MGT 4150 Exam 3

Strategy-Driven Budgeting: Allocating Resources

- screen resource requests CAREFULLY - approve only those that CONTRIBUTE to strategy execution - provide the level of resources necessary for the success of strategic initiatives - shift resources to higher-priority activities where new execution initiatives are needed

What kinds of things can you as leaders do to foster a particular culture in your company

-A company's culture is grounded and shaped by its: 1. Core values 2. Ethical standards (aka Code of Ethics)

Strategic Management Principle

-A properly designed reward structure is management's most powerful tool for mobilizing organizational commitment to successful strategy execution and aligning efforts throughout the organization with strategic priorities -Two types of rewards: (monetary and non-monetary)

Strategic Management Principle

-A strong culture that encourages actions, behaviors, and work practices that are in sync with the chosen strategy and conducive to good strategy execution is a valuable ally in the strategy execution process -It is in management's best interest to dedicate considerable effort to establishing a strong corporate culture that encourages behaviors and work practices conducive to good strategy execution

Changing a problem culture: the role of leadership

-A strong, out of sync, or unhealthy culture must be changed in order to execute strategy successfully. -Competent leadership at the top is necessary for culture-change efforts to succeed. (recognize and believe you have a problem)

Linking Rewards to strategically relevant performance outcomes

-Administer the reward system with scrupulous objectivity and fairness -Focus on and reward results, not the effort -Set strategically relevant, specific, and measurable stretch performance goals -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

Allocating Resources to the Strategy Execution Effort

-Allocate resources to match STRATEGY -Resource allocation should be LEAN (resources are always LIMITED and people always WANT MORE) -Possible Adverse Resource Allocation Outcomes (TOO LITTLE funding may SLOWS PROGRESS and IMPEDES THE EFFORTS TO EXECUTE pieces of the strategic plan proficiently, TOO MUCH funding that WASTES organizational resources and reduces financial performance)

Superior Strategy Execution Capabilities

-Are DIFFICULT TO IMITATE and SOCIALLY COMPLEX processes that take a long time to develop -Maximize organizational resources and competitive capabilities in support of the business model -Lower costs and permit firms to deliver more value to customers -Enable a firm to react more quickly to market changes, beat competitors to market with new products and services, and gain uncontested market dominance

Strategic Management Principle

-As a company's strategy evolves, an adaptive culture is a definite ally in the strategy-implementing, strategy-executing process as compared to cultures that are resistant to change -The challenge in creating high-performance culture is to inspire loyalty and dedication in employees. Often by rewarding top performers or purging behaviors that stand in the way of high productivity

unhealthy cultures that impede good strategy execution

-Change resistant cultures -Politicized cultures -Insular, inwardly focused cultures -Unethical and greed-driven cultures

How long does it take to change a problem culture?

-Changing a problem culture is never a short-term exercise. -A sustained and persistent effort to reinforce the culture at every opportunity through word and deed is required. -It takes time for a new culture to emerge and prevail; it takes even longer for it to become deeply embedded. -Fixing a problem culture and instilling a new set of attitudes and behaviors can take 2 to 5 years.

Key Strategic Performance Indicators Tracked by Information Systems

-Customer data -Operations data -Employee data -Supplier/partner/collaborative ally data -Financial performance data

Advantages of Decentralized Organizational Structures

-ENCOURAGES EMPLOYEES TO EXERCISE INITIATIVE and act responsibly -Promotes GREATER MOTIVATION and involvement in the business on the part of more company personnel -Spurs new ideas and CREATIVE THINKING -Allows FAST response to market change -Entails fewer layers of management

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

Selling the Change

-Explain why and how certain behavioral norms and work practices are obstacles to good execution of strategic initiatives -Explain how new behaviors and work practices will produce better results -If the need for cultural change is due to a change in strategy, cite reasons why the current strategy has to be modified

Strong-Culture Firm

-Has deeply rooted widely-shared values, behavioral norms, and operating approaches. -Insists that its values and principles be reflected in the decisions and actions taken by all company personnel.

Healthy cultures that aid good strategy execution

-High-performance cultures-Commitment to achieve stretch objectives and accountability -Adaptive cultures- Willingness to accept change and take on challenges

Disadvantages of Decentralized Organizational Structure

-Higher-level managers may be unaware of actions taken by empowered personnel under their supervision -Puts the organization at risk if empowered employees happen to make "bad" decisions -can impair cross-unit collaboration

Recruiting, Training, and Retaining Capable Employees

-INTENSIVELY SCREEN and evaluate applicants to ensure selecting those who are best-suited and best-fitted -Provide TRAINING programs throughout employee careers -ROTATE promising people through challenging, and skill-strengthening international assignments -Make the WORK ENVIRONMENT STIMULATING and engaging so that the firm is considered a great place to work -Use an assortment of FINANCIAL INCENTIVES and other PERKS to retain employees -COACH AVERAGE PERFORMERS to improve their skills and capabilities, while WEEDING OUT UNDERPERFORMERS

Which of the following does the text say is a good way to recruit, train, and retain capable employees:

-Intensively screen -Rotate through skill stretching positions -Make the work environment stimulating -Provide financial incentives to perform

Strategy Execution

-Is operations-driven, involving LEADING & MANAGING PEOPLE and business PROCESSES -Is a JOB FOR THE WHOLE MANAGEMENT TEAM, not just a few senior managers -Can take years longer to develop as a real proficiency than developing a strategy -Requires a DETERMINED COMMITMENT to change, action, and PERFORMANCE

Structure is ALIGNED WITH STRATEGY when:

-Its design CONTRIBUTES TO THE CREATION OF VALUE for customers -It lowers operating costs through LOWER BUREAUCRATIC COSTS AND OPERATIONAL EFFICIENCIES

Disadvantages of Centralized Organizational Structures

-LENGTHENS RESPONSE TIME by those closest to the market conditions because they must seek approval for their actions -DOES NOT ENCOURAGE RESPONSIBILITY among lower-level managers and rank-and-file employees -DISCOURAGES LOWER-LEVEL MANAGERS and rank-and-file employees from exercising any initiative

Weak-Culture Firm

-Lacks values and principles that are consistently preached or widely shared. -Has few or no traditions, beliefs, values, common bonds, or behavioral norms.

Guidelines for Designing Effective Incentive Compensation Systems

-Make financial incentives a MAJOR, not a minor piece of the total compensation package -Have incentives that extend to all managers and all workers, not just top management -Keep the time between achieving the targeted performance outcome and payment of the reward as short as possible

Six Sigma Programs

-Program aimed to REDUCE COST by ELIMINATING WASTE -Waste in the form of Defects, Variation and Non-Productive Activities

non monetary approaches to enhancing motivation

-Provide attractive perks and fringe benefits. -Give awards and other forms of public recognition. -Rely on promotion from within whenever possible. -Invite and act on ideas and suggestions. -Create a work atmosphere of caring and mutual respect. -State the strategic vision in inspirational terms. -Share the firm's critical information with employees. -Provide a comfortable working environment.

Policies and Procedures

-Provide top-down guidance about how certain things need to be done -Help enforce consistency in how strategy-critical activities are performed -Promote the creation of a work climate that facilitates good strategy execution

Substantive Culture-Changing Actions

-Replace key executives who are stonewalling needed organizational and cultural changes. -Promote individuals who advocate for cultural shifts and can serve as a role model for the cultural behavior. -Appoint outsiders with the desired cultural attributes to high-profile positions. -Screening candidates for positions carefully, hiring only those who appear to fit in with the new culture. -Mandate that all personnel attend culture-training. -Design compensation incentives that boost the pay of teams and individuals.

Leading Strategy Execution Requires:

-Staying on top of what is happening and closely monitoring progress -Putting constructive pressure on the organization to execute the strategy well and achieve operating excellence -Initiating corrective actions to improve strategy execution and achieve the targeted performance results

Monetary Rewards

-Stock Option = Ownership -Pay Increases -Bonuses -Profit-Sharing Plans -401k Matching -Retirement Plans -Piecework Incentives

In what ways do well-conceived policies and operating procedures facilitate strategy execution?

-They provide top-down guidance regarding how things are to be done -They help ensure consistency in how execution-critical activities are performed -They promote the creation of a work climate that facilitates good strategy execution -They channel individual and group efforts along a strategy-supportive path

Strategic Management Principle

-Well-conceived policies & procedures AID STRATEGY EXECUTION; out-of-sync ones hinder effective execution -Prescribe enough policies to give organization members clear direction and to place REASONABLE BOUNDARIES on their actions; THEN EMPOWER them to act within these boundaries in pursuit of company goals

Strategic Management Principle

-When strategies FAIL, it is often because of POOR EXECUTION. Strategy execution is therefore a critical managerial endeavor -The TWO BEST SIGNS OF GOOD STRATEGY EXECUTION are whether a company is: 1. Meeting or BEATING ITS PERFORMANCE TARGETS 2. Performing value chain activities in a manner that is conducive to COMPANYWIDE OPERATING EXCELLENCE

A final word on leading the process of crafting and executing strategy

-crafting, implementing and executing strategy is a continuous process that requires much adjusting and fine-tuning of the strategy to fit changing circumstances -The tests of strategic leadership are 1. whether the firm has a good strategy and business model 2. whether its strategy is competently executed 3. whether the firm is achieving its performance targets

The broad areas that internal information business systems need to cover include:

-financial performance data -supplier/strategic partner data -customer data -operations data

A disadvantage of the centralized organization is:

-it lengthens response times by those closest to the market conditions because they must seek approval for their actions. -it does not encourage responsibility among lower-level managers and rank-and-file employees. -it discourages lower-level managers and rank-and-file employees from exercising any initiative. -it diverts authority away from those closest to, and most knowledgeable about, the situation for actions.

Changing the culture of an organization

-top executive and upper management behaviors -ceremonial events to honor exemplary employees -physical symbols that represent the new culture

Acquiring capabilities through mergers and acquisitions

1. A ? of market opportunity- When a MARKET OPP can slip by faster than a needed capability can be created internally 2. A ? of Competitive Necessity- When industry conditions, technology, or competitors are moving at such a rapid clip that time is of the essence 3. A ? of successful integration- Tacit knowledge and complex routines may not transfer readily from one organizational unit to another

Why corporate cultures matter to the strategy execution process

1. A culture well matched to the requirements of the strategy execution effort focuses the attention of employees on what it most important to this effort. 2. Culture-induced peer pressure induces personnel to do things in a manner that aids good strategy execution 3. A culture consistent with the requirements for good strategy execution can energize employees, deepens their commitment to execute the strategy, and enhance worker productivity

Determining how much authority to delegate

1. Centralized decision making- authority is retained by TOP MANAGEMENT 2. Decentralized decision-making- authority delegated to LOWER-LEVEL MANAGER AND EMPLOYEES

Strategy Execution Requirements

1. Chosen strategy 2. Capabilities and competencies 3. Centralized or Decentralized Control

Matching Organizational Structure to the Strategy

1. Decide which value chain activities to perform INTERNALLY and which ones to OUTSOURCE 2. Align the ORGANIZATIONAL STRUCTURE (chart) with the strategy 3. Decide how much AUTHORITY to CENTRALIZE at the top and how much to DELEGATE to down-the-line managers and employees 4. Facilitate COLLABORATION with external PARTNERS, and strategic allies

Advantages of Centralized Organizational Structures

1. Fixes accountability through tight control from the top 2. ELIMINATES POTENTIAL FOR CONFLICTING GOALS AND ACTIONS on the part of lower-level managers 3. Facilitates QUICK DECISION making and strong leadership UNDER CRISIS situations

Embedding Cultural Norms in the Organization and Perpetuating the Culture

1. Screen applicants and hire those who will mesh well with the culture 2. Incorporate discussions of the firm's culture and its behavioral norms into orientation programs for new employees and training courses for managers and employees 3. Have senior executives frequently reiterate the importance and role of the firm's values and ethical principles at the firm's events and in internal communications to employees 4. Expect managers at all levels to be cultural role models and exhibit advocated cultural norms in their own behavior

Types of Organizational Structures

1. Simple (Line-and-Staff) 2. Functional Structure (Departmental or Unitary) 3. Multidivisional Structure (Divisional or M-form) 4. Matrix Structure (Composite or Combination)

Building the Organization

1. Staff the organization with the right people for executing the strategy 2. Build the organizational capabilities required for successful strategy execution 3. Establish a strategy supportive organizational structure

Forces that cause a firm's culture to evolve

1. new or revolutionary technologies 2. diversification into new businesses 3. rapid growth of the firm 4. merger or acquisition of another firm 5. shifting internal conditions 6. new challenges in the marketplace

Acquiring, Developing, and Strengthening Key Resources and Capabilities

3 approaches to build building and strengthening capabilities 1. Develop capabilities internally 2. Acquire capabilities through mergers and acquisitions 3. Access capabilities via collaborative partnerships

Embedding Cultural Norms in the Organization and Perpetuating the Culture Pt. 2

5. Make the display of cultural norms a factor in evaluating each person's job performance, granting compensation increases, and offering promotions 6. Stress that line managers all the way down to first-level supervisors give ongoing attention to explaining the desired cultural traits and behaviors in their areas and clarifying why they are important 7. Encourage company personnel to exert strong peer pressure on co-workers to conform to expected cultural norms 8. Hold periodic ceremonies to honor people who excel in displaying the company values and ethical principles

Strategic Management Principle

A COMPANY'S CAPABILITIES MUST BE CONTINUALLY REFRESHED AND RENEWED to remain aligned with changing customer expectations, altered competitive conditions, and new strategic initiatives

Strategic Management Principle

A company's values statement and code of ethics communicate expectations of how employees should conduct themselves in the workplace -Posted them in conference rooms, break rooms -Senior staff wrote articles for company news paper on each value

Accessing capabilities through collaborative partnerships

Approaches to acquiring capabilities from an external source 1. OUTSOURCE the function requiring the capabilities of a key supplier or another provider 2. COLLABORATE with a firm that has complementary resources and capabilities 3. Engage in a collaborative PARTNERSHIP for the purpose of LEADING how the partner does things

Functional Structure Example

Champion Aero Example Traditional Department vs Product Line Team Structure -Task specialization (advantage) -Departmental boundaries (disadvantage) -PLT physically located in same office area -PLT leader kept focus on customer (advantage)

Organizational Structure

Comprises the FORMAL and INFORMAL arrangement of tasks, responsibilities, lines of authority, and reporting relationships for the firm

Core Concept

Corporate Culture refers to the shared values, ingrained attitudes, core beliefs and company traditions that DETERMINE NORMS OF BEHAVIOR, accepted work practices, and styles of operating

Total Quality Management (TQM)

Creating a total quality culture bent on CONTINUOUSLY IMPROVING the performance of every task in the value chain -Mostly been replaced by "Six Sigma" type programs

Existing Processes and Six Sigma: DMAIC

DEFINE- Define what constitutes a defect or variation MEASURE- Collect data to find out why, how, and how often this defect occurs ANALYZE- Determine when, why, and where the defect is occurring IMPROVE- Implement best practice to eliminate defect or variation CONTROL- Implement training, monitoring and controls to sustain the improvement

Managerial actions to develop core competencies and competitive capabilities internally generally take one of two forms. What are they?

Either strengthening the company's base of skills, knowledge, and experience or coordinating and integrating the efforts of various work groups and departments

Strategic Management Principle

In many industries, ADDING TO A COMPANY'S TALENT BASE and building intellectual capital are MORE IMPORTANT to good strategy execution THAN ADDITIONAL INVESTMENTS IN CAPITAL PROJECTS

Business Process Reenginnering

Involves RADICALLY redesigning and streamlining work effort, flows, and processes to achieve dramatic improvements in performance. -Often involves: cross-functional teams, cutting-edge technology, and information systems -"All Hands On-Deck"

Management by walking around (MBWA)

Is used by leaders to stay informed about how well the strategy execution process is progressing. Involves spending time with people at company facilities, asking questions, listening to their opinions and concerns, and gathering firsthand information about how good aspects of the strategy execution process are going.

Develop Capabilities Internally

Managerial actions to develop competencies and capabilities 1. STRENGTHEN firm's BASE OF SKILLS, KNOWLEDGE, AND INTELLECT 2. COORDINATE and INTEGRATE the EFFORTS OF WORK GROUPS and departments

According to Instructor Liddle, what is the first step in changing a problem culture?

Recognize and believe you have a problem culture

Changing a Problem Culture

STEP 0: Recognize and believe you have a problem STEP 1: Identify facets of the present culture that are dysfunctional and impede good strategy execution STEP 2: Specify clearly what new actions, behaviors, and work practices should characterize the new culture STEP 3: Talk openly about problems with the current culture and make a persuasive case for cultural reform STEP 4: Follow with visible, forceful actions--both substantive and symbolic--to ingrain a new set of behaviors, practices, and norms

Strategic Management Principle

SUPERIOR STRATEGY EXECUTION capabilities are the ONLY SOURCE OF SUSTAINABLE COMPETITIVE ADVANTAGE when strategies are easy for rivals to copy

Wells Fargo Article

Sep 2016- WF agrees to a $185M fine after the scandal around sales tactics -Opened ~2M accounts without customers' knowledge -Hard changing sales culture Oct 2016- CEO steps down after 35 years at WF

According to Instructor Liddle, which of the following best describes Wells Fargo's culture under Mr. Stumpf?

Strong and Unhealthy

Corporate Norms of behavior

The way people think and act that are learned from experience with coworkers "How we do things around here" -OK to show up late to work/meetings -How people communicate call/email/message -How do they handle disagreements

Continuous Improvement

a commitment to constantly make things better one step at a time

The Six Sigma process of define, measure, analyze, improve, and control (DMAIC) is:

an improvement system for existing processes falling below specification and needing incremental improvement

From a strategy-implementing executing perspective, operating budget allocations should:

be strategy-driven and be based on how much each organizational unit needs to carry out its piece of the strategic plan efficiently and effectively

A company's corporate culture is BEST defined and identified by:

by the company's shared values, ingrained attitudes, core beliefs, and company traditions that determine norms of behavior, accepted work practices of "how we do things around here," and styles of operating

The three components of BUILDING a capable organization are

staffing the organization, acquiring, developing, and strengthening key resources and competitive capabilities, and structuring the organization and work effort

In order to coordinate and control the complex set of activities, managers must ensure:

the various parts of the organizational structure are aligned with one another and also matched to the requirements of the strategy

Corporate Culture

is the meshing of shared VALUES, BELIEFS, business principles, and TRADITIONS that IMBUES a firm's operating style, behavioral norms, ingrained attitudes, and work atmosphere (Imbues- instills, permeates, infuses, influences)

A work environment where the culture is in sync with the chosen strategy & is conducive to good strategy execution is considered a valuable managerial ally because:

it provides company personnel with clear guidance regarding "how we do things around here and produces significant peer pressures from coworkers to conform to culturally acceptable norms."

A company's culture is typically grounded in and shaped by:

its core values and the bar it sets for ethical standards

Management's most powerful tool for mobilizing organizational commitment to competent strategy execution and operating excellence is the:

proper use of a reward structure with motivational incentives and rewards