MODULE 10 IMPLEMENTING STRATEGY : BUDJETS, POLICIES, BEST PRACTICES, SUPPORT SYSTEMS, AND REWARDS

MODULE OUTLINE Linking Budgets to Strategy Crafting Strategy-Supportive Policies & Procedures Instituting Best Practices & a Commitment to Continuous Improvement Installing Support Systems Designing Strategy-Supportive Reward Systems

LINKING THE BUDGET TO STRATEGY Strategy implementers need to See that strategy-critical units have enough resources Screen requests for new capital projects & bigger operating budgets Be willing to shift resources to support new strategic priorities Make persuasive case to superiors on what resources are really needed

LINKING THE BUDGET TO STRATEGY New strategies often call for significant budget reallocations Down sizing some areas & upsizing others Killing activities that make or break success How Well allocations are linked to the needs of strategy can either promote or impeded the implementation process!

HOW POLICIES & PROCEDURE AID STRATEGY IMPLEMENTATION Provide top-down guidance regarding expected behaviors & performance Help align actions & behavior with strategy Help enforce consistency in performance of strategy – critical activities in geographically scattered operating units Serves as powerful lever for changing corporate culture to produce strong fit with a new strategy

CREATING STRATEGY-SUPPORTIVE POLICIES & PROCEDURES Role of new policies in implementing strategy Channel actions, behaviors, & decisions in directions to promotes strategy execution counteract tendencies of people to resist chosen strategy. Too much policy can be as stifling as wrong policy or as chaotic as no policy Sometimes, BEST POLICY is willingness to “ empower” employees “ Empowerment “ is important when employee initiative is essential to good strategy execution.

INSTITIUTING BEST PRACTICES & CONTINUOUS IMPROVEMENT Searching out & adopting “ best practices “ is integral to effective implementation Benchmarking has spawned new approach to improving strategy execution Reengineering Continuous improvement programs Total quality management- TQM

INSTITUTING BEST PRACTICE & CONTINUOS IMPROVEMENT Quality improvement programs are tools for implementing strategies keyed to Defect-free manufacture Superior product quality service Total customer satisfaction Identifying & implementing best practices is a journey, not a Destination; it’s an exercise in doing things in a world-class manner!

WHAT IS TOTAL QUALITY MANAGEMRENT-TQM? Creating a TOTAL QUALITY CULTURE bent on CONTINOUSLY IMPROVING The performance of every task and Value –chain activity!

IMPLEMENTING A CONTINIOUS IMPROVEMENT PHILOSOPHY Instill enthusiasm & commitment to doing things right from top to bottom of forward each day : kaizen Ignite employee efforts to be creative in improving performance of value-chain activities. Preach there is no such thing as good enough & everyone must be involved Reform the corporate culture

BEST PRACTICE PROGRAMS Aim at Improved efficiency Reduced costs Better product quality Greater customer satisfaction Involves benchmarking against companies regarded as “ Best in industry “ or “ Best in world “

REENGINEERING & TQM Reengineering vs. TQM programs REENGINEERING seeks one-time quantum gains on order of 30 to 50% or more TQM seeks ongoing incremental improvement Reengineering vs. TQM are not mutually exclusive First, reengineering is used to produce a good basic design yielding dramatic improvements Then, TQM is used to perfect process, gradually improving efficiency.

USING BEST PRACTICE PROGRAMS AS AN IMPLEMENTATION TOOL Select indicators of successful strategy execution Next,benchmark against best practice companies Reengineer business processes Then, build a TQ culture Starts with management commitment Install TQ-supportive employees to do the “ right things” Provide employees with quick access to required information Preach that performance can be improved

INSTALLING SUPPORT SYSTEMS Strategy implementers must Invest in creating support Systems that promote Successful strategy execution!

EXAMPLES: SUPPORT SYSTEMS Computerized reservation system Computerized parcel-tracking system & leading –edge flight operations systems Sophisticated maintenance support system

EXAMPLES: SUPPORT SYSTEMS System to obtain early warning signs of product problems & changing tastes System to monitor sales, at 15inutes intervals, to suggest product mix changes & to improve customer response

STRATEGIC MANAGEMENT PRINCIPLE Innovative, state-of-the-art Support systems can be a basis For competitive advantage if They give a firm capabilities if They give a firm capabilities that rivals can’t match!

FORMAL REPORTIN OFN STRATEGY-CRITICAL INFORMATION Accurate & timely information is essential to guide action Prompt feedback on implementation initiatives needed BEFFORE actions are fully completed monitoring early implementation actions serves two purposes Quick detection of needed to adjust either strategy or its implementation Assuring things move ahead as planned Key strategic performance indicators must be tracked as often as practical

FORMAL REPORTING OF STRATEGY-CRITICAL INFORMATION Information systems should cover 4 areas Customer data Operations data Employee data Financial performance data Accurate, timely information allows Strategists to monitor progress and take Corrective actions promptly!

GAINING COMMITMENT TO CHOSEN STRATEGY Motivational practices Rewards & incentives inducing employees to make the strategy work promoting a results orientation The strategy implementer’s challenges to design a reward structure that motivates people to do the things It takes to make the strategy work successfully!

DEVELOPING AN EFFECTIVE REWARD STRUCTURE INVOLVES CREATIVE using full range of reward punishment mechanisms Salary raises Bonuses, stock options,& “ perks” Promotions Praise & recognition Constructive criticism peer pressure More (or less) responsibility Opportunity for personal satisfaction

MOTIVATING PEOPLE TO EXECUTE THE STRATEGY WELL Support for good strategy execution involves Inspiring & challenging employees to do their best Involving employees in decisions about how to perform their jobs Making jobs interesting & satisfying

EXAMPLES: MOTIVATIONAL PRACTICES Every employee, including the president, gets a weekly 10% bonus by coming to work on time each day that week Employees meet regularly to hear inspirational speeches, sing company songs, & chant the corporate litany

EXAMPLE : MOTIVATIONAL PRACTICES Hold inspirational get-together for sales force organizations Encourages competition among brand managers; system breeds people who love to compete and excel

POSITIVE OR NAGATIVE REWARS? Elements of both are necessary But, positive reinforcement should outweigh negative work environment

LINKING WORK ASSIGNMENTS TO PERFORMANCE TARGETS Create RESULT-ORIENTED reward system Define jobs in terms of RESULTS TO BE ACCOMPLISHWS Stress “ achievement “ Track actual achievement vs. targeted performance Use performance targets in strategic plan as basis for incentive compensation Have SEVERAL PERFORMANCE measures

REWARDING PERFORMANCE Objective Provide ample rewards to people Who achieve objectives and Deny rewards to those not Achieving objectives!

REWARDING PERFORMANCE Standards “ Doing a good job” means achieving agreed-upon performance targets “ No excuses “ standard must prevail Cannot reward “ trying hard”

STRATEGIC MANAGEMENT PRINCIPLE The strategy implementer’s standard for judging whether individuals and organizational units have done a good job must be whether the performance targets in the strategic plan were achieved!

GUIDELINES: DESIGNING AN EFFECTIVE REWARD SYSTEM Performance payoff must be a major, not minor, piece of total compensation package Incentive must be administered with scrupulous care & employee System must be administered with scrupulous care & fairness Incentives must be linked tightly to achieving only performance targets in strategic plan Performance targets each person is expected to achieve must involve outcomes person can personally affect

WHY PERFORMANCE-REWARD LINK IS IMPORTANT Reward structure is management’s most powerful implementation tool Kinds of incentives offered signal desired behavior & performance Rewards induce people to go all out to Execute strategy effectively Achieve objectives in strategic plan

MAKING PERFORMANCE-DRIVEN COMPENSATION WORK Keys to implementing pay-for-performance Make performance targets basis for designing incentive system Ensure performance targets are clearly defined & every person/group is accountable for achieving them Be fair & impartial in comparing actual performance against targets Avoid skirting system to reward non-performers

MAKING PERFORMANCE-DRIVEN COMPENSATION WORK Keys to implementing pay-for-performance Explore causes of deviations to assess if they are due to “ poor” individual performance or Circumstances beyond individual’s control Hold people accountable for carrying out their assigned part of strategic plan Base rewards on caliber of each individual’s accomplishments