1

CHAPTER 11 Strategic Control and Continuous Improvement

Chapter Topics
Establishing Strategic Controls
Premise Control Strategic Surveillance Special Alert Control Implementation Control

The Quality Imperative: Continuous Improvement to Build Customer Value

What is Strategic Control?

Tracks a strategy as it is implemented, detects problems or changes in its underlying premises, and makes necessary adjustments

Questions Involved in Assessing a Strategys Success

1. Are we moving in the proper direction? Are our assumptions about major trends and changes correct? Should we adjust or abort the strategy?

2. How are we performing? Are objectives and schedules being met? Are costs, revenues, and cash flows matching projections? Do we need to make operational changes?

Ex. 11-1: Four Types of Strategic Control

Strategic Surveillance

Premise Control
Special Alert Control Implementation Control

Strategy Formulation Time 1 Time 2

Strategy Implementation Time 3

Ex. 11-1: Characteristics of the Four Types of Strategic Control

Basic Characteristics
Objects of control

Premise Control
Planning premises and projections

Implementation Control
Key strategic thrusts and milestones

Strategic Surveillance
Potential threats and opportunities related to the strategy Low

Special Alert Control

Occurrence of recognizable but unlikely events

Degree of focusing Data Acquisition: Formalization Centralization

High

High

High

Medium Low

High Medium

Low Low

High High

Ex. 11-1 (contd.)

Basic Characteristics
Use with: Environmental factors Industry factors Strategy-specific factors Companyspecific factors

Premise Control
Yes Yes No No

Implementation Control
Seldom Seldom Yes Yes

Strategic Surveillance
Yes Yes Seldom Seldom

Special Alert Control

Yes Yes Yes Seldom

Definitions of Types of Strategic Controls

Premise Control Designed to check systematically and continuously whether premises on which the strategy is based are still valid Strategic Surveillance Designed to monitor a broad range of events inside and outside the firm that are likely to affect the course of its strategy Special Alert Control Thorough, and often rapid, reconsideration of the firms strategy because of a sudden, unexpected event Implementation Control Designed to assess whether the overall strategy should be changed in light of the results associated with the incremental actions that implement the overall strategy

Types of Implementation Control

Monitoring strategic thrusts

Milestone reviews

10

Establishing Effective Operational Control Systems

Set standards of performance

Measure actual performance

Steps involved in postaction control systems

Initiate corrective action

Identify deviations from standards set

11

Concepts Related to TQM

Viewed as a new organizational culture and way of thinking Foundations of TQM Intense focus on customer satisfaction Accurate measurement of every critical variable in a businesss operation Continuous improvement of products, services, and processes Work relationships based on trust and teamwork

12

Key Elements of Implementing TQM

Define quality and customer value Develop a customer orientation Focus on companys business processes Develop customer and supplier partnerships Take a preventive approach Adopt an error-free attitude Get the facts first Encourage all levels of employees to participate Create an atmosphere of total involvement Strive for continuous improvement

13

The Value Chain Approach to Developing a Customer Orientation

Input

External suppliers

Internal suppliers (functions)

Input

Function (like production) Seeking: Quality Efficiency Responsiveness

Outputs

External (ultimate) customer Other internal customers (activities)

Outputs

14

What is Six-Sigma?

A highly rigorous and analytical approach to quality and continuous improvement with an objective to improve profits through deficit reduction, yield improvement, improved customer satisfaction and best-in-class performance

15

Differences Between TQM and SixSigma

Acute understanding of customers and the product or service provided Emphasis on the science of statistics and measurement Meticulous and structured training development Strict and project-focused methodologies Reinforcement of the doctrine advocated by Juran such as top management support and continuous education

16

ISO 9001
The ISO 9001 standard focuses on achieving customer satisfaction through
Continuous measurement Documentation Assessment Adjustment

It specifies requirements where an organization

Needs to demonstrate its ability to consistently provide product and services that meet customer requirements Aims to enhance customer satisfaction through the effective application of the system, including processes for continual improvement of the system and the assurance of conformation to customer requirements

17

The Balanced Scorecard Methodology

Intends to provide a clear prescription as to what companies should measure in order to balance the financial perspective in implementation and control of strategic plans It adapts the TQM ideas of customer-defined quality, continuous improvement, employee empowerment, and measurement-based management/feedback into an expanded methodology that includes traditional financial data and results Uses four perspectives: the learning and growth perspective, the business process perspective, the customer perspective, and the financial perspective

18

Ex. 11-7: Integrating Shareholder Value and Organizational Activities Across Organizational Levels
Sales Targets
Margin COGS/ Sales Dev. Cost/ Sales ROCE Inv. Turnover Capital Turnover Cap. Utilization Cash Turnover Order Size Customer Mix Sales/Account Customer Churn Rate Deficit Rates Cost Per Delivery Maintenance Cost New Product Dev. Time Indirect/Direct Labor Customer Complaints Downtime Accounts Payable Time Accounts Receivable Time

Shareholder value creation

Economic Profit

CEO

Corporate/Divisional

Functional

Depts. And Teams