Strategy Implementation: Internal Control and Performance Chapter 12

Learning Objectives Translate strategy into functional goals and activities. Develop effective metrics for control and growth. Different models for implementation and control. Strategic leadership core responsibilities.

5 Keys to Implementation & Control Top management involvement Demonstrates importance & commitment Fit Strategy, structure, value chain, resources Clear and compelling objectives Relevance to employees at their levels Single currency Uniform incentive system applied to all Resource allocation Matched to goals & supports incentives

Strategic Metrics Tied to vision, mission, overall corporate objectives Translated down to all levels and value chain activities All departments / functions included Appropriate for the level within the function Include quantitative & qualitative measures Can be used as part of a uniform incentive system

Metrics Provide Feedback, Create Learning Expected Effect Activities Actual Effect B A is expected, but B occurs Next steps Diagnose if more of activities is needed, or Change activities

Three Implementation Models Balanced Scorecard Model Value-Driver-Action Model McKinsey 7-S Framework

Balanced Scorecard Driven by strategy All activities and metrics consistent with strategic approach Develops "cause-and-effect logic" across four levels of the organization Requires developing "lead" and "lag" performance metrics for each level Consistent with Value Chain focus on activities

Cause and Effect Logic Actions and performance in each level contribute to and enable the next level

Develop Lead and Lag Metrics Lead – measure activities performed Lag – measure results of activities

Discount Airline Example Work from the bottom up Success in each level enables the next level of performance

Value-Action-Driver Model Focuses on value creation efforts Easier to implement vs. Balanced Scorecard Draws upon Key Success Factors (industry analysis) Extraordinary Resource positions Vision and mission

Value-Action-Driver Model Steps Identify key value drivers. Outline desired stakeholder experience for each value driver dimension. Translate stakeholder experience to business / market position. Identify actions to take to achieve position. Develop metrics to assess progress toward position.

Ford Inc. Example Value Driver Desired Stakeholder Experience Translation to Position Consumer Economic Value Getting most "bang for the buck." "Buying is no haggling, straightforward." "Get a great price when I sell my Ford." Develop classic, popular designs to ensure high retained value. List price = sales price. No haggle sales process. Reduce cost structure to best in class.

Ford Inc. Example Translation to Position Actions to Take Metrics Develop classic, popular designs to ensure high retained value. List price = sales price. No haggle sales process. Reduce cost structure to best in class. Revamp designs where needed. Change sales process and sales incentive structure. Reduce excessive overhead costs in management and production. Consumer choice awards for design, performance, and value. Cash rebates usage lowest in industry. Average list price discounts lowest in industry. Production unit cost/model lowest compared to peer group.

McKinsey 7-S Framework Popular model dating from 1970s. Focuses on alignment and fit across the organization. Seven S's "Hard" 3 – easier to identify "Soft" 3 – more difficult to pin down exactly Centered around "Shared Values & Goals"

McKinsey 7-S Framework

McKinsey 7-S Framework Shared Values & Goals Strategy Structure Embodied in Vision, Mission, Principles Strategy Value chain, resources, type of strategic approach Structure How structures help coordinate & organize Systems Alignment of systems to support strategy & structure Skills Core capabilities & related training / learning Style Culture & how it supports the type of work done Staff Onboarding process & continuity of support

Strategic Leadership Establish and extol vision, mission, principles, goals Establish code of ethics Build senior management team Establish structure for communication, coordination, control Establish culture and match leadership style Ensure process exists to recognize new opportunities Rational decision making Motivation through style, and incentives