Chapter 06 - Evaluating strategic moves What this chapter...

Info icon This preview shows pages 1–18. Sign up to view the full content.

View Full Document Right Arrow Icon
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 6
Image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 8
Image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 10
Image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 12
Image of page 13

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 14
Image of page 15

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 16
Image of page 17

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 18
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Evaluating strategic moves What this chapter is about The viable firm matrix has shown the organisational transition needed to implement strategic actions. That move has to be assessed by: I how well it satisfies the aspirations of stakeholders, and I the resources needed to make it come about. There are two practical strategy tools for those tasks: I congruence analysis, and I resource analysis. Introduction to congruence and resource analysis In Chapter 5, we studied the viable firm matrix and saw .how it is used to differen- tiate between firms (or any other organisation), identify strategic options, and to design the organisation that should be able to implement a chosen strategy. It was stressed that a VFM is an organisational evaluation and design tool. That is, though, only the first step in strategic implementation and we must now address two other aspects. The first is how well the identified strategies or viable strategic options fit with the aspirations of the different stakeholders in the situation. This is called congru- ence analysis. For instance, in the case of Littieworth and T hrupp, the legal firm, Mr Littleworth is near to retirement age while Ms Thrupp is far from it and a strategy that is congruent with his aspirations might not fit at all well with what she wants to achieve. Congruence analysis is highly political (with a small p) as it relates to the prefer- ences, and even the ethical constraints, of the people and groups involved in strategic choices. That is as it should be. Practical strategy is, congruence analysis at its very roots, concerned with bringing about change in a situation, handles the vital and that is fundamentally political. In democratic elections the competing Po'itica' aSPeCtS 0f parties seek to persuade the voters that their proposals for change will change' 1 26 Chapter 6 / Evaluating strategic moves best meet the aspirations of most of the people. Investors in ethical investment funds seek to make money, but prefer not to do so by owning shares in firms that deal in products of which they do not approve; perhaps benefiting from the profits of a tobacco company would not be congruent with their beliefs. Congruence analysis is a vital part of the practical strategy process and cannot be neglected. The second method covered in this chapter deals with the practical details of the resources needed for strategic implementation. It may be that the strategy which emerged from TOWS and led to the identification of a viable firm, or some strategic options which came from the quick use of the VFM (as with the oil consulting firm), will require additional resources of people, machines, money or whatever, or there may be existing resources that will not be needed with the new strategy. Not surprisingly, this is called resource analysis. As with just about everything in this book, the ideas are very simple, but the practice is a little more difficult and is best studied by means of examples and best of all by syndicate work to apply the tool to an interesting problem. Resource analysis deals with the practical detaiis. An example of congruence analysis Background We will use the strategic options for Petroieum Associates Inc. (PAI), the consulting firm discussed in Chapter 5, to illustrate congruence analysis and you will recall that study of PAI's VFM suggested two possibilities. To help you to follow the argu- ment, the plain VFM for PA] is shown again in Table 6.1. One of PAI’s options is the bold one of trying to stay at 03, maintaining their present size and value despite the likely drastic reduction in their existing business. PAl’s owners reasoned that, in order to ‘stay at 03, they needed to try to reach E2, seen as having good solutions to problems outside the oil business. That would require the MS marketing strategy, monitoring both markets to exploit their repu- tation. However, reputation depends on performance so it would be needful to improve their portfolio to C2, a planned and actively managed skill set supported by good training. That posture should lead to A2, a well-respected firm with a good client base in two markets, and (22m2 might reasonably be expected to improve the recruitment position to R2, though some additional actions might also be nec- essary to achieve R2. PAl’s other option is to retrench the business, choosing 0,1 as the objective, a choice that is viable with a posture of C6, R6 or R5, and A4. They could no longer rely on M6 and would have to adopt M4, M3 being too risky. It is vital to your understanding of what follows to trace this out in Table 6.1. 127 An example of congruence analysis 0::0:0 m:_:m_x0 30: 0 0: 933:0 02:09: :5: 3:200:06 0:50:20 .3 5:6 0: 9:20:50 000V: 00 {0.5 E 0:00 0: 0:09:00 0:0 :020500: :0 20m 0:2 0000 ::0:0 00:E: 00050 5:050? :00; .EE :90 04. 202050: 0096 3:9: :50: .0: 0m 0.00 0009053 SE 000E: :00 .:0Ew mQ FE: 30::0E0EE00 £55 0E0..0::000090E .3 3:505 0E8 300000 0:0: 02an :00m mo 0|. 0000500.. 00:0:0050 :0_0x0 0: 0:0::0E £00 :0 m::0:_:0E 0:000:00 m:2 .I_I| 5: _0:0 0550:0000: :0 mE:: :0E0 >:0E 0:9:0 0:0 0:: 000:0:0E30:0 000:0:0 0% :80: :_ 03023.0 00 0: 0009000 6:: :0:0Em 4. v0 mmCD 25.: 0:00.00 :0 09:0 950 hEmEEmJU 95006 0: 50:00.0 .2000 VS: ExaE _0:o::_00:: 0: 00650 550:: 200:5 :0: :20 500500: 0006 «a. 09060000 :0 00: 030:003 :3 00::0E0_Qn_:m E00: 0:00 ,0. mm ::0E00_0>00 :Ew 0: 5:5 0000 0:20 m :0 _. :0 :0::0._::00:00 .00 3:03:05 :0 00.050 E0520: m0 :000 :0: 0:20 .290 :05 mm :0EOE 5:350:00 E00600: E 00905 5:00: o: 0000: m 000E 5:5 502 o 0: 000000 :00: 5:5 05:0 0.5: :0 0:0 3:0 0:0 0: 05,0. :00: mm 0060: F005 £5, 0:00 m: 0 40: 0:200: 50: :0 @5500 5:900 0:0 020030 00: .0020 :00 m :0 m :0 :0_:0:::00:00 v0 0205 0:0 0N0 00:00 0:: :03: 50:05 :_0Em: 0: E3 M0 :cwEmwm :000E 0200303.? 0 :0 0:0._E00:00 J2 02mg: mfi 0:: :_ :0: :0: :30 36005 mEBEm 0000 E0:0 0:0 :030309: 0:: >00 0:0 :0_:0>::0E 0m0._0>< 5:000 {05 E :000005 0E0w 0.0000 0000 E06: 0:0 :200: 0: >000 :02 0:: 0:0 08:: :Es 20000 :0 ::0E:200: £5 20an : :00 £00010 20:20.0:00 mo .Uw: 0:00,. 0:0_:: :0 0000000 0:003:00 0:50 00:2: .0 0:09:00 :050 EB: :o_::00E00 90:00 :5 0000: :c ,_0 60:: 320E £00002: 05.300000. mm 00: :00000 00,030 0000:-E 0.000 020200 w::0:0 5,02 m._. 050: 000200.. >:::00_:_:m._0 :0 «:05 :o 52: 0me Q 0:005 .50: 0:0: :0: {05 :0 0E:_0> 0:0 50:03:09: :_ €2.00 0:0 :3 05005 a: 0205 0:0 050 E 5.59m 00.50 :0: E3. NO 0:20 :0 09:0: 00:00:00 0 0:: :m :_ 3:0 :39 0:00: 0: :00 :_ 05902.5 000E030 x000 205500. 0:: 0000 5000:: £0: E 0000 :00:0 0000 0 5:5 0:: 00:00:00.. 0:0 :300x‘205 ,0. 0,9 500 0:0 :0_:0>_:0E 000050 05004. 3:030 {05 000m. 2::22050 05000 000m :_0:0: 0:0 05:00.: 0: >000 3:0“. 00. ::0E00m0>00 :20 :0: 90:00 0: 5:500 0:90 5:5 0:00 :0 0:0an 0000:0E 205200 0:0 00::05 NO 0600:: 0:9: :0 00:0: 0 :_ 0000: 30:0 0: 00003.00 .00? @030: 00 :00m .0000 30> mm :55 :0 .50: 200% w._. 0:_0> 0:0 000 :_ 5505 0:00: .6: E3. F0 0 9:30.30 0.62th 9.3000 30:00.00 0_ : 00:5 :0 000.0000: 0:0 0:30: 00 :00 a 0590:; 0005030 x000 5:02:04. J2 50:00 00:00:03. E0305. :0 0005: :09: :0: 0:0 000 020:: 5:0 :_ 005000: :00: :0 E53080 _00_:>_0:0 :0 00 :000 0:0: 30: 30> 0:: :0 0:0 :0. a. 00:5: 0:0 0030500: 30:00:00 >00 0:0 00:05:0E :9: 2:05 :0 3:02: :9: 50> 00:0 50:00 000m 0 00 FE: 5:5 E0E520E0 000 03000 09:03: 2:01 i m :0_:_mon_ 00.5000: 005:: 00302202050 anus—Eon. 0:;0 000:: 5:5 90000 :0 ::0E:Eow._ .3 00:06: 0000 :20 .0000 05:50 :0 0::0 :0 00:0: 005.) :O O 0000 52.3300 can :10 00000 :0 09:0: 00:5 0 E 0000: E20 0: 0:28.00 :00? 0:30: 00 :00w .::0__00xw _m_ m. 39:00.. .650 :_ 020:0an :0: 0:00...» 3:022: «9:05. 000:: 3:023:00 :0 :_ £0505 0E8 @000 >:__:0_0> 0:E0:000 :050 00:63 :._. ._. “ugh—«E 33305 :0 Eggs—00...: .5... .5: 5_u_> ESQ 0:... .26 .030... 128 The problem owners make the assessments in congruence analysis. Congruenoe analysis forces judgements to be explicit. Chapter 6 / Evaluating strategic moves The congruence analysis technique PAl’s problem The issue that congruence analysis addresses is how well or badly these options rate against the preferences of the interested parties, and a simple way of handling that is shown in Table 6.2 for PAI’s first, bold, option. The ’from’ and ’to’ definitions from the VFM are listed at the left, and that copy- ing is essential as it ensures that everyone has the same understanding of what is being discussed (we shall consider the practice of congruence analysis after we have explained what it is). One then has as many columns as are needed for the interested parties, or stakeholders. In this case, we have three, respectively for the four people who own PAI, for their 30 employees, and for their existing clients. Including the clients may seem paradoxical, but not all of them want to go in- house, and some might be persuaded not to if they perceive PAI to be a viable business offering good services. The final step is to rate each row in the columns to reflect a perception of how much each party likes or dislikes that aspect. Since these are qualitative assess- ments of preferences, we use a simple scheme of pluses and minuses (rather as was done in Table 4.1 for the relative attractiveness of different strategies vis-a-vis the Mont Fleur scenarios for South Africa). Three pluses mean 'like it very much’, two pluses mean ’like it quite a lot’, and one means ’like it a little’. The scale goes down to three minuses, for the opposite meanings. A blank entry means ’don’t care one way or the other’. Before explaining the plus and minus entries in Table 6.2, we need to make it clear that the assessments are those of the owners of PAI, as it is they who have to decide between the two options. They can judge how well or badly they themselves would like each of the two but they also have the difficult task of assessing {or guessing) the preferences of the employees and the clients. There might, perhaps, be some discreet conversations with the external stakeholders but the owners can hardly go to the employees and say ‘How would you like it if we cut the business back to a small core?’ The answer would be predictable and would trigger a lot more trouble than PAI‘s owners need. Politicians have to make the same kind of judgements about potentially unpopular initiatives, some of which are abandoned because it is perceived that an announce- ment that the government was even thinking about X would be too damaging. In short, only the holders of power can ultimately make the strategic choice but they must take into account other legitimate stakeholders who, if they have different preferences, might make or mar the contemplated decision. Congruence analysis is, of course, highly subjective precisely because it summarises opinions and assessments (or guesses). its advantage is that it forces those assessments to be made clear and it displays them plainly. We will discuss the interpretation of the assessments at the end of the example. First, we need to explain Table 6.2. The first row says that the owners don’t like this option very much as, having struggled to build up the existing business, they do not really want another battle The congruence analysis technique 129 Table 6.2 Congruence analysis for PAl’s first option 02 Aim for some growth in size and value i3a Conscioust chosen, but limited, portfolio with recruitment of people with those skills REl Not easy to recruit and retain good people. Some variation in work quality. Average motivation and pay 02 Aim for some growth in size and value 02 Planned and actively managed portfolio of skills with strong attention to training for skill development R2 Fairly easy to recruit and retain good people. Consistently good work quality. Above average motivaticm A,1 Good reputation but not widely known outside its traditional market M,5 Rely on reputation and contacts to bring in work A2 A well-known and respected firm with a good client base in both market areas M5 Constant monitoring of both markets to exploit established Attractiveness from the perspective of: Owners Employees Existing clients -- reputation to survive (they have done a VFM to assess the strength of the likely competition in other markets). They think that the employees would like the attempt to stay in business, but the clients probably don’t care what PAI’s objectives are. The reasons for the second row’s ratings are that the employees might be quite attracted by the idea of learning new, and portable, skills. The owners do not, therefore, like the idea of a huge and expensive effort that might simply be wasted if the employees take their new skills with them. It is important not to see congru- ence analysis as an exercise in filling in a form, and also to be willing to change assessments after further thought. The owners at first quite like the (jg/C2 transi- tion and rate it +. When they study the employees' preferences, they change their minds and make it — —. Finally in this row, the existing clients might not be happy at the likely loss of attention from PAI. In the third row, everyone likes the idea of good, well-trained people. Work out for yourself the apparent reasons behind the rest of the ratings. After you have done that, and preferably in syndicate discussion, try to put your- self in the shoes of PAl’s owners and make your own assessments of these issues. As we have seen, though, PAI's owners have identified two strategic options (and you may have found another if you did the exercise in Chapter 5), so Table 6.3 is the congruence analysis for retrenching the business. This time, we will explain these illustrative assessments by working down the columns, rather than across the rows. In practical use, you should use both methods as a cross—check on your understanding. 1 30 Chapter 6/ Evaluating strategic moves Table 6.3 Congruence analysis for PAI’s second option To Attractiveness from the perspective of: Owners Employees Existing clients 02 Aim for some growth in 04 A smaller firm, designed to size and value be survivable in difficult and changed circumstances C3 Consciously chosen, but ('26 Small, but unique with limited. portfolio with recruitment world-class skills ++ — a 4 ++ of people with those skills R3 Not easy to recruit and retain RsA core team supplemented by good people. Some variation in extensive use of associates or +++ _ _ _ + work quality. Average motivation REA few highly expert individuals and pay A4 Good reputation but not A 4 Good reputation but not widely known outside its widely known outside its traditional market traditional market M5 Rely on reputation and contacts M4 Careful attention to existing to bring in work customers, some effort at getting new ones In essence, the owners are not too happy with 04, going back to being the small firm they were when they started PAI, they like C6 as they will be able to' practise their own skills instead of having to spend a lot of time on management, and R5,6 avoids all the recruitment trouble. A4 seems to them to be a little restrictive and M 4’s attraction is the positive interaction with the clients. The owners judge that the employees would hate the whole idea, for obvious reasons, but the existing clients might quite like the prospect of dealing with top-quality people and getting some marketing attention. Interpreting the congruence analysis tables We have the results, but what do they mean? How can we interpret them into meaningful actions? On the face of it, one might add up plus and minus ratings and ’calculate’ Don t Eldd the pluses the net effect but a little thought shows that to do so would be pretty and “muses” 93‘ ' 1 th t d ff 1d b- b t d'ff t r t r the wean Emma meaning ess as e ra e-o 5 won e e ween very 1 eren ac ors. or instance, in Table 6.2 there are two minuses against 02, an objective, but they do not cancel out two pluses against R2, a human resource issue. The preferred approach is the gestalt, whole-pattern, viewpoint of the web of fac- tors that we used with field anomaly relaxation in Chapter 3. To remind Aim foragestalt you, gestalt means 'perception of a pattern or structure possessing quali- apprec'at'on 0f the ties as a whole that cannot be described merely as a sum of its parts’. In whole pattern. . other words, one has to look at a congruence analysrs table as a whole. Congruence analysis in practice 131 For Table 6.2 the picture that emerges, from the owners’ standpoint, is that while there are things that would be nice if they happened (R2 and A2), the discontents are too great (02 and C2) and there is little to maintain the support of the existing clients. Table 6.3, on the other hand, has the drawback that it takes the owners back to square one, but that is outweighed by its other attractions and the possibil— ity of continued business with at least some of the existing clients. Retrenching the business seems, on balance, to be the better preferred of the two options. Although the plus and minus ratings are the judgements of the owners, it is worth looking at the implications of the employees’ presumed preferences, which are that retrenchment is deeply unattractive to them, but there are things that they might like about the bold option. Perhaps, then, there is a third The 100‘s for Practical , _ _ _ . . . strategy can suggest possrbility. a management buy-out by the employees. It 1.5 a characteristlc an option that had of many of these tools for practical strategy that they sometimes suggest a previously been possible strategic action that had been overlooked until then; they might overlooked. equally well be called tools for strategic imagination. Congruence analysis in practice There are two aspects of the use of congruence analysis; the first is some practical tips and the second is its subtleties. The first practical point is that the people who should do it are normally the focus group monitoring the practical strategy process. The second is that one has to think carefully about which stakeholders to include. Some obvious possibilities are the management group, employees, customers, shareholders, suppliers and, where it is relevant, the regulatory authority (where an authority exists it would probably be very unwise to exclude it!). It is usually a good idea to write a short explanation of why an interested party has been included and some statement about that entity’s assumed preferences. It is tempting to have too many stake- holders, but more than about four or five makes it hard to use the gestalt appreciation. The upper limit for gestalt is seven in FAR but there the appreciation is of a one-dimensional configuration of items, one from each row. in congruence analysis, the table is two-dimensional and it has to be appreciated as a whole. Congruence analysis is much more subtle than it looks. At first sight it might be dismissed as being no more than a set of guesses (we deliberately used that word earlier), and therefore of no value. However, consider the alternative and imagine PAl’s owners trying to decide what they would prefer to do and how that might be influenced by the preferences of other parties (and this issue of Congrufince a_nalYSiS i preferences cannot be ignored in practical strategy). It is easy to see that, hmaa‘lge: $22324: to lacking the framework which congruence analysis provides, the discus- debate about sion might rapidly degenerate into an argument, and perhaps a very preferences. heated one. On the other hand, if the congruence analysis concept is used not only with imagination but also with common sense, reasoned debate becomes possible about why one person rates a factor as two pluses while the rest of the group sees it as a minus. The issue might be resolved by a vote but it would be far more fruitful to explore the reasons for the extreme views. That, you will recall, was the essence of the Delphi method discussed in Chapter 3 and congru- I 132 Chapter 6/ Evaluating strategic moves ence analysis is best seen as a Delphic approach to preference evaluation. In...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern