March 24, 2016

Managing Internal Organization and Operations for Better Strategy Execution - Review Notes

Based on Chapter of Thompson and Strickland

Chapter  Learning  Objectives

  • Learn why resource allocation should always be based on strategic priorities.
  • Understand why policies and procedures should be designed to facilitate good strategy execution.
  • Understand why and how benchmarking, best-practices adoption, and tools for continuously improving the performance of value chain activities help an organization achieve operating excellence and superior strategy execution.
  • Understand the role of information and operating systems in enabling company personnel to carry out their strategic roles proficiently.
  • Learn how and why the use of well-designed incentives and rewards can be management’s single most powerful tool for promoting proficient strategy execution and operating excellence

Five Managerial Actions that facilitate the success of a company's strategy execution efforts.

1. Marshalling ample resources behind the drive for good strategy execution and operating excellence.
2. Instituting policies and procedures that facilitate strategy execution.
3. Adopting best practices and striving for continuous improvement in how value chain activities are performed.
4. Installing information and operating systems that enable company personnel to carry out their  strategic roles proficiently.
5. Tying rewards and incentives directly to the achievement of strategic and financial targets and to good strategy execution.

Marshalling ample resources behind the drive for good strategy execution and operating excellence

Resourcing is an important function of management. I brought out the idea very strongly and telling it to my students.

The authors of this book write that managers implementing and executing a new or different strategy must identify the resource requirements of each new strategic initiative and provide these resources to various subunits that are involved in implementing strategic initiatives. This calls for strategy driven budgeting. A change in strategy always calls for budget reallocations and the operating units have to be specifically told not to extrapolate past budget figure but rework out budget figures in line with the new strategy. People and equipment may have to be reallocated.

Developing and Instituting Policies and Procedures to Facilitates Good Strategy Execution

Anytime a company alters its strategy, managers should review existing policies and operating procedures, proactively revise or discard those that are out of sync, and formulate new ones to facilitate execution of new strategic initiatives. Prescribing new or freshly revised policies and operating procedures aids the task of strategy execution (1) by providing top-down guidance to operating managers, supervisory personnel, and employees regarding how certain things need to be done and what the boundaries are on independent actions and decisions; (2) by enforcing consistency in how particular strategy-critical activities are performed in geographically scattered operating units; and (3) by promoting the creation of a work climate and corporate culture (Behavior, procedures, and values) that promotes good strategy execution.

Adopting Best Practices and Continuous Improvement

Competent strategy execution entails visible, unyielding managerial commitment to best practices and continuous improvement. Benchmarking has to be done to discover and adopt best practices. The interest to do benchmarking has to be developed at the lowest levels.

Industrial engineering is the oldest discipline that has focus on improving technical and managerial processes. Business process reengineering, total quality management (TQM) and  Six Sigma programs are relatively new method with aim at improved efficiency, lower costs, better product quality, and greater customer satisfaction. These initiatives have to be promoted as part of strategy to develop, identify and adopt best practices.

Instituting Information and Operating Systems

Company strategies can't be implemented or executed well without a number of support systems to carry on business operations. Well-conceived state-of-the-art support systems not only facilitate better strategy execution but also strengthen organizational capabilities enough to provide a competitive edge over rivals. Real-time information and control systems further aid the cause of good strategy execution. In the current days information system field is coming out with new avenues to improve performance of organizations. Big data analytics and Internet of Things are the two recent initiatives from information systems field. Companies have to start using these new methods in pilot projects so that they understand the business potential of them and scale their application in a rapid manner to maintain the competitive advantage and increase it.

Tying Rewards and Incentives to Strategy Execution


Strategy-supportive motivational practices and reward systems are powerful management tools for gaining employee commitment. The key to creating a reward system that promotes good strategy execution is to make strategically relevant measures of performance the dominating basis for designing incentives, evaluating individual and group efforts, and handing out rewards. Positive motivational practices generally work better than negative ones, but there is a place for both. There's also a place for both monetary and nonmonetary incentives.

Incentives and Rewards

For an incentive compensation system to work well
(1) the monetary payoff should be a major percentage of the compensation package,
(2) the use of incentives should extend to all managers and workers,
(3) the system should be administered with care and fairness,
(4) the incentives should be linked to performance targets spelled out in the strategic plan,
(5) each individual's performance targets should involve outcomes the person can personally affect, (6) rewards should promptly follow the determination of good performance,
(7) monetary rewards should be supplemented with liberal use of nonmonetary rewards, and
(8) skirting the system to reward non-performers or subpar results should be scrupulously avoided.

Companies with operations in multiple countries often have to build some degree of flexibility into the design of incentives and rewards in order to accommodate cross-cultural traditions and preferences.

Powerpoint presentation

Updated 24 Mar 2016, 7 June 2014

No comments:

Post a Comment