Chapter 11: Managing Internal Operations: Actions that Promote Good Strategy Execution

Question 1

Why resource allocation should always be based on strategic priorities?

Answer 1

The funding requirements of good strategy execution must drive how capital allocations are made and the size of each unit’s operating budget. Under-funding organisational units and activities pivotal to the strategy impedes successful implementation

A company’s operating budget must be both strategy-driven (in order to amply fund the performance of key value chain activities) and lean (in order to operate as cost-efficiently as possible)

Units that now have a bigger strategic role may need more people, new equipment, additional facilities, and above-average in their operating budget. Implementing a new strategy requires managers to take an active and forceful role in shifting resources, downsizing some functions and upsizing others, not only to amply fund activities with a critical role in the strategy but also to avoid inefficiency and achieve profit projections. It requires putting enough resources behind new strategic initiatives to fuel their success and making the tough decisions to kill projects that are no longer justified.

Question 2

3 ways policies and procedures can facilitate good strategy execution by:

Answer 2

1) Provide top-down guidance about how things need to be done.
(a) Channel individual efforts along a strategy-supportive path

(b) Align the actions and behavior of employee with the requirements for good strategy execution
(c) Place limits on independent action and help overcome resistance to change

2) Help ensure consistency in how execution-critical activities are performed.
(a) Improve the quality and reliability of strategy execution

(b) Help coordinate the strategy execution efforts of individuals and groups throughout the organisation
3) Promoting the creation of a work climate that facilitates good strategy execution

Question 3

How does using process management tools that strive for continuous improvement can help achieve superior strategy execution? (Why are they important)

Answer 3

1) To drive continuous improvement in how internal operations are conducted
2) Tools to promote better strategy execution and operating excellence
3) Provide useful yardsticks for judging the effectiveness and efficiency of internal operations and setting performance standards for organisation units to meet or beat
4) Because they are able to monitor and review the goals and objectives that have been set to improve the work process/performance

Question 4

5 tools for promoting operational excellence and enhancing strategy execution

Answer 4

1) Benchmarking
2) Business process reengineering
3) Total quality Management
4) Six Sigma quality programs
5) Balanced scorecard

Question 5

Benchmarking is

Answer 5

Comparing one’s business processes and performance metrics to industry bests and best practices from other companies

The backbone of the process of identifying, studying, and implementing best practices (method of performing an activity that consistently delivers superior result compared to other approach)

Question 6

4 steps in benchmarking

Answer 6

Step 1: Engage in benchmarking to identify the best practice for performing an activity

Step 2: Adapt the “best practice” to fit the company’s situation; then implement it

Step 3: Continue to benchmark company performance of the activity against “best-in-industry” or “best-in-world” performers

Step 4: Move closer to operational excellence in strategy execution

Question 7

Balanced Scorecared:

Answer 7

1) Communicate what they are trying to accomplish
2) Align the day-to-day work that everyone is doing with strategy
3) Prioritise projects, products, and services
4) Measure and monitor progress towards strategic targets

Question 8

How does business process reengineering contribute to top-notch strategy execution and operating excellence?

Answer 8

Radically redesigning and streamlining activity performed with the aim of achieving dramatic improvement in performance. It recreates a core business process with the goal of improving product output, quality, or reducing costs

Question 9

How does total quality management contribute to top-notch strategy execution and operating excellence?

Answer 9

Creating a total quality culture involving manager and employees at all level to continuously improve the performance of every task and value chain activity

Question 10

How does Six Sigma quality programs contribute to top-notch strategy execution and operating excellence?

Answer 10

Utilise advanced statistical methods to improve quality by reducing defects and variability in business performance

Question 11

What is the role of information and operating systems in enabling employees to carryout their strategic roles proficiently?

Answer 11

It is vital in today’s business world especially those relying on online operating systems (eg. Amazon, Airasia, Ebay). Company strategies cannot be implemented or executed well without a number of support systems to carry on business operations.

Key advantages is to acquire real time information that allows:
(a) performance tracking and control -real-time information systems permit company managers to stay on top of implementation initiatives and daily operations and to intervene if things seem to be drifting off course

(b) monitoring employee performance - statistics or information available can help to reduce constant over-the-shoulder supervision. eg. if operating results look good, can assume that empowerment is working

Question 12

How and why the use of properly designed incentives and reward structure is management’s most powerful for mobilising organisational commitment to successful strategy execution?

Answer 12

Incentives and reward do more than just strengthen the resolve of employee to succeed - they also focus their attention on the accomplishment of specific strategy execution objectives.

Not only do they spur the efforts of individuals to achieve those aims, but they also help to coordinate the activities of individuals throughout the organisation by aligning their personal motives with the goals of the organisation.

In this manner, reward systems serve as an indirect type of control mechanism that is cheaper than supervision.

Question 13

Monetary rewards provide high-powered incentives when rewards are tied to specific outcome objectives. They typically involves:

Answer 13

1) Base-pay increases
2) Performance bonus
3) Profit-sharing plans
4) Stock awards
5) Company contribution to retirement plans

Question 14

Nonmonetary rewards include:

Answer 14

1) Provide attractive perks and fringe benefits (health insurance, tuition reimbursement etc)
2) Give awards and other form of public recognition to high performers (best employee, words of praise)
3) Promote internally if possible
4) Invite and act on suggestions and ideas from employees
5) Create a positive work atmosphere
6) State the strategic vision in inspirational terms so employees feel they are part of something very worthwhile
7) Maintain attractive office space and facilities (Googleplex)

Question 15

How to make rewards promote good strategy execution?

Answer 15

Tie rewards to performance outcomes directly linked to good strategy execution and targeted strategic and financial objectives.

Eg. CEO compensation is tied to revenue growth, stock price performance

In sales and marketing, compensation tied to market share, new accounts acquired, customer satisfaction

Question 16

6 guidelines in effectively designing and administering the reward system

Answer 16

1) Make the financial incentives a major of the total compensation
2) Have incentives that extend to all managers and all workers, not just top management
3) Administer the reward system with fairness
4) Ensure that each person’s performance targets should involve outcomes that they can personally affect
5) Shorter time between achievement and rewards
6) Rewards should be given for strategically relevant performance results and not just effort
7) Communicate the incentive plan to employees