Strategic Control Methods for Continuous Improvement

1. CHAPTER 11 Strategic Control and Continuous Improvement

2. Chapter Topics • Establishing Strategic Controls • Premise Control • Strategic Surveillance • Special Alert Control • Implementation Control • The Quality Imperative: Continuous Improvement to Build Customer Value

3. What is Strategic Control? Tracks a strategy as it is implemented, detects problems or changes in its underlying premises, and makes necessary adjustments

4. Questions Involved in Assessing a Strategy’s Success • Are we moving in the proper direction? Are our assumptions about major trends and changes correct? Should we adjust or abort the strategy? • 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?

5. Ex. 11-1: Four Types of Strategic Control Strategic Surveillance Premise Control Special Alert Control Implementation Control Strategy Formulation Strategy Implementation Time 3 Time 1 Time 2

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

7. Ex. 11-1 (contd.)

8. 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 firm’s 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

9. Types of Implementation Control Monitoring strategic thrusts Milestone reviews

10. Establishing Effective Operational Control Systems Set standards of performance Initiate corrective action Measure actual performance Steps involved in postaction control systems 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 business’s operation • Continuous improvement of products, services, and processes • Work relationships based on trust and teamwork

12. Define quality and customer value Develop a customer orientation Focus on company’s 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 Key Elements of Implementing TQM

13. The Value Chain Approach to Developing a Customer Orientation Input External suppliers External (ultimate) customer Function (like production) Outputs Seeking: Quality Efficiency Responsiveness Other internal customers (activities) Outputs Internal suppliers (functions) Input

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 Six-Sigma • 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 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 Sales Targets Margin COGS/ Sales Dev. Cost/ Sales Shareholder value creation ROCE Inv. Turnover Cap. Utilization Capital Turnover Economic Profit Cash Turnover CEO Corporate/Divisional Functional Depts. And Teams