Strategic Management week 7 Discussion

Chapter11.pptx

Home >Business & Finance homework help >Management homework help >Strategic Management week 7 Discussion

chapter 11 Managing Internal Operations: Actions That Promote Good Strategy Execution

Arthur A. Thompson The University of Alabama

An e-book published and distributed by McGraw Hill Education

Sixth Edition of Strategy: Core Concepts and Analytical Approaches (2020-2021). Arthur A. Thompson, The University of Alabama. Published and distributed by McGraw Hill Education. Image of globe comprised of puzzle pieces with several pieces dislodged and scattered below the globe. Chapter 5 The Five Generic Competitive Strategy Options: Which One to Employ

“Processes underpin business capabilities, and capabilities underpin strategy execution.”

~–2

Pearl Zhu

“Winning companies know how to do their work better.”

~–3

Michael Hammer and James Champy

“Companies that make best practices a priority are thriving, thirsty, learning organizations. They believe that everyone should always be searching for a better way. Those kinds of companies are filled with energy and curiosity and a spirit of can-do.”

11–4

Jack Welch, former CEO, General Electric

“Motivation is the art of getting people to do what you want them to do because they want to do it.”

11–5

Dwight D. Eisenhower, Thirty-fourth President of the United States

“Pay your people the least possible and you’ll get the same from them.”

11–6

Malcolm Forbes, late Publisher of Forbes Magazine

Learn why resource allocation should always be based on strategic priorities.

Understand why policies and procedures should be designed to facilitate good strategy execution.

Understand why and how benchmarking, best-practices adoption, and tools for continuously improving the performance of value chain activities help an organization achieve operating excellence and superior strategy execution.

Understand the role of information and operating systems in enabling company personnel to carry out their strategic roles proficiently.

Learn how and why the use of well-designed incentives and rewards can be management’s single most powerful tool for promoting proficient strategy execution and operating excellence.

11–7

Learning Objectives

Steering Needed Resources to Execution-Critical Activities

Instituting Policies and Procedures that Facilitate Strategy Execution

Adopting Best Practices and Striving for Continuous Improvement

Installing Information and Operating Systems

Using Rewards and Incentives to Promote Better Strategy Execution

11–8

Chapter 11 Roadmap

Good strategy execution requires:

Top management involvement in directing the proper kinds and amounts of resources to various organizational units so that the units can effectively and efficiently execute their parts of the strategic plan.

Changes in strategy and efforts to improve execution of an existing strategy typically entail budget reallocation and resource shifting.

Previously important units with a lesser role in a new strategy may need downsizing.

Units that now have a bigger strategy-critical role may need more people, new equipment, additional facilities, and above-average increases in their operating budgets, especially if they need to develop and strengthen particular resources, competencies, and capabilities.

Allocating Needed Resources to Execution-Critical Activities

11–9

Expenditures for operations and capital improvements must be

Driven by what it takes to achieve good strategy execution (to amply fund performance of strategy-critical value chain activities)

Lean (to operate cost-efficiently).

Underfunding organizational units and activities pivotal to strategic success impedes the implementing and executing of strategy.

Overfunding of particular organizational units and value chain activities wastes organizational resources and reduces financial performance.

Guidelines for Allocating Resources to Promote Good Strategy Execution

11–10

Core Concept

Good strategy execution requires steering the proper kinds and amounts of resources to the enterprise’s various organization units and strategy-critical value chain activities.

Visible actions to reallocate operating funds and increase/decrease the staffing of certain organizational units give credibility to management’s intent to institute internal change and signal personnel to exhibit a sense of urgency in putting the new strategy elements into place and/or improving the performance of activities essential to better strategy execution.

11–11

When a firm puts new strategy elements in place or improves its strategy execution capabilities, some changes in work practices and behavior of personnel are usually called for.

Well-conceived policies and procedures facilitate good strategy execution by:

Providing top-down guidance in how certain things need to be done

Helping enforce needed consistency in how execution-critical activities are performed in geographically scattered operating units

Promoting the creation of a work climate that facilitates good strategy execution

Ensuring That Policies and Procedures Facilitate Strategy Execution

11–12

Figure 11.1 How Prescribed Policies and Procedures Facilitate Strategy Execution

Access the text alternatives for slide image.

11–13

Core Concept

A company’s policies and procedures provide guidance for conducting particular aspects of the company’s business and a set of white lines and routines for steering employee behavior.

11–14

Core Concept

A company’s policies and procedures can either support or hinder good strategy execution.

Well-conceived policies and procedures aid strategy execution; out-of-sync ones are barriers.

Instituting strategy-facilitating policies can mean more policies, fewer policies, or different policies.

It can mean policies that require things to be done a certain way or policies that give employees some leeway between the white lines.

11–15

One of the big policy-making issues concerns what activities need to be rigidly prescribed and what activities ought to allow room for independent action on the part of empowered personnel

Too much policy can erect as many obstacles as wrong policy or be as confusing as no policy. There is wisdom in a middle-ground approach:

Prescribe enough policies to give organization members clear direction and to place desirable boundaries on their actions, then empower them to act within these boundaries however they think makes sense.

Allowing company personnel to act anywhere between the “white lines” is especially appropriate when individual creativity and initiative are more essential to good strategy execution than standardization and strict conformity.

11–16

Rigid Policies or Room for Independent Action?

Managers can promote competent strategy execution by pushing organization units and personnel to identify and adopt the best practices for performing value chain activities and, further, insisting on continuous improvement in how internal operations are conducted

Benchmarking a firm’s performance of particular activities and business processes against “best-in-industry” and “best-in-world” performers is a powerful tool for gauging how well a firm is executing pieces of its strategy and performing particular value chain activities

Benchmarking provides yardsticks for

Judging the effectiveness and efficiency of internal operations

Setting performance standards for organization units to meet or beat

Adopting Best Practices and Employing Process Management Tools to Improve Execution

11–17

Strategic Insight

Managerial efforts to identify and adopt best practices are a powerful tool for promoting operating excellence and better strategy execution.

11–18

Core Concept

A best practice is a means of performing an activity or process that yields results consistently superior to other approaches.

A method of performing an activity or process qualifies as a best practice when at least one enterprise has shown that it is unusually effective in:

Significantly lowering costs OR

Improving quality or performance OR

Shortening time requirements or enhancing safety OR

Delivering other highly positive outcomes

A best practice can evolve over time as improvements are discovered.

11–19

The role of benchmarking is to:

Look outward to find best practices of other firms

Develop measures of how well a firm’s own performance of the activity compares to the best-practice standard of outside enterprises

Then the firm must

Adapt the best practices to fit its own circumstances

Implement its customized version of the best practice

Continue to track how well its performance outcomes compare to those achieved elsewhere

How the Process of Identifying and Incorporating Best Practices Works

11–20

Strategic Insight

Implementing use of best practices across a company’s entire value chain is a powerful way for managers to push a company along the path to operating excellence and good strategy execution.

11–21

Figure 11.2 From Benchmarking and Best-Practice Implementation to Operating Excellence

Access text alternative for slide image.

11–22

Successfully adapting a best practice methodology improves a firm’s performance of that activity, perhaps dramatically, promoting better strategy execution

Benefits of best practices and benchmarking

Using best practices extensively in value chain activities increases both the effectiveness and the efficiencies of those activities

Benchmarking data confirms the achievement of superior outcomes in the performance of value chain activities Wide-scale use of best practices across a firm’s entire value chain promotes operating excellence and good strategy execution.

Best Practice Adoption + Benchmarking = Powerful Tools for Achieving Operating Excellence

11–23

Three other potent management tools for improving the performance of certain internal activities and thereby moving closer to operating excellence and more competent strategy execution are:

Business process reengineering

Total quality management (TQM) programs

Six Sigma programs

11–24

Business Process Reengineering, TQM, and Six Sigma Quality Programs: Tools for Promoting Operating Excellence

When strategically relevant activities are distributed piecemeal across several functional departments:

Inefficiencies are created and optimal performance is impeded

Accountability is lacking since no one functional manager is responsible for optimum performance of the entire activity

Solution  Business Process Reengineering

Involves redesigning and streamlining workflows and work process steps, with the goal of achieving quantum gains in performance of the activity

Often leads to the establishment of process departments and/or cross-functional work groups that unify performance of activities, thereby improving overall performance and/or lowering costs, which in turn promotes operating excellence

11–25

Business Process Reengineering

Core Concept

Business process reengineering involves radically redesigning and streamlining how an activity is performed, with the intent of achieving quantum improvements in performance.

11–26

TQM is a management approach that emphasizes:

Continuous improvement in all phases of operations

100 percent accuracy in performing tasks

Involvement and empowerment of employees at all levels

Team-based work design

Benchmarking

Total customer satisfaction

TQM entails creating a total quality culture focused on continuously improving the performance of every task and value chain activity.

11–27

Total Quality Management Programs

Core Concept

TQM entails creating a total quality culture bent on continuously improving the performance of every task and value chain activity.

TQM stresses ongoing incremental progress, striving for inch-by-inch gains again and again in a never-ending stream.

11–28

Implementing and executing a TQM program

Involves reforming the firm’s culture and focusing on a total quality/ continuous improvement philosophy

Aims to instill enthusiasm and commitment to doing things right from the top to the bottom of the organization

Involves an ongoing search for ways to improve

TQM doctrine

There is no such thing as “good enough” and everyone has a responsibility to participate in continuous improvement

TQM is a race without a finish—success comes from making small steps forward each day

TQM takes a fairly long time to show significant results—very little benefit emerges in the first six months. But TQM programs can deliver good long-term results if top executives succeed in creating a culture and work climate where TQM philosophies and practices can thrive.

11–29

How TQM Works

Six Sigma Programs

Six Sigma techniques entail the use of advanced statistical methods to identify and remove the causes of defects (errors) and undesirable variations in performing an activity or business process

When performance of an activity or process reaches “Six Sigma quality,” there are not more than 3.4 defects/errors per million iterations (equal to 99.9997% accuracy)

The statistical thinking underlying Six Sigma is based on three principles:

All work is a process

All processes have variability

All processes create data that explains variability

11–30

Core Concept

Six Sigma programs use advanced statistical methods to enable an activity or process to be performed with 99.9997 percent accuracy—fewer than 3.4 million defects per million iterations.

11–31

Type 1

Using Six Sigma methods to improve existing processes falling below specification and needing incremental improvement

Useful for improving performance when there are wide variations in how well an activity is being performed

Type 2

Using Six Sigma techniques to develop new processes or products at Six Sigma quality levels

11–32

Two Main Types of Six Sigma Programs

An enterprise that systematically applies Six Sigma methods to its value chain, activity by activity, can make major strides in improving the proficiency with which its strategy is executed provided:

Top management is genuinely committed to employing Six Sigma programs and methods of operating

Senior management spends the time it takes to establish and nurture a Six Sigma-style quality culture

Management is able to fully involve employees and train adequate numbers of Six Sigma green belt, black belt, and master black belt personnel to conduct the Six Sigma programs competently

The Challenges of Successfully Employing Six Sigma Programs

11–33

Six Sigma techniques can stifle innovation and creativity

The strength of Six Sigma techniques is developing and improving how activities and processes are performed, but creative processes such as R&D and new product development involve (or require):

Outside-the-box brainstorming

Trial-and-error experimentation

Innovative exploration of ideas and approaches, with many being discarded and those that appear promising going through multiple testing, revisions, and prototyping to identify what works best

Six Sigma users have backed off using strict Six Sigma procedures for activities where personnel need free rein to discover new and better ways of doing things

A Drawback of Six Sigma Programs

11–34

Business process reengineering aims at one-time quantum improvement whereas both TQM and Six Sigma programs aim at ongoing incremental improvements

Reengineering can be used first to produce a good basic design that yields quick dramatic improvements in performing a business process

TQM or Six Sigma programs can then be used as a follow-on to achieve gradual improvements beyond the one-time quantum gain

The Difference between Business Process Reengineering and Continuous Improvement Programs

11–35

Benchmarking, best practices, business process reengineering, TQM, and Six Sigma techniques help a firm:

Execute its strategy proficiently

Improve the performance of value chain activities

Strengthen organizational capabilities

Build a culture of operating excellence

While rivals can also implement benchmarking, best practices, and continuous improvement programs, it is much more difficult and time-consuming for them to instill a deeply ingrained culture of operating excellence, thus enabling a successful first-mover to achieve a potentially sustainable competitive advantage

Capturing the Benefits of Initiatives to Improve Operations

11–36

Core Concept

The purpose of using benchmarking, best practices, business process reengineering, TQM, and Six Sigma programs is to improve the performance of all value chain activities, become ever more proficient in executing the firm’s strategy, and create a work climate and culture where personnel constantly strive for operating excellence.

When a firm’s use of the tools proves successful, it often gains a competitive advantage over rivals based on superior strategy execution capabilities.

11–37

11–38

Installing Information and Operating Systems

State-of-the-art operating systems and real time data

Help strengthen operating capabilities and improve the performance of value chain activities

Are integral to competent strategy execution and operating excellence

Provide a competitive advantage by giving a firm capabilities that rivals do not have and are unable to match (without the expenditure of considerable time, money, and organizational effort)

Core Concept

State-of-the-art operating systems and real-time data are integral to competent strategy execution and operating excellence.

They can also be a basis for competitive advantage if they give a firm competitively valuable capabilities that rivals do not have or cannot offset with other capabilities they have developed.

11–39

Internal communication systems that coordinate 100,000 vehicles and 650 aircraft handling an average of 17.7 million packages per day

Leading-edge flight operations systems allow a single controller to redirect many FedEx aircraft at once, overriding their flight plans should weather or other contingencies arise

E-business logistics management tools allow customers to ship and track their packages online

Example: Execution-Critical Support Systems at FedEx

11–40

Amazon.com

Global network of warehouses where computers control order-picking by sending signals to wireless receivers

Otis Elevator

Sophisticated support systems for monitoring, maintaining, and quickly repairing the 2.6 million elevators, escalators, and moving sidewalks it has installed for customers

Other Examples of Execution-Critical Support Systems

11–41

Information concerning about daily operations is essential if managers are to gauge how well the strategy execution process is proceeding.

Information systems should cover five broad areas:

Customer data

Operations data

Employee data

Supplier/partner/collaborative ally data

Financial performance data

All key strategic performance indicators must be tracked and reported in real time where possible

Why Information Systems and Performance Tracking Matter

11–42

Real-Time Information Systems

Permit timely tracking of key performance indicators across all aspects of the business

Allow managers to gather and review information rapidly, to quickly identify and diagnose problems, and to initiate corrective actions

Enable managers to gauge how well the execution process is proceeding

Provide a means for managers to exercise control over operations

Provide empowered personnel with information essential to performing their jobs (responding to customer inquiries, providing personalized customer service)

Amazon CEO Jeff Bezos, a proponent of managing by the numbers, says: “The trouble with most corporations is that they make judgment-based decisions when data-based decisions could be made.”

The Benefits of Real-Time Information and Performance Tracking

11–43

Personnel must be enthusiastically committed to executing strategy proficiently and achieving performance targets

Enlisting such organization commitment requires an assortment of motivational techniques and rewards

Just talking about how important new operating practices and the achievement of performance targets are to the firm’s well-being seldom commands people’s best efforts for very long

An effectively designed system of incentives and rewards is a very powerful management tool for winning employee commitment to diligent, competent strategy execution and operating excellence.

Tying Rewards and Incentives Directly to Achieving Good Execution-Critical Outcomes

11–44

Core Concept

A well designed reward structure is management’s single most powerful tool for mobilizing organizational commitment to successful strategy execution.

11–45

Providing attractive financial compensation

Providing attractive perks and fringe benefits

Relying on promotion from within whenever possible.

Inviting and acting on ideas and suggestions from employees.

Giving awards and public recognition to high performers and showcasing company successes.

Creating a work atmosphere in which there is genuine sincerity, caring, and mutual respect among workers and between management and employees.

Stating the strategic vision in inspirational terms that make employees feel they are doing something worthwhile in a larger social sense.

Providing an appealing workplace environment.

Incentives and Motivational Practices That Facilitate Good Strategy Execution

11–46

Monetary Incentives

Base pay increases

Performance bonuses

Profit sharing plans

Stock options

Retirement packages

Piecework incentives

Non-Monetary Incentives

Praise/constructive criticism

Special recognition

More/less job security

Stimulating or dead-end job assignments

More/less autonomy

Rapid/slow promotion

11–47

Components of an Effective Reward System

There is scant evidence that a no-pressure/no-adverse-consequences work environment leads to superior strategy execution or operating excellence. Hence, it is unwise to:

Take off the pressure for good individual and group performance

Play down the adverse consequences of shortfalls in performance

Nonetheless, it is usually best to emphasize positive rather than negative approaches

Too much stress, internal competitiveness, job insecurity, and unpleasant consequences can have a counterproductive impact on workforce morale and strategy execution

Striking the Right Balance between Rewards and Punishment

11–48

A well-designed incentive system emphasizes rewarding people for accomplishing results, not for dutifully performing assigned tasks

Focus must be on “what to achieve”, NOT ON “what to do.”

Reward people for achieving the right results, NOT for activity or trying hard.

Performing assigned tasks is not equivalent to achieving intended outcomes.

Every organization unit, manager, team or work group, and employee must be held accountable for achieving outcomes that contribute to good strategy execution and business performance.

Linking Rewards to Achieving the Right Outcomes

11–49

Tying rewards to the achievement of strategic and financial performance targets is management’s single most powerful tool to win the commitment of personnel to effective strategy execution.

Generously reward people who meet or beat performance targets.

Deny rewards to those who don’t.

Incentives/rewards must never be awarded for “a commendable effort,” always staying busy, coming to work on time, or “trying hard”

Linking the Reward System to Performance Outcomes

11–50

Core Concept

Incentives must be based on accomplishing the right results, not on dutifully performing assigned tasks.

People should never be rewarded just because they “work hard” or “put forth a good effort.”

Incentives work best when tied directly to achieving performance outcomes linked to both good strategy execution and good financial performance.

11–51

Make the performance payoff a major, not minor, piece of the total compensation package

Have incentives that extend to all managers and all workers, not just top management

Administer the reward system with scrupulous objectivity and fairness

Make sure that the performance targets each individual or team is expected to achieve involve outcomes that the individual or team can personally affect

Keep the time between achieving the target performance outcome and the payment of the reward as short as possible

Absolutely avoid skirting the system to find ways to reward effort rather than results

11–52

Guidelines for Designing Effective Incentive Compensation Systems

Core Concept

The unwavering standard for judging whether individuals, teams, and organizational units have done a good job must be whether they meet or beat performance targets that reflect good strategy execution.

Once “good excuses” start to creep into justifying rewards for subpar results, the door is open for all kinds of reasons why actual performance failed to match targeted performance.

A “no excuses” standard is more evenhanded, easier to administer, and more conducive to creating a results-oriented work climate.

11–53

What specific actions has your company taken to manage internal operations so as to promote good strategy execution and operating excellence?

What specific evidence (based on the industry benchmarking data and other operating statistics) can you cite that indicates your company is making reasonable progress toward achieving operating excellence?

Is there hard evidence (from the industry benchmarking data and other operating statistics) that your company is not as close to achieving operating excellence as are one or more rival companies?

11–54

Questions for Company Co-Managers

Accessibility Content: Text Alternatives for Images

Figure 11.1 How Prescribed Policies and Procedures Facilitate Strategy Execution, Text Alternate

Return to parent slide.

Well-conceived policies and procedures:

Provide top-down guidance about how certain things need to be done.

Channel individual and group efforts along a strategy-supportive path.

Help align the actions and behavior of company personnel with the requirements for good strategy execution.

Place limits on independent action and help overcome resistance to change.

Help enforce standardization and consistency in how execution-critical activities are performed in geographically scattered organization units.

Promote the creation of a work climate that facilitates good strategy execution.

Return to parent slide.

Figure 11.2 From Benchmarking and Best-Practice Implementation to Operating Excellence, Text Alternate

Return to parent slide.

The graphic shows from benchmarking and best-practice implementation to operating excellence.

Engage in benchmarking to identify the “best practice” for performing an activity.

Adapt the “best practice” to fit the company’s situation, then implement it (and further improve it over time).

Continue to benchmark company performance of the activity against “best-in-industry” or “best-in-world” performers.

Strategic Management week 7 Discussion

image2.png

image3.png

image1.png

image4.gif

image5.png

image6.png