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IMPLEMENTING STRATEGY: IMPLEMENTING STRATEGY: BUDGETS, POLICIES, BEST BUDGETS, POLICIES, BEST

PRACTICES, SUPPORT PRACTICES, SUPPORT SYSTEMS, AND REWARDSSYSTEMS, AND REWARDS

CHAPTER 10

Screen graphics created by:Jana F. Kuzmicki, PhD, Indiana University Southeast

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Chapter Outline

Linking Budgets to Strategy

Establishing Strategy-Supportive Policies

Instituting Best Practices and Striving for Continuous Improvement

Installing Support Systems

Motivational Practices and Incentive Compensation Systems

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Linking Budgets to Strategy

Allocating resources in ways that support effective strategy execution involves Funding capital projects that can make a

contribution to strategy implementation Funding efforts to strengthen

competencies and capabilities or to create new ones

Shifting resources--downsizing some areas, upsizing others, Killing activities that are no longer justified, and funding new activities with a critical strategy role

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How Policies and ProceduresAid Strategy Implementation

Provide top-down guidance regarding expected behaviors

Help align internal actions with strategy, channeling efforts along the intended path

Enforce consistency in performance of activities in geographically scattered units

Serve as powerful lever for changing corporate culture to produce stronger fit with a new strategy

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Creating Strategy-SupportivePolicies and Procedures

Role of new policies Channel behaviors and decisions

to promote strategy execution Counteract tendencies of people to

resist chosen strategy Too much policy can be as stifling as

Wrong policy or as Chaotic as no policy

Often, the best policy is a willingness to empower employees

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Instituting Best Practicesand Continuous Improvement

Searching out and adopting best practices is integral to effective implementation

Benchmarking has spawned new approaches to improve strategy execution

Reengineering

TQM

Continuous improvement programs

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The Objectives of QualityImprovement Programs

Defect-free manufacture

Superior product quality

Superior customer service

Total customer satisfaction

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Implementing a Philosophy of Continuous Improvement

Instill enthusiasm to do things right throughout company

Strive to achieve little steps forward each day, i.e. Kaizen

Ignite creativity in employees to improve performance of value-chain activities

Preach there is no such thing as good enough

Reform the corporate culture

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What Is Total Quality Management?

TQM is an approach to managing the

business that involves creating a total

quality culture bent on continuously

improving the performance of every

value-chain activity and task!

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Popular TQM Approaches

Deming’s

14 Points

1992 Baldridge

Award Criteria

The Juran

Trilogy

Crosby’s 14

Quality Steps

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Table 10-1: Components ofPopular TQM Approaches

1. Constancy of purpose

2. Adopt the philosophy

3. Don’t rely on mass inspection

4. Don’t award business on price

5. Constant improvement

6. Training

7. Leadership

8. Drive out fear

9. Break down barriers

10. Eliminate slogan and exhortations

11. Eliminate quotas

12. Pride of workmanship

13. Education & retraining

14. Plan of action

Deming’s 14 Points

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Table 10-1: Components ofPopular TQM Approaches

The Juran Trilogy

Quality Planning Quality Control Quality Improvement

• Set goals

• Identify customers & their needs

• Develop products & processes

• Evaluate performance

• Compare to goals & adapt

• Establish infrastructure

• Identify projects & teams

• Provide resources & training

• Establish controls

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Table 10-1: Components ofPopular TQM Approaches

1. Management commitment

2. Quality improvement teams

3. Quality measurement

4. Cost of quality evaluation

5. Quality awareness

6. Corrective action

7. Zero-defects committee

8. Supervisor training

9. Zero-defects day

10. Goal-setting

11. Error cause removal

12. Recognition

13. Quality councils

14. Do it over again

Crosby’s 14 Quality Steps

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Table 10-1: Components ofPopular TQM Approaches

1992 Baldridge Award Criteria (1000 points)

Quality

1. Leadership (90 points)

2. Information & analysis (80 points)

3. Strategic quality planning (60 points)

4. Human resource development (150 points)

5. Management of process quality (140 points)

6. Quality & operation results (180 points)

7. Customer focus & satisfaction (300 points)

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Twelve Aspects Common to TQM and Continuous Improvement Programs

1. Committed leadership

2. Adoption & communication of TQM

3. Closer customer relationships

4. Closer supplier relationships

5. Benchmarking

6. Increased training

7. Open organization

8. Employee empowerment

9. Zero-defects mentality

10. Flexible manufacturing

11. Process improvement

12. Measurement

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Characteristics of TQM/ContinuousImprovement Programs

Valuable competitive asset in a company’s resource portfolio

Have hard-to-imitate aspects

Require substantial investment of management time and effort

Expensive in terms of training and meetings

Seldom produce short-term results

Long-term payoff - Instilling a TQM culture

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TQM vs. Process Reengineering

Reengineering Aims at quantum gains of

30 to 50% or more TQM

Stresses incremental progress Techniques are not mutually exclusive

Reengineering - Used to produce a good basic design yielding dramatic improvements

TQM - Used to perfect process, gradually improving efficiency and effectiveness

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Using Best Practice Programsas an Implementation Tool

Select indicators of successful strategy execution Benchmark against best practice

companies Reengineer business processes Build a TQ culture

Starts with management commitment Install TQ-supportive employee practices Empower employees to do the right things Provide employees with quick access to

required information Preach that performance can be improved

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Installing Support Systems

Essential to promote successful strategy execution

Types of support systems On-line data systems Internet and company intranets Electronic mail Web pages

Mobilizing information and creating systems to use knowledge effectively can yield Competitive advantage

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Formal Reporting ofStrategy-Critical Information

Accurate, timely information is essential to guide action

Prompt feedback on implementation activities is needed before actions are fully completed

Key strategic performance indicators must be tracked as often as practical

Barometers of overall performance Statistical information Reports and meetings Personal contact

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What Areas ShouldInformation Systems Address?

Customer data

Operations data

Employee data

Supplier/partner/collaborative ally data

Financial performance data

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Exercising Adequate Control Over Empowered Employees

Challenge How to ensure actions of employees stay

within acceptable bounds Purpose of diagnostic control systems

Relieve managers of burden of constant monitoring

Control methods Establish boundaries on what not to

do, allowing freedom to act with limits Face-to-face meetings to assess

performance

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Gaining Commitment: Componentsof an Effective Reward System

Monetary Incentives

Salary raises

Performance bonuses

Stock options

Retirement packages

Promotions

Perks

Non-monetary Incentives Praise Constructive criticism Special recognition More, or less,

job security Interesting

assignments More, or less, job

responsibility

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Approaches: Motivating Peopleto Execute the Strategy Well

Inspire employees to do their best

Get employees to buy into strategy

Structure individual efforts in teams to facilitate a supportive climate

Allow employees to participate in decisions about their jobs

Make jobs interesting and satisfying

Devise strategy-supportive motivational approaches

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Balancing Positivevs. Negative Rewards

Elements of both are necessary Challenge and competition is

necessary for self-satisfaction Prevailing view

Positive approaches work better than negative ones

Enthusiasm Effort Initiative

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Linking the Reward Systemto Performance Outcomes

Rewards are the single most powerful tool to win commitment to the strategy

Objectives Generously reward those

achieving objectives Deny rewards to those who don’t Make strategic performance measures

the dominate basis for designing incentives

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Key Considerations inDesigning Reward Systems

Create a results-oriented system Reward people for results, not for activity Define jobs in terms of what to achieve Incorporate several performance measures Tie incentive compensation to

relevant outcomes Top executives - Key

measures of overall firm performance Department heads, teams, and individuals -

Strategic areas of responsibility

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Guidelines for Designing anEffective Compensation System

1. Payoff must be a major, not minor, piece of total compensation package

2. Incentive plan should extend to all employees

3. Administer system with scrupulous fairness

4. Link incentives to achieving only the performance targets in strategic plan

5. Targets each person is expected to achieve must involve outcomes that can be personally affected

6. Keep time between performance review and payment short

7. Make liberal use of non-monetary rewards

8. Avoid ways of rewarding non-performers