Chapter 8: Build execution into strategy Jill, Shelby, Jason, Paul, Brandon

What is a company? Everyone from the top to the bottom When all members of an organization are aligned around a strategy and support it, for better or for worse The attitudes and behavior of its people deep in the organization Creates a culture of trust and commitment

In Blue Oceans People are asked to step out of their comfort zones

6th Principle of Blue Ocean Strategy To build peoples trust and commitment deep into the ranks and inspire their voluntary cooperation. Companies need to start this from the beginning Minimizes the management risk of distrust, noncooperation, and even sabotage

The Power of Fair Process John W. Thibaut and Laurens Walker They combined their interests in psychology of justice with the study of process, creating the term procedural justice They began to understand what makes people trust a legal system so that they will comply with laws without being coerced

How Fair Process Affects Peoples Attitudes and Behaviors

Three E Principles of Fair Process Three mutually reinforcing elements that define fair process Engagement Explanation Clarity of expectation

1. Engagement Involving individuals in the strategic decisions that affect them by asking for their input and allowing them to refute the merits of one another’s ideas and assumptions Sharpens everyone’s thinking Builds collective wisdom

2. Explanation Everyone involved and affected should understand why final strategic decisions are made as they are Employees trust managers intentions Overall interest in the company

3. Expectation Clarity Requires that after a strategy is set, managers state clearly the new rules of the game Employees need to know standards and penalties What are goals? What are new targets and milestones? Who is responsible for what?

3 E’s Principle Plan for ethically sourced coffee Outline guidelines Goals and progress Want to reach 100% ethically sourced

Elco 1980’s Elevator Company Falling demand Office space vacancy up to 20% Abandoned batch-manufacturing Adopted cellular approach

Tale of Two Plants Chester High Park Great employee relations Decertified their own union “ideal work force” High Park Reputation for resistance Strong union

Chester Violated fairness principles Did not engage employees No explanation Why the change No clear expectation What were employee expectations Employees feared layoffs

High Park Followed principles of fairness Engagement Explanation Series of plant-wide meetings Explanation Management visited other companies and saw benefits to cellular manufacturing Expectations Clearly defined expectations of employees

Fair Process Matters Employees feel valued Emotional recognition Respect, dignity Intellectual recognition Thoughts and ideas valued

Intellectual and emotional recognition theory Individuals have a need to feel recognized for their intellectual worth Shared knowledge Suggesting active ideas Individuals have a need for emotional recognition Emotionally tied to strategy More willing to give it their all

“You don’t value my ideas, so I don’t value your ideas, nor do I trust in or care about the strategic decisions you’ve reached” Sabotage- Elco’s Chester plant

Intellectual and Emotional Recognition Trust and Commitment http://www.youtube.com/watch?v=iQcXKZ93cUw Fair Process Intellectual and Emotional Recognition Trust and Commitment Voluntary Cooperation in Strategy Execution

Violation of Fair Process Intellectual and Emotional Indignation Distrust and Resentment Refusal to Execute Strategy

Fair Process Commitment Trust Voluntary Cooperation Attitudes and behaviors? Intangible capital?

Fair Process The question companies wrestle with is how to create trust, commitment, and voluntary cooperation deep in the organization. Exercise of fair process People realize that compromises and sacrifices are necessary in building a strong company Accept the need for short-term personal sacrifices in order to advance the long- term interests off the corporation This acceptance is conditional on the presence of FAIR PROCESS

Class Take aways Blue oceans are scary for employees also, not just management Ignoring fairness principles can ruin even the best working environment Intellectual and Emotional Recognition are necessary for building a blue ocean 4. Trust, commitment, and voluntary cooperation are Intangible Capital