Lecture Outline

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Lecture Outline
MAN 6721 Strategic Management
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Class 6
Strategy Implementation Saturday, February 11,
2006
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Principle Components of Strategy Implementation
Building an organization with the competencies,
capabilities, and resources needed to execute the
strategy
Shaping the work environment and corporate
culture to fit the strategy
Exercising strong leadership
The Action Agenda for Implementing Strategy
Establishing a strategy supporting compensation
plan
Marshalling resources behind the drive for
strategy execution
Instituting policies and procedures that
facilitate strategy execution
Installing information and operating systems that
support the strategy
Adopting best practices and striving for
continuous improvement
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Strategy Implementation Component 3
Marshaling resources behind the drive for
strategy execution
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Resources
Early in the process of implementing and
executing a new or different strategy, managers
need to determine what resources will be needed
and then consider whether the current budgets of
organizational units are suitable
Plainly, organizational units must have the
budgets and resources for executing their parts
of the strategic plan effectively and efficiently
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Budget Implications

• Budget Implications
• A change in strategy nearly always calls for
  budget reallocations.
• Units important in the prior strategy but having
  a lesser role in the new strategy may need
  downsizing.
• Units that now have a bigger and more critical
  strategic role may need more people, new
  equipment, additional facilities, and increases
  in their operating budgets.

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Strategy Implementation Component 4
Instituting policies and procedures that
facilitate strategy execution
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How Policies and Procedures Facilitate Strategy
Implementation

• Provides top-down guidance about how certain
  things need to be done
• Channels individual and group efforts along a
  strategy-supportive path
• Places limits on independent action and helps
  overcome resistance to change

Prescribing policies and procedures
Helps enforce consistency in how
strategy-critical activities are performed in
geographically scattered organizational units
Promotes the creation of a work climate that
facilitates good strategy execution
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Examples from McDonalds Operating Manual
Cooks must turn, never flip, hamburgers. If
they havent been purchased, Big Macs must be
discarded in 10 minutes after being cooked and
French fries in 7 minutes. Cashiers must make
eye contact with and smile at every customer.
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Strategy Implementation Component 5
Adopting best practices and striving for
continuous improvement
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Best Practices

• Best Practices
• Managerial efforts to identify and adopt best
  practices are a powerful tool for promoting
  operating excellence and better strategy
  execution.
• Best Practice
• A best practice is any practice that at least one
  company has proved works particularly well.
• Jack Welch Example

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Example Benchmarking
Continue to benchmark company performance of the
activity against best-in-industry performers
Participate in benchmarking to identify the best
practice for performing an activity
Adapt the best practice to fit the companys
situation then implement it
Move closer to operating excellence in performing
the activity
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Other Examples Best Practices

• Business Process Reengineering
• Involves reorganizing the fragmented tasks of a
  strategy-critical activity into a close-knit
  group that has charge over the whole process and
  can be held accountable for performing the
  activity in a cheaper, better, and/or more
  strategy-supportive fashion.
• Total Quality Management
• Entails creating a total quality culture bent on
  continuously improving the performance of every
  task and value chain activity.

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Other Examples Best Practices

• Six Sigma Quality Control
• Consists of a disciplined, statistics-based
  procedure aimed at producing not more than 3.4
  defects per million iterations for any business
  processfrom manufacturing to customer
  transactions.
• The six sigma process of define, measure,
  analyze, improve and control (DMAIC) is an
  improvement systems for existing processes
  falling below specifications and needing
  incremental improvement
• Six sigma is based on the following three
  principles
• All work is a process, all processes have
  variability, and all processes produce data that
  explains the variability.
• Textbook example

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Strategy Implementation Component 6
Installing information and operating systems
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Importance of Information Systems

• Information Systems and Strategy
• Company strategies cant be executed well without
  a number of internal systems for business
  operations.
• Well-conceived state-of-the-art operating systems
  not only enable better strategy execution but
  also strengthen organizational capabilitiesperhap
  s enough to provide a competitive edge over
  rivals.
• Wal-Mart Example
• Textbook Example

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Areas Information Systems Needs to Cover
Customer data
Operations data
Employee data
Supplier, partner, collaborative ally data
Financial performance data
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Strategy Implementation Component 7
Establishing strategy supportive compensation
systems
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Importance of Motivating Employees

• Motivation
• It is important for both organizational units and
  individuals to be enthusiastically committed to
  executing strategy and achieving performance
  targets.
• Company managers typically use an assortment of
  motivational techniques and rewards to enlist
  organizational-wide commitment to executing the
  strategic plan.

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Importance of a Property Designed Reward Structure

• Reward Structure
• A properly designed reward structure is
  managements most powerful tool for mobilizing
  organizational commitment to successful strategy
  execution.
• No matter how inspiring, talk seldom commands
  peoples best efforts for long.
• To get employees sustained, energetic
  commitment, management has to be resourceful in
  designing and using motivational incentivesboth
  monetary and non-monetary.

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Strategy Facilitating Motivational Practices

• Providing attractive perks and fringe benefits
• Relying on promotion from within whenever
  possible
• Making sure that the ideas and suggestions of
  employees are valued and respected
• Creating a work atmosphere in which there is
  genuine sincerity, caring, and mutual respect
  among workers and between management and employees

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Strategy Facilitating Motivational Practices

• Stating a strategic vision in inspirational terms
  that make employees feel they are a part of doing
  something very worthwhile in a larger social
  sense
• Sharing information with employees about
  financial performance, strategy, operational
  measures, market conditions, and competitors
  actions
• Being flexible in how the company approaches
  people management in multinational, multicultural
  environments

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Striking the Right Balance Between Rewards and
Punishment

• Importance of Balance
• While most approaches to motivation,
  compensation, and people management accentuate
  the positive, companies also embellish positive
  rewards with the risk of punishment
• Unwise to Take Off the Pressure
• As a general rule, it is unwise to take off the
  pressure for good individual and group
  performance or play down the adverse consequences
  of shortfalls in performance.
• There is no evidence that a no-pressure/no-adverse
  consequences work environment leads to superior
  strategy execution or operating excellence.

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Key Concept Alignment

• Alignment
• A properly designed reward system aligns the
  well-being of organization members with their
  contributions to competent strategy execution and
  the achievement of performance targets.
• The role of the reward system is to align the
  well-being of organizational members with
  realizing the companys vision so that
  organizational members benefit by helping the
  company execute its strategy competently and
  fully satisfy customers.

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Guidelines for Designing Incentive Compensation
Systems
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
Tie incentives to performance outcomes directly
linked to good strategy execution and financial
performance
Make sure that the performance targets
each individual or team is expected to achieve
involves outcomes that they can influence
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Guidelines for Designing Incentive Compensation
Systems
Keep the time between achieving the
target performance outcome and the payment of the
reward as short as possible
Make liberal use of non-monetary rewards dont
rely solely on monetary rewards
Absolutely avoid skirting the system to find ways
to reward effort rather than results
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Strategy Implementation Component 8
Exercising strong leadership
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Strategic Leadership

• Basics of Managing the Strategy Implementation
  Process
• Craft a sound strategic plan, implement it,
  execute it to its fullest, adjust it as needed,
  and win!
• Basics of Strategic Leadership
• To achieve results, a manager must take on a
  variety of leadership roles in managing the
  strategy execution process
• Resource acquirer and allocator, capabilities
  builder, motivator, policy maker, policy
  enforcer, head cheerleader, crisis solver,
  decision maker, taskmaster, and so on.

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Specific Leadership Actions to ProperlyImplement
Strategies

• Staying on top of what is happening, closely
  monitoring progress, ferreting out issues, and
  learning what obstacles lie in the path of good
  execution
• Identifying enabling factors
• Putting constructive pressure on the organization
  to achieve good results and operating excellence
• Leading the development of stronger core
  competencies and competitive capabilities

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Specific Leadership Actions to ProperlyImplement
Strategies

• Displaying ethical integrity and leading social
  responsibility initiatives
• Pushing corrective actions to improve strategy
  execution and achieve the targeted results

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Key Concept Alignment

• Alignment
• A properly designed reward system aligns the
  well-being of organization members with their
  contributions to competent strategy execution and
  the achievement of performance targets.
• The role of the reward system is to align the
  well-being of organizational members with
  realizing the companys vision so that
  organizational members benefit by helping the
  company execute its strategy competently and
  fully satisfy customers.

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Key Concept Alignment

• Alignment
• A properly designed reward system aligns the
  well-being of organization members with their
  contributions to competent strategy execution and
  the achievement of performance targets.
• The role of the reward system is to align the
  well-being of organizational members with
  realizing the companys vision so that
  organizational members benefit by helping the
  company execute its strategy competently and
  fully satisfy customers.