1 Strategy Implementation  What must we do to put the strategy in place, execute it proficiently, and produce good results?  Creating FITS between strategy and external environment and creating FITS inside the organization  Control, coordination, and motivation issues

2 Figure 10.1: The Eight Components of the Strategy Execution Process The Action Agenda for Executing Strategy

ALLOCATING RESOURCES TO THE STRATEGY EXECUTION EFFORT

4  Resource allocation should fit strategy  Changing strategy requires changes to resource allocation process  Shifting resources — downsizing some areas, upsizing others, getting rid of activities no longer needed, and funding new strategically critical activities  Financial and other resources (physical and human assets)  Historical process vs. Zero-based Budgeting

INSTITUTING POLICIES AND PROCEDURES THAT FACILITATE STRATEGY EXECUTION

How Policies and Procedures Facilitate Good Strategy Execution

USING PROCESS MANAGEMENT TOOLS TO STRIVE FOR CONTINUOUS IMPROVEMENT

8  Searching out and adopting best practices is integral to effective implementation  Benchmarking is the backbone of the process of identifying, studying, and implementing best practices  Key tools to promote continuous improvement  Business process reengineering  TQM  Six Sigma quality control

9 What Is Total Quality Management?  A philosophy of managing a set of business practices that emphasizes  Continuous improvement in all phases of operations  100 percent accuracy in performing activities  Involvement and empowerment of employees at all levels  Team-based work design  Benchmarking and  Total customer satisfaction

10  Six Sigma is a disciplined, statistics-based system aimed at having not more than 3.4 defects per million iterations for any business practice  From manufacturing to customer transactions  Applying Six Sigma to value chain activities can significantly improve the proficiency of strategy implementation Six Sigma Quality Control — A Tool for Promoting Operating Excellence

INSTALLING INFORMATION AND OPERATING SYSTEMS

12 Installing Information and Operating Systems  Good information and operating systems are essential for first-rate strategy execution  Support systems can relate to all value-chain activities  Includes all type of Computer Based Information Systems (CBISs):  MIS, DBMS, TPS, DSS, E-commerce and e- business systems, CRM, SCM, etc…  Mobilizing information and creating systems to use knowledge effectively can yield  Competitive advantage  Can be used for coordination and control

TYING REWARDS AND INCENTIVES TO STRATEGY EXECUTION

14  Challenge – Behavioral Control  How to ensure actions of employees stay within acceptable bounds  Control approaches  Managerial control Establish boundaries on what not to do, allowing freedom to act with limits Track and review daily operating performance  Peer-based control Culture Exercising Adequate Control Over Empowered Employees

15 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, or less, job security  Stimulating assignments  More, or less, autonomy  Rapid promotion Gaining Commitment: Components of an Effective Reward System

16 Rewards are the single most powerful tool to win the commitment of company personnel to effective strategy implementation  Generously reward those achieving objectives and deny rewards to those who don’t  Create a results-oriented system  Define jobs in terms of what to achieve  Tie incentive compensation to relevant outcomes- both strategic and financial  Top executives – Incentives tied to overall firm performance  Department heads, teams, and individuals – Incentives tied to achieving performance targets in their areas of responsibility Linking the Reward System to Performance Outcomes

INSTILLING A CORPORATE CULTURE THAT PROMOTES GOOD STRATEGY EXECUTION

18 A company’s culture is manifested in...  Values, business principles, and ethical standards preached and practiced by management  Approaches to people management and problem solving  Atmosphere and spirit permeating work environment  The way managers and employees interact and relate to one another  Peer pressures that exist to display core values  Encouraged and rewarded actions and behaviors  Its revered traditions and often repeated stories  Its relationships with external stakeholders Identifying the Key Features of Corporate Culture

19  Founder or early leader  Influential individual or work group  Policies, vision, or strategies  Operating approaches  Company’s approach to people management  Traditions, supervisory practices, employee attitudes  Organizational politics  Relationships with stakeholders  Internal sociological forces Where Does Corporate Culture Come From?

20 How Is a Company’s Culture Perpetuated?  Screening and selecting new employees based on how well they “fit” in  Systematic indoctrination of new employees  Senior employees’ reinforcement of core values  Story-telling of company legends  Ceremonies honoring employees who display cultural ideals  Visibly rewarding those who follow cultural norms

21 Types of Corporate Cultures Strong vs. Weak Cultures Unhealthy Cultures High-Performance Cultures Adaptive Cultures

22  Conduct business according to a clear, widely- understood philosophy  Considerable time spent by management communicating and reinforcing values  Values are widely shared and deeply rooted  Have a well-defined corporate character, reinforced by a creed or values statement  Careful screening/selection of new employees to be sure they will “fit in” Characteristics of Strong Culture Companies

23 Characteristics of Weak Culture Companies  Lack of a widely-shared core set of values  Few behavioral norms evident in operating practices  Few strong traditions  No strong sense of company identity  Little cohesion among departments  Weak employee allegiance to company’s vision and strategy

24  Highly politicized  Issues resolved on basis of political clout  Resistant to change  Avoid risks and don’t screw up  Experimentation and efforts to alter status quo discouraged  Inwardly focused – company personnel discount need to look outside for  Best practices  New or better managerial approaches  Innovative ideas  Unethical and greed-driven  Incompatible subcultures Characteristics of Unhealthy Cultures

25  Standout cultural traits include  A can-do spirit  Pride in doing things right  No-excuses accountability  A results-oriented work climate in which people go the extra mile to achieve performance targets  Strong sense of involvement by all employees  Emphasis on individual initiative and creativity  Performance expectations are clearly identified for all organizational members  Strong bias for being proactive, not reactive  Respect for the contributions of all employees Characteristics of High-Performance Cultures

26  Willingness to accept change and embrace challenge of introducing new strategies  Risk-taking, experimentation, and innovation to satisfy stakeholders  Entrepreneurship is encouraged and rewarded  Funds provided for new products  New ideas openly evaluated  Genuine interest in well-being of all key constituencies  Proactive approaches to implement workable solutions Hallmarks of Adaptive Cultures

27 Why is Culture Important?  Matching culture to strategy will improve performance  A culture that promotes attitudes and behaviors that are well-suited to strategy is a valuable ally in the strategy implementation process  Can hinder strategy implementation and performance if not compatible with strategy  A culture where attitudes and behaviors impede good strategy implementation is a huge obstacle to overcome  Provides another means to control, coordinate, and motivate employees

28  A culture based on ethical principles is vital to long-term strategic success  Ethics programs help make ethical conduct a way of life  Executives must provide genuine support of personnel displaying ethical standards in conducting the company’s business  Value statements serve as a cornerstone for culture-building  Can be used to control employees – to behave in the “right” way Grounding the Culture in Core Values and Ethics

LEADING THE STRATEGY EXECUTION PROCESS LEADING THE STRATEGY EXECUTION PROCESS

30 Visionary Chief Entrepreneur & Strategist Capabilities Builder Resource Acquirer & Allocator Culture Builder Chief Administrator & Strategy Implementer Process Integrator Coach Crisis Solver Taskmaster Spokesperson Negotiator Motivator Arbitrator Consensus Builder Policymaker Policy Enforcer Mentor Head Cheerleader Numerous Roles of Strategic Leaders

31 Leadership Roles of the Strategy Implementer  Staying on top of how well things are going  Putting constructive pressure on organizational units to execute the strategy well and achieve operating excellence  Leading the process of making corrective adjustments