CHAPTER 11 MANAGING INTERNAL OPERATIONS Actions That Promote Good Strategy Execution Student Version
PROMOTING GOOD STRATEGY EXECUTION • Allocating resources to the drive for good strategy execution. • Instituting policies and procedures that facilitate strategy execution. • Using process management tools to drive continuous improvement in how value chain activities are performed. • Installing information and operating systems that enable 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.
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.
Benchmarking Process Reengineering Best Practices Managing for Continuous Improvement Total Quality Management (TQM) Six Sigma Quality Programs USING PROCESS MANAGEMENT TOOLS TO STRIVE FOR CONTINUOUS IMPROVEMENT
Reengineering the Organization • 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.
Achieving Continuous Improvement • Total Quality Management (TQM ) • Creating a total quality culture 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).
A Statistical Approach to Achieving Continuous Improvement Six Sigma 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.
The Difference between Business Process Reengineering and Continuous Improvement Top-notch Strategy Execution and Operating Excellence Business Process Reengineering Continuous Improvement (TQM, Six Sigma) Aims at one-time quantum improvement Aims at ongoing incremental improvements
Capturing the Benefits of Initiatives to Improve Operations Action Steps to Realize the Value of TQM and Six Sigma Initiatives Committing to total quality and continuous improvement Emphasizing the necessity for improved performance Empowering all employees to improve quality Fostering quality-supportive behaviors Using online systems to speed the adoption of best practices
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
Instituting Adequate Information Systems,Performance Tracking, and Controls Key Strategic Performance Indicators Tracked by Information Systems Customer data Financial performance data Employee data Operations data Supplier/partner/collaborative ally data
TYING REWARDS AND INCENTIVES TO STRATEGY EXECUTION Providing incentives and an engaging in motivational practices that facilitate good strategy execution. Techniques for winning sustained, energetic commitment of employees to the strategy execution process Striking the right balance between rewards and punishment for individual performance. Linking employee rewards to strategically relevant organizational performance outcomes.
Performance Striking the Right Balance between Rewards and Punishment The firm’s motivational approaches and reward structure Rewards Punishment Commitment-generating incentives and rewards Adverse employment consequences
Linking Rewards to Strategically RelevantPerformance Outcomes • Focus on and reward results, not effort. • Create a results-oriented work environment that focuses on what to achieve, not what to do. • Set strategically-relevant, specific, and measurable stretch performance goals that are difficult but achievable. • Link the performance goals of each individual in an organizational unit to the unit’s goals. • Reward and recognize as success superior performance in accomplishing the goals.
Guidelines for Designing Effective Incentive Compensation Systems • Make financial incentives a major, not minor, piece of the total compensation package. • Have incentives that extend to all managers and all workers, not just top management. • Administer the reward system with scrupulous objectivity and fairness. • Keep the time between achieving targeted performance outcome and payment of the reward as short as possible. • Avoid rewarding effort rather than results.