LO1 Gain command of what managers must do to build an

organization capable of good strategy execution.

LO2 Learn why resource allocation should always be based
on strategic priorities.
LO3 Understand why policies and procedures should be
designed to facilitate good strategy execution.
LO4 Understand how process management programs that
drive continuous improvement help an organization
achieve operating excellence.
LO5 Recognize the role of information and operating
systems in enabling company personnel to carry out
their strategic roles proficiently.

10-2
 (contd)

LO6 Learn how and why the use of well-designed

incentives and rewards can be managements single
most powerful tool for promoting operating excellence.
LO7 Gain an understanding of how and why a companys
culture can aid the drive for proficient strategy
execution.
LO8 Understand what constitutes effective managerial
leadership in achieving superior strategy execution.

10-3
 Crafting versus Implementing Strategy
Crafting Strategy
Market-and resource-
driven activities
Success depends on
Attracting and pleasing
customers
Outcompeting rivals
The firms collection of
resources and capabilities
Implementing Strategy
Execution of operations-
driven activities
Successful depends on
managements ability to
Direct change
Allocate resources
Build capabilities
Build strategy-supportive
policies and culture
Deliver good results
10-4
CORE CONCEPT

Good strategy execution requires a team effort.

All managers have strategy executing
responsibility in their areas of authority, and all
employees are active participants in the strategy
execution process.

10-5
 Who Is Responsible for Implementation
of the Chosen Strategy?
The organizations chief executive officer and other
senior managers are ultimately responsible for
ensuring that the strategy is executed successfully.
It is middle and lower-level managers who must see
to it that frontline employees and work groups
competently perform strategy-critical activities that
allow companywide performance targets to be met.
Requires all managers thinking about:
What does my area have to do to implement its part of the
strategic plan, and what should I do to get these things
accomplished effectively and efficiently?

10-6
 Principal Managerial Components
of the Strategy Execution Process
1. Building an organization with the capabilities,
people, and structure needed to execute the
strategy successfully.
2. Allocating ample resources to strategy-critical
activities.
3. Ensuring that policies and procedures facilitate
rather than impede effective strategy execution.
4. Adopting process management programs that
drive continuous improvement in how strategy
execution activities are performed.

10-7
 Principal Managerial Components of
the Strategy Execution Process (contd)
5. Installing information and operating systems that
enable company personnel to perform essential
activities.
6. Tying rewards directly to the achievement of
performance objectives.
7. Fostering a corporate culture that promotes good
strategy execution.
8. Exerting the internal leadership needed to propel
implementation forward.

10-8
FIGURE 10.1 The Eight Components of Strategy Execution

10-9
 Building an Organization with the
Capabilities, People, and Structure
Needed for Good Strategy Execution

Organization
building actions

Staffing the Acquiring, developing, Structuring the

organizations and strengthening organization and
workforce strategy-supportive work effort
resources and
capabilities

10-10
 Staffing the Organization
Building Managerial Talent

Assembling a capable management team is a

cornerstone organization-building task:
Put people with strong strategy implementation skills
and a results orientation in key managerial posts.
Replace weak executives, strengthening the skills
of those who remain, and bringing in fresh outsiders.

10-11
 Recruiting and Retaining
a Capable Workforce

The quality of a firms people is an essential

ingredient of successful strategy execution.
Staffing the right people at all levels is required to
ensure competent performance of value chain
activities.
Find, develop, and then retain engaged employees
with excellent compensation packages, opportunities
for rapid advancement and professional growth, and
challenging and interesting assignments.

10-12
 Tactics for Recruiting and Retaining
a High-Performance Workforce
Put extra effort into screening and evaluating job applicants
selecting for skill sets, energy, initiative, judgment, aptitudes
for learning, and adaptability to the firms culture.
Invest in training programs that continue throughout
employees careers.
Provide promising employees with challenging, interesting,
and skill-stretching assignments.
Rotate people through jobs that span functional and
geographic boundaries.
Retain high-performing employees via promotions, salary
increases, performance bonuses, stock options and equity
ownership, fringe benefit packages, and other perks.
Coach average performers to improve their skills and
capabilities, weeding out underperformers and benchwarmers.

10-13
Acquiring, Developing, and Strengthening
Key Resources and Capabilities

Good strategy execution requires:

Putting key resources and capabilities into place.
Refreshing and strengthening them as needed.
Modifying them as market conditions evolve.
Organization building requires deciding
when and how to recalibrate competencies
and capabilities.

10-14
 Three Approaches to Building and
Strengthening Capabilities

Developing dynamic
capabilities to manage
organizational change

Become proficient Acquire Accessing

in developing capabilities capabilities via
capabilities through mergers collaborative
internally and acquisitions partnerships

10-15
 Accessing Capabilities Through
Collaborative Partnerships

Outsource the function or activity

requiring new capabilities to an outside
provider to conserve resources

Acquiring
capabilities from Collaborate with a firm that has
an external complementary resources and
source via capabilities in a partnership to
collaborative achieve a shared strategic objective.
partnerships
Engage in a collaborative partnership
to learn how the partner performs
activities, internalizing its methods,
and thereby acquiring its capabilities.

10-16
Concepts & TOYOTAS LEGENDARY PRODUCTION SYSTEMA CAPABILITY
Connections 10.1 THAT TRANSLATES INTO COMPETITIVE ADVANTAGE
The heart of Toyotas strategy in motor vehicles is to
outcompete rivals by manufacturing world-class, quality
vehicles at lower costs and selling them at competitive price
levels. Executing this strategy requires top-notch
manufacturing capability and super-efficient management of
people, equipment, and materials. Toyota began conscious
efforts to improve its manufacturing competence more than
50 years ago. Through tireless trial and error, the company
gradually took what started as a loose collection of
techniques and practices and integrated them into a full-
fledged process that has come to be known as the Toyota
Production System (TPS). The TPS drives all plant
operations and the companys supply chain management
practices. TPS is grounded in the following principles,
practices, and techniques:
Use just-in-time delivery of parts and components to the
point of vehicle assembly.
Develop people who can come up with unique ideas for
production improvements.
Emphasize continuous improvement.
Empower workers to stop the assembly line when theres
a problem or a defect is spotted.
Deal with defects only when they occur.
Ask yourself Why? five times.
Organize all jobs around human motion to create a
production/assembly system with no wasted effort.
Find where a part is made cheaply and use that price as a
benchmark.
The TPS utilizes a unique vocabulary of terms (such as
kanban, takt-time, jikoda, kaizen, heijunka, monozukuri, poka
yoke, and muda ) that facilitates precise discussion of
specific TPS elements. In 2003, Toyota established a Global
Production Center to efficiently train large numbers of shop-
floor experts in the latest TPS methods and better operate an
increasing number of production sites worldwide. Since then,
additional upgrades and refinements have been introduced,
some in response to the large number of defects in Toyota
vehicles that surfaced in 20092010.
There is widespread agreement that Toyotas ongoing effort
to refine and improve on its renowned TPS gives it important
manufacturing capabilities that are the envy of other motor
vehicle manufacturers. Not only have such auto manu-
facturers as Ford, Daimler, Volkswagen, and General Motors
attempted to emulate key elements of TPS, but elements of
Toyotas production philosophy have been adopted by
hospitals and postal services.
Sources: Information posted at www.toyotageorgetown.com;
Hirotaka Takeuchi, Emi Osono, and Norihiko Shimizu, The
Contradictions that Drive Toyotas Success, Harvard
Business Review 86, no. 6 (June 2008), pp. 96104; and
Taiichi Ohno, Toyota Production System: Beyond Large-
Scale Production (New York:Sheridan Books, 1988).
10-17
 Matching Organizational Structure
to the Strategy

Key value chain activities that deliver value

to the customer are critical to its proficient
strategic performance.
Structure follows strategya changed
strategy requires a new or different structure
and new or different key activities and
capabilities.
Attempting a new strategy with an outdated
organizational structure is unwise.

10-18
 Types of Organizational Structures

Functional (or Departmental) Structure

Organizes strategy critical activities into functional,
product, geographic, process, or customer groups
Multidivisional (or Divisional) Structure
Organizes value chain activities involved in making a
product or service available to consumers into a
common (self-contained) division
Matrix Structure
Allows for dual reporting relationships between
divisional heads and departmental heads

10-19
 Organizational Structure and
Authority in Decision Making

In a centralized structure:
Top managers retain authority for most decisions.

In a decentralized structure:
Decision-making authority is pushed down to the
lowest organizational level capable of making timely,
informed, competent decisions.
The trend in most companies
A shift from authoritarian to decentralized structures
stressing empowerment

10-20
 Characteristics of
Centralized Decision Making
Retention of authority by top executives
Command and control paradigm reins in lower-level managers
Minimal discretionary authority
Frontline supervisors and rank-and-file employees must seek
prior approval by their superiors for their actions
Key advantage
Easy to know who is accountable when things do not go well
Disadvantages
Bureaucracy creates sluggish response to changing conditions
Large firms with widely scattered operations require that decision
making authority be granted to on-site managers

10-21
 Exercising Control Over the Actions
of Empowered Employees
Place limits on the authority that empowered
personnel can exercise
Hold employees accountable for their decisions
Institute compensation incentives that reward
people for doing their jobs in a manner that
contributes to good company performance
Create a corporate culture where there is strong peer
pressure for employees to act responsibly

10-22
 Facilitating Collaboration with External
Partners and Strategic Allies

Actively manage collaborative relationships:

Appoint relationship managers with responsibility for
fostering strategic partnership success through:
Getting the right people together
Promoting good rapport
Facilitating the flow of information
Nurturing interpersonal communication and cooperation
Ensuring effective coordination.
Adopt a network structure that links independent
organizations involved in cooperative arrangements
to achieve some common undertaking.

10-23
CORE CONCEPT

A network structure is the arrangement linking a

number of independent organizations involved in
some common undertaking.

10-24
 Allocating Resources to
Strategy-Critical Activities
Reasons for the allocation process include:
To determine what funding is needed to execute new strategic
initiatives
To bolster value-creating processes
To strengthen the firms capabilities and competencies
Allocating resources to support strategy execution
involves:
Funding promising proposals; turning down those that do not
Providing the proper amount of funding to support new strategic
initiatives
Reallocation of resources to support new strategies

10-25
 Instituting Strategy Supportive
Policies and Procedures

Strategy execution is facilitated by policies

and procedures that:
Help enforce the needed consistency in how
particular strategy critical activities are performed.
Provide top-down guidance regarding how certain
things need to be done.
Promote a work climate that facilitates good strategy
execution.

10-26
 When Do Policies and Procedures
Become Excessive?

Too much policy:

Can be confusing and erect obstacles to good
strategy implementation.
Is inappropriate when individual creativity and
initiative are more essential to good strategy
execution than standardization and strict conformity.
There is wisdom in a middle approach:
Prescribe enough policies to place boundaries on
employees actions; then empower them to act within
these boundaries in ways they think makes sense.

10-27
Striving for Continuous Improvement
in Processes and Activities

Key tools for continuous

improvement

Business Total quality Six Sigma

process management quality control
reengineering (TQM) programs techniques

10-28
 Management Tools for
Continuous Improvement

Business process reengineering

Involves pulling the pieces of strategy-critical activities
out of different departments and unifying their
performance in a single department or cross-
functional work group
Total quality management (TQM)
Emphasizes continuous improvement in all phases of
operations, 100% accuracy in performing tasks,
involvement and empowerment of employees at all
levels and departments, team-based work design,
benchmarking, and total customer satisfaction.

10-29
 Management Tools for
Continuous Improvement (contd)

Six Sigma
Is a statistics-based quality control system aimed at
producing not more than 3.4 defects per million
iterations for any business processfrom
manufacturing to customer transactions.
Seeks to define, measure, analyze, improve, and
control variability in the organizations processes.
Improves the efficiency of operating activities and
processes, but its rigidity can also stifle innovation.

10-30
Concepts & WHIRLPOOLS USE OF SIX SIGMA
Connections 10.2 TO PROMOTE OPERATING EXCELLENCE

10-31
 The Difference between
Business Process Reengineering and
Continuous Improvement Programs

Business process reengineering aims at

quantum gains of 30 to 50%
Continuous improvement programs stress
incremental progressthe never-ending
pursuit of inch-by-inch quality gains.
Business Process Reengineering

TQM

10-32
 Installing Information and
Operating Systems

Execution of strategies and value-creating

internal processes depend on a number of
internal operating systems.
Information systems are needed to track and
report data on:
Customers
Operations
Employees
Suppliers
Finances

10-33
 Trends in Information Systems

Up-to-the-minute reporting:
Manufacturers have daily production reports
Retail companies have real-time inventory and sales
records for each item
Manufacturers and retailers are able to use online
systems to monitor inventories and track shipments
and deliveries
Real-time information systems permit
managers to quickly intervene changes if
initiatives and operations drift off course

10-34
 Using Rewards and Incentives to
Promote Better Strategy Execution

Rewards should motivate employees to

focus on what results must be achieved and
not on simply performing their jobs.
Reward systems should include both
monetary and non-monetary incentives.

10-35
 Guidelines for Designing
Monetary Incentive Plans

Make performance payoff Tie incentives to strategy

a major piece of the total execution and financial
compensation package performance

Have incentives that Set performance targets

Compensation
extend to all managers that individuals or teams
Incentives
and all workers can personally affect

Administer the reward Keep time between

system with scrupulous achievement and reward
objectivity and fairness as short as possible

10-36
 Common Non-Monetary Rewards
Used to Enhance Motivation
Provide attractive perks and fringe benefits
Adopt promotion from within policies
Act on suggestions from employees
Create a work atmosphere where there is genuine
sincerity, caring, and mutual respect among all
employees
Share information with employees about financial
performance, strategy, operational measures, market
conditions, and competitors actions
Have attractive office spaces and facilities

10-37
Concepts & WHAT COMPANIES DO TO MOTIVATE
Connections 10.3 AND REWARD EMPLOYEES

10-38
 Instilling a Corporate Culture that
Promotes Good Strategy Execution

A corporate culture :
Is the firms organizational DNAits approach to
people management
Is comprised of shared core values, beliefs, and
business principles that are engrained in employee
behaviors and attitudes
defines its operating stylethe chemistry of the firms
work environment (how we do things around here)

10-39
CORE CONCEPT

Corporate culture is a firms internal work

climate and is shaped by its core values, beliefs,
and business principles. A firms culture is
important because it influences its traditions, work
practices, and style of operating.

10-40
 High-Performance Cultures

Standout cultural traits include:

A can-do spirit
Pride in doing things right
No-excuses accountability
A results-oriented work climate in which people go
the extra mile to achieve performance targets.

10-41
 Characteristics of
High-Performance Cultures

A strong sense of involvement by all

employees
An emphasis on individual initiative and
creativity
Clear statement of performance expectations
Prompt addressing of critical issues
Constructive pressure to achieve good results

10-42
 Adaptive Cultures

Adaptive cultures are well-suited to fast-

changing industries
Characteristics of adaptive cultures include:
Willingness to accept change and embrace challenge
of introducing and executing new strategies.
Internal entrepreneurship on the part of individuals
and groups is encouraged and rewarded.
Adopting a proactive approach to identifying issues,
evaluating the implications and options, and quickly
moving ahead with workable solutions

10-43
Concepts & THE CULTURE THAT DRIVES INNOVATION
Connections 10.4 AT W.L. GORE & ASSOCIATES

10-44
 Unhealthy Corporate Cultures
Highly politicized internal environment
Issues are resolved on the basis of political clout
Hostility to change
Avoid risks; experimentation and efforts to alter status quo are
discouraged
Insular, inwardly-focused Not-invented-here mind-
set
Personnel discount the need to look outside for best practices
Disregard for high ethical standards
Presence of incompatible, clashing subcultures

10-45
FIGURE 10.2 Steps in Changing a Problem Culture

10-46
 Making a Compelling Case
for a Culture Change

Cite reasons the current strategy has

to be modified and why new strategic
initiatives are being undertaken.

Why the Cite why and how current behavioral

need for norms and work practices are
obstacles to new strategic initiatives
change?

Explain how new behaviors and work

practices will produce better results.

10-47
 Substantive Culture-Changing Actions
1. Replace key executives who stonewall needed
organizational and cultural changes.
2. Promote individuals who advocate for the shift to a
different culture and who can serve as role models
for the desired cultural behavior.
3. Appoint outsiders with desired cultural attributes
to high-profile positionsnew-breed managers
send an unambiguous message that a new era is
dawning.
4. Screen candidates for new positions carefully,
hiring only those who fit in with the new culture.

10-48
 Substantive Culture-Changing Actions
(contd)
5. Mandate that all personnel attend culture-training
programs to better understand the culture-related
actions and behaviors that are expected.
6. Design compensation incentives that boost the pay
of teams and individuals who display the desired
cultural behaviors, while hitting change-resisters in
the pocketbook.
7. Revise policies and procedures in ways that will
help drive cultural change.

10-49
 Symbolic Culture Changing Actions

Lead by executive exampleexecutives must

be alert to the fact that company personnel
will be watching their actions and decisions
to see if they are walking the talk.
Executives promote the strategyculture fit
by appearing at ceremonial functions to
celebrate the culture and praise individuals
and groups that get with the program.

10-50
Leading the Strategy Execution Process

Managers at all levels of the firm must:

1. Stay on top of what is happening and closely
monitoring progress by engaging in managing by
walking around (MBWA)
2. Put constructive pressure on the organization to
achieve good results and operating excellence.
3. Not delay in initiating corrective actions to improve
strategy execution and achieve the targeted
performance results.

10-51
 Putting Constructive Pressure on
Organizational Units to Achieve
Good Results and Operating Excellence

Treat employees with Focus attention on

dignity and respect continuous improvement

Fostering
a results- Use motivation and
Encourage employee
oriented, high- compensation to reward
initiative and creativity
performance high performance
culture

Set stretch objectives Celebrate individual,

and clearly communicate group, and company
expectations successes

10-52
Pushing Corrective Actions to Improve
Both the Companys Strategy and
Its Execution

Deciding when Making Deciding what

adjustments are corrective adjustments to
needed adjustments make

10-53