Cqe preparation | overcoming barriers to quality improvement
Chap011
1. 11
Building an
Organization
Chapter Title
Capable of
Good Strategy
Execution
2. “A second-rate
strategy perfectly
executed will beat a
first-rate strategy
poorly executed every
Richardtime.”
M. Kovacevich
11-2
3. Chapter Roadmap
A Framework for Executing Strategy
The Principal Managerial Components of the Strategy
Execution Process
Buildingan Organization Capable of Good Strategy
Execution
Staffing the Organization
Building Core Competencies and Competitive
Capabilities
Execution-Related Aspects of Organizing the Work
Effort
Current Organizational Trends
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4. Crafting vs. Executing Strategy
Crafting the Strategy Executing the Strategy
Primarily a market-driven Primarily an operations-
activity driven activity
Successful strategy making Successful strategy
depends on execution depends on
Business vision Doing a good job of
Perceptive analysis of working through others
market conditions and Good organization-
company capabilities building
Attracting and pleasing Building competitive
customers capabilities
Outcompeting rivals Creating a strategy-
Using company supportive culture
capabilities to forge a Getting things done and
competitive advantage delivering good results
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5. Executing the Strategy
Anaction-oriented, make-things happen task
involving management’s ability to
Implementation
Direct organizational change involves . . .
Achieve continuous improvement in
operations and business processes
Move toward operating excellence
Create and nurture a
strategy-supportive culture
Consistently meet or beat performance targets
Tougher and more time-consuming than crafting
strategy
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6. Implementing a New Strategy
Requires practiced Leadership
Implementing a new strategy
takes expert leadership to
Convincingly communicate
reasons for the new strategy
Overcome pockets of doubt
Secure commitment of concerned parties
Build harmony and enthusiasm
Get all implementation pieces in place and coordinated
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7. Why Executing Strategy Is
a Tough Management Job
Overcoming resistance to change
Wide array of demanding managerial
activities to be performed
Numerous ways to tackle each activity
Number of complex issues to be worked out
Demands good people management skills
Requires launching and managing
a variety of initiatives simultaneously
Hardto integrate efforts of many different work
groups into a smoothly-functioning whole
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8. Who Are the Strategy Implementers?
Implementing
and executing strategy involves a
company’s whole management team and all
employees
Just as every part of a watch plays a role in making the
watch function properly, it takes all pieces of an
organization working cohesively for a strategy
to be well-executed
Top-levelmanagers must lead the
process and coordinate major initiatives
But they must rely on cooperation of
Middle and lower-level managers to see things go well in
various parts of an organization and
Employees to perform their roles competently
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9. Goals of the Strategy
Implementing-Executing Process
Unite total organization behind strategy
See that activities are done in a manner that is
conducive to best strategy execution
Generatecommitment so an enthusiastic
movement emerges to carry out strategy
Fithow organization conducts its
operations to strategy requirements
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10. Fig. 11.1: The Eight Components of the Strategy Execution Process
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11. What Top Executives Have to Do in
Leading the Implementation Process
Communicate the case for change
Build harmony on how to proceed
Arouseenthusiasm for the strategy to turn
implementation process into a companywide crusade
Empower subordinates to keep process moving
Establish measures of progress and deadlines
Reward those who achieve
implementation milestones
Direct resources to the right places
Personally lead strategic change process
and the drive for operating excellence
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12. Test Your Knowledge
Management's handling of the strategy implementation/execution
process can be considered successful
A. so long as a company is profitable.
B. if and when the company meets or beats its performance targets and
shows good progress in achieving its strategic vision for the
company.
C. once the company's management team convinces a majority of
company personnel that the company is headed in the right
direction.
D. if management is able to put the strategy in place within 6 months.
E. once a capable top management team has been hired, employees
have been appropriately empowered, and effective training
programs for company personnel have been put in place.
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14. Fig. 11.2: The Three Components of Building an
Organization Capable of Proficient Strategy Execution
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15. Putting Together a
Strong Management Team
Assembling a capable management team is a
cornerstone of the organization-building task
Find the right people to fill each slot
Existing management team
may be suitable
Core executive group
may need strengthening
Promote from within
Bring in skilled outsiders
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16. Selecting the Management Team:
Key Considerations
Determine mix of
Backgrounds
Experiences and know-how
Beliefs and values
Styles of managing and personalities
Personal chemistry must be right
Talent base needs to be appropriate
Pickinga solid management team needs to be
acted on early in implementation process
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17. Recruiting and Retaining Talented
Employees: Implementation Issues
The quality of a company’s people is an essential
ingredient of successful strategy execution
Biggest challenge facing companies
How to recruit and retain the best
and brightest talent with strong
skill sets and management potential
Intellectualcapital, not tangible assets, is
increasingly being viewed as the most important
investment
Talented people are a prime source of competitive
advantage
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18. Building Core Competencies
and Competitive Capabilities
Crafting the strategy involves
Identifying the desired competencies and
capabilities to build into the strategy to help
achieve a competitive advantage
Good strategy execution requires
Putting desired competencies and capabilities in
place,
Upgrading them as needed, and
Modifying them as market
conditions evolve
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19. Example: Intel’s Core Competence
Design and mass production
of complex chips
for personal computers
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20. Example: Procter & Gamble’s
Core Competencies
Superb marketing-distribution skills and R&D
capabilities in five core technologies - fats,
oils, skin chemistry, surfactants, emulsifiers
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21. Example: General Electric’s
Core Competencies
Developing professional managers with
broad problem-solving skills and
proven ability to grow
global businesses
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23. Example: Dell’s Core Competencies
Capabilities to deliver state-of-the-art
products to customers within days of next-
generation components coming available and
at attractively low costs
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24. Example: Toyota’s Core Competence
Legendary “production system” giving it
the capability to produce high-quality
vehicles at relatively low costs
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25. Three-Stage Process of Developing
Competencies and Capabilities
1. Develop ability to do something
2. As experience builds,
ability can translate into a
competence or capability
3. If ability continues to be polished and
refined, it can become a distinctive
competence, providing a path to
competitive advantage!
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26. Step 1 in Developing Competencies
Develop ability to do something
Select people with relevant skills/experience
Broaden or expand individual abilities as needed
shape efforts and work products of
individuals into a cooperative effort
to create organizational ability
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27. Step 2 in Developing Competencies
As experience builds and company learns how to
perform the activity consistently well and at
acceptable cost, the ability evolves into a
competence or capability
Typically, a capability or competence emerges from
establishing and nurturing collaborative
relationships between
Individuals and groups in different departments and/or
A company and its external allies
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28. Step 3 in Developing Competencies
Ifcompany masters the activity, performing it
better than rivals, the “capability” or
“competence” becomes a
Distinctive competence and
Holds potential for
competitive advantage
This is the optimal outcome of the process
of building capabilities-competencies!
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29. Managing the Process of Building
Competences: Four Key Traits
1. Competencies are bundles of skills and know-how
growing from combined efforts of cross-functional
departments
2. Normally, competencies emerge incrementally from
various company efforts to respond to market
conditions
3. Leveraging competencies into competitive advantage
requires concentrating more effort and talent than
rivals on strengthening competencies to create
valuable capabilities
4. Sustaining competitive advantage requires adjusting
competencies to new conditions
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30. Approaches to Developing Competencies
Internal development involves either
Strengthening the company’s base of skills,
knowledge, and intellect or
Coordinating and networking the efforts
of various work groups and departments
Partnering with key suppliers,
forming strategic alliances, or maybe
even outsourcing certain activities to
specialists
Buying a company that has the required
capabilities and integrating these competences into
the firm’s value chain
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31. Updating Competencies and
Capabilities as Conditions Change
Competenciesand capabilities must
continuously be modified and perhaps
even replaced with new ones due to
New strategic requirements
Evolving market conditions
Changing customer expectations
Ongoing efforts to keep core competencies up-to-
date can provide a basis for sustaining both
Effective strategy execution and
Competitive advantage
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32. Strategic Role of Employee Training
Training plays a critical role in implementation when
a firm shifts to a strategy requiring different
Skills or core competences
Competitive capabilities
Managerial approaches
Operating methods
Types of training approaches
Internal “universities”
Orientation sessions for new employees
Tuition reimbursement programs
Online training courses
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33. Competitive Advantage Potential
of Competencies and Capabilities
When it is difficult to outstrategize rivals
with a superior strategy . . .
. . . Best avenue to industry
leadership is to out-compete
rivals with
superior strategy execution!
Building competencies and capabilities
rivals can’t match is one of the
best ways to out-compete them!
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34. Test Your Knowledge
When it is difficult or impossible to out-strategize rivals (beat
them with a superior strategy), the other main avenue to
competitive advantage is to
A. institute a lower cost organization structure.
B. outcompete them with smarter managers.
C. do a better job of selecting and training employees.
D. outexecute them (beat them by performing certain value chain
activities in superior fashion).
E. do a better job of empowering and motivating employees.
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35. Execution-Related Aspects
of Organizing Work Efforts
Few hard and fast rules for organizing
One Big Rule: Role and purpose of organization
structure is to support and facilitate good strategy
execution!
Each firm’s structure is distinctive, reflecting
Prior arrangements and internal politics
Executive judgments and preferences about how to
arrange reporting relationships
How best to integrate and coordinate work effort of
different work groups and departments
CEO
Vice President Vice President Vice President
11-39
37. Step 1: Decide Which Value Chain Activities to
Perform Internally and Which to Outsource
Involvesdeciding which activities are
essential to strategic success
Most strategies entail certain crucial business processes
or activities that must be performed exceedingly well or
in closely coordinated fashion if the strategy is
to be executed with real proficiency
These processes/activities usually
Critical
need to be performed internally activities
Other activities, such as routine
administrative housekeeping and
some support functions, may be
candidates for outsourcing
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38. Appeal of Outsourcing
Outsourcingnon-critical activities allows a firm to
concentrate its energies and resources on those
value-chain activities where it
Can create unique value
Can be best in the industry
Needs direct control to
Build core competencies
Achieve competitive advantage
Manage key customer-supplier-distributor relationships
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39. Dangers of Outsourcing
A company must guard against hollow out its
knowledge base and capabilities
Way to guard against pitfalls of outsourcing
Avoid sourcing key components from a single supplier
Use two or three suppliers to minimize
dependence on any one supplier
Regularly evaluate suppliers
Work closely with key suppliers
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40. Step 2: Make Strategy-Critical
Activities the Main Building Blocks
Assign managers of strategy-critical activities a
visible, influential position
Avoid fragmenting responsibility for strategy-critical
activities across many departments
Assign
Providecoordinating linkages managers
key roles
between related work groups Primary Support
activities functions
join into a valuable
Strategic Coordi- Valuable
competitive capability relation- nation capability
ships
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41. What Types of Organizational
Structures Fit Which Strategies?
A company operating in one business
Functional department structure
A company with operations in various parts of
the world
Geographic organizational units
A vertically integrated company
Divisional organizational structure
A diversified company
Individual businesses, with each business unit operating
as independent profit center
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42. Step 3: Determine How Much
Authority to Delegate to Whom
In a centralized structure
Top managers retain authority
for most decisions
In a decentralized structure
Managers and employees are
empowered to make decisions
Trend in most companies
Shift from authoritarian to decentralized
structures stressing empowerment
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44. Characteristics of
Centralized Decision Making
Top executives retain authority
For most strategic and operating decisions and
Keep a tight restriction on lower-level managers
Minimal discretionary authority is granted to
Frontline supervisors
Rank-and-file employees
Key advantage – Tight control by top
managers fixes accountability
Disadvantages
Lengthens response time to changing conditions
Does not encourage responsibility among lower-level managers and
employees
Discourages lower-level managers and employees from exercising
initiative
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45. Advantages of a Decentralized Structure
Creates a more horizontal structure with fewer management layers
Managers and employees develop their own answers and action
plans
Make decisions in their areas of responsibility
Held accountable for results
Shortens organizational response times and spurs
New ideas
Creative thinking and innovation
Greater involvement of managers and employees
Jobs can be defined more broadly
Fewer managers are needed
Electronic communication systems provide quick, direct access to
data
Genuine gains in morale and productivity
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46. Maintaining Control in
a Decentralized Structure
Place limits on authority empowered employees
can exercise
Hold people accountable for their decisions
Institutecompensation incentives that reward
employees for doing their jobs in a manner
contributing to good company performance
Create a corporate culture where
there’s strong peer pressure on
employees to act responsibly
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47. For Discussion: Your Opinion
A decentralized organization structure is more likely
to further the cause of good strategy execution than is
a centralized organization structure. True or false?
Explain.
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48. Step 4: Provide for Internal
Cross-Unit Coordination
Classicmethod of coordinating activities – Have
related units report to single manager
Upper-level managers have clout to
coordinate efforts of their units
Supportactivities should be
woven into structure to
Maximize performance of primary activities
Contain costs of support activities
Formal
reporting relationships often need to be
supplemented to facilitate coordination
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49. Examples of Fragmented
Strategy-Critical Activities
Filling customer orders
Speeding new products to market
Improving product quality
Supply chain management
Building capability to conduct business via the
Internet
Obtainingfeedback from customers, making
product modifications to meet their needs
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50. Coordinating Mechanisms to Supplement
the Basic Organization Structure
Cross-functional task forces
Dual reporting relationships
Informal networking
Voluntary cooperation
Incentive compensation tied
to group performance
Teamwork and cross-
departmental cooperation
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51. Step 5: Provide for
Collaboration With Outsiders
Need multiple ties at multiple levels to ensure
Communication
Coordination and control
Findways to produce collaborative
efforts to enhance firm’s capabilities
and resource strengths
Whilecollaborative relationships present
opportunities, nothing valuable is realized until
the relationship develops into an engine for
better organizational performance
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52. Roles of Relationship Managers
With Strategic Partners
Get right people together
Promote good bonding.
See plans for specific activities
are developed and implemented
Helpadjust internal procedures
and communication systems to
flatten operating dissimilarities
Nurture interpersonal ties
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53. Current Organizational Trends
Numerous companies have completed the task of
remodeling traditional, hierarchical structures built
on
Functional specialization and
Centralized authority
Corporatedownsizing movement in the
late 1980s and early 1990s was aimed at
Recasting authoritarian, pyramidal
organizational structures
Into flatter, decentralized structures
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54. Drawbacks of Centralized
Authoritarian Structures
Centralized or authoritarian structures have
often turned out to be a liability where
Customer preferences shift from
standardized to customized products
Product life-cycles grow shorter
Flexible manufacturing replaces
mass production
Customers want to be treated as individuals
Pace of technological change accelerates
Market conditions are fluid
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55. Organizational Structures of
the Future: Overall Themes
Revolutionary changes in how work is organized
have been triggered by
New strategic priorities
Rapidly shifting competitive conditions
Tools of organizational design include
Empowered managers and workers The future
Reengineered work processes structure
will be . . .
Self-directed work teams
Rapid incorporation of Internet
technology
Networking with outsiders
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56. Characteristics of
Organizations of the Future
Extensiveuse of Internet technology
and e-commerce business practices
Fewer barriers between
Different vertical ranks Change &
Learning
Functions and disciplines
Units in different geographic locations
Company and its suppliers, distributors,
strategic allies, and customers
Capacity for change and rapid learning
Collaborative efforts among people in different
functions and geographic locations
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Hinweis der Redaktion
Answer: B
Answer: D
True. In a decentralized structure, man agers and employees develop their own answers and action plans, make decisions in their areas of responsibility, and are held accountable for results. A decentralized structure shortens organizational response times and spurs new ideas, creative thinking and innovation, and greater involvement of managers and employees. In addition, in a decentralized structure jobs can be defined more broadly, fewer managers are needed, electronic communication systems provide quick, direct access to data, and there are often gains in employee morale and productivity.