Case
The Social Embeddedness
of Strategy Implementation
Hanna Lehtimäki
Katja Karintaus
South Asian Journal of
Business and Management Cases
2(2) 229–239
© 2013 Birla Institute of Management Technology
SAGE Publications
Los Angeles, London,
New Delhi, Singapore,
Washington DC
DOI: 10.1177/2277977913509169
http://bmc.sagepub.com
Abstract
The purpose of this case is to deepen understanding about strategy implementation. The study draws
on a network survey conducted in four internationally operating companies and presents analysis on
the role of social relations in strategy implementation. As an outcome, the study provides insight into
the ways by which social relations within the firm facilitate strategy implementation. This article contributes to literature of strategic initiatives by examining the informal structure, the social relations in
four internationally operating firms.
Keywords
Social capital, strategy implementation, social networks, multinationals, top-management perspective
Introduction
To cope with changes in the competitive environment, firms need to have capabilities to persistently
renew themselves (Danneels, 2010; Lechner & Floyd, 2012). Based on information collected from the
business environment, top management articulates the long-term goal and a strategic intent to maintain
the firm’s competitive fitness. The strategic intent is then translated into strategic initiatives to be implemented in the organization. In the literature, strategic initiatives are defined as proactive and temporary
undertakings to foster the strategic renewal (Lechner & Floyd, 2012) and to create economic value from
the environment (Lovas & Ghoshal, 2000). Often strategic initiatives seek to accomplish both exploring
new and exploiting existing capabilities.
Strategy implementation is an ongoing concern to practitioners but the topic has not raised a broad
based interest in the academic research. Strategy implementation has been studied, on the one hand,
from the top-down management perspective and on the other hand, from the middle-management perspective. Research on the top-down management has been interested in the antecedents and effects of
Hanna Lehtimäki and Katja Karinatus have developed this case to be used for classroom discussion for programmes
in management education, management development and for practicing executives to enhance skills in decision
making. It is not intended to illustrate either effective or ineffective handling of an administrative situation. It does
not represent or endorse the views of the management about the issues in the case. The research case study has
been developed from field research.
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Hanna Lehtimäki and Katja Karintaus
implementation (Parmigiani & Holloway, 2011) and parent-divisions relationships (Poppo, 2003).
Research on the middle management, in turn, has examined the cognitive aspects and sense-making
among middle management (for example, Balogun & Johnson, 2005), emotions of middle management
(Huy, 2011) and social networks of middle management (Lechner, Frankenberger & Floyd, 2010;
Lehtimäki & Karintaus, 2012).
Implementing strategic initiatives is particularly challenging in multinational companies where the
top management and the middle management and workforce are located in different countries and in
different business environments. One of the key challenges is the top management’s ability to recognize
what the key resources and competences of the firm are (Danneels, 2010). We argue, that social connections within the firm are among the hidden resources in strategy implementation in multinational
companies. Kostova & Roth (2003) show that, in an MNE, a challenge lies in the difficulty of managing
social connections and in measuring the efficiency and effectiveness of the connections. Also, in the
strategic management literature, there is a strong recognition of the central role of social interaction and
context in the capacity of middle management to interpret and sell the change (Balogun & Johnson,
2005; Rouleau, 2005).
This study joins the research stream interested in the activity of middle management in strategy
implementation and focuses on the social relationships among middle management. The research question is: How do social relations facilitate the implementation of strategy initiative? In seeking to answer
this question, first, strategy initiatives of four multinational companies are identified and second, social
relations among middle management and workforce are analyzed.
An empirical study on the four multinational companies was conducted in 2010–2011. The study
was situated in a context where companies were seeking ways to recover from the global economic
crisis that erupted in 2008. The force of the crises in the global financial market and the change in customer behaviour and business environment was unexpected and dramatic. The decline in sales continued
for months and the future scenarios were dismal. Intensive focus was put on cost cutting and restructuring as the companies were seeking ways to survive the turbulence in the market. At the time of the study,
in 2010–2011, companies were again making strategic plans for growth. However, after several quarters
of cost cutting and restructuring, the members of the organization were still in a state of feeling insecure
about the future and dealing with the emotional distress caused by layoffs of fellow workers. The situation posed a challenge for the top management who were seeking ways to find new ways to increase
sales and build conditions for future growth.
This article contributes to literature of strategic initiatives by presenting an empirical study on
strategy implementation. By examining the informal structure, the social relations in multinational
firms, this study highlights the importance of understanding the fabric of intra-organizational social
relations that facilitates action in the chosen strategic direction. In the following, we will, first, review
the existing research on the role of social capital in strategy implementation. Next, we will present the
strategic initiatives of four internationally operating companies and the analysis on the social relations
within the firms. Finally, we will discuss the implications of our study for research and practice.
Social Relations in Strategy Implementation
Research on strategy initiatives is interested, on the one hand, on the role of the top management and
on the other hand, on the role of the middle management, people working for the firm and relationships
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The Social Embeddedness of Strategy Implementation
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between different people (Lovas & Ghoshal, 2000). Research interested in the role of the top
management examines not only the actions taken by the top management but also the governance structures effective in implementing strategy initiatives. For instance, Parmigiani and Holloway (2011)
studied parent implementation capabilities in restaurant chains and showed that in service-sector
business the parent implementation capabilities are aligned with both the parent’s operational expertise
in the subunits or franchisee business and the governance structure between the parent and the
subunits. Poppo (2003) showed in her study that parent guidance is needed to diminish the potential
of losses due to the divisional self-interest and to guide inter-divisional coordination.
Another stream of research on strategy implementation deals with the role and activity of middle
management. Adopting a behavioural view, Lechner & Floyd (2012) study group influence activity and
show that the success of strategy initiatives is shaped through the dynamics of top-management and
middle-management group influence activity. Rouleau (2005) has adopted a sensemaking perspective
and shows how middle managers both interpret and sell change in the day-to-day activities. Balogun &
Johnson (2005) show that middle management sensemaking occurs through both formal and informal
communication and that, in strategy implementation, attention needs to be paid to facilitating interaction.
Going deeper into the interaction, Huy (2011) conducted an empirical study on middle management’s
emotions and shows that fostering increased attention to social-emotional matters would support strategy
implementation.
Lovas and Ghoshal (2000) argue that firms that are able to choose strategic initiatives which
effectively exploit existing and explore new valuable human and social capital, will perform better in the
long run than those that are not able to achieve this synergy. Furthermore, there is a broad consent that
social capital is built on not only efficient reporting and sharing of explicit knowledge but also on
rich variety of social interaction, which allows for sharing tacit and complex knowledge (cf. Gupta &
Govindarajan, 2000).
Social capital research addresses the importance of understanding cooperation between individuals
when implementing strategy initiatives and creating and exploiting collaborative advantage (Nahapiet,
2009). Social capital is most commonly treated as a construct with relationship structure and relationship content (Bartkus & Davis, 2009). While the structural dimension describes with whom people
have relationships, the concept of relational social capital refers to the contents and quality of these
relationships (Bartkus & Davis, 2009). Even though two people could be similarly connected with other
individuals within the network structure, the outcomes of the relationships may differ depending on the
emotional and personal attachments between the interacting individuals. The relational dimension of
social capital comprises trust and trustworthiness, norms and sanctions, obligations and expectations and
identity and identification (Nahapiet & Ghoshal, 1998, p. 244). The interest is, in particular, in the values
inherent in relational activity.
In this study, the focus is on the content of the individual level relationships. The purpose is to gain
insight into the social construction of meaning (Gergen, 2009; Heracleous & Hendry, 2000, p. 1255).
The interest in the analysis lies in examining what norms and values are expressed in describing the
relationships and what are the expectations towards the interacting individuals. This approach is built
on a notion that in order to understand individual reason we must first understand the relationships
the individual is embedded in (Gergen, 2009, p. xxi). Thus, implementation of strategy initiative is
studied as a social and relational activity.
The article joins the interpretive approaches and focuses on the communicative action that is
constructive of social and organizational reality (Heracelous & Hendry, 2000, p. 1252). Studying social
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Hanna Lehtimäki and Katja Karintaus
connections between the members of an organization allows for making the functioning of the informal
organization visible. The informal organization depicts the day-to-day relational activity that is not
visible in the organization charts and prescribed processes. Also, analyzing the middle management’s
expressions about the relationships allows for taking into account not only the instrumentality of
ties between the interacting individuals but also the other aspects of social connectedness, such as sociability, approval, acceptance, social support and pleasure (Nahapiet, Gratton & Rocha, 2005). These
aspects create the conditions that facilitate the individual capabilities and motivation to exchange and
combine knowledge (Nahapiet & Ghoshal, 1998, p. 254). The content and quality of the relationships
have an impact on the implementation of strategy initiatives.
Methodology
In this research, the research design, data collection and preliminary analysis of network survey results
were conducted in close collaboration with the companies. The research design follows the framework
of engaged scholarship, according to which the planning, implementation and the utilization of the
results are carried out in close collaboration with the participating companies. Such an approach seeks to
ensure the relevance of the research while ensuring its theoretical validity (Van de Ven, 2007). This is an
inductive collective case study and the interest is in developing a theoretically informed understanding
about the phenomenon (Eriksson & Kovalainen, 2008, p. 119; Stake, 2000). Two researchers were
involved in designing the study and collecting and analyzing the data.
The data was collected in four internationally operating companies between 2010–2012. The process
of data collection followed a similar pattern in all companies. First, an interview or a workshop with
the top management of the company was organized to discuss the company’s business situation, the
future strategic initiatives and the focusing of the network survey. Notes and recordings were taken
during these meetings. The interviews and workshops lasted between one to two hours and they were
recorded and transcribed. Second, three to five directors in different locations were individually
interviewed to deepen the understanding on the key issues in business development. The main interest
was to discuss collaboration practices between the distant sales companies and the headquarters. The
interviews were made either face-to-face or over a videoconference depending on the location of
the director. The interviews were recorded and transcribed.
Third, a social network questionnaire was sent globally to managers. The respondents to the
survey belonged to top-middle and middle management and they were located in units in different
countries. The questionnaire comprised both network survey and open ended questions to depict
how the managers perceived internal communication. The primary data in this study consisted of
answers to the open ended question which was stated as follows: ‘Think about the colleague or
workmate that you prefer to cooperate most with. What makes that collaborative relationship successful?’ The total number of responses was 173. The response rate to the questionnaire varied between
70 to 80 per cent.
The analysis of data was conducted using the methods of content and discourse analysis. Attention
was paid to the adjectives describing what makes the collaborative relationship successful with other
individuals within the firm. The analysis then proceeded to assessing the meanings and the ways by
which they construct the inherent values of acting in relationships.
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The Social Embeddedness of Strategy Implementation
Results
Strategic Initiatives
All four companies were seeking to increase the sales, strengthen the customer interface and enhance the
flow of customer knowledge within the firm. The companies were just recovering from the 2008–2009
recession and were seeking to find ways to transfer the operating mode from savings and streamlining
the business into looking forward and building new growth for the business. The strategic initiatives of
each company and their interests in participating in the study are summarized in Table 1.
Table 1. The Strategic Initiatives of the Case Firms
Interest Regarding Intra-organizational
Communication
Company
Strategic Initiative
A
To increase the sales orientation of the service
and maintenance personnel when visiting the
customer’s site on maintenance duties. The service
and maintenance employees pay regular visits to
customers’ premises and easily build the relationships
of trust with the customer. They were now expected
to convey the sales information from the company
to the customers and to inform the company
about sales opportunities and new signals from
the market.
To increase information flow between headquarters
and regional sales units. The recession period
had obliged the company to exercise very strict
and controlled management which had focused
communication on continuous reporting of sales
results.
To enhance cooperation practices between the
sales and projects. In order to survive the recession,
the company started to make tailored projects
for customers, which required new practices for
knowledge sharing within the firm.
B
C
D
To build an organization model which can grow
internationally and form strong network of
distributors around the world.
The management wanted to gain a better
view of the flows of activity within the firm
and to better understand how the social
connections within the firm support the
strategic initiative to foster the proactive
sales of maintenance personnel.
There was a need for understanding the
unofficial communication practices and
structures both within and between the
headquarters and sales companies.
The company’s interest was, first, to
understand, whether the sales support
group had achieved the role planned for it,
second, to learn about how cooperation
takes place between the different
teams and, third, how the practices of
cooperation could be further developed.
To understand how the communication
is structured between different units in
different countries, and to understand how
the new organization model functions.
To learn personnel’s thoughts about
changes and the capabilities of the new
organization.
Source: Authors.
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Hanna Lehtimäki and Katja Karintaus
In company A, the strategic initiative and the interest in learning about interpersonal interaction
was related to fostering proactive sales by the maintenance personnel and to increasing the efficiency
of sharing customer information within the firm. The strategy language used by the top management
emphasizes the role of individuals in information sharing and examines information sharing primarily
as an activity of exchange. The focus and desire were on the efficiency of information sharing. The
company wanted to utilize the social capital already created in the relationships between customers
and the service personnel. The service personnel had access to customers, they had created trustful
relationships with customers and they had the same language to discuss the technical details with
customers.
In company B, the practice of information sharing in the past had heavily relied on the reporting of
financial data from the subsidiaries to the headquarters. The interest of the company was to take another
look at the communication and to find out whether there is any ground in supporting a richer communication between the headquarters and the subunits. A need to broaden an understanding of the personal
interaction between the individuals was expressed.
In company C, the strategy initiative emphasized collaboration between individuals. The interest
in individual level collaboration was to understand how it supported complex knowledge sharing.
The goal was not only to support the exchange of information but also to foster learning together. The
company provided highly technical projects, which required that very complex knowledge was shared
efficiently between the different parts of the organization. The interest of the company was to build
strong and dense relationships between the sales, project support and research and development.
In Company D, the strategy initiative was related to the capability of the organization to grow
internationally. The company had recently implemented a new organizational structure and the aim was
to understand how it supported knowledge sharing and information exchange and the international
growth of the company.
Common to all four strategy initiatives is the goal of gaining business benefits from the exchange of
information and sharing knowledge. Inherent in the initiatives is the goal of well-functioning collaboration between individuals in different parts of the organization. The interest regarding intra-organizational
communication in all companies relate to the practices of knowledge sharing and to the ways by which
access to information is created in the organization.
Content of Social Relations
To depict the relational aspect of social capital, the respondents were asked to describe a colleague
with whom the respondent preferred to work with and to illustrate what made collaboration with
colleagues within the firm successful. Table 2 summarizes the thematization of the responses. First, the
expressions in the questionnaire were grouped together under similar topics that formed a classification
of the expressions. The classifications were then grouped together and they formed five themes that
express relational values inherent in communication.
The first two themes express the value of goal and task orientation. The first theme, ‘Good corporate
member’, comprises an understanding of the business goals for the whole company, showing commitment to the company and fellow workers and manifesting personal skill and expertise. The second theme,
‘Skill in information sharing’, consists of professional communication behaviour and timely and reliable
communication. Also, it is expressed that maintaining routines in communication is helpful in creating
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Table 2. Relational Values Inherent in Communication
Theme
Classification
Expressions in the Questionnaire
Good corporate
member
Business goals
in mind
Looking into corporate interest instead of own
The whole company’s perspective
Understanding the whole picture
Both thinking the best interest of the company
See the whole business setting, not only one’s own sandbox
Shared vision
Common goals
Serving customer
Find common solutions
Team spirit
Competence
Competence in technical issues
Competence in customer issues
Professional skills
Knowledge
Expertise
Experience
Effective
Fixing problems
Providing solutions
Capability to tell so that the information is easy to understand
Communication skills
Correct manners
Professional in information exchange
Open communication
Good communication on personal level
Honest communication
Direct communication
Professionalism in response
Fluency
Immediate feedback
Rapid response
Prompt reply
Fast reaction
Immediate response
Work with speed
Quick and clear replies to questions
Quick response to questions
Respect of deadline
Reply on request
Confidence that you will get an answer
Reliable
Daily communication
Regular discussion and meetings
Using all available media
(Table 2 continued)
Commitment
Personal capability in
the subject matter
Skill in information
sharing
Communication
behaviour
Speed in
communication
Reliability in
communication
Routine in
communication
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Hanna Lehtimäki and Katja Karintaus
(Table 2 continued)
Theme
Classification
Expressions in the Questionnaire
Skill in working
together
Approachability
Easiness to do work
Easy to contact
Easy to communicate
Listening
Time to listen
Ability to listen
Understanding even without saying too much
Listens to other’s perspective
Being available
Honest and constructive feedback
Gives feedback
Gives direct feedback without badwill
Willingness to cooperate
Willingness to go the extra mile
Willingness to help
Getting help when needed
Ability to enjoy a colleague’s success
Active
Problem solving mentality
Proactive
Keeping promises
Honesty
Integrity
Supporting each other
Mutual trust and understanding
Mutual respect and understanding
Meeting expectations
Same duties
Responsible, Taking responsibility
Reliable, Reliability
Confidence
Sense of duty
Capable of making decisions
Attention to detail
Passion
Showing commitment
Humbleness
Joy
Inspiring
Capability to challenge in a positive way
Nice to work with
Positive
Feel comfortable with the person
Friendly attitude
Friendliness
Positive attitude towards others
Positive attitude
Capability to listen
Skill in giving
feedback
Capability to
cooperate
Capability to provide
for a rewarding
communication
Trustworthy
behaviour
Showing personal
responsibility
Delightfulness
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The Social Embeddedness of Strategy Implementation
Theme
Sharing a sense of
togetherness
Classification
Seeing eye to eye
Giving from oneself
Personal agility
Frankness
237
Expressions in the Questionnaire
Long-term relationship
Personal relationship
Similar experiences
Likemindedness
Same interests
Mutual understanding
Feeling of togetherness
Personal relationship with trust and support
Fruitful discussions
Fruitful dialogue
Willingness to dialogue
Solving questions together
Sharing ideas and developing them together
Common sense of humor
Good sense of humor
Open dialogue
Open communication
Open mindedness
Flexibility
Adaptability
Openness
Transparency
Sincerity
Goodwill
No backstabbing
No hidden agendas, no secrets
Source: Authors.
successful knowledge sharing and information exchange. Both themes construct an understanding
of social relations as instrumental. What becomes emphasized as valuable is efficiency and reliability
in information transfer. Also, expertise and good manners are considered as elements to professional
relations. This appears to emphasize the mechanistic feature of social relations in a corporate setting.
The three consequent themes emphasize social connectedness as a value in relationships. The third
theme, ‘Skill in working together’, includes approachability, capability to listen, skill in giving feedback
and capability to cooperate. The fourth theme ‘Capability to provide for a rewarding communication’
consists of trustworthy behaviour, showing personal responsibility and delightfulness. The fifth theme
‘Sharing a sense of togetherness’ comprises seeing eye to eye, giving from oneself, personal agility and
frankness. These themes construct an understanding of social relations as valuable in terms of sociability
and sense of togetherness. What becomes constructed as valuable is the richness and quality of social
interaction. The expressions manifest sociability, connectedness, trust and as inherent values in connecting with others and working together within a firm.
The analysis of the expressions shows that both instrumentality and social connectedness become
constructed as the features of social relationships. This finding is supported by Uzzi (1997), who states
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Hanna Lehtimäki and Katja Karintaus
that ideally there is a balance between arms-length ties, that is, ties that emphasize transaction and economic exchange and embedded ties, that is, ties of close relationships with trust, fine grained information
transfer and joint problem solving arrangements.
Conclusion
In this study, social embeddedness was chosen as the key construct for understanding the implementation of strategic initiatives. An empirical study on social relations in middle management in four
multinational companies show, that in the everyday social activity, both task orientation and sociability
are values simultaneously present. The results of the analysis highlight the importance of understanding
the fabric of intra-organizational social relations that facilitates action in the chosen strategic direction.
It can be concluded that for strategy implementation to be successful, attention needs to be paid to
social relations. The strategic initiatives recognize access to information, trust and collaboration as the
important aspects of social activity and knowledge sharing. When put in contrast to the values expressed
by the interacting individuals, this understanding of the social activity appears as abstract and universal.
The strategic initiatives do not appreciate the richness of social activity and thus, it could be argued, the
benefits of social capital cannot be fully exploited. By increasing the acknowledgement of the importance of sociability in strategic management, the potential of social connectedness could be better
capitalized.
The study contributes to the research on the role of middle management in strategy implementation
by showing that both sensemaking and emotions are affected by the relationships among middle management. Relational values inherent in communication form the social fabric of connections and have an
impact on how strategy is implemented, by whom and through whom.
In internationally operating companies the connections tend to be weak because of cultural and
geographical distances. To achieve functioning relationships that are capable of handling rich knowledge
and solve complex problems, the relationships require intended attention (Kilduff, 1993). This study
shows that social connections in internationally operating companies are manifold, but without recognition from the top management, the company is not capable of utilizing social connections in building
collaborative advantage.
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Hanna Lehtimäki is Professor, Department of Business, Innovation Management, University of Eastern
Finland, Kuopio Campus, Kuopio, Finland. [E-mail: [email protected]]
Katja Karintaus is a Doctoral Student and Researcher, School of Management, University of Tampere,
University of Tampere, Finland. [E-mail: [email protected]]
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