CHAPTER 11

MANAGING INTERNAL OPERATIONS:

Actions That Promote Good Strategic Execution

Student Version
Copyright ®2012 The McGraw-Hill Companies, Inc. McGraw-Hill/Irwin
 PROMOTING GOOD STRATEGY
EXECUTION
♦ Allocating resources to the drive for good strategy
execution.
♦ Instituting policies and procedures that facilitate strategy
execution.
♦ Using process management tools to drive continuous
improvement in how value chain activities are performed.
♦ Installing information and operating systems that enable
personnel to carry out their strategic roles proficiently.
♦ Using rewards and incentives to promote better strategy
execution and the achievement of strategic and financial
targets.
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 INSTITUTING POLICIES AND
PROCEDURES THAT FACILITATE
STRATEGY EXECUTION

♦ Policies and operating procedures

facilitate strategy execution by:
● Providing top-down guidance regarding how
things need to be done.
● Helping ensure consistency in how
execution-critical activities are performed.
● Promoting the creation of a work climate that
facilitates good strategy execution.

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USING PROCESS MANAGEMENT
TOOLS TO STRIVE FOR CONTINUOUS
IMPROVEMENT

Benchmarking

Best Process
Practices Reengineering
Managing for
Continuous
Improvement

Total Quality Six Sigma

Management Quality
(TQM) Programs

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 Reengineering the Organization

♦ Business Process Reengineering

● Involves radically redesigning and streamlining
work effort, flows and processes to achieve
dramatic improvements in performance.
● Uses cross-functional teams, cutting-edge
technology and information systems to reset
and refocus the organization’s strategy.

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 Achieving Continuous Improvement

♦ Total Quality Management (TQM )

● Creating a total quality culture bent on
continuously improving the performance
of every task and value chain activity.
● Is a long-term race without a finish in
which success comes slowly in small
steps forward (kaizen).

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 A Statistical Approach to Achieving
Continuous Improvement

♦ Six Sigma Programs

● Utilize statistical methods to improve quality
by reducing defects and variability in
business processes.
♦ Six Sigma Principles
● All work is a process.
● All processes have variability.
● All processes create data that explain
variability.

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 The Difference between Business Process
Reengineering and Continuous Improvement

Top-notch
Business Strategy Continuous
Process Execution and Improvement
Reengineering Operating (TQM, Six Sigma)

Excellence

Aims at one-time Aims at ongoing

quantum incremental
improvement improvements

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 Capturing the Benefits of Initiatives
to Improve Operations

Action Steps to Realize the Value of

TQM and Six Sigma Initiatives

Committing to Emphasizing the

total quality and necessity for improved
continuous performance
improvement Empowering all employees
to improve quality
Fostering quality- Using online systems
supportive behaviors to speed the adoption
of best practices

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 INSTALLING INFORMATION AND
OPERATING SYSTEMS

♦ Benefits of Information Technologies

● Enable better strategy execution through
data-based decisions
● Strengthen organizational capabilities
● Allow for real-time tracking of implementation
initiatives and daily operations
● Provide monitoring of empowered employee
performance (electronic scorecards)
● Build closer relationships with customers
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Instituting Adequate Information Systems,
Performance Tracking, and Controls

Key Strategic Performance Indicators

Tracked by Information Systems

Customer data Financial performance

data

Employee data
Operations data Supplier/partner/
collaborative ally data

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 TYING REWARDS AND INCENTIVES
TO STRATEGY EXECUTION

Providing incentives and an engaging

in motivational practices that facilitate
good strategy execution.
Techniques for
winning sustained,
energetic Striking the right balance between
commitment of rewards and punishment for individual
employees to the performance.
strategy execution
process
Linking employee rewards to
strategically relevant organizational
performance outcomes.

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 Striking the Right Balance between
Rewards and Punishment

Performance

The firm’s motivational

Rewards approaches and reward Punishment
structure

Commitment-generating Adverse employment

incentives and rewards consequences

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 Linking Rewards to Strategically Relevant
Performance Outcomes

♦ Focus on and reward results, not effort.

♦ Create a results-oriented work environment that focuses
on what to achieve, not what to do.
♦ Set strategically-relevant, specific, and measurable
stretch performance goals that are difficult but
achievable.
♦ Link the performance goals of each individual in an
organizational unit to the unit’s goals.
♦ Reward and recognize as success superior performance
in accomplishing the goals.

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Guidelines for Designing Effective Incentive
Compensation Systems

♦ Make financial incentives a major, not minor, piece of the

total compensation package.
♦ Have incentives that extend to all managers and all
workers, not just top management.
♦ Administer the reward system with scrupulous objectivity
and fairness.
♦ Keep the time between achieving targeted performance
outcome and payment of the reward as short as possible.
♦ Avoid rewarding effort rather than results.

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