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Instituting policies and procedures that facilitate strategy execution

04/01/2021 Client: saad24vbs Deadline: 2 Day

CHAPTER 11 Managing Internal Operations: Actions That Promote Good Strategy Execution


LEARNING OBJECTIVES


THIS CHAPTER WILL HELP YOU UNDERSTAND:


Why resource allocation should always be based on strategic priorities


How well-designed policies and procedures can facilitate good strategy execution


How best practices and process management tools drive continuous improvement in the performance of value chain activities and promote superior strategy execution


The role of information and operating systems in enabling company personnel to carry out their strategic roles proficiently


How and why the use of well-designed incentives and rewards can be management’s single most powerful tool for promoting adept strategy execution


© McGraw-Hill Education.


PROMOTING GOOD STRATEGY EXECUTION


Allocating ample resources to execution-critical value chain activities


Instituting policies and procedures that facilitate good strategy execution


Employing process management tools to drive continuous improvement in how value chain activities are performed


Installing information and operating systems that enable company personnel to carry out their strategic roles proficiently


Using rewards and incentives to promote better strategy execution and the achievement of strategic and financial targets


© McGraw-Hill Education.


ALLOCATING RESOURCES TO THE STRATEGY EXECUTION EFFORT


Possible adverse resource allocation outcomes


Too little funding that slows progress and impedes the efforts of organizational units to execute their pieces of the strategic plan proficiently


Too much funding that wastes organizational resources and reduces financial performance


© McGraw-Hill Education.


STRATEGIC MANAGEMENT PRINCIPLE (1 of 14)


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.


© McGraw-Hill Education.


STRATEGY-DRIVEN BUDGETING: ALLOCATING RESOURCES


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


© McGraw-Hill Education.


Strategic Management Principle (2 of 14)


A company’s operating budget must be both strategy-driven (in order to amply fund the performance of key value chain activities) and lean (in order to operate as cost-effectively as possible).


© McGraw-Hill Education.


INSTITUTING POLICIES AND PROCEDURES THAT FACILITATE STRATEGY EXECUTION


Policies and operating procedures facilitate strategy execution by:


Providing top-down guidance regarding how things need to be done


Helping ensure consistency in how execution-critical activities are performed


Promoting the creation of a work climate that facilitates good strategy execution


© McGraw-Hill Education.


Strategic Management Principle (3 of 14)


A company’s policies and procedures provide a set of well-honed routines for running the company and executing the strategy.


© McGraw-Hill Education.


Strategic Management Principle (4 of 14)


Well-conceived policies and procedures aid strategy execution; out-of-sync ones hinder effective 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.


© McGraw-Hill Education.


FIGURE 11.1 How Policies and Procedures Facilitate Good Strategy Execution


Jump to Appendix 1 long image description


© McGraw-Hill Education.


ADOPTING BEST PRACTICES AND EMPLOYING PROCESS MANAGEMENT TOOLS


Managing for Continuous Improvement


Best practices


Benchmarking


Process reengineering


Total quality management (TQM)


Six Sigma quality programs


Jump to Appendix 2 long image description


© McGraw-Hill Education.


Core Concept (1 of 5)


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


© McGraw-Hill Education.


Strategic Management Principle (5 of 14)


Wide-scale use of best practices across a firm’s entire value chain promotes operating excellence and good strategy execution.


The more that organizational units use best practices in performing their work, the closer a company comes to achieving effective and efficient strategy execution.


© McGraw-Hill Education.


FIGURE 11.2 From Benchmarking and Best-Practice Implementation to Operating Excellence in Strategy Execution


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.


Jump to Appendix 3 long image description


© McGraw-Hill Education.


BUSINESS PROCESS REENGINEERING, TOTAL QUALITY MANAGEMENT, AND SIX SIGMA QUALITY PROGRAMS: TOOLS FOR PROMOTING OPERATING EXCELLENCE


Business process reengineering:


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


© McGraw-Hill Education.


CORE CONCEPT (2 of 5)


Business process reengineering involves radically redesigning and streamlining how an activity is performed, with the intent of achieving quantum improvements in performance.


© McGraw-Hill Education.


ACHIEVING CONTINUOUS IMPROVEMENT


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 task and value chain activity.


Is a long-term race without a finish in which success comes slowly in small steps forward (kaizen)


© McGraw-Hill Education.


CORE CONCEPT (3 of 5)


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.


© McGraw-Hill Education.


A STATISTICAL APPROACH TO ACHIEVING CONTINUOUS IMPROVEMENT


Six Sigma quality control programs:


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


All processes create data that explain variability


© McGraw-Hill Education.


Core Concept (4 of 5)


Six Sigma programs utilize advanced statistical methods to improve quality by reducing defects and variability in the performance of business processes.


© McGraw-Hill Education.


SIX SIGMA AND NEW PROJECTS: DMADV


Define What are our project goals and customer requirements?

Measure How do we measure and determine both our goals and the needs of our customers?

Analyze What existing process options do we have for meeting customer needs?

Design Should we use an old or new process to meet customer needs and specifications?

Verify How will we verify design performance and our ability to meet customer needs?

© McGraw-Hill Education.


EXISTING PROCESSES AND SIX SIGMA: DMAIC


Define Define what constitutes a defect or variation

Measure Collect data to find out why, how, and how often this defect occurs

Analyze Determine when, 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

© McGraw-Hill Education.


Charleston Area Medical Center’s Six Sigma Program


How does CAMC’s Six Sigma program support its attempt to control costs and improve its competitive position?


Why is Six Sigma a necessity for achieving continuous improvement and operating excellence?


How does the Six Sigma process change an organization’s culture?


© McGraw-Hill Education.


Strategic Management Principle (6 of 14)


Ambidextrous organizations are adept at employing continuous improvements in operating processes while allowing R&D to operate under a set of rules that allows for exploration and the development of breakthrough innovations.


© McGraw-Hill Education.


THE DIFFERENCE BETWEEN BUSINESS PROCESS REENGINEERING AND CONTINUOUS IMPROVEMENT


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


Jump to Appendix 4 long image description


© McGraw-Hill Education.


Strategic Management Principle (7 of 14)


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


© McGraw-Hill Education.


CAPTURING THE BENEFITS OF INITIATIVES TO IMPROVE OPERATIONS


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


Jump to Appendix 5 long image description


© McGraw-Hill Education.


FOSTERING QUALITY-SUPPORTIVE BEHAVIORS


Screening job applicants rigorously and hiring only those with attitudes and aptitudes that are right for quality-based performance


Providing quality training for employees


Using teams and team-building exercises to reinforce and nurture individual effort


Recognizing and rewarding individual and team efforts to improve quality regularly and systematically


Stressing prevention (doing it right the first time), not correction (instituting ways to undo or overcome mistakes)


© McGraw-Hill Education.


STRATEGIC MANAGEMENT PRINCIPLE (8 of 14)


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.


© McGraw-Hill Education.


INSTALLING INFORMATION AND OPERATING SYSTEMS


Benefits of information technologies


Enable better strategy execution through data-based decisions


Strengthen organizational capabilities


Allow for real-time tracking of implementation initiatives and daily operations


Provide monitoring of empowered employee performance (electronic scorecards)


Build closer relationships with customers


© McGraw-Hill Education.


INSTITUTING ADEQUATE INFORMATION SYSTEMS PERFORMANCE TRACKING AND CONTROLS


Employee data


Financial performance data


Customer data


Operations data


Supplier/partner/ collaborative ally data


Key Strategic Performance Indicators Tracked by Information Systems


Jump to Appendix 6 long image description


© McGraw-Hill Education.


Strategic Management Principle (9 of 14)


Having state-of-the-art operating systems, information systems, and real-time data is integral to superior strategy execution and operating excellence.


© McGraw-Hill Education.


USING REWARDS AND INCENTIVES TO PROMOTE BETTER STRATEGY EXECUTION


Techniques for winning sustained, energetic commitment of employees to the strategy execution process


Providing incentives and engaging in motivational practices that facilitate good strategy execution


Striking the right balance between rewards and punishment for individual performance


Linking employee rewards to strategically relevant organizational performance outcomes


Jump to Appendix 7 long image description


© McGraw-Hill Education.


Strategic Management Principle (10 of 14)


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.


© McGraw-Hill Education.


Core Concept (5 of 5)


Financial rewards provide high-powered incentives when rewards are tied to specific outcome objectives.


© McGraw-Hill Education.


NONMONETARY APPROACHES TO ENHANCING MOTIVATION


Provide attractive perks and fringe benefits


Give awards and other forms of public recognition


Rely on promotion from within whenever possible


Invite and act on ideas and suggestions


Create a work atmosphere of caring and mutual respect


State the strategic vision in inspirational terms


Share the firm’s critical information with employees


Provide a comfortable working environment


© McGraw-Hill Education.


STRIKING THE RIGHT BALANCE BETWEEN REWARDS AND PUNISHMENT


The firm’s motivational approaches and reward structure


Punishment


Rewards


Commitment-generating incentives and rewards


Adverse employment consequences


Performance


Jump to Appendix 8 long image description


© McGraw-Hill Education.


HOW THE BEST COMPANIES TO WORK FOR MOTIVATE AND REWARD EMPLOYEES


The times they are changing: Why are companies finding it increasingly necessary to motivate and reward workers to achieve higher levels of performance?


As businesses continue to globalize, how will companies have to adapt their reward and incentive systems?

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