Bài giảng Crafting and Executing Strategy - Chapter 11: Managing Internal Operations: Actions That Promote Good Strategy Execution

Chapter 11: Managing Internal Operations: Actions That Promote Good Strategy ExecutionScreen graphics created by:Jana F. Kuzmicki, Ph.D.Troy UniversityChapter Learning ObjectivesLearn 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.Chapter RoadmapMarshaling Resources Behind the Drive for Good Strategy ExecutionInstituting Policies and Procedures that Facilitate Strategy ExecutionAdopting Best Practices and Striving for Continuous ImprovementInstalling Information and Operating SystemsTying Rewards and Incentives to Strategy ExecutionMARSHALING RESOURCES BEHIND THE DRIVE FOR GOOD STRATEGY EXECUTION 11-4Allocating Resources toSupport Strategy Execution Allocating resources in ways to support effective strategy execution involves Funding strategic initiatives that can makea contribution to strategy implementationFunding efforts to strengthen competenciesand capabilities or to create new onesShifting resources — downsizingsome areas, upsizing others, killingactivities no longer justified, and fundingnew activities with a critical strategy roleINSTITUTING POLICIES AND PROCEDURES TO FACILITATE STRATEGY EXECUTION11-6Role of new policiesChannel behaviors and decisionsto promote strategy executionCounteract tendencies ofpeople to resist chosen strategyToo much policy can be as stifling as Wrong policy or as Chaotic as no policyOften, the best policy is empowering employees, letting them operate between the “white lines” anyway they think bestCreating Strategy-SupportivePolicies and ProceduresFigure 11.1: How Prescribed Policies andProcedures Facilitate Strategy Execution11-8ADOPTING BEST PRACTICES AND STRIVING FOR CONTINUOUS IMPROVEMENT11-9Instituting Best Practicesand Continuous ImprovementIdentifying and adopting best practicesis integral to effective implementationBenchmarking is the backbone of theprocess of identifying, studying, andimplementing best practicesKey tools to promote continuous improvementSix Sigma quality controlBusiness process reengineeringTQMWhat Is a Best Practice?An activity that at leastone company has provedworks particularly wellA path to operating excellenceBest PracticesCharacteristics of Best PracticesThe best practice must have a proven record inSignificantly lowering costsImproving quality or performanceShortening time requirementsEnhancing safety orDelivering some other highly positive operating outcomeTo be valuable and transferable, a best practice mustDemonstrate success over timeDeliver quantifiable and highly positive results andBe repeatable11-12Involves determining how well a firm performs particular activities and processes when compared against“Best in industry” or “Best in world” performersGoal  Promote achievement of operating excellence in performing strategy-critical activitiesCaution  Exact duplication of best practices of other firms is not feasible dueto differences in implementation situationsBest approach – Best practices of otherfirms need to be modified or adaptedto fit a firm’s own specific situationCharacteristics of BenchmarkingFigure 11.2: From Benchmarking and Best-PracticeImplementation to Operating Excellence11-14Business Process Reengineering:A Contributor to Operating ExcellenceOften the performance of strategicallyrelevant activities is scatteredacross several functional departmentsCreates inefficiencies and often impedes performanceResults in lack of accountability since no one functional manager is responsible for optimum performance of an entire activitySolution  Business process reengineeringInvolves pulling strategy-critical processes from functional silos to create process departments or cross-functional work groupsUnifies performance of the activity  improves how well activity is performed and often lowers costsPromotes operating excellenceWhat Is Total Quality Management?A philosophy of managing a set of business practices that emphasizesContinuous improvement in all phases of operations100 percent accuracy in performing activitiesInvolvement and empowermentof employees at all levelsTeam-based work designBenchmarking andTotal customer satisfactionPopular TQM Approaches Deming’s 14 PointsBaldridge AwardCriteria The Juran Trilogy Crosby’s 14 Quality Steps11-17Implementing a Philosophyof Continuous ImprovementReform the corporate cultureInstill enthusiasm to do thingsright throughout companyStrive to achieve little steps forwardeach day (what the Japanese call kaizen)Ignite creativity in employees to improveperformance of value-chain activitiesPreach there is no such thing as good enoughUnderstand it is a race without a finishSix Sigma is a disciplined, statistics-based system aimed at having not more than 3.4 defects per million iterations for any business practice Two approaches to Six SigmaDMAIC process (Design, Measure,Analyze, Improve, Control)An improvement system for existingprocesses falling below specificationand needing incremental improvementA great tool for improving performancewhen there are wide variations in howwell an activity is performedDMADV process (Define, Measure, Analyze, Design, Verify) or DFSS (Design for Six Sigma)An improvement system used to develop new processes or products at Six Sigma quality levelsSix Sigma Quality Control — A Toolfor Promoting Operating ExcellenceCharacteristics ofSix Sigma Quality ProgramsSix Sigma is based on three principles1. All work is a process2. All processes have variability3. All processes create data to explain variabilityDMAIC process is a good approach to improve performance when wide variations in how well an activity is performed existEvidence exists that innovation can be stifled by Six Sigma programsBlended approach to Six Sigma implementation involvesPursuing incremental improvementsin operating efficiency andGiving freer rein to R & D and other processesfocusing on new ways to offer value to customers Approach of the DMAIC ProcessDefineWhat constitutes a defect?MeasureCollect data to find out why, how,and how often the defect occursAnalyze – InvolvesStatistical analysis of the metricsIdentification of a “best practice”ImproveImplementation of the documented “best practice”ControlEmployees are trained on the “best practice”Over time, significant improvement in quality occursGuidelines for ImplementingSix Sigma Quality ProgramsSystematic application of Six Sigma methods to a company’s value chain activitiesCan significantly improve the proficiency of strategy implementation Key challenges in implementing Six Sigma quality programs1. Obtain managerial commitment2. Establish a quality culture3. Full involvement of employeesReengineeringAims at quantum gains of 30 to 50% or moreTotal quality programsStress incremental progressTechniques are not mutually exclusiveReengineering – Used to produce a good basic design yielding dramatic improvementsTotal quality programs – Used to perfect process, gradually improving efficiency and effectivenessBusiness Process Reengineeringvs. Total Quality ProgramsSelect indicators of successfulstrategy executionBenchmark against best practice companiesBuild a TQ cultureRequires top management commitmentInstall TQ-supportive employee practicesEmpower employees to do the right thingsProvide employees with quick access to required information using on-line systemsPreach that performance can/must be improvedHow to Capture Benefits of Best-Practice and Continuous Improvement ProgramsThe Benefits of EmployingContinuous Improvement ProgramsCan greatly enhance a company’sCompetitive capabilitiesAbility to achieve a competitive advantageHave hard-to-imitate aspectsRequire substantial investmentof management time and effortExpensive in terms of training and meetingsSeldom produce short-term resultsLong-term payoff — instilling a culturethat strives for operating excellence INSTALL INFORMATIONAND OPERATING SYSTEMS11-26Installing Strategy-SupportiveInformation and Operating SystemsGood information and operating systems areessential for first-rate strategy executionSupport systems can relate toOn-line data capabilitiesSpeedy delivery or repair Inventory managementE-commerce capabilities Mobilizing information and creating systemsto use knowledge effectively can yieldCompetitive advantageTrends in Design and Use of Information SystemsOn-line technologyDaily statistical updatesUp-to-the minute performance monitoringRetailers and manufacturers have up-to-the minute inventory and sales records for each itemElectronic scorecards for senior managersGather daily or weekly statistics from different databases about inventory, sales, costs, and sales trendsEnables managers to make betterdecisions on a real-time basisChallengeHow to ensure actions of employeesstay within acceptable boundsControl approachesManagerial control Establish boundaries on what not todo, allowing freedom to act with limitsTrack and review daily operating performancePeer-based controlExercising Adequate ControlOver Empowered EmployeesTYING REWARDS AND INCENTIVES TO STRATEGY EXECUTION11-30Gaining Commitment: Componentsof an Effective Reward SystemMonetary IncentivesBase pay increasesPerformance bonusesProfit sharingplans Stock optionsRetirement packagesPiecework incentivesNon-Monetary IncentivesPraiseConstructivecriticismSpecial recognitionMore, or less, job securityStimulating assignmentsMore, or less,autonomyRapid promotion 11-31Provide attractive perks and fringe benefitsRely on promotion from within when possibleMake sure ideas and suggestions ofemployees are valued and respectedCreate a work atmosphere where there is genuine sincerity and mutual respect among all employeesState strategic vision in inspirational terms to make employees feel they are part of something worthwhileShare financial and strategicinformation with employeesHave knockout facilitiesBe flexible in how company approaches peoplemanagement in multicultural environmentsApproaches: Motivating Peopleto Execute the Strategy WellElements of both are necessaryChallenge and competition arenecessary for self-satisfactionPrevailing viewPositive approaches work betterthan negative ones in terms of EnthusiasmDedicationCreativityInitiativeBalancing Positive vs. Negative RewardsTying rewards to the achievement of strategic and financial performance targets is management’s single most powerful tool to win the commitment of company personnel to effective strategy executionObjectives in designing the reward systemGenerously reward thoseachieving objectivesDeny rewards to those who don’tMake the desired strategic andfinancial outcomes the dominantbasis for designing incentives,evaluating efforts, and handing out rewards Linking the Reward Systemto Performance OutcomesCreate a results-oriented systemReward people for results, not for activityDefine jobs in terms of what to achieve Incorporate several performance measuresTie incentive compensation to relevant outcomesTop executives – Incentives tied tooverall firm performanceDepartment heads, teams, andindividuals – Incentives tied toachieving performance targetsin their areas of responsibility Key Considerations inDesigning Reward SystemsGuidelines for Designing anEffective Compensation System1. Payoff must be a major, not minor, piece of total compensation package2. Incentive plan should extend to all employees3. Administer system with scrupulous fairness4. Link incentives to achieving only the performance targets in strategic plan5. Targets a person is expected to achieve must involve outcomes that can be personally affected6. Keep time between performance reviewand payment short7. Make liberal use ofnon-monetary rewards8. Avoid ways of rewarding non-performers11-36