Chapter 11: Managing Internal Operations

Question 1

What must management do if internal cash flows prove insufficient to fund the planned strategic initiatives?

Answer 1

Management must raise additional funds through borrowing or selling shares of stock to investors.

Question 2

In which 3 ways do well-conceived policies and operating procedures facilitate strategy execution?

Answer 2

1. Providing top-down guidance
2. Helping ensure consistency in how execution-critical activities are performed
3. Promoting the creation of a work climate that facilitates good strategy execution

Question 3

What does the “middle-ground approach” to prescribing policies mean?

Answer 3

Prescribe enough policies to give members clear direction and to place reasonable boundaries on their actions, then empower them to act within these boundaries in pursuit of company goals.

Question 4

What are the three most powerful management tools for promoting operating excellence and better strategy execution?

Answer 4

1. Business process reengineering
2. TQM programs
3. Six Sigma quality control programs

Question 5

Which type of problem do companies with functional organizational structures tend to have?

Answer 5

When pieces of activities are performed in several different functional departments, this can lead to disconnect among different departments.

Question 6

What does “reengineering the work effort” refer to?

Answer 6

Pulling the pieces of an activity out of different departments and creating a cross-functional work group or single department (process department) to take charge of the whole process.

Question 7

What is business process reengineering?

Answer 7

Radically redesigning and streamlining how an activity is performed, with the intent of achieving quantum improvements in performance.

Question 8

What popularized the use of cross-functional teams?

Answer 8

Business process reengineering.

Question 9

What is business process reengineering often criticized for?

Answer 9

As an excuse for downsizing.

Question 10

What was enterprise resource planning inspired by?

Answer 10

Business process reengineering.

Question 11

What is TQM?

Answer 11

Total Quality Management entails creating a total quality culture, involving managers and employees at all levels, bent on continuously improving the performance of every value chain activity.

Question 12

What is “kaizen”?

Answer 12

Japanese term meaning that success comes from making little steps forward each day.

Question 13

What is the downside of TQM?

Answer 13

Takes a fairly long time to show significant results - very little benefit emerges within the first 6 months.

Question 14

What are Six Sigma programs?

Answer 14

Utilize advanced statistical methods to improve quality by reducing defects and variability in the performance of business processes.

Question 15

What happens when performance of an activity reaches “Six Sigma quality”?

Answer 15

There are no more than 3.4 defects per million iterations (99.9997 percent accuracy)

Question 16

What are the 2 important types of Six Sigma programs?

Answer 16

1. DMAIC (define, measure, analyze, improve, and control)

2. DMADV (define, measure, analyze, design, and verify)

Question 17

What is DMADV sometimes referred to?

Answer 17

DMADV is define, measure, analyze, design, and verify. Often referred to as Design for Six Sigma or DFSS.

Question 18

What 3 principles is the statistical thinking underlying Six Sigma based on?

Answer 18

1. All work is a process
2. All processes have variability
3. All processes create data that explain variability

Question 19

What is the downside of Six Sigma?

Answer 19

There is evidence that Six Sigma techniques can stifle innovation and creativity.

Question 20

What are ambidextrous organizations adept at?

Answer 20

Employing continuous improvement in operating processes while allowing R&D and other areas engaged in development of new ideas freer reign.

Question 21

What blended approach to Six Sigma implementation is gaining popularity?

Answer 21

Pursues incremental improvements in operating efficiency while R&D and other processes that allow the company to develop new ways of offering value to customers.

Question 22

What percent of quantum gains does business process reengineering aim at?

Answer 22

30 to 50 percent or more

Question 23

What is the main way that TQM and Six Sigma differ from business process reengineering?

Answer 23

TQM and Six Sigma stress ongoing incremental progress in a never-ending stream, rather than quantum gains on the order of 30 to 50 percent.

Question 24

How can reengineering be used in tandem with TQM and Six Sigma?

Answer 24

Reengineering can be used first to produce a good basic design that yields quick improvements, then TQM or Six Sigma can be used as a follow-on to deliver incremental improvements over a longer period of time.

Question 25

What can provide a realistic basis for setting internal performance milestones and longer-range targets?

Answer 25

Benchmarking best-in-industry and best-in-world performance of targeted value chain activities.

Question 26

Which 5 broad areas do information systems need to cover?

Answer 26

1. Customer data
2. Operations data
3. Employee data
4. Supplier and/or strategic partner data
5. Financial performance data

Question 27

What is management’s most powerful tool for gaining employee commitment to successful strategy execution?

Answer 27

A properly designed incentive and reward structure

Question 28

What are examples of nonmonetary incentives (8)?

Answer 28

1. Attractive perks and fringe benefits (wellness programs, generous paid vacation, free lunches, etc.)
2. Giving awards and public recognition
3. Relying on promotion from within
4. Inviting and acting on ideas and suggestions from employees
5. Fostering a respectful and caring atmosphere
6. Stating the strategic vision in inspirational terms
7. Sharing information with employees about the company
8. Providing an appealing work environment

Question 29

What must incentives be based on (and not based on)?

Answer 29

Accomplishing results, not dutifully performing assigned tasks.

Question 30

How much should performance bonuses be to have an impact on employees?

Answer 30

At least 10 to 12 percent of base salary.

Question 31

Should you reward effort or results?

Answer 31

Results. It is all advised to reward efforts when employees have fallen short of achieving performance targets as “good excuses” start to creep into justifying rewards for subpar results.