Strategic Business Plan Report

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Week 6 Objectives 1. Recognise what issues to consider in establishing a strategy-supportive

organizational structure and organizing the work effort;

2. Become aware of the pros and cons of centralized and decentralized

decision making in implementing the chosen strategy;

3. Understand the different strategy implementation policies and

procedures employed by firms; and

4. Understand the importance of strategy evaluation.

Structuring the Organisation

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Deciding Which Value Chain Activities to Perform

Internally and Which to Outsource

Wisely choosing which activities to perform internally and which to outsource can

lead to several strategy-executing advantages—lower costs, heightened strategic

focus, less internal bureaucracy, speedier decision making, and a better arsenal of

organizational capabilities.

• Outsourcing’s Execution-Related Benefits:

• Helps in outclassing rivals in strategy-critical activities and in turning a core

competence into a distinctive competence.

• Decreases bureaucracies, flattens structure, speeds decision making, and

shortens respond time to changing market conditions.

• Adds to a firm’s capabilities and contributes to better strategy execution

through partnerships with suppliers and channel partners.

Structuring the Organisation

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Aligning the Firm’s Organisational Structure with its

Strategy

• Organizational Structure

• Comprises the formal and informal arrangement

of tasks, responsibilities, lines of authority, and reporting relationships for the

firm.

• Structure Is Aligned with Strategy When:

• Its design contributes to the creation of value for customers.

• Its parts are aligned with one another and also matched to the requirements of

the strategy.

• It lowers operating costs through lower bureaucratic costs and operational

efficiencies.

Structuring the Organisation

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Aligning the Firm’s Organisational Structure with its Strategy

Structuring the Organisation

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Simple Structure (Line-and-Staff)

Functional Structure (Departmental or Unitary)

Multidivisional Structure (Divisional or M-form)

Matrix Structure (Composite or Combination)

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Determining How Much Authority to Delegate

Structuring the Organisation

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Centralized Organizational Structures

Decentralized Organizational Structures

Basic Tenets Basic Tenets

• Decisions on most matters of importance should be in the hands of top-level managers who have the experience, expertise, and judgment to decide what is the best course of action

• Lower-level personnel have neither the knowledge, the time, nor the inclination to properly manage the tasks they are performing

• Strong control from the top is a more effective means for coordinating the firm’s actions

• Decision-making authority should be put in the hands of the people closest to, and most familiar with, the situation

• Those with decision-making authority should be trained to exercise good judgment

• A firm that draws on the combined intellectual capital of all its employees can outperform a command-and-control firm

Determining How Much Authority to Delegate

Structuring the Organisation

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Centralized Organizational Structures

Decentralized Organizational Structures

Chief Advantages Chief Advantages

• Fixes accountability through tight control from the top

• Eliminates potential for conflicting goals and actions on the part of lower- level managers

• Facilitates quick decision making and strong leadership under crisis situations

• Encourages employees to exercise initiative and act responsibly

• Promotes greater motivation and involvement in the business on the part of more company personnel

• Spurs new ideas and creative thinking

• Allows fast response to market change

• Entails fewer layers of management

Determining How Much Authority to Delegate

Structuring the Organisation

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Centralized Organizational Structures

Decentralized Organizational Structures

Primary Disadvantages Primary Disadvantages

• Lengthens response times by those closest to the market conditions because they must seek approval for their actions

• Does not encourage responsibility among lower-level managers and rank-and-file employees

• Discourages lower-level managers and rank-and-file employees from exercising any initiative

• Higher-level managers may be unaware of actions taken by empowered personnel under their supervision

• Puts the organization at risk if empowered employees happen to make “bad” decisions

• Can impair cross-unit collaboration

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Structuring the Organisation Facilitating Collaboration with External Partners and

Strategic Allies

Strategic alliances

Outsourcing arrangements

Joint ventures

Cooperative partnerships

Creating a Network

Structure: Using

“relationship managers” to build and

maintain cooperative

arrangements of value to

both parties

Strategy Execution: Policies and Procedures How Policies and Procedures Facilitate Good Strategy

Execution

Strategy Execution: Policies and Procedures

Managing for Continuous

Improvement

Best Practices

Benchmarking

Process Reengineering

Total Quality Management

(TQM)

Six Sigma Quality

Programs

The purpose of using benchmarking, best practices, business process reengineering, TQM, and Six Sigma programs is to improve the performance of strategy-critical activities and thereby enhance strategy execution.

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Best Practice A best practice is a method of performing an activity that consistently delivers superior results compared to other approaches.

From Benchmarking and Best Practice Implementation to Operating Excellence

The more that organizational units use best practices in performing their work, the closer a company moves toward performing its value chain

activities as effectively and efficiently as possible.

This is what excellent strategy execution is all about.

• Involves radically redesigning and streamlining work effort, flows and processes to

achieve dramatic improvements in performance.

• Uses cross-functional teams, cutting-edge technology and information systems to

reset and refocus the organization’s strategy.

Business Process Reengineering

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• Creating a total quality culture bent on continuously improving the performance of

every task and value chain activity.

• Is a long-term race without a finish in which success comes slowly in small steps

forward (kaizen).

Total Quality Management (TQM)

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• Utilize statistical methods to improve quality by reducing defects and variability in

business processes.

Six Sigma Principles

• All work is a process.

• All processes have variability.

Six Sigma Programs

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Top-notch Strategy Execution and

Operating Excellence

Continuous Improvement (TQM, Six Sigma)

Business Process

Reengineering

Aims at one-time quantum

improvement

Aims at ongoing incremental

improvements

• All processes create data that explain variability.

Six Sigma/TQM Action Steps

Empowering all employees to improve quality

Emphasizing the necessity for improved

performance

Committing to total quality and

continuous improvement

Fostering quality- supportive behaviors

Using online systems to speed the adoption

of best practices

Action Steps to Realize the Value of TQM and Six Sigma Initiatives

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1. Measuring to assess and control the progress of strategy implementation;

and

2. Assessing components that influence the strategy – context and environment

– to detemine whether the strategy requires adjustment.

Data analysis

http://www.cnbc.com/id/100792215

Data analytics has become a ‘sexy’ job

Evaluation involves…

Installing Information and Operating Systems

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Benefits of Information Technologies

• Enable better strategy execution

• Strengthen organizational capabilities

• Allow for real-time tracking

• Provide monitoring of empowered employee performance

• Build closer relationships with customers

Considerations

• Confidentiality

• Privacy

• Proprietary

Sources of Data

Employee

Customer

Operations Supplier/partner/ collaborative ally

Key Strategic Performance Indicators Tracked by Information Systems

Industry

Government Financial performance

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Benefits and Challenges of Evaluation

Benefits

• Necessity

• Evidence

• Relevance

• Innovation

• Identification of strengths and

weaknesses

Challenges

• Extent of analysis required

• Taking action

• Importance of the issue identified

• Detailed and time consuming

• Change

• Time lags and communication

lines

• Information overload!

• KPIs are quantifiable measurements that reflect the critical success factors of

an organisation.

– Reflect the success (or failure) of the company in meeting its goals and

objectives, and even its vision/mission.

• KPIs must be:

– Reflective of the organisation’s goals

– Keys to its success (reflect KSFs)

– Quantifiable

• KPIs will vary depending on the organisation.

• A business’ KPI may be the percentage of its income that comes from return customers.

• A school’s KPI may relate to graduation rates of its students.

Key Performance Indicators (KPIs)