Patagonia Strategy Implementation and Human Capital Management

Concepts in Strategy Implementation and Human Capital Management

Effective strategy implementation is not intuitive. It is not accomplished simply by making structural changes to an organization chart, or even necessarily by recruiting and hiring new talent (Nielsen et al., 2008). Both of these responses to struggling strategy implementation are common, but they are almost never the right response — not the response that will help a company achieve its most sought-after strategic goals (Nielsen et al., 2008). Research in the area of strategic implementation has shown the importance of two attributes of strategy execution: ensuring that decision rights are clear, and that information is pushed to those who need it (Nielsen et al., 2008).

Decision rights can be thought of as the lines connecting the nodes in a flowchart. Not only do decision rights indicate who owns critical decisions, but they also illustrate the relationships between the various decision owners and decision makers in a process or unit (Nielsen et al., 2008). In order to provide and push information where it is needed, a cross-functional network is required (Nielsen et al., 2008). One way to build this type of information-rich network is to promote managers laterally rather than vertically, so that cross-unit collaboration becomes the functional norm (Nielsen et al., 2008).

Companies tend to create and use metrics that do not enable them to measure organizational performance effectively (Bassi & McMurrer, 2007). For example, tracking employee turnover rates, total hours of training per employee, and average time to successfully recruit and hire for open positions are not good predictors of organizational health or performance (Bassi & McMurrer, 2007). While there is some evidence that total expenditure on training per person is a useful marker for organizational performance, a more comprehensive and systematic model is available (Bassi & McMurrer, 2007). A set of human capital management (HCM) best practices has been developed through research in economics, human resources, and organizational development (Bassi & McMurrer, 2007). These best HCM practices can be measured in individual organizations through surveys, and the results used to improve the performance of participating organizations (Bassi & McMurrer, 2007). The primary HCM best practices categories are as follows: employee engagement, knowledge accessibility, leadership practices, organizational learning capacity, and workforce optimization (Bassi & McMurrer, 2007).

The Boston Consulting Group's Growth Share Matrix is a quadrant-based analytical tool for examining the parameters of market share and market growth as a basis for making decisions about whether to invest in a company or take some other strategic action. The quadrants support decision-making and assist with identifying where a company might be located in the lifecycle continuum — a factor that can have great influence on investment decisions. Companies are represented in this matrix as Stars, Question Marks, Cash Cows, or Dogs — nomenclature related to the probable actions that investors and owners are likely to take given a cluster of indicators related to a company's market share and market growth.

All other things being equal, a company classified as a Cash Cow is generally considered mature and does not need an infusion of cash, whereas a company classified as a Dog is considered to be in decline and requires a radical decision to reposition it. A company considered to be a Star may need capital from the Cash Cow but is likely to continue on a trajectory of increased market share and sales growth. A company considered a Question Mark may be an as-yet unproven startup or a more established company seeking to increase market share. Strategic decisions for a Question Mark company entail both risk and opportunity, and will likely be designed to attract investment and grow sales in order to increase market share.

References

Bassi, L., & McMurrer, D. (2007). Maximizing your return on people. Harvard Business Review.

Hamm, S. (2006, August 20). A passion for the planet. BusinessWeek.

Nielsen, G. L., Martin, K. L., & Powers, E. (2008). The secrets to successful strategy execution. Harvard Business Review.

The Boston Growth Share Matrix. Boston Consulting Group.

The Boston Portfolio Analysis. Boston Consulting Group.