Chapter 11 Summary - book \"Crafting and Executing Strategy\" PDF

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Download Chapter 11 Summary - book "Crafting and Executing Strategy" PDF

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Chapter 11: Managing Internal Operations Allocating Resources to the Strategy Execution Effort  A company's ability to marshal the resources needed to support new strategic initiatives has a major impact on the strategy execution process. Too little funding and an insufficiency of other types of resources slow progress and impede the efforts  The funding requirements of good strategy execution must drive how capital allocations are made and the size of each unit's operating budget. Underfunding organizational units and activities pivotal to the strategy impedes successful strategy implementation.  A company's operating budget must be strategy-driven (in order to amply fund the performance of key value chain activities) and lean (in order to operate as costeffectively as possible)  Allocating Resources to match strategy important o Resources are always limited o People always want more (Jim L experience)  Possible Adverse Resource Allocation Outcomes: o Too little funding may slows progress & impedes the efforts to execute pieces of the strategic plan proficiently. o Too much funding that wastes organizational resources and reduces financial performance  Screen resource requests carefully.  Approve only those that contribute to strategy execution.  Provide the level of resources necessary for the success of strategic initiatives.  Shift resources to higher-priority activities where new execution initiatives are needed. Instituting Polices and Procedures that facilitate strategy execution  Well-conceived polices and procedures o Provides top down guidance about how certain things need to be done  Channel individual and group efforts along a strategy-supportive path  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 o Help enforce consistency in how strategy-critical activities are performed  Improve the quality and reliability of strategy execution  Help coordinate the strategy execution efforts of individuals and groups throughout the organization o Promote the creation of a work climate that facilitates a good strategy execution

 There is wisdom in a middle-ground approach: Prescribe enough policies to give organization members clear direction and to place reasonable boundaries on their actions; then empower them to act within these boundaries in pursuit of company goals.  Well-conceived policies and procedures aid strategy execution; out-of-sync ones hinder effective execution.  Prescribe enough policies to give organization members clear direction and to place reasonable boundaries on their actions; then empower them to act within these boundaries in pursuit of company goals. Adopting Best Practices and Employing Process Management Tools  Managing for Continuous Improvement o Business process reengineering involves radically redesigning and streamlining how an activity is performed, with the intent of achieving quantum improvements in performance.  Involves radically redesigning and streamlining work effort, flows and processes to achieve dramatic improvements in performance.  Often involves:  cross-functional teams,  cutting-edge technology  information systems  “All Hands On-Deck” attitude to think outside the box  ex:  Hallmark- Greeting card process- removed 24 mths  GE- Circuit Breaker Division- Order to Ship from 3 wks to 3 days  Champion- “Kaizen” events to reduce process flow distance/time (Room for 2 new product lines)  A best practice is a method of performing an activity that consistently delivers superior results compared to other approaches.

 Total quality management (TQM) entails creating a total quality culture, involving managers and employees at all levels, bent on continuously improving the performance of every value chain activity.

o While TQM concentrates on producing quality goods and fully satisfying customer expectations, it achieves its biggest successes when it is extended to employee efforts in all departments—human resources, billing, accounting, and information systems—that may lack pressing, customer-driven incentives to improve o TQM takes a fairly long time to show significant results—very little benefit emerges within the first six months. o US Navy coined TQM in mid-1980’s using teachings of W. Edward Deming o Creating a total quality culture bent on continuously improving the performance of every task in value chain. o Has mostly been replaced by ISO9000 and Six Sigma type programs.  Six Sigma programs utilize advanced statistical methods to improve quality by reducing defects and variability in the performance of business processes. o Program aimed to reduce cost by eliminating waste  Waste in the form of Defects, Variation & Non-Productive Activities  Heavy use of DOE and statistics methods to reduce defects and variation  Developed at Motorola in 1986  GE & Honeywell have been a big supporters  Greenbelts, Yellowbelts, Blackbelts are typical certifications  99.99966% statistically defect free product when +- 6 Standard Deviations fall within specification limits  Generally, more sigmas the better  Criticism from some quality “experts” o Existing Processes  Define what onsite a defect of variation  Measure- collect data to find out why how and how often this defect occurs  Analysis to determine when and why and where the defect is occurring  Improve- implement best practice to eliminate defect or variation  Control- implement training, monitoring and controls to sustain the improvement o New Projects  Define project goals and customer requirements  Measure how to we measure and determine our goals and the needs of our customers  Analyze what exact process options do we have for meeting customer needs  Design-should we use old or new process  Verify- how will we verify design performance and out ability to meet customer needs  The difference Between Business Process Reengineering and Continuous Improvement

o Business process reengineering aims at one-time quantum improvement, while continuous-improvement programs like TQM and Six Sigma aim at ongoing incremental improvements.

Installing Information and Operating Systems  Benefits of Information Technologies o Enable better strategy execution through data-based decisions o Strengthen organizational capabilities o Allow for real-time tracking of implementation initiatives and daily operations o Provide monitoring of empowered employee performance (electronic scorecards) o Build closer relationships with customers o Ex: amazon, UPS, Airlines  Instituting Adequate Information Systems, Performance Tracking and Controls o Having state-of-the-art operating systems, information systems, and realtime data is integral to superior strategy execution and operating excellence. o Customer Data: many customers take order and feedback online o Operations data: daily data at champion production o Employee data: HR o Suppliers/partner/collaborate ally data o Financial performance data Using Rewards and Incentives to Promote Better Strategy Execution  A properly designed reward structure is management’s most powerful tool for mobilizing organizational commitment to successful strategy execution and aligning efforts throughout the organization with strategic priorities.  Two Types of Rewards: o Monetary  Stock options pay increases, bonuses, profit sharing plans, 401K matching, retirement plans o Non-Monetary  Cafes, snack bars, pool tables, bikes, gyms  Nonmonetary approaches to enhancing motivation o Provide attractive perks and fringe benefits. o Give awards and other forms of public recognition. o Rely on promotion from within whenever possible. o Invite and act on ideas and suggestions. o Create a work atmosphere of caring and mutual respect. o State the strategic vision in inspirational terms. o Share the firm’s critical information with employees. o Provide a comfortable working environment.  Monetary Rewards

o Can provide high-powered incentives when rewards are tied to specific outcome objectives. o The first principle in designing an effective incentive compensation system is to tie rewards to performance outcomes directly linked to good strategy execution and the achievement of financial and strategic objectives.  Guidelines for Designing Effective Compensation System o Make financial incentives a major, not minor, piece of the total compensation package. o Have incentives that extend to all managers and all workers, not just top management. o Administer the reward system with scrupulous objectivity and fairness. o Keep the time between achieving targeted performance outcome and payment of the reward as short as possible. o Avoid rewarding effort rather than results.  Linking Rewards to Strategically Relevant Performance Outcomes o Focus on and reward results, not effort. o Create a results-oriented work environment that focuses on what to achieve, not what to do. o Set strategically relevant, specific, and measurable stretch performance goals. o Link the performance goals of each individual in an organizational unit to the unit’s goals. o Reward and recognize as success superior performance in accomplishing the goals. o The key to creating a reward system that promotes good strategy execution is to make measures of good business performance and good strategy execution the dominating basis for designing incentives, evaluating individual and group efforts, and handing out rewards. o The first principle in designing an effective incentive compensation system is to tie rewards to performance outcomes directly linked to good strategy execution and the achievement of financial and strategic objectives. o The key to creating a reward system that promotes good strategy execution is to make measures of good business performance and good strategy execution the dominating basis for designing incentives, evaluating individual and group efforts, and handing out rewards. o Incentives must be based on accomplishing the right results, not on dutifully performing assigned tasks.  Striking the Right Balance Between Rewards and Punishment o General Electric, McKinsey & Company, several global public accounting firms, and other companies that look for and expect top-notch individual performance, there's an “up-or-out” policy—managers and professionals

whose performance is not good enough to warrant promotion are first denied bonuses and stock awards and eventually weeded out. o Unwise to take off the pressure for good performance or play down the adverse consequences of shortfalls in performance. There is little evidence that n-pressure work environments leaders to superior strategy or operating excellence o “Play like you’re a touchdown down”...