
when some resources are allocated to these areas.

7-48. Explain why successful strategy implementation often hinges on whether the
strategy-formulation process empowers managers and employees.

Answer: Managers and employees make or break a firm. More and more, firms are
empowering managers and employees through involvement in the strategic-management
process. Lack of involvement or “empowering” often results in a lack of commitment to see the
firm do well.

7-49. Identify and discuss four primary reasons why annual objectives are so
essential for effective strategy implementation.

Answer: Annual objectives are essential for strategy implementation for four
primary reasons:
1. They represent the basis for allocating resources.
2. They are a primary mechanism for evaluating managers.
3. They are the major instrument for monitoring progress toward achieving
long-term objectives.
4. They establish organizational, divisional, and departmental priorities.
7-50. Identify and discuss eight characteristics of objectives.

Answer: Annual objectives should be measurable, consistent, reasonable,

challenging, clear, communicated throughout the organization, characterized by an
appropriate time dimension, and accompanied by commensurate rewards and
sanctions. These elements are often called the “characteristics of objectives.” Too
often, objectives are stated in generalities, with little operational usefulness. Annual
objectives, such as “to improve communication” or “to improve performance,” are
not clear, specific, or measurable. Objectives should state quantity, quality, cost, and
time—and also be verifiable. Terms and phrases such as maximize, minimize, as
soon as possible, and adequate should be avoided. Annual objectives should be
supported by clearly stated policies. It is important to tie rewards and sanctions to
annual objectives so that employees and managers understand that achieving
objectives is critical to successful strategy implementation.

7-51. What are the two major disadvantages of an SBU-type organizational

structure? What are the two major advantages? At what point in a firm’s
growth do you feel the advantages offset the disadvantages? Explain.

Answer: A general rule of thumb is whenever a company grows to the point of

having ten segments/divisions, then an SBU structure may be best – but this rule of
thumb depends on the size of the segments and how geographically dispersed the
segments are located. The SBU structure groups similar divisions into SBUs and
delegates authority and responsibility for each unit to a senior executive who reports
directly to the chief executive officer. This change in structure can facilitate strategy
implementation by improving coordination between similar divisions and channeling
accountability to distinct business units. In a 100-division conglomerate, the
divisions could perhaps be regrouped into 10 SBUs according to certain common
characteristics, such as competing in the same industry, being located in the same
area, or having the same customers.
Two disadvantages of an SBU structure are that it requires an additional layer
of management, which increases salary expenses. Also, the role of the group vice
president is often ambiguous. However, these limitations often do not outweigh the
advantages of improved coordination and accountability. Another advantage of the
SBU structure is that it makes the tasks of planning and control by the corporate
office more manageable.

7-52. Would you recommend a divisional structure by geographic area, product,

customer, or process for a medium-sized bank in your local area? Why?

Answer: A divisional structure by geographic area, since the products/services offered

vary little across regions.
Answers to the End-of-Chapter 7 Assurance of
Learning Exercises
ASSURANCE OF LEARNING EXERCISE 7A:
CRITIQUE CORPORATE ORGANIZATIONAL CHARTS

ANSWER:
In the Crocs divisional chart, the CEO should not also have the title President. Also, the
division head persons should have the title President, not Vice-President. Also, there
must be a head HRM person reporting to the CEO.

In the ConAgra SBU chart, Paul Maass and Tom McGough may report to the CEO or to
the CFO, but a better approach would be to add a COO and have those two positions
reporting to a COO. The ConAgra chart does include two female executives which is
good.

ASSURANCE OF LEARNING EXERCISE 7B:

DRAW AN ORGANIZATIONAL CHART FOR HERSHEY USING A FREE,
ONLINE TEMPLATE

ANSWER:
This exercise mentions five websites that may be used to develop a new and improved
organizational chart for Hershey. Let’s here use
http://www.smartdraw.com/specials/orgchart.asp Smartdraw is free and easy to use.
Hershey’s organizational chart is given in the case, but that organizational structure
can be improved. Hershey should go to three divisions: USA, Canada/Latin
America/South America, Europe/Asia/Australia/Africa. With Smartdraw, you
simply enter your organization's information and the company’s software does the
rest, aligning positions and connecting them automatically. There are options to add
photos and information to personalize your new and improved organizational chart.

ASSURANCE OF LEARNING EXERCISE 7C:

DO ORGANIZATIONS REALLY ESTABLISH OBJECTIVES?

ANSWER:
This type of exercise is excellent to offer to students for extra credit. Research shows
clearly that having clear objectives greatly enhances performance. In fact, ask students
to find a couple of research articles that focus on objectives and include a summary of
those in their report to the class. Even on an individual basis, to have an objective to lose
20 lbs., or to obtain a BBA Degree, or to increase sales of a family business by 10%
annually would immensely help in achievement of that objective. Objectives provide
direction, serve to motivate, and often serve as a basis incentive compensation to be
received if and when the objectives are met. Employees and managers expect a firm to
have clear objectives, so they know what is expected, and ideally how they can expect to
benefit if the objectives are reached.

ASSURANCE OF LEARNING EXERCISE 7D:

UNDERSTANDING YOUR UNIVERSITY’S CULTURE

ANSWER:
This exercise makes a good homework assignment, though the examples identified
should be discussed in class. This will enable students to compare their responses and
identify the unifying culture at your institution. An example is provided below for
Virginia Commonwealth University (VCU).

Cultural form Example

Hero/Heroine Grace Harris is a heroine at VCU. She served as President of the institution
twice and also as Provost. She was instrumental in guiding the institution
and is known now as the example by which all leaders are measured.
Belief VCU believes that football is detrimental to the learning environment and, for
this reason, does not have a football team.
Metaphor VCU is like a friend of the community. It seeks to be seen as a friend and
support system in all community affairs.
Language There are several words that are heavily used in the VCU language. They are
interdisciplinary, entrepreneurial, international, diversity, and growth.
Value VCU values those things that are represented by its language. These include
interdisciplinary programs, programs that generate revenues, international
experiences, a commitment to diversity, and growth.
Symbol The symbol of VCU is the ram.
Story VCU evolved from two other small institutions just three decades ago. The
president likes to tell this story to illustrate the youthfulness and vigor of the
institution.
Legend The work of Dr. John Fenn, a Nobel prize winning scientist, is legendary at
VCU.
Saga VCU develops an annual report each year that details its many
accomplishments.
Folktale Upper classmen often warn freshmen about the “Freshmen 15” – the 15
pounds that freshmen tend to gain during the first year of college.
Myth Music students believe that the building that houses the School of Music is
haunted by a pianist who died in the Civil War. The School is housed in an
old church.
Ceremony Graduation is a ceremony that marks the end of each student’s formal
relationship with the institution.
Rite A rite of passage at graduation is the throwing of caps at the conclusion of the
service.
Ritual Students have a ritual of going out on Thursday nights.
Answers to the End-of-Chapter 7 Mini-Case Questions
1. Do you think the benefits will offset the costs of the new Hilton cancellation
policy? Why?

Answer: The benefits may indeed exceed the costs (upset customers not returning).
Why? Because numerous apps as described in the case enable customers to switch
reservations at the last minute, to the detriment of hotels – and restaurants. At a
recent meeting, the authors were charged a $25 cancellation fee at a restaurant
(Homestead in the Borgata in Atlantic City in New Jersey) for not showing up for a
reservation. Technology is such now that both hotels and restaurants cannot afford
to book reservations, and then customers not show up, because the business forgoes
revenue from other customers when that happens. Of course, everyone knows that
when you book a deep sea fishing trip or an airplane ticket, etc., you lose your
money if you do not show up, so the practice is not uncommon at all.

2. Do you think the new Hilton cancellation policy is ethical? Is it legal? Is it

practical?

Answer: Most folks think the new Hilton policy is ethical, legal, and practical.

3. What would be a more effective cancellation policy for Hilton?

Answer: Perhaps instead of 24-hour notice, a 12-hour notice would be more

effective, in terms of not upsetting customers, yet preventing most last-minute
cancellations. Most customers will understand that when a hotel or restaurant takes
your reservation it means they will tell other customers no who desire the room and
were ready to pay for the room, so a reservation is a service for customers that
should not be exploited.

4. How should a company such as Hilton decide upon new policies?

Answer: Collect survey data and run some statistics to determine opinions, coupled with
polling managers. Consider rival businesses’ policies and then collectively make decisions.

NOTE – THE FOLLOWING IS AN EXCELLENT, FUN, NOT-IN-THE-BOOK,

ADDITIONAL ASSURANCE OF LEARNING EXERCISE FOR CHAPTER 7

EXERCISE TITLE: What Are The Most Important Benefits of Having a Diverse
Workforce?

Purpose
 Sometimes students, and even managers and executives, do not realize or
appreciate why it is important to have a diverse workforce and management team.
As discussed in Chapter 7, there are six major benefits of having a diverse workforce,
as follows:
1. Women and minorities have different insights, opinions, and perspectives that
should be considered.
2. A diverse workforce portrays a firm committed to nondiscrimination.
3. A workforce that mirrors a customer base can help attract customers, build
customer loyalty, and design/offer products/services that meet customer needs/wants.
4. A diverse workforce helps protect the firm against discrimination lawsuits.
5. Women and minorities represent a huge additional pool of qualified applicants.
6. A diverse workforce strengthens a firm’s social responsibility and ethical position.
The purpose of this exercise is to examine more closely the benefits of having a
diverse workforce and management team. In addition, the purpose of this exercise is
to examine whether individual decision making is better than group decision making.
Academic research suggests that groups make better decisions than individuals about
eighty percent of the time.

Instructions

Rank the six benefits of having a diverse workforce and management team as to their
relative importance (1 = most important, 9 = least important). First, rank the six
benefits as an individual. Then, rank the six benefits as part of a group of three.
Thus, determine what person(s) and what group(s) here today can come closest to
the expert ranking. This exercise enables examination of the relative effectiveness of
individual versus group decision making in strategic planning.

The Steps

1. Fill in Column 1 in Table 1 to reveal your individual ranking of the relative

importance of the six benefits (1 = most important to 6 = least important).
For example, if you think Benefit #1 (Women and minorities have different
insights, opinions, and perspectives) is the 2nd most important benefit, then
enter a 2 into Table 1 in Column 1 beside Benefit 1.
2. Fill in Column 2 in Table 1 to reveal your group’s ranking of the relative
importance of the six benefits (1=most important to 6 = least important).
3. Fill in Column 3 in Table 1 to reveal the expert’s ranking of the six benefits.
4. Fill in Column 4 in Table 1 to reveal the absolute difference between Column
1 and Column 3 to reveal how well you performed as an individual in this
exercise. (Note: For absolute difference, disregard negative numbers.)
5. Fill in Column 5 in Table 1 to reveal the absolute difference between Column
2 and Column 3 to reveal how well your group performed in this exercise.
6. Sum Column 4. Sum Column 5.
7. Compare the Column 4 sum with the Column 5 sum. If your Column 4 sum
is less than your Column 5 sum, then you performed better as an individual
than as a group. Normally, group decision making is superior to individual
 decision making, so if you did better than your group, you did excellent.
8. The Individual Winner(s): The individual(s) with the lowest Column 4 sum
is the WINNER.
9. The Group Winners(s): The group(s) with the lowest Column 5 score is the
WINNER.

Table 1 – Assessing the Benefits of a Diverse Workforce: Comparing

Individual versus Group Decision Making

Benefits of Diversity Column 1 Column 2 Column 3 Column 4 Column 5

1. Women and minorities have

different insights, opinions,
and perspectives that should
be considered.
2. A diverse workforce portrays a
firm committed to nondiscrimination.
3. A workforce that mirrors a
customer base can help attract
customers, build customer loyalty,
and design/offer products/services
that meet customer needs/wants.
4. A diverse workforce helps
protect the firm against
discrimination lawsuits.
5. Women and minorities
represent a huge additional
pool of qualified applicants.
6. A diverse workforce
strengthens a firm’s social
responsibility and ethical position.

Sums

Answer: The Expert Ranking

Benefits of Diversity Authors’ Ranking

(1= most important to 6 = least important)

1. Women and minorities have 1

different insights, opinions,
and perspectives that should
be considered.
2. A diverse workforce portrays a 3
firm committed to nondiscrimination.
3. A workforce that mirrors a 5
customer base can help attract
customers, build customer loyalty,
and design/offer products/services
that meet customer needs/wants.
4. A diverse workforce helps 6
protect the firm against
discrimination lawsuits.
5. Women and minorities 2
represent a huge additional
pool of qualified applicants.
6. A diverse workforce 4
strengthens a firm’s social
responsibility and ethical position.

Rationale: The expert rankings are based on the authors’ extensive experience, rather
than on findings from empirical research. However, the most important benefit is that
women and minorities have different insights, opinions, and perspectives that should
be considered. If everyone is thinking alike, then many folks are not thinking, and
effective strategic planning requires thinking. The second most important benefit of
having a diverse workforce and management team is that women and minorities
represent a huge additional pool of qualified applicants. To purposely forgo this
talent is unwise. The third most important benefit is that a diverse workforce
portrays a firm committed to nondiscrimination. Having all white males, for
example, on the board or among the top management team sends the wrong signal or
message to numerous constituencies and stakeholders and makes the firm vulnerable
to lawsuits. The fourth most important benefit of having a diverse workforce and
management team is that it strengthens a firm’s social responsibility and ethical
position. Good ethics is good business and bad ethics can derail even the best
strategic plans. The fifth most important benefit of having a diverse workforce and
management team is that whenever a workforce mirrors a customer base it can help
attract customers, build customer loyalty, and design/offer products/services that
meet customer needs/wants. Last but not least, a diverse workforce indeed helps
protect the firm against discrimination lawsuits.