Gerald, Brett, Courtney, Ryan, Scott, Brandon, William, Kara

Preview of Main Points Build Execution into a Strategy Poor Process Can Ruin Strategy Execution The Power of Fair Process The Three E Principles of Fair Process A Tale of Two Plants Why Does Fair Process Matter? Intellectual and Emotional Recognition Theory Fair Process and Blue Ocean Strategy Conclusion

Build Execution into Strategy A company equals everyone from the top to the front lines. Everyone in an organization must support and be aligned with strategy Create a culture of trust and commitment This allows people to embrace new strategy willingly Involve front lines in creation of strategy Front line employees are the ones who must execute strategy day in and day out.

Build Execution into Strategy To build trust and commitment and to inspire voluntary cooperation Build execution into strategy from the start Reach to fair process in making and executing of strategy

Poor Process can Ruin Strategy Execution Strategy execution for blue oceans requires significant change and a well thought out process contributed by every level of the company. When the process is poor, decisions, if made at all, are likely to be poor as well. Countless mistakes can be made, the issues can be misidentified or dealt with out of order, the process can be too complex with too many steps, or so short and simple that important facts or opinions are not considered. Ex. Water-based liquid coolants for metalworking industries

Samuel Adams changes strategy The Company has historically pursued a strategy of combining brewery ownership with production arrangements at breweries owned by third parties. Having less control of breweries owned by third parties, Sam Adams faced Potential disruptions at breweries including labor issues, governmental actions, quality issues, contractual disputes, machinery failures or operational shut downs. Samuel Adams has changed its strategy and made it clear that all brewing will be done in Sam Adams owned Breweries.

The Power of Fair Process Originated by John W. Thibaut and Laurens Walker in the mid-1970s With their focus on legal settings, they found that people care just as much about the process of a strategy as they do about the outcome Fair process is the managerial expression of the procedural justice theory procedural justice psychology of justice study of process

Fair Process in the Strategy Making Process Employees trust that everyone has an input in the process Inspires people to cooperate voluntarily in the execution of strategies Voluntary Cooperation > Mechanical Execution

Attitudes and Behaviors toward Fair Process Figure 8-1 pg.174 Strategy Formulation Process Attitudes Behavior Strategy Execution Exceed Expectations Self-initiated Fair Process Engagement Explanation Expectation clarity Trust and Commitment “I feel my opinions count.” Voluntary Cooperation “I’ll go beyond the call of duty.”

The Three E Principles of Fair Process All three principles collectively lead to the judgment of fair process 1. Engagement 2. Explanation 3. Clarity of expectation

Engagement Involving individuals in the strategic decisions that affect them Ask for input Allow employees to question the ideas or assumptions of others Communicates management’s respect for individuals and their ideas Creates better strategic decisions from management and greater commitment from everyone involved

Explanation Everyone involved should understand why the final strategic decisions are made People are confident that managers have considered all opinions and made decisions based on the overall interest of the company Employees can trust managers intentions Managers can receive feedback from employees allowing for enhanced learning of the decision

Expectation Clarity Once the strategy has been set into action, managers must clearly communicate the new rules and procedures Employees should know what standards they will be judged on and what penalties they will receive for failure Are the new goals, targets, and responsibilities for our employees clearly understood?

The Tale of Two Plants Three E’s of fair process in a real life example: Elco elevator company needs to implement new manufacturing system to cut costs.

The Tale of Two Plants Principle Strategy Begin implementing change at Chester, then roll over to High Park. Chester had ideal employees and no union, unlike High Park Expected Chester’s success to provide momentum for change at High Park

However the opposite occurred Management at Chester violated the three E’s, unlike High Park High Park is more successful than Chester

Chester Plant vs. High Park plant Chester High Park Failed to Engage Employees Consulting firm ordered not to disturb employees Failed to Explain Employees were not explained why new system was being implemented Failed to clarify Expectations Did not elaborate on how new system worked, and what employees jobs were Engaged Employees Introduced consultants to employees, held company meetings. Explained why new process was being implemented Clearly stated employee Expectations in new system

Results Chester plant employees lose trust in management and is met with resistance to the new strategy High Park strategy is implemented, Employees gain trust in management and shift from being the worst employees to the best.

Why Does Fair Process Matter? It all comes down to intellectual and emotional recognition Intellectually Individuals seek recognition that their ideas are sought after and given thoughtful reflection Emotionally Individuals seek recognition of their value

Intellectual and Emotional Recognition Theory When individuals feel recognized for their intellectual worth, they are willing to share their knowledge By using fair process employees will be to engage in voluntary cooperation

If individuals are not treated as though there knowledge is valued they may not share their ideas and best thinking Employees may also begin to reject other’s intellect as well Ultimately employees can push for changing back strategies even if they are good ones Lacking trust in the strategy-making process, people lack trust in the resulting strategies.

Sam Adams Homebrew competition Companywide events help bring together employees in a family environment Homebrew competition lets employees brew their own beer as they begin to grow a passion for beer Sam Adams promotes a relaxed environment that encourages new ideas from all levels of employees

Fair Process and Blue Ocean Strategy Intangible capital Commitment Trust Voluntary cooperation *Willing to put self interest aside, for the good of the company

Intangible capital Companies who have created blue oceans are quick to praise their employees who show commitment, trust and voluntary cooperation. Companies who have this intangible capital stand apart in speed, quality and consistency of their execution and to implement strategic shifts at low cost.

Obtaining Intangible Capital What not to do: What to do: Money and Power? This will simply fall short of inspiring human behavior beyond self interest. Don’t separate strategy formulation from execution This is a hallmark of questionable implementation and mechanical flow through at best! Implement Fair process Build execution into strategy making from the start People tend to be committed to support the resulting strategy even when it is viewed as not favorable or at odd with their unit People realize that small self sacrifices are essential in building a strong company

Conclusion Build Execution into a Strategy A company means everyone Culture of trust and commitment Use frontline employees in strategy creation Poor Process Can Ruin Strategy Execution Poor process = poor decisions The Power of Fair Process Employees trust everyone has a say Inspires everyone to cooperate voluntarily

Conclusion The Three E Principles of Fair Process Engagement Explanation Clarity of expectataion A Tale of Two Plants Chester Plant vs High Park Plant Why Does Fair Process Matter? Intellectual and Emotional recognition Intellectual and Emotional Recognition Theory Fair Process and Blue Ocean Strategy Intangible Capital