Management 455

1. Management 455 Managing Internal Operations Chapter 11

3. MARSHALING RESOURCES BEHIND THE DRIVE FOR GOOD STRATEGY EXECUTION 11-3

4. Allocating Resources toSupport Strategy Execution • Allocating resources in ways to support effective strategy execution involves • Funding strategic initiatives that can makea contribution to strategy implementation • Funding efforts to strengthen competenciesand capabilities or to create new ones • Shifting resources — downsizingsome areas, upsizing others, killingactivities no longer justified, and fundingnew activities with a critical strategy role

5. ESTABLISH POLICIES AND PROCEDURES TO FACILITATE STRATEGY EXECUTION 11-5

6. Creating Strategy-SupportivePolicies and Procedures • Role of new policies • Channel behaviors and decisionsto promote strategy execution • Counteract tendencies ofpeople to resist chosen strategy • Too much policy can be as stiflingas • Wrong policy or as • Chaotic as no policy • Often, the best policy is empowering employees, letting them operate between the “white lines” anyway they think best

7. ADOPTING BEST PRACTICES AND STRIVING FOR CONTINUOUS IMPROVEMENT 11-7

8. Instituting Best Practicesand Continuous Improvement • Identifying and adopting best practicesis integral to effective implementation • Benchmarking is the backbone of theprocess of identifying, studying, andimplementing best practices • Key tools to promote continuous improvement • Six Sigma quality control • Business process reengineering • TQM

9. Best Practices What Is a Best Practice? • An activitythat at leastone company has provedworks particularly well • A pathto operating excellence

10. Characteristics of Best Practices • The best practice must have a proven record in • Significantly lowering costs • Improving quality or performance • Shortening time requirements • Enhancing safety or • Delivering some other highly positive operating outcome • To be valuable and transferable, a best practice must • Demonstrate success over time • Deliver quantifiable and highly positive results • and • Be repeatable 11-10

11. Characteristics of Benchmarking • Involves determining how well a firmperforms particular activitiesand processeswhen compared against • “Best in industry” or “Best in world” performers • Goal Promote achievement of operating excellence in performing strategy-critical activities • Caution Exact duplication of best practices of other firms is not feasible dueto differences in implementation situations • Best approach – Best practices of otherfirms need to be modified or adaptedto fit a firm’s own specific situation

12. Figure 11.2: From Benchmarking and Best-PracticeImplementation to Operating Excellence 11-12

13. Business Process Reengineering:A Contributor to Operating Excellence • Often the performance of strategicallyrelevant activities is scatteredacross several functional departments • Creates inefficiencies and often impedes performance • Results in lack of accountabilitysince no one functional manager is responsible for optimum performance of an entire activity • Solution Business process reengineering • Involves pulling strategy-critical processes from functional silos to create process departments or cross-functional work groups • Unifies performance of the activity improves how well activity is performed and often lowers costs • Promotes operating excellence

14. Approach of the DMAIC Process • Define • What constitutes a defect? • Measure • Collect data to find out why, how,and how often the defect occurs • Analyze – Involves • Statistical analysis of the metrics • Identification of a “best practice” • Improve • Implementation of the documented “best practice” • Control • Employees are trained on the “best practice” • Over time, significant improvement in quality occurs

15. Installing Strategy-SupportiveInformation and Operating Systems • Good information and operating systems areessential for first-rate strategy execution • Support systems can relate to • On-line data capabilities • Speedy delivery or repair • Inventory management • E-commerce capabilities • Mobilizing information and creating systemsto use knowledge effectively can yield • Competitive advantage

16. What Areas ShouldInformation Systems Address? • Customer data • Operations data • Employee data • Supplier/partner/collaborative ally data • Financial performance data

17. Trends in Design and Use of Information Systems • On-line technology • Daily statistical updates • Up-to-the minute performance monitoring • Retailers and manufacturers have up-to-the minute inventory and sales records for each item • Electronic scorecards for senior managers • Gather daily or weekly statistics from different databases about inventory, sales, costs, and sales trends • Enables managers to make betterdecisions on a real-time basis

18. Exercising Adequate ControlOver Empowered Employees • Challenge • How to ensure actions of employeesstay within acceptable bounds • Control approaches • Managerial control • Establish boundaries on what not todo, allowing freedom to act with limits • Track and review daily operating performance • Peer-based control

19. TYING REWARDS AND INCENTIVES TO STRATEGY EXECUTION 11-19

20. Gaining Commitment: Componentsof an Effective Reward System • Monetary Incentives • Base pay increases • Performance bonuses • Profit sharingplans • Stock options • Retirement packages • Piecework incentives • Non-Monetary Incentives • Praise • Constructivecriticism • Special recognition • More, or less, job security • Stimulating assignments • More, or less,autonomy • Rapid promotion 11-20

21. Key Considerations inDesigning Reward Systems • Create a results-orientedsystem • Reward people for results, not for activity • Define jobs in terms of what to achieve • Incorporate several performance measures • Tie incentive compensation to relevant outcomes • Top executives – Incentives tied tooverall firm performance • Department heads, teams, andindividuals – Incentives tied toachieving performance targetsin their areas of responsibility