Weekly Reflection
COURTMCLARKE777
ipptchap010.pptx
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LO1 Gain command of what managers must do to build an organization capable of good strategy execution.
LO2 Learn why resource allocation should always be based on strategic priorities.
LO3 Understand why policies and procedures should be designed to facilitate good strategy execution.
LO4 Understand how process management programs that drive continuous improvement help an organization achieve operating excellence.
LO5 Recognize the role of information and operating systems in enabling company personnel to carry out their strategic roles proficiently.
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LO6 Learn how and why the use of well-designed incentives and rewards can be management’s single most powerful tool for promoting operating excellence.
LO7 Gain an understanding of how and why a company’s culture can aid the drive for proficient strategy execution.
LO8 Understand what constitutes effective managerial leadership in achieving superior strategy execution.
(cont’d)
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Crafting versus Implementing Strategy
Crafting Strategy
Market-and resource-driven activities
Success depends on
Attracting and pleasing customers
Outcompeting rivals
The firm’s collection of resources and capabilities
Implementing Strategy
Execution of operations-driven activities
Successful depends on management’s ability to
Direct change
Allocate resources
Build capabilities
Build strategy-supportive policies and culture
Deliver good results
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Good strategy execution requires a team effort. All managers have strategy executing responsibility in their areas of authority, and all employees are active participants in the strategy execution process.
CORE CONCEPT
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Who Is Responsible for Implementation of the Chosen Strategy?
The organization’s chief executive officer and other senior managers are ultimately responsible for ensuring that the strategy is executed successfully.
It is middle and lower-level managers who must see to it that frontline employees and work groups competently perform strategy-critical activities that allow companywide performance targets to be met.
Requires all managers thinking about:
“What does my area have to do to implement its part of the strategic plan, and what should I do to get these things accomplished effectively and efficiently?”
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Principal Managerial Components of the Strategy Execution Process
Building an organization with the capabilities, people, and structure needed to execute the strategy successfully.
Allocating ample resources to strategy-critical activities.
Ensuring that policies and procedures facilitate rather than impede effective strategy execution.
Adopting process management programs that drive continuous improvement in how strategy execution activities are performed.
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Principal Managerial Components of the Strategy Execution Process (cont’d)
Installing information and operating systems that enable company personnel to perform essential activities.
Tying rewards directly to the achievement of performance objectives.
Fostering a corporate culture that promotes good strategy execution.
Exerting the internal leadership needed to propel implementation forward.
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The Eight Components of Strategy Execution
FIGURE 10.1
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Building an Organization with the Capabilities, People, and Structure Needed for Good Strategy Execution
Staffing the organization’s workforce
Structuring the organization and work effort
Organization building actions
Acquiring, developing, and strengthening strategy-supportive resources and capabilities
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Staffing the Organization— Building Managerial Talent
Assembling a capable management team is a cornerstone organization-building task:
Put people with strong strategy implementation skills and a results orientation in key managerial posts.
Replace weak executives, strengthening the skills of those who remain, and bringing in fresh outsiders.
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Recruiting and Retaining a Capable Workforce
The quality of a firm’s people is an essential ingredient of successful strategy execution.
Staffing the right people at all levels is required to ensure competent performance of value chain activities.
Find, develop, and then retain engaged employees with excellent compensation packages, opportunities for rapid advancement and professional growth, and challenging and interesting assignments.
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Tactics for Recruiting and Retaining a High-Performance Workforce
Put extra effort into screening and evaluating job applicants—selecting for skill sets, energy, initiative, judgment, aptitudes for learning, and adaptability to the firm’s culture.
Invest in training programs that continue throughout employees’ careers.
Provide promising employees with challenging, interesting, and skill-stretching assignments.
Rotate people through jobs that span functional and geographic boundaries.
Retain high-performing employees via promotions, salary increases, performance bonuses, stock options and equity ownership, fringe benefit packages, and other perks.
Coach average performers to improve their skills and capabilities, weeding out underperformers and benchwarmers.
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Acquiring, Developing, and Strengthening Key Resources and Capabilities
Good strategy execution requires:
Putting key resources and capabilities into place.
Refreshing and strengthening them as needed.
Modifying them as market conditions evolve.
Organization building requires deciding when and how to recalibrate competencies and capabilities.
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Three Approaches to Building and Strengthening Capabilities
Become proficient in developing capabilities internally
Accessing capabilities via collaborative partnerships
Developing dynamic capabilities to manage organizational change
Acquire capabilities through mergers and acquisitions
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Accessing Capabilities Through Collaborative Partnerships
Outsource the function or activity requiring new capabilities to an outside provider to conserve resources
Engage in a collaborative partnership to learn how the partner performs activities, internalizing its methods, and thereby acquiring its capabilities.
Collaborate with a firm that has complementary resources and capabilities in a partnership to achieve a shared strategic objective.
Acquiring capabilities from an external source via
collaborative partnerships
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TOYOTA’S LEGENDARY PRODUCTION SYSTEM—A CAPABILITY THAT TRANSLATES INTO COMPETITIVE ADVANTAGE
Concepts & Connections 10.1
The heart of Toyota’s strategy in motor vehicles is to outcompete rivals by manufacturing world-class, quality vehicles at lower costs and selling them at competitive price levels. Executing this strategy requires top-notch manufacturing capability and super-efficient management of people, equipment, and materials. Toyota began conscious efforts to improve its manufacturing competence more than 50 years ago. Through tireless trial and error, the company gradually took what started as a loose collection of techniques and practices and integrated them into a full-fledged process that has come to be known as the Toyota Production System (TPS). The TPS drives all plant operations and the company’s supply chain management practices. TPS is grounded in the following principles, practices, and techniques:
Use just-in-time delivery of parts and components to the point of vehicle assembly.
Develop people who can come up with unique ideas for production improvements.
Emphasize continuous improvement.
Empower workers to stop the assembly line when there’s a problem or a defect is spotted.
Deal with defects only when they occur.
Ask yourself “Why?” five times.
Organize all jobs around human motion to create a production/assembly system with no wasted effort.
Find where a part is made cheaply and use that price as a benchmark.
The TPS utilizes a unique vocabulary of terms (such as kanban, takt-time, jikoda, kaizen, heijunka, monozukuri, poka yoke, and muda ) that facilitates precise discussion of specific TPS elements. In 2003, Toyota established a Global Production Center to efficiently train large numbers of shop-floor experts in the latest TPS methods and better operate an increasing number of production sites worldwide. Since then, additional upgrades and refinements have been introduced, some in response to the large number of defects in Toyota vehicles that surfaced in 2009–2010.
There is widespread agreement that Toyota’s ongoing effort to refine and improve on its renowned TPS gives it important manufacturing capabilities that are the envy of other motor vehicle manufacturers. Not only have such auto manu-facturers as Ford, Daimler, Volkswagen, and General Motors attempted to emulate key elements of TPS, but elements of Toyota’s production philosophy have been adopted by hospitals and postal services.
Sources: Information posted at www.toyotageorgetown.com; Hirotaka Takeuchi, Emi Osono, and Norihiko Shimizu, “The
Contradictions that Drive Toyota’s Success,” Harvard Business Review 86, no. 6 (June 2008), pp. 96–104; and Taiichi Ohno, Toyota Production System: Beyond Large-Scale Production (New York:Sheridan Books, 1988).
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Matching Organizational Structure to the Strategy
Key value chain activities that deliver value to the customer are critical to its proficient strategic performance.
Structure follows strategy—a changed strategy requires a new or different structure and new or different key activities and capabilities.
Attempting a new strategy with an outdated organizational structure is unwise.
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Types of Organizational Structures
Functional (or Departmental) Structure
Organizes strategy critical activities into functional, product, geographic, process, or customer groups
Multidivisional (or Divisional) Structure
Organizes value chain activities involved in making a product or service available to consumers into a common (self-contained) division
Matrix Structure
Allows for dual reporting relationships between divisional heads and departmental heads
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Organizational Structure and Authority in Decision Making
In a centralized structure:
Top managers retain authority for most decisions.
In a decentralized structure:
Decision-making authority is pushed down to the lowest organizational level capable of making timely, informed, competent decisions.
The trend in most companies
A shift from authoritarian to decentralized structures stressing empowerment
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Characteristics of Centralized Decision Making
Retention of authority by top executives
Command and control paradigm reins in lower-level managers
Minimal discretionary authority
Frontline supervisors and rank-and-file employees must seek prior approval by their superiors for their actions
Key advantage
Easy to know who is accountable when things do not go well
Disadvantages
Bureaucracy creates sluggish response to changing conditions
Large firms with widely scattered operations require that decision making authority be granted to on-site managers
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Exercising Control Over the Actions of Empowered Employees
Place limits on the authority that empowered personnel can exercise
Hold employees accountable for their decisions
Institute compensation incentives that reward people for doing their jobs in a manner that contributes to good company performance
Create a corporate culture where there is strong peer pressure for employees to act responsibly
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Facilitating Collaboration with External Partners and Strategic Allies
Actively manage collaborative relationships:
Appoint “relationship managers” with responsibility for fostering strategic partnership success through:
Getting the right people together
Promoting good rapport
Facilitating the flow of information
Nurturing interpersonal communication and cooperation
Ensuring effective coordination.
Adopt a network structure that links independent organizations involved in cooperative arrangements to achieve some common undertaking.
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A network structure is the arrangement linking a number of independent organizations involved in some common undertaking.
CORE CONCEPT
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Allocating Resources to Strategy-Critical Activities
Reasons for the allocation process include:
To determine what funding is needed to execute new strategic initiatives
To bolster value-creating processes
To strengthen the firm’s capabilities and competencies
Allocating resources to support strategy execution involves:
Funding promising proposals; turning down those that do not
Providing the proper amount of funding to support new strategic initiatives
Reallocation of resources to support new strategies
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Instituting Strategy Supportive Policies and Procedures
Strategy execution is facilitated by policies and procedures that:
Help enforce the needed consistency in how particular strategy critical activities are performed.
Provide top-down guidance regarding how certain things need to be done.
Promote a work climate that facilitates good strategy execution.
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When Do Policies and Procedures Become “Excessive?”
Too much policy:
Can be confusing and erect obstacles to good strategy implementation.
Is inappropriate when individual creativity and initiative are more essential to good strategy execution than standardization and strict conformity.
There is wisdom in a middle approach:
Prescribe enough policies to place boundaries on employees’ actions; then empower them to act within these boundaries in ways they think makes sense.
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Striving for Continuous Improvement in Processes and Activities
Business process reengineering
Six Sigma quality control techniques
Key tools for continuous improvement
Total quality management (TQM) programs
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Management Tools for Continuous Improvement
Business process reengineering
Involves pulling the pieces of strategy-critical activities out of different departments and unifying their performance in a single department or cross-functional work group
Total quality management (TQM)
Emphasizes continuous improvement in all phases of operations, 100% accuracy in performing tasks, involvement and empowerment of employees at all levels and departments, team-based work design, benchmarking, and total customer satisfaction.
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Management Tools for Continuous Improvement (cont’d)
Six Sigma
Is a statistics-based quality control system aimed at producing not more than 3.4 defects per million iterations for any business process—from manufacturing to customer transactions.
Seeks to define, measure, analyze, improve, and control variability in the organization’s processes.
Improves the efficiency of operating activities and processes, but its rigidity can also stifle innovation.
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WHIRLPOOL’S USE OF SIX SIGMA TO PROMOTE OPERATING EXCELLENCE
Concepts & Connections 10.2
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The Difference between Business Process Reengineering and Continuous Improvement Programs
Business process reengineering aims at quantum gains of 30 to 50%
Continuous improvement programs stress incremental progress—the never-ending pursuit of inch-by-inch quality gains.
TQM
Business Process Reengineering
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Installing Information and Operating Systems
Execution of strategies and value-creating internal processes depend on a number of internal operating systems.
Information systems are needed to track and report data on:
Customers
Operations
Employees
Suppliers
Finances
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Trends in Information Systems
Up-to-the-minute reporting:
Manufacturers have daily production reports
Retail companies have real-time inventory and sales records for each item
Manufacturers and retailers are able to use online systems to monitor inventories and track shipments and deliveries
Real-time information systems permit managers to quickly intervene changes if initiatives and operations drift off course
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Using Rewards and Incentives to Promote Better Strategy Execution
Rewards should motivate employees to focus on what results must be achieved and not on simply performing their jobs.
Reward systems should include both monetary and non-monetary incentives.
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Guidelines for Designing Monetary Incentive Plans
Tie incentives to strategy execution and financial performance
Set performance targets that individuals or teams can personally affect
Keep time between achievement and reward as short as possible
Compensation Incentives
Make performance payoff a major piece of the total compensation package
Have incentives that extend to all managers and all workers
Administer the reward system with scrupulous objectivity and fairness
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Common Non-Monetary Rewards Used to Enhance Motivation
Provide attractive perks and fringe benefits
Adopt promotion from within policies
Act on suggestions from employees
Create a work atmosphere where there is genuine sincerity, caring, and mutual respect among all employees
Share information with employees about financial performance, strategy, operational measures, market conditions, and competitors’ actions
Have attractive office spaces and facilities
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WHAT COMPANIES DO TO MOTIVATE AND REWARD EMPLOYEES
Concepts & Connections 10.3
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Instilling a Corporate Culture that Promotes Good Strategy Execution
A corporate culture :
Is the firm’s organizational DNA—its approach to people management
Is comprised of shared core values, beliefs, and business principles that are engrained in employee behaviors and attitudes
defines its operating style—the chemistry of the firm’s work environment (“how we do things around here”)
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Corporate culture is a firm’s internal work climate and is shaped by its core values, beliefs, and business principles. A firm’s culture is important because it influences its traditions, work practices, and style of operating.
CORE CONCEPT
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High-Performance Cultures
Standout cultural traits include:
A “can-do” spirit
Pride in doing things right
No-excuses accountability
A results-oriented work climate in which people go the extra mile to achieve performance targets.
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Characteristics of High-Performance Cultures
A strong sense of involvement by all employees
An emphasis on individual initiative and creativity
Clear statement of performance expectations
Prompt addressing of critical issues
Constructive pressure to achieve good results
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Adaptive Cultures
Adaptive cultures are well-suited to fast-changing industries
Characteristics of adaptive cultures include:
Willingness to accept change and embrace challenge of introducing and executing new strategies.
Internal entrepreneurship on the part of individuals and groups is encouraged and rewarded.
Adopting a proactive approach to identifying issues, evaluating the implications and options, and quickly moving ahead with workable solutions
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THE CULTURE THAT DRIVES INNOVATION AT W.L. GORE & ASSOCIATES
Concepts & Connections 10.4
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Unhealthy Corporate Cultures
Highly politicized internal environment
Issues are resolved on the basis of political clout
Hostility to change
Avoid risks; experimentation and efforts to alter status quo are discouraged
Insular, inwardly-focused “Not-invented-here” mind-set
Personnel discount the need to look outside for best practices
Disregard for high ethical standards
Presence of incompatible, clashing subcultures
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Steps in Changing a Problem Culture
FIGURE 10.2
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Making a Compelling Case for a Culture Change
Explain how new behaviors and work practices will produce better results.
Cite reasons the current strategy has to be modified and why new strategic initiatives are being undertaken.
Cite why and how current behavioral norms and work practices are obstacles to new strategic initiatives
Why the need for change?
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Substantive Culture-Changing Actions
Replace key executives who stonewall needed organizational and cultural changes.
Promote individuals who advocate for the shift to a different culture and who can serve as role models for the desired cultural behavior.
Appoint outsiders with desired cultural attributes to high-profile positions—new-breed managers send an unambiguous message that a new era is dawning.
Screen candidates for new positions carefully, hiring only those who fit in with the new culture.
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Substantive Culture-Changing Actions (cont’d)
Mandate that all personnel attend culture-training programs to better understand the culture-related actions and behaviors that are expected.
Design compensation incentives that boost the pay of teams and individuals who display the desired cultural behaviors, while hitting change-resisters in the pocketbook.
Revise policies and procedures in ways that will help drive cultural change.
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Symbolic Culture Changing Actions
Lead by executive example–executives must be alert to the fact that company personnel will be watching their actions and decisions to see if they are walking the talk.
Executives promote the strategy–culture fit by appearing at ceremonial functions to celebrate the culture and praise individuals and groups that get with the program.
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Leading the Strategy Execution Process
Managers at all levels of the firm must:
Stay on top of what is happening and closely monitoring progress by engaging in managing by walking around (MBWA)
Put constructive pressure on the organization to achieve good results and operating excellence.
Not delay in initiating corrective actions to improve strategy execution and achieve the targeted performance results.
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Putting Constructive Pressure on Organizational Units to Achieve Good Results and Operating Excellence
Focus attention on continuous improvement
Use motivation and compensation to reward high performance
Celebrate individual, group, and company successes
Fostering a results-oriented, high-performance culture
Treat employees with dignity and respect
Encourage employee initiative and creativity
Set stretch objectives and clearly communicate expectations
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Pushing Corrective Actions to Improve Both the Company’s Strategy and Its Execution
Deciding what adjustments to make
Deciding when adjustments are needed
Making corrective adjustments
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