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CHAPTER 7 • IMPLEMENTING STRATEGIES: MANAGEMENT AND OPERATIONS ISSUES 217

TABLE 7-2 The Stamus Company’s Revenue
Expectations (in $Millions)
2010 2011 2012
Division I Revenues 1.0 1.400 1.960
Division II Revenues 0.5 0.700 0.980
Division III Revenues 0.5 0.750 1.125
Total Company Revenues 2.0 2.850 4.065

Stamus Company will slightly exceed its long-term objective of doubling company
revenues between 2010 and 2012.
Figure 7-2 also reflects how a hierarchy of annual objectives can be established based
on an organization’s structure. Objectives should be consistent across hierarchical levels
and form a network of supportive aims. Horizontal consistency of objectives is as impor-
tant as vertical consistency of objectives. For instance, it would not be effective for manu-
facturing to achieve more than its annual objective of units produced if marketing could
not sell the additional units.
Annual objectives should be measurable, consistent, reasonable, challenging, clear,
communicated throughout the organization, characterized by an appropriate time dimen-
sion, and accompanied by commensurate rewards and sanctions. 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 measur-
able. 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 compatible with employees’ and managers’ values and
should be supported by clearly stated policies. More of something is not always better.
Improved quality or reduced cost may, for example, be more important than quantity. 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 implemen-
tation. Clear annual objectives do not guarantee successful strategy implementation, but
they do increase the likelihood that personal and organizational aims can be accomplished.
Overemphasis on achieving objectives can result in undesirable conduct, such as faking the
numbers, distorting the records, and letting objectives become ends in themselves.
Managers must be alert to these potential problems.

Policies

Changes in a firm’s strategic direction do not occur automatically. On a day-to-day basis,
policies are needed to make a strategy work. Policies facilitate solving recurring problems
and guide the implementation of strategy. Broadly defined, policy refers to specific guide-
lines, methods, procedures, rules, forms, and administrative practices established to
support and encourage work toward stated goals. Policies are instruments for strategy
implementation. Policies set boundaries, constraints, and limits on the kinds of adminis-
trative actions that can be taken to reward and sanction behavior; they clarify what can
and cannot be done in pursuit of an organization’s objectives. For example, Carnival’s
Paradise ship has a no smoking policy anywhere, anytime aboard ship. It is the first cruise
ship to ban smoking comprehensively. Another example of corporate policy relates to
surfing the Web while at work. About 40 percent of companies today do not have a formal
policy preventing employees from surfing the Internet, but software is being marketed
now that allows firms to monitor how, when, where, and how long various employees use
the Internet at work.
Policies let both employees and managers know what is expected of them, thereby
increasing the likelihood that strategies will be implemented successfully. They provide
a basis for management control, allow coordination across organizational units, and