Roadmap To Strategy Execution  Steer Resources to Execution-Critical Activities  Institute Policies and Procedures that Facilitate Strategy Execution  Adopt Best Practices and Design for Continuous Improvement  Install Execution-critical Information and Operating Systems  Use Rewards and Incentives to Promote Strategy Execution 11–1 Copyright © 2016 by Glo-Bus Software, Inc.

Core Concept Good strategy execution requires steering the proper kinds and amounts of resources to the enterprise’s various organization units and strategy-critical value chain activities. Visible actions to Visible actions to reallocate operating funds and reallocate operating funds and increase/decrease the staffing of certain organizational units increase/decrease the staffing of certain organizational units give credibility to management’s intent to institute internal change. give credibility to management’s intent to institute internal change. 11–2 Copyright © 2016 by Glo-Bus Software, Inc.

How Prescribed Policies and Procedures Facilitate Strategy Execution 11–3 Copyright © 2016 by Glo-Bus Software, Inc.

 A best practice is a means of performing an activity or process that yields results consistently superior to other approaches.  A method of performing an activity or process qualifies as a best practice when at least one enterprise has shown that it is unusually effective in: Significantly lowering costs Improving quality or performance Shortening time requirements or enhancing safety OR Delivering other highly positive outcomes 11–4 Copyright © 2012 by Glo-Bus Software, Inc. Adopting Best Practices and Striving for Continuous Improvement

Benchmarking  Best-Practice Implementation  Operating Excellence 11–5 Copyright © 2016 by Glo-Bus Software, Inc.

 Three other potent management tools for promoting operating excellence and better strategy execution are: ► Business process reengineering ► Total quality management (TQM) programs ► Six Sigma programs 11–6 Copyright © 2016 by Glo-Bus Software, Inc. Business Process Reengineering, Six Sigma Quality Programs, and TQM: Tools for Promoting Operating Excellence

Business Process Reengineering  When strategically relevant activities are distributed piecemeal across several functional departments: ► Inefficiencies are created and optimal performance is impeded ► Accountability is lacking since no one functional manager is responsible for optimum performance of the entire activity  Solution  Business Process Reengineering ► Involves redesigning and streamlining workflows and work process steps, with the goal of achieving quantum gains in performance of the activity ► Often leads to the establishment of process departments and/or cross-functional work groups that unify performance of activities, improving overall performance and lowering costs, which in turn promotes operating excellence 11–7 Copyright © 2016 by Glo-Bus Software, Inc.

 TQM is a management approach that emphasizes: ► Continuous – ongoing – improvement in all phases of operations ► 100 percent accuracy in performing tasks ► Involvement and empowerment of employees at all levels ► Team-based work design ► Benchmarking ► Total customer satisfaction  T QM takes a fairly long time to show significant results— very little benefit emerges in the first six months.  TQM entails creating a total quality culture focused on continuously improving the performance of every task and value chain activity. 11–8 Copyright © 2016 by Glo-Bus Software, Inc. Total Quality Management Programs T Q M

 Six Sigma techniques use advanced statistical methods to identify and remove the causes of defects (errors) and variations in performing an activity or business process  When performance of an activity or process reaches “Six Sigma quality,” there are not more than 3.4 defects/errors per million iterations (equal to % accuracy)  The statistical thinking underlying Six Sigma is based on three principles: 1.All work is a process 2.All processes have variability 3.All processes create data that explains variability  Like TQM – Six Sigma requires culture of commitment. 11–9 Copyright © 2016 by Glo-Bus Software, Inc. Six Sigma Programs

 Six Sigma techniques can stifle innovation and creativity  The strength of Six Sigma techniques is improving how activities and processes are performed – “structuring” them perfectly.  BUT creative processes such as R&D and new product development involve (or require): ► Outside-the-box brainstorming ► Trial-and-error experimentation ► Innovative exploration of ideas and approaches, with many being discarded and those that appear promising going through multiple testing, revisions, and prototyping to identify what works best  Six Sigma users have backed off using strict Six Sigma procedures for activities where personnel need freedom/flexibility to discover new and better ways of doing things. 11–10 Copyright © 2016 by Glo-Bus Software, Inc. A Drawback of Six Sigma Programs

 Worldwide 59 manufacturing and technology centers, 69,000 employees  2015 sales = $19b  Market leader N.A., L.A., India, #3 Europe  Strategy = innovative, wide selection, low cost efficiencies, competitive pricing  Every operating unit implemented Six Sigma in all functions (R&D, technology, manufacturing, marketing, admin) ► Improved quality, eliminated unnecessary processes/costs  Saved $175m in manufacturing costs in first three years  Now employ both Continuous Improvement and Six Sigma 11–11 Copyright © 2016 by Glo-Bus Software, Inc. Six Sigma: Whirlpool Corporation

 State-of-the-art operating systems and real time data ► Help strengthen operating capabilities and improve the performance of value chain activities ► Are integral to competent strategy execution and operating excellence ► Provide a competitive advantage by giving a firm capabilities that rivals do not have and are unable to match (without the expenditure of considerable time, money, and organizational effort) 11–12 Copyright © 2016 by Glo-Bus Software, Inc. Installing Information and Operating Systems

 Amazon.com ► Global network of warehouses where computers control order- picking by sending signals to wireless receivers  Otis Elevator ► Sophisticated support systems for monitoring, maintaining, and quickly repairing the 2.5 million elevators and escalators it has installed for customers 11–13 Copyright © 2016 by Glo-Bus Software, Inc. Examples of Execution-Critical Support Systems

 Information about daily operations is essential if managers are to gauge how well the strategy execution process is proceeding. Information systems need to cover five broad areas: ► Customer data ► Operations data ► Employee data ► Supplier/partner/collaborative ally data ► Financial performance data  All key strategic performance indicators must be tracked and reported in real time where possible 11–14 Copyright © 2016 by Glo-Bus Software, Inc. Instituting First-Rate Information Systems and Performance Tracking

 Monetary Incentives ► Base pay increases ► Performance bonuses ► Profit sharing plans ► Stock options ► Retirement packages ► Piecework incentives  Non-Monetary Incentives ► Praise/constructive criticism ► Special recognition ► More/less job security ► Stimulating or dead-end job assignments ► More/less autonomy ► Rapid/slow promotion 11–15 Copyright © 2016 by Glo-Bus Software, Inc. Reward System  Operational Effectiveness

 Appropriate reward systems have been shown to:  Increase retention – decrease turnover  Improve work practices  Increase productivity  Increase employee satisfaction 11–16 Copyright © 2016 by Glo-Bus Software, Inc. Reward Systems  Good Execution

 Little evidence that no-pressure/no-adverse- consequences leads to superior operating excellence.  So, pressure to perform and consequences for poor performance are helpful.  However, t oo much stress, internal competitiveness, job insecurity, and unpleasant consequences can have a counterproductive impact on workforce morale and strategy execution  Therefore, best to emphasize positive rather than negative approaches 11–17 Copyright © 2016 by Glo-Bus Software, Inc. Striking the Right Balance between Rewards and Punishment

 A well-designed incentive system emphasizes rewarding people for achieving good results, not for dutifully performing assigned tasks ► Focus must be on “what to achieve”, NOT ON “what to do” ► Reward people for achieving the right results, not for activity or trying hard ► Performing assigned tasks is not equivalent to achieving intended outcomes  Generously reward people who meet or beat performance targets  Deny rewards to those who don’t ► Incentives/rewards should never be awarded for “effort,” always staying busy, coming to work on time, or “trying hard” 11–18 Copyright © 2016 by Glo-Bus Software, Inc. Linking Rewards to Achieving the Right Outcomes

 In top US three steel producers  Strategy – low cost  Workforce organized into production teams ► Workers are paid a base wage comparable to other workers in the local area ► Assigned weekly production targets Product quantity, reject rate, labor hours, production costs, etc. For every 1% the team’s production output exceeds target, each employee receives a 1% pay bonus.  Teams typically exceed targets by 20-50%  Nucor productivity levels 10-20% above industry averages  Nucor employees highest paid in the indsutry 11–19 Copyright © 2016 by Glo-Bus Software, Inc. Workforce Support: Nucor Corpporation

 Prioritizes work-life balance and mental health  Onsite health center ► 53 medical and support staff including physicians, dieticians, psychologists, etc. ► Recreational facilities including frisbee golf course, indoor pool, walking/biking trails, 4,000-item art display  95% of employees look forward to work every day 11–20 Copyright © 2016 by Glo-Bus Software, Inc. Workforce Support: SAS Software

 Oil/gas exploration co. #20 on Fortune’s 100 best firms to work for  In 2011 they reached five-year goal of doubling in size ► Awarded every employee a $50,000 dream car voucher or $35,000 cash  Established new reward program – Dream 2015 to award each employee $100,000 if company doubles in ► Production rate, reserves, value ► 1,350 employees received $100,000 bonus in –21 Copyright © 2016 by Glo-Bus Software, Inc. Workforce Support: Hilcorp

 Forbes most innovative American compay  Workforce doubled in past 2 years 5,000  10,000  Rewards for ► Achievement in work ► Contribution to community  Top sellers awarded two-week trip to Bhutan 11–22 Copyright © 2016 by Glo-Bus Software, Inc. Workforce Support: Salesforce.com

 Top 50 general contractor  Teamwork fostered - open-office floor plans  Safety fostered ► 30,000 consecutive safe work hours rewarded with new Ford F-150 ► In people received a $2,00 trip + 40-hour week off withpay + jacket with # safe hours printed 11–23 Copyright © 2016 by Glo-Bus Software, Inc. Workforce Support: DPR Construction

 What specific actions has your company taken to manage internal operations so as to promote good strategy execution and operating excellence?  What evidence indicates your company is making reasonable progress toward achieving operating excellence?  Is there hard evidence (from the industry-wide benchmarking data and other operating statistics) that your company is not as close to achieving operating excellence as are one or more rival companies? 11–24 Copyright © 2016 by Glo-Bus Software, Inc. Questions for Company Co-Managers