CHAPTER 11

MANAGING INTERNAL OPERATIONS:

Actions That Promote Good Strategic Execution

Student Version
Copyright 2012 The McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

PROMOTING GOOD STRATEGY EXECUTION

Allocating resources to the drive for good strategy execution. Instituting policies and procedures that facilitate strategy execution. Using process management tools to drive continuous improvement in how value chain activities are performed. Installing information and operating systems that enable personnel to carry out their strategic roles proficiently. Using rewards and incentives to promote better strategy execution and the achievement of strategic and financial targets.
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INSTITUTING POLICIES AND PROCEDURES THAT FACILITATE STRATEGY EXECUTION Policies and operating procedures facilitate strategy execution by:

Providing top-down guidance regarding how things need to be done. Helping ensure consistency in how execution-critical activities are performed. Promoting the creation of a work climate that facilitates good strategy execution.
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USING PROCESS MANAGEMENT TOOLS TO STRIVE FOR CONTINUOUS IMPROVEMENT

Benchmarking

Best Practices

Managing for Continuous Improvement

Process Reengineering

Total Quality Management (TQM)

Six Sigma Quality Programs

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Reengineering the Organization

Business Process Reengineering

Involves radically redesigning and streamlining work effort, flows and processes to achieve dramatic improvements in performance. Uses cross-functional teams, cutting-edge technology and information systems to reset and refocus the organizations strategy.

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Achieving Continuous Improvement

Total Quality Management (TQM )

Creating a total quality culture bent on continuously improving the performance of every task and value chain activity. Is a long-term race without a finish in which success comes slowly in small steps forward (kaizen).

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A Statistical Approach to Achieving Continuous Improvement Six Sigma Programs

Utilize statistical methods to improve quality by reducing defects and variability in business processes.

Six Sigma Principles

All work is a process. All processes have variability. All processes create data that explain variability.
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The Difference between Business Process Reengineering and Continuous Improvement

Business Process Reengineering

Top-notch Strategy Execution and Operating Excellence

Continuous Improvement
(TQM, Six Sigma)

Aims at one-time quantum improvement

Aims at ongoing incremental improvements

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Capturing the Benefits of Initiatives to Improve Operations

Action Steps to Realize the Value of TQM and Six Sigma Initiatives

Committing to total quality and continuous improvement

Empowering all employees to improve quality

Emphasizing the necessity for improved performance

Fostering qualitysupportive behaviors

Using online systems to speed the adoption of best practices

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INSTALLING INFORMATION AND OPERATING SYSTEMS Benefits of Information Technologies

Enable better strategy execution through data-based decisions Strengthen organizational capabilities Allow for real-time tracking of implementation initiatives and daily operations Provide monitoring of empowered employee performance (electronic scorecards) Build closer relationships with customers
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Instituting Adequate Information Systems, Performance Tracking, and Controls

Key Strategic Performance Indicators Tracked by Information Systems

Customer data
Employee data

Financial performance data

Supplier/partner/ collaborative ally data

Operations data

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TYING REWARDS AND INCENTIVES TO STRATEGY EXECUTION

Providing incentives and an engaging in motivational practices that facilitate good strategy execution. Techniques for winning sustained, energetic commitment of employees to the strategy execution process

Striking the right balance between rewards and punishment for individual performance.

Linking employee rewards to strategically relevant organizational performance outcomes.

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Striking the Right Balance between Rewards and Punishment

Performance

Rewards

The firms motivational approaches and reward structure

Punishment

Commitment-generating incentives and rewards

Adverse employment consequences

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Linking Rewards to Strategically Relevant Performance Outcomes

Focus on and reward results, not effort. Create a results-oriented work environment that focuses on what to achieve, not what to do. Set strategically-relevant, specific, and measurable stretch performance goals that are difficult but achievable. Link the performance goals of each individual in an organizational unit to the units goals. Reward and recognize as success superior performance in accomplishing the goals.

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Guidelines for Designing Effective Incentive Compensation Systems

Make financial incentives a major, not minor, piece of the total compensation package.
Have incentives that extend to all managers and all workers, not just top management.

Administer the reward system with scrupulous objectivity and fairness.

Keep the time between achieving targeted performance outcome and payment of the reward as short as possible. Avoid rewarding effort rather than results.

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