GS MGT 439 CH 10 Building an Organization Capable of Good Strategy Execution People, Capabilities, and Structure

In order to be successful, any quality-building program must be integrated with ______.

a company's overall business strategy

Successful businesses often seek to attract ______.

ambitious employees who enjoy a challenge

3 of 5 : Matching Organizational Structure to the Strategy : Determining How Much Authority to Delegate (continued) Decentralized Decision Making: Pros and Cons In a highly decentralized organization, decision-making authority is pushed down to the lowest organizational level capable of making timely, informed, competent decisions The objective is to put adequate decision-making authority in the hands of the people closest to and most familiar with the situation and train them to weigh all the factors and exercise good judgment. The case for empowering down-the-line managers and employees to make decisions related to daily operations and strategy execution is based on the belief that a company that draws on the combined intellectual capital of all its employees can outperform a command-and control company The ultimate goal of decentralized decision making is to put authority in the hands of those persons closest to and most knowledgeable about the situation. ○ The challenge in a decentralized system is maintaining adequate control. Authoritarian, hierarchical organizational structures are not well suited to implementing and executing strategies in an era when extensive information and instant communication are the norm and when a big fraction of the organization's most valuable assets consists of intellectual capital that resides in its employees' capabilities.

Advantages ○ Encourages employees to take responsibility and exercise initiative ○ Shortens organizational response times to market changes and ○ Spurs new ideas, creative thinking, innovation, and greater involvement on the part of all company personnel. ○ Jobs can be defined more broadly, several tasks can be integrated into a single job, and people can direct their own work. ○ Fewer managers are needed because deciding how to do things becomes part of each person's or team's job. ○ Typically, there are genuine gains in morale and productivity when people are provided with the tools and information they need to operate in a self- directed way But decentralization also has some disadvantages. ○ Top managers lose an element of control over what goes on and may thus be unaware of actions being taken by personnel under their supervision. ○ Decentralization gives organizational units the authority to act independently, there is risk of too little collaboration and coordination between different units.

The best companies make a point of recruiting and retaining talented employees

the objective is to make the company's entire workforce (managers and rank- and- file employees) a genuine competitive asset.

Six Sigma's highly specialized processes of statistical analysis are especially useful for ______.

large companies with wide variations in performance

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.

Matching Organizational Structure to the Strategy Every firm's organizational chart is partly a product of its particular situation, reflecting prior organizational patterns, varying internal circumstances, and executive judgments about how to best structure reporting relationships. Some considerations in organizing the work effort are common to all companies. These are summarized in Figure 10.3 and discussed in the following sections.

Ensuring that Structure Follows Strategy By: • Decide which value chain activities to perform internally and which ones to outsource. • Align the organizational structure with the strategy • Decide how much authority to centralize at the top and how much to delegate down the line • Provide for cross-unit coordination • Facilitate collaboration with external partners and strategic allies A company's organizational structure should be matched to the particular requirements of implementing the firm's strategy.

True or false: New strategic initiatives require increased budgets and a larger allocation of resources to succeed.

False

Macy works at an ice cream store. She needs to use a store-issued scoop, dip the scoop into 100-degree water for 2 seconds, scoop using a back-to-front motion, and weigh each serving. This is an example of which of the three ways policies and procedures facilitate strategy execution?

Helping to ensure consistency in how execution-critical activities are performed

Eliminating differences in the operating practices of different factory locations accomplishes which of the following?

It helps to ensure and enforce consistency in how execution-critical activities are performed.

Organizational units that assume a larger strategic role owing to new strategic plans nearly always need which of the following? (Choose every correct answer.)

New equipment More people

Which of the following policies encourage the development of a workforce committed to quality? (Choose every correct answer.)

Screening applicants for their attitudes about workplace excellence Providing valuable employee training experiences

Like crafting strategy, executing strategy is a job for a company's

company's whole management team—not just a few senior managers. While the chief executive officer and the heads of major units (business divisions, functional departments, and key operating units) are ultimately responsible for seeing that strategy is executed successfully, the process typically affects every part of the firm—all value chain activities and all work groups. ○ Top-level managers must rely on the active support of middle and lower managers to institute whatever new operating practices are needed in the various operating units to achieve proficient strategy execution.

An ambidextrous organization allows research and development to explore innovation while also ______.

continually improving operating processes

Six Sigma and TQM are examples of _______ improvement programs.

continuous

In order for a business incentive program to achieve the desired results, ______.

employees must understand how incentive pay is calculated

It is generally much easier and less time-consuming to update and remodel a company's existing capabilities as external conditions and company strategy change than it is to create them from scratch.

○ Maintaining organizational capabilities in top form may simply require exercising them continually and fine-tuning them as necessary. ○ Augmenting a capability may require less effort if it involves the recombination of well-established company capabilities and draws on existing company resources.

What can the structured use of benchmarking, total quality management, and Six Sigma techniques lead to? (Choose every correct answer.)

A competitive advantage in the marketplace A corporate culture of operating excellence

Which of the following is the most likely to lead to competitive advantage in the marketplace?

A long-range plan dedicated to building an understanding of the importance of excellence on every level of business activity

For factory workers, incentive payments are generally based on which of the following? (Choose every correct answer.)

Avoiding work stoppages Meeting production deadlines Cost of manufacturing

Well-conceived policies and operating procedures facilitate strategy execution in which of the following three ways? (Choose every correct answer.)

By helping enforce consistency in how strategy-critical activities are performed By providing top-down guidance regarding how things need to be done By promoting the creation of a work climate that facilitates good strategy execution

How can an emerging businesses facilitate rapid growth? (Choose every correct answer.)

By putting efficient human resource systems in place By creating flexible infrastructures geared to handle expansion

5 of 5 : Matching Organizational Structure to the Strategy : Facilitating Collaboration with External Partners and Strategic Allies Organizational mechanisms—whether formal or informal—are also required to ensure effective working relationships with each major outside constituency involved in strategy execution. Strategic alliances, outsourcing arrangements, joint and cooperative partnerships can contribute little of value without active management of the relationship. ○ Unless top management sees that constructive organizational bridge building with external partners occurs and that productive working relationships emerge, the potential value of cooperative relationships is lost and the company's power to execute its strategy is weakened.

Building organizational bridges with external partners and strategic allies can be accomplished by appointing "relationship managers" with responsibility for making particular strategic partnerships generate the intended benefits. Relationship managers have many roles and functions: • getting the right people together, • promoting good rapport, • facilitating the flow of information, • nurturing interpersonal communication and cooperation, and • ensuring effective coordination ○ Organizing and managing a network structure provides a mechanism for encouraging more effective collaboration and cooperation among external partners. A network structure is the arrangement linking a number of independent organizations involved in some common undertaking. A well-managed network structure typically includes one firm in a more centraI role, with the responsibility of ensuring that the right partners are included and the activities across the network are coordinated.

Which of the following are nearly always necessary when a company adopts a new strategic plan? (Choose every correct answer.)

Changes in budget allocations Adjustment of resources

Which of the following are non-monetary rewards used to boost employee performance? (Choose every correct answer.)

Desirable fringe benefits A friendly work environment Awards and acknowledgments

Business statistical information systems are chiefly geared to tracking data concerning which of the following? (Choose every correct answer.)

Employees Customers Suppliers and strategic partners

1 of 3 : Building and Strengthening Organizational Capabilities : Developing Organizational Capabilities Internally Internal efforts to create or upgrade organizational capabilities is an evolutionary process that entails a series of deliberate and well orchestrated steps as organizations search for solutions to their problems. The process is a complex one, since capabilities are the product of bundles of skills and know-how that ale integrated into organizational routines and deployed within activity systems through the combined efforts of teams that are often cross-functional in nature, spanning a variety of departments and locations. The process is incremental Managerial actions to develop competitive capabilities generally take one of two forms: 1. Either strengthening the company's base of skills, knowledge, and experience or 2. Coordinating and integrating the efforts of the various work groups and departments. Actions of the first sort can be undertaken at all managerial levels, but actions of the second sort are best orchestrated by senior managers who not only appreciate the strategy-executing significance of strong capabilities but also have the clout to enforce the necessary cooperation and coordination among individuals, groups, and departments.

First step is to develop the ability to do something, however imperfectly or inefficiently. • Select people with the requisite skills and experience, enabling them to upgrade their abilities as needed, and then molding the efforts of individuals into a joint effort to create an organizational ability • At this stage, progress can be fitful since it depends on experimenting, actively searching for alternative solutions, and learning through trial and error. As experience grows and company personnel learn how to perform the activities consistently well and at an acceptable cost, the ability evolves into a tried-and-true competence. • Getting to this point requires a continual investment of resources and systematic efforts to improve processes and solve problems creatively as they arise. • Improvements in the functioning of an organizational capability come from task repetition and the resulting learning doing of individuals and teams. • But the process can be accelerated by making learning a more deliberate endeavor and providing the incentives that will motivate company personnel to achieve the desired ends.

Which of the following changes helped General Electric improve product delivery from its circuit-breaker division? (Choose every correct answer.)

Instituting an automated design system Consolidating manufacturing areas Introducing a more streamlined management system

One way well-conceived policies and operating procedures facilitate strategy execution is by providing top-down guidance regarding how things need to be done. This top-down guidance includes which of the following? (Choose every correct answer.)

It provides guidelines to channel individual and group efforts along a strategy-supportive path. It aligns the actions and behavior of personnel in an efficient manner. It restricts ineffective independent action and keeps the focus on supporting the plan.

Matching Type of Organizational Structure to Strategy Execution Requirements (continued) 3. Multidivisional Structure A multidivisional structure is a decentralized structure consisting of a set of operating divisions organized along market, customer, product, or geographic lines, along with a central corporate headquarters, which monitors divisional activities, allocates resources, performs assorted support functions, and exercises overall control. ○ Each division is essentially a business (often called a single business unit or SBU), the divisions typically operate as independent profit centers (i.e., with profit and loss responsibility) and are organized internally along functional lines. ○ Multidivisional structures are also called divisional structures or M-forms, in contrast with U-form (functional) structures. ○ Common among companies pursuing some form of diversification strategy or international strategy, with operations in a number of businesses or countries ○ When the strategy is one of unrelated diversification, as in a conglomerate, the divisions generally represent businesses in separate industries. ○ When the strategy is based on related diversification, the divisions may be organized according to industries, customer groups, product lines, geographic regions, or technologies. ○ Multidivisional structures are also common among vertically integrated firms. There the major building blocks are often divisional units performing one or more of the major processing steps along the value chain (e.g., raw-material production, components manufacture, assembly, wholesale distribution, retail store operations)

Multidivisional structures offer significant advantages over functional structures in terms of facilitating the management of a complex and diverse set of operations. Putting business-level strategy in the hands of division managers while leaving corporate strategy to top executives reduces the potential for information overload and improves the quality of decision making in each domain. Minimizes the costs of coordinating division-wide activities while enhancing top management's ability to control a diverse and complex operation. Moreover, multidivisional structures can help align individual incentives with the goals of the corporation and spur productivity by encouraging competition for resources among the different divisions. But a multidivisional structure can also present some problems to a company pursuing related diversification, because having independent business units—each running its own business in its own way—inhibits cross-business collaboration and the capture of cross-business synergies, which are critical for the success of a related diversification strategy

3 of 5 : Matching Organizational Structure to the Strategy : Determining How Much Authority to Delegate (continued) Centralized Decision Making: Pros and Cons In a highly centralized organizational structure, top executives retain authority for most strategic and operating decisions and keep a tight rein on business unit heads, department heads, and the managers of key operating units. Comparatively little discretionary authority is granted to frontline supervisors and rank-and-file employees. The thesis underlying centralized structures is that strict enforcement of detailed procedures backed by rigorous managerial oversight is the most reliable way to keep the daily execution of strategy on track. Hence, centralized decision making is often impractical—the larger the company and the more scattered its operations, the more that decision-making authority must be delegated to managers closer to the scene of the action.

One advantage of a centralized structure, with tight control by the manager in charge, is that it is easy to know who is accountable when things do not go well. ○ also reduce the potential for conflicting decisions and actions among lower-level managers who may have differing perspectives and ideas about how to tackle certain tasks or resolve particular issues ○ can facilitate strong leadership from the top in a crisis situation that affects the organization as a whole and can enable a more uniform and swift response But there are some serious disadvantages as well. ○ Hierarchical command-and-control structures do not encourage responsibility and initiative on the part of lower-level managers and employees. ○ a large organization with a complex structure sluggish in responding to changing market conditions because of the time it takes for the review-and-approval process to run up all the layers of the management bureaucracy ○ Centralized decision making requires top-level managers to gather and process whatever information is relevant to the decision. When the relevant knowledge resides at lower organizational levels (or is technical, detailed, or hard to express in words), it is difficult and time-consuming to get all the facts in front of a high-level executive located far from the scene of the action.

Which of the following are likely outcomes if a new strategic business initiative has insufficient resources and too little funding? (Choose every correct answer.)

Organizational units will not be able to efficiently execute their roles. Progress will be slowed.

When existing ways of doing things pose a barrier to strategy execution initiatives, management must establish and enforce new policies and operating practices. Which of the following statements explain why this is useful? (Choose every correct answer.)

People will try not to violate company policy. The action aligns behavior of personnel with the requirements for good strategy execution. People who are resistant to change can understand the importance of following company policies and will adapt.

Which of the following is a recommended guideline for designing incentive compensation?

Performance targets should be based on outcomes that individuals or their team can affect directly.

Helping to ensure consistency in how execution-critical activities are performed is one of the ways policies and procedures facilitate good strategy execution. Which of the following statements about how to enforce consistency in strategy-critical activities are true? (Choose every correct answer.)

Policies and procedures help coordinate the strategy execution efforts of personnel throughout the organization. Policies and procedures improve the quality and reliability of strategy execution

Which of the following should be applied to a company's existing policies and procedures when a new strategy is put into action? (Choose every correct answer.)

Policies and procedures that are incompatible with the new strategy should be discarded. The company's policies and procedures should be revised to reflect the new strategy.

Which of the following are motivational practices that facilitate good strategy execution? (Choose every correct answer.)

Sharing information with employees about financial performances and strategy Inviting and acting on ideas and suggestions from employees Promoting from within whenever possible

Major drawbacks to the Six Sigma approach include which of the following? (Choose every correct answer.)

The expense of training employees and implementing changes A reduction in creativity and innovation

Putting Together a Strong Management Team Assembling a capable management team is a cornerstone of the organization-building task

The most important consideration is to fill key managerial slots with • smart people who are • clear thinkers, • good at figuring out what needs to be done, • skilled in managing people, and • accomplished in delivering good results.

Making Strategy-Critical Activities the Main Building Blocks of the Organizational Structure With respect to such core value chain activities, it is important for management to build its organizational structure around proficient performance of these activities, making them the centerpieces or main building blocks in the enterprise's organizational structure.

The rationale is compelling: If activities crucial to strategic success are to have the resources, decision-making influence, and organizational impact they need, they must be centerpieces in the enterprise's organizational scheme. Making them the focus of structuring efforts will also facilitate their coordination and promote good internal fit—an essential attribute of a winning strategy.

3 of 5 : Matching Organizational Structure to the Strategy : Determining How Much Authority to Delegate Under any organizational structure, there is room for considerable variation in how much authority top-level executives retain and how much is delegated to down-the-line managers and employees. In executing strategy and conducting daily operations, companies must decide how much authority to delegate to the managers of each organizational unit—especially the heads of divisions, functional departments, plants, and other operating units—and how much decision-making latitude to give individual employees in performing their jobs.

The two extremes are to 1. centralize decision making at the top or to 2. decentralize decision making by giving managers and employees at all levels considerable decision-making latitude in their areas of responsibility.

Which of the following are true concerning a company's policies and procedures? (Choose every correct answer.)

They contribute to a common understanding of the company culture. They help to set the tone of a company's work climate.

In big organizations with geographically scattered operating units, senior executives' action agenda mostly involves • communicating the case for change, • building consensus for how to proceed, • installing strong managers to move the process forward in key organizational units, • directing resources to the right places, • establishing deadlines and measures of progress, • rewarding those who achieve implementation milestones, and • personally leading the strategic change process. Whether the organization is large or small and whether strategy implementation involves sweeping or minor changes, effective leadership requires a keen grasp of what to do and how to do it in light of the organization's circumstances.

Thus, the bigger the organization, the more that successful strategy execution depends on the cooperation and implementation skills of operating managers who can promote needed changes at the lowest organizational levels and deliver results. ○ In small organizations, top managers can deal directly with frontline managers and employees, personally orchestrating the action steps and implementation sequence, observing firsthand how implementation is progressing, and deciding how hard and how fast to push the process along.

Which of the following is a primary goal when creating new policies or procedures?

To catch the attention of personnel and prompt them to quickly adopt and execute the new policies and procedures

Which of the following best explains why existing policies and procedures should be carefully reviewed when a company adopts a new strategy?

When a company adopts a new strategy, some changes in work practices are usually needed, and these are addressed in policies and procedures.

Incentive compensation systems are based on the idea that ______.

all employees should be rewarded for high levels of performance

Computerized procedures that track company processes are referred to as ______.

business activity monitoring

A recommended tool in monitoring the performance of empowered employees in self-managed work groups is ______.

peer review

Many successful companies use ______ to track a variety of company activities.

real-time data monitoring

In all situations, it is important to identify and

replace managers who are incapable, for whatever reason, of making the required changes in a timely and cost-effective manner. For a management team to be truly effective at strategy execution, it must be composed of managers who recognize that organizational changes are needed and who are both capable and ready to get on with the process.

Superior strategy execution capabilities are the only source of sustainable competitive advantage when

strategies are easy for rivals to copy. There is no substitute for good strategy execution. (Recall the tests of resource advantage from Chapter 4.) As such, they may be as important a source of sustained competitive advantage as the core competencies that drive a firm 's strategy Indeed, they may be a far more important avenue for securing a competitive edge over rivals in situations where it is relatively easy for rivals to copy promising strategies.

Strategy Execution Capabilities and Competitive Advantage As firms get better at executing their strategies, they develop capabilities in But excellence in strategy execution can also be a more direct source of competitive advantage, since more efficient and effective strategy execution can lower costs and permit firms to deliver more value to customers.

the domain of strategy execution much as they build other organizational capabilities. Superior strategy execution capabilities allow companies to get the most from their other organizational resources and competitive capabilities. Superior strategy execution capabilities may also enable a company to react more quickly to market changes and beat other firms to the market with new products and services. This can allow a company to profit from a period of uncontested market dominance.

Renewing, upgrading, and revising the organization's resources and capabilities is a part of the strategy execution process even if the strategy is fundamentally

the same, since strategic assets depreciate and conditions are always changing. Thus, augmenting and strengthening the firm's core competencies and seeing that they are suited to the current strategy are also top priorities

Companies such as FedEx and Amazon have risen to the top of their industries because ______.

they have developed efficient internal systems to facilitate each of their activities

It takes first-rate "managerial smarts" to zero in on

what exactly needs to be done and how to get good results in a timely manner. Excellent people- management skills and perseverance are needed to get a variety of initiatives underway and to integrate the efforts of many different work groups into a smoothly functioning whole.

Three Approaches to Building and Strengthening Organizational Capabilities

• Developing Organizational Capabilities Internally • Acquiring Capabilities through Mergers and Acquisitions • Accessing Capabilities through Collaborative Partnerships

Staffing the Organization No company can hope to perform the activities required for successful strategy execution without attracting and retaining talented managers and employees with suitable skills and intellectual capital.

• Putting together a strong management team • Recruiting training and retaining capable employees

Matching Type of Organizational Structure to Strategy Execution Requirements Organizational structures can be classified into a limited number of standard types. Which type makes the most sense for a given firm depends largely on the firm's size and business makeup, but not so much on the specifics of its strategy. 1. Simple Structure 2. Functional Structure 3. Multi divisional Structure 4. Matrix Structure 1. Simple Structure A simple structure is one in which a central executive (often the owner-manager) handles all major decisions and oversees the operations of the organization with the help of a small staff. Simple structures are also known as line-and-staff structure, since a central administrative staff supervises line employees who conduct the operations of the firm, or flat structures, since there are few levels of hierarchy. ○ Typically employed by small firms and entrepreneurial startups ○ The most common type of organizational structure ○ Characterized by • limited task specialization; • few rules; • informal relationships; • minimal use of training, planning, and liaison devices; and • a lack of sophisticated systems

2. Functional Structure A functional structure is one that is organized along functional lines, where a function represents a major component of the firm's value chain, such as R&D, engineering and design, manufacturing, sales and marketing, logistics, and customer service. ○ Each functional unit is supervised by functional line managers who to the chief executive officer and a corporate staff. ○ This arrangement allows functional managers to focus on their area of responsibility, leaving it to the CEO and headquarters to provide direction and ensure that the activities of the functional managers are coordinated and integrated. ○ Also known as departmental structures, since the functional units are commonly called departments, and unitary structures or U-forms, since a single unit is responsible for each function. ○ lighten the load on top management, in comparison to simple structures, and enable more efficient use of managerial resources ○ Primary advantage, however, is greater task specialization, which promotes learning, enables the realization of scale economies, and offers productivity advantages not otherwise available ○ Their chief disadvantage is that the departmental boundaries can inhibit the flow of information and limit the opportunities for cross-functional cooperation and coordination. It is generally agreed that a functional structure is the best organizational arrangement when a company is in just one particular business (irrespective of which of the five generic competitive strategies it opts to pursue).

Further Perspectives on Structuring the Work Effort All organizational designs have their strategy-related strengths and weaknesses. To do a good job of matching structure to strategy, strategy implementers first have to pick a basic organizational design and modify it as needed to fit the company's particular business lineup. They must then Some companies may avoid setting up "ideal" organizational arrangements because they do not want to disturb existing reporting relationships or because they need to accommodate other situational idiosyncrasies, yet they must still work toward the goal of building a competitively capable organization.

1. Supplement the design with appropriate coordinating mechanisms (cross-functional task forces, special project teams, self-contained work teams, etc.) and 2. Institute whatever networking and communications arrangements are necessary to support effective execution of the firm's strategy What can be said unequivocally is that building a capable organization entails a process of consciously knitting together the efforts of individuals and groups. ○ Organizational capabilities emerge from establishing and nurturing cooperative working relationships among people and groups to perform activities in a more efficient, value-creating fashion. ○ While an appropriate organizational structure can facilitate this, organization building is a task in which senior management must be deeply involved.

3 of 3 : Building and Strengthening Organizational Capabilities : Accessing Capabilities through Collaborative Partnerships A third way of obtaining valuable resources and capabilities is to form collaborative partnerships with suppliers, competitors, or other companies having the cutting-edge expertise. There are three basic ways to pursue this course of action: 1. Outsource the function in which the company's capabilities are deficient to a key supplier or another provider. Whether this is a wise move depends on whether developing the capabilities internally are key to the company's long-term success. ○ Outsourcing may be a good choice especially for firms that are too small and resource-constrained to execute all the parts of their strategy internally 2. Collaborate with a firm that has complementary resources and capabilities in a joint venture, strategic alliance, or other type of partnership established for the purpose of achieving a shared strategic objective. ○ This requires launching initiatives to identify the most attractive potential partners and to establish collaborative working relationships.

3. Engage in a collaborative partnership for the purpose of learning how the partner does things, internalizing its methods and thereby acquiring its capabilities. ○ This may be a viable method when each partner has something to learn from the other and can achieve an outcome beneficial to both partners. Collaborative arrangements tend to be less risky when the partnership involves companies from different industries.

Building an Organization Capable of Good Strategy Execution: Three Key Actions Proficient strategy execution depends foremost on having in place an organization capable of the tasks demanded of it 1. Staffing the organization—putting together a strong management team, and recruiting and retaining employees with the needed experience, technical skills, and intellectual capital. 2. Acquiring, developing, and strengthening the resources and capabilities required for good strategy execution—accumulating the required resources, developing proficiencies in performing strategy-critical value chain activities, and updating the company's capabilities to match changing market conditions and customer expectations.

3. Structuring the organization and work effort—organizing value chain activities and business processes, establishing lines of authority and reporting relationships, and deciding how much decision-making authority to delegate to lower-level managers and frontline employees. ○ Building an execution-capable organization is thus always a top priority Implementing a strategy depends critically on ensuring that strategy-supportive resources and Organizational capabilities are in place, ready to be deployed. These include the skills, talents, experience, and knowledge of the company's human resources (managerial and otherwise) ○ Proficient strategy execution depends heavily on competent personnel of all types, but because of the many managerial tasks involved and the role of leadership in strategy execution, assembling a strong management team is especially important.

In recognition of the importance of a talented and energetic workforce, companies have instituted a number of practices aimed at staffing jobs with the best people they can find: 1. Spending considerable effort on screening and evaluating job applicants—selecting only those with suitable skill sets, energy, initiative, judgment, aptitude for learning, and personality traits that mesh well with the company's work environment and culture. 2. Providing employees with training programs that continue throughout their careers. 3. Offering promising employees challenging, interesting, and skill- stretching assignments. 4. Rotating people through jobs that span functional and geographic boundaries. Providing people with opportunities to gain experience in a variety of international settings is increasingly considered an essential part of career development in multinational companies.

5. Making the work environment stimulating and engaging so that employees will consider the company a great place to work. 6. Encouraging employees to challenge existing ways of doing things, to be creative in proposing better ways of operating, and to push their ideas for new products or businesses. Progressive companies work hard at creating an environment in which employees are made to feel that their views and suggestions count. 7. Striving to retain talented, high-performing employees via promotions, salary increases, performance bonuses, stock options and equity ownership, benefit packages including health insurance and retirement packages, and other perks, such as flexible work hours and onsite day care. 8. Coaching average performers to improve their skills and capabilities, while weeding out under performers.

The Principal Components of the Strategy Execution Process Despite the need to tailor a company's strategy-executing approaches to the situation at hand, certain managerial bases must be covered no matter what the circumstances. These include 10 basic managerial tasks 1. Staffing the organization with managers and employees capable of executing the strategy well. 2. Developing the resources and organizational capabilities required for successful strategy execution. 3. Creating a strategy-supportive organizational structure. 4. Allocating sufficient resources (budgetary and otherwise) to the strategy execution effort. 5. Instituting policies and procedures that facilitate strategy execution. How well managers perform these 10 tasks has a decisive impact on whether the outcome of the strategy execution effort is a spectacular success, a colossal failure, or something in between

6. Adopting business management processes that drive continuous improvement in how value chain activities are performed. 7. Installing information and operating systems that support strategy implementation activities. 8. Tying rewards directly to the achievement of performance objectives. 9. Fostering a corporate culture that promotes good strategy execution. 10. Exercising the leadership needed to propel strategy execution forward. ○ 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 meeting its performance targets and whether it has attained real proficiency in performing strategy-critical value chain activities.

2 of 3 : Building and Strengthening Organizational Capabilities : Acquiring Capabilities through Mergers and Acquisitions Sometimes the best way for a company to upgrade its portfolio of capabilities is by acquiring (or merging with) another company with attractive resources and capabilities. The advantage of this mode of acquiring new capabilities is primarily one of speed, since developing new capabilities internally can, at best, take many years of effort and, at worst, come to naught.

Capabilities-motivated acquisitions are essential 1. When the company does not have the ability to create the needed capability internally (perhaps because it is too far afield from its existing capabilities) and 2. When industry conditions, technology, or competitors are moving at such a rapid clip that time is of the essence. At the same time, acquiring capabilities in this way is not without difficulty. Capabilities involve tacit knowledge and complex routines that cannot be transferred readily from one organizational unit to another. This may limit the extent to which the new capability can be utilized. ○ Moreover, since internal fit is important, there is always the risk that under new management the acquired capabilities may not be as productive as they had been. In a worst-case scenario, the acquisition process may end up damaging or destroying the very capabilities that were the object of the acquisition in the first place.

Capturing Cross-Business Strategic Fit in a Decentralized Structure Diversified companies striving to capture the benefits of synergy between separate businesses must beware of giving business unit heads full rein to operate independently. Efforts to decentralize decision making and give company personnel some leeway in conducting operations must be tempered with the need to maintain adequate control and cross-unit coordination

Cross-business strategic fit typically must be captured either by • enforcing close cross-business collaboration or by • centralizing the performance of functions requiring close coordination at the corporate level Where cross-business strategic fit with respect to R&D is important, one solution is to centralize the R&D function and have a coordinated corporate R&D effort that serves the interests of both the individual businesses and the company as a whole. ○ Likewise, centralizing the related activities of separate businesses makes sense when there are opportunities to share a common sales force, use common distribution channels, rely on a common field service organization, use common eCommerce systems, and so on.

Which of the following are important factors of effective incentive compensation? (Choose every correct answer.)

Fair and objective administration Realistic performance goals Prompt payment upon accomplishment of a goal

True or false: Companies today use only positive approaches to employee motivation, such as an effective reward structure, and reject applying pressure or negative consequences to employees for poor work performance.

False

Continuous-improvement programs like Six Sigma focus on which of the following?

Incremental gains

A new strategic initiative has been announced at Uptown Software, but it must be implemented without adding to company expenses. Jake, a manager, must do which of the following to execute the plan? (Choose every correct answer.)

Jake will need to study the existing budget and look for ways to trim costs. Jake should shift resources to higher-priority activities.

Which of the following are likely outcomes if a new strategic business initiative has too much funding and an overabundance of resources? (Choose every correct answer.)

Organizational resources will be wasted. Financial performance will be reduced and suffer.

Hiring, retaining, and cultivating talent are critical activities at Deloitte, the world's largest professional services firm. By offering robust learning and development programs, Deloitte has been able to create a strong talent pipeline to the firm's partnership. The following programs contribute to Deloitte's successful execution of its talent strategy: Clear path to partnership. During the initial recruiting phase and then throughout an employee's tenure at the firm, Deloitte lays out a clear career path. The path indicates the expected timeline for promotion to each of the firm's hierarchy levels, along with the competencies and experience required. Formal training programs Each time an employee is promoted, he or she attends "milestone" school, a week long simulation that replicates true business situations employees would face as they transition to new stages of career development. In addition, Deloitte institutes mandatory training hours for all of its employees to ensure that Individuals continue to further their professional development.

Special programs for high performers. Deloitte also offers fellowships and programs to help employees acquire new skills and enhance their leadership development. Deloitte has also established the Emerging Leaders Development Program, which utilizes skill building, 360- degree feedback, and one-on-one executive coaching to help top- performing managers and senior managers prepare for partnership. Sponsorship, not mentorship. To train the next generation of leaders, Deloitte has implemented formal mentorship programs to provide leadership development support. Deloitte, however, uses the term sponsorship to describe this initiative. A sponsor is tasked with taking a vested interest in an individual and advocating on his or her behalf. Sponsors help rising leaders navigate the firm, develop new competencies, expand their network, and hone the skills needed to accelerate their career.

In devising an action agenda for executing strategy, managers should start by conducting a probing assessment of what the organization must do differently to carry out the strategy successfully. Each manager needs to ask the question "What needs to be done in my area of responsibility to implement our part of the company's strategy, and what should I do to get these things accomplished in a timely fashion?" ○ It is then incumbent on every manager to determine precisely how to make the necessary internal changes.

Strong managers have a knack for diagnosing what their organizations need to do to execute the chosen strategy well and figurine out how to get these things done efficiently. They are masters in promoting results-oriented behaviors on the part of company personnel and following through on making the right things happen to achieve the target outcomes. When strategies fail, it is often because of poor execution.

1 of 5 : Matching Organizational Structure to the Strategy : Deciding Which Value Chain Activities to Perform Internally and Which to Outsource Outsourcing the performance of selected activities to outside vendors enables a company to heighten its strategic focus and concentrate its full energies on performing those value chain activities that are at the core of its strategy, where it can create unique value. Wisely choosing which activities to perform internally and which to outsource can lead to several strategy-executing advantages— • lower costs, • heightened strategic focus, • less internal bureaucracy, • speedier decision making, and • a better arsenal of organizational capabilities.

Such heightened focus on performing strategy-critical activities can yield three important execution-related benefits: • The company improves its chances for outclassing rivals in the performance of strategy-critical activities and turning a competence into a distinctive competence • The streamlining of internal operations that flows from outsourcing often acts to decrease internal bureaucracies, flatten the organizational structure, speed internal decision making, and shorten the time it takes to respond to changing market conditions. • Partnerships with outside vendors can add to a company's arsenal of capabilities and contribute to better strategy execution. Outsourcing activities to vendors with first-rate capabilities can enable a firm to concentrate on strengthening its own complementary capabilities internally; the result will be a more powerful package of organizational capabilities that the firm can draw upon to deliver more value to customers and attain competitive success. A company must guard against going overboard on outsourcing and becoming overly dependent on outside suppliers.

Matching Type of Organizational Structure to Strategy Execution Requirements (continued) 4. Matrix Structure A matrix structure is a combination structure in which the organization is organized along two or more dimensions at once (e.g., business, geographic area, value chain function) for the purpose of enhancing cross-unit communication, collaboration, and coordination. In essence, it overlays one type of structure onto another type. ○ Matrix structures are managed through multiple reporting relationships, so a middle manager may report to several bosses. ○ Also called composite structures or combination structures.

The modern incarnation of the matrix structure is generally a more flexible arrangement, with a single primary reporting relationship that can be overlaid with a temporary secondary reporting relationship as need arises. ○ They are often used for project based, process-based, or team-based management. ○ The type of close cross-unit collaboration that a flexible matrix structure supports is also needed to build competitive capabilities in strategically important activities, such as speeding new products to market, that involve employees scattered across several organizational units. An advantage of matrix structures is that they facilitate the sharing of plant and equipment, specialized knowledge, and other key resources. Thus, they lower costs by enabling the realization of economies of scope. They also have the advantage of flexibility in form and may allow for better oversight since supervision is provided from more than one perspective. A disadvantage is that they add another layer of management, thereby increasing bureaucratic costs and possibly decreasing response time to new situations 21 In addition, there is a potential for confusion among employees due to dual reporting relationships and divided loyalties.

4 of 5 : Matching Organizational Structure to the Strategy : Providing for Internal Cross-Unit Coordination Close cross-unit collaboration is usually needed to build capabilities in such strategically important activities as speeding new products to market and providing superior customer service This is because these activities involve collaboration among the efforts of company personnel who work in different departments or organizational units (and perhaps the employees of outside strategic partners or specialty vendors) It has to be recognized that top-executive urging that departmental managers and their staff voluntarily place high priority on coordinating their respective activities poses significant challenges in achieving effective cross-unit coordination. This is especially true in decentralized organizational structures where department heads are delegated a high degree of decision-making authority in running their respective units and, thus, have a natural tendency to place a lower priority on cooperating closely with other organizational units than on ensuring that the activities under their direct supervision are done well. The weakness of heavily depending on the largely voluntary efforts of personnel for the development of critical cross-unit capabilities has prompted many companies to supplement such efforts by forming cross-functional committees, project management teams, and centralized project management offices to forge better cross-unit working relationships and improve coordination across multiple organizational units.

To achieve tight coordination when pieces of execution critical tasks are performed in multiple organizational units, company executives typically emphasize the necessity of cross-unit and cooperation and the importance of frequent back-and-forth communication among key people in the various related organizational units to resolve problems, avoid delays, and keep things moving along. • relevant department heads and key personnel are all expected to work closely together and coordinate their actions • meetings to discuss schedules and set deadlines, often ending with the verbal commitments of everyone involved to stick close to the agreed-upon schedule, coordinate their activities, and meet the established deadlines In many instances, the chief cause of ineffective cross-unit coordination in building capabilities rests with departmental-level managers and other key operating personnel who, for assorted reasons, don't or won't spend the time and effort needed to partner with other organizational units in the capability-building process.

The Strategic Role of Employee Training Successful strategy implementation requires that the training function is both adequately funded and effective. Many companies • conduct orientation sessions for new employees, • fund an assortment of competence-building training programs, and • reimburse employees for tuition and other expenses associated with obtaining additional college education, attending professional development courses, and earning professional certification of one kind or another.

Training is important in: • executing a strategy that requires different skills, competitive capabilities, and operating methods • organizational efforts to build skills-based competencies • supplying technical know-how to employees when rapidly changing technology puts a firm in danger of losing its ability to compete ○ A number of companies offer online training courses that are available to employees around the clock. ○ Increasingly, companies are expecting employees at all levels are expected to take an active role in their own professional development and assume responsibility for keeping their skills up to date and in sync with the company's needs.

What type of organization combines incremental improvements in operating efficiency with an open mind toward developing new ways of offering value to customers?

ambidextrous

Employers can avoid heavy-handed scrutiny of employees by ______.

closely monitoring day-to-day operating data

There's no definitive managerial recipe for successful strategy execution that

cuts across all company situations and strategies or that works for all managers. Rather, the specific actions required to execute a strategy—the "to-do list" that constitutes management's action agenda—always represent management's judgment about how best to proceed in light of prevailing circumstances. ○ The managerial approach to executing a strategy always has to be customized to fit the particulars of a company's situation. ○ Making minor changes in an existing strategy differs from implementing radical strategy changes.

Critics of business process reengineering claim that it promotes ______.

downsizing

In general, employee incentive compensation should be tied to ______.

effective implementation of business strategies

Statistical information is generally the most useful if it is provided ______.

in real time

Total Quality Management is distinguished from other approaches to promoting excellence by ______.

its focus on improvement in every area of work

Successful Total Quality Management is demonstrated by ______.

limited, but regular, daily improvement

Whereas crafting strategy is largely an analysis-driven activity focused on market conditions and the company's resources and capabilities, executing strategy is primarily Executing strategy is an action-oriented task that tests a manager's ability to • direct organizational change, • achieve improvements in day-to-day operations, • create and nurture a culture that supports good strategy execution, • and meet or beat performance targets. It takes adept managerial leadership to convincingly communicate • the reasons for a new strategy and • overcome pockets of doubt, • secure the commitment of key personnel, • build consensus for how to implement the strategy, and • move forward to get all the pieces into place and deliver results.

operations-driven, revolving around the management of people, resources, business processes, and organizational structure. Successful strategy execution depends on • doing a good job of working with and through others; • building and strengthening competitive capabilities; • creating an appropriate organizational structure; • allocating resources; • instituting strategy-supportive policies, processes, and systems; and • instilling a discipline of getting things done. Company personnel must understand—in their heads and hearts—why a new strategic direction is necessary and where the new strategy is taking them.

Putting together a talented management team with When a first-rate manager enjoys the help and support of other first-rate managers, it's possible to create a managerial whole that is greater than the sum of individual efforts—talented managers who work well together as a team can produce organizational results that are dramatically better than what one or star managers acting individually can achieve

the right mix of experiences, skills, and abilities to get things done is one of the first steps to take in launching the strategy- executing process. ○ The overriding aim in building a management team should be to assemble a critical mass of talented managers who can function page as agents of change and spearhead excellent strategy execution. ○ Every managers success is enhanced (or limited) by • the quality of his or her managerial colleagues and • the degree to which they freely exchange ideas, • debate ways to make operating improvements, and • join forces to tackle issues and solve problems.

Learning Objectives After reading this chapter, you should be able to: • Understand what managers must do to execute strategy successfully. • Understand why hiring, training, and retaining the right people constitute a key component of the strategy execution process.

• Recognize that good strategy execution requires continuously building and upgrading the organization's resources and capabilities. • Identity and establish a strategy-supportive organizational structure and organize the work effort. • Comprehend the pros and cons of centralized and decentralized decision making in implementing the chosen strategy.

2 of 5 : Matching Organizational Structure to the Strategy : Aligning the Firm's Organizational Structure with Its Strategy The organizational structure comprises the formal and informal arrangement of tasks, responsibilities, and lines of authority and communication by which the firm is administered. It specifies the linkages among parts of the organization, the reporting relationships, the direction of information flows, and the decision-making processes. It is a key factor in strategy implementation since it exerts a strong influence on how well managers can coordinate and control the complex set of activities involved.

○ Good organizational design may even contribute to the firm 's ability to create value for customers and realize a profit By enabling lower bureaucratic costs and facilitating operational efficiency, it can lower a firm's operating costs.

Without a capable, results-oriented management team, the implementation process is likely to be hampered by missed deadlines, misdirected or wasteful efforts, and managerial ineptness. ○ Weak executives are serious impediments to getting optimal results—the caliber of work done under their supervision suffers.

○ In contrast, managers with strong strategy implementation capabilities understand how to drive organizational change, and know how to motivate and lead the company down the path for first-rate strategy execution. • ask tough, incisive questions and • know enough about the details of the business to ensure the soundness of the decisions of the people around them • good at getting things done through others, partly by making sure they have the right people under them, assigned to the right jobs and partly because they know how to motivate and inspire people • strong social skills and high emotional intelligence. • They consistently follow through on issues, monitor progress carefully, • make adjustments when needed, and keep important details from slipping through the cracks

Developing and Building Critical Resources and Organizational Capabilities High among the organization-building priorities in the strategy execution process is the need to build and strengthen the company's portfolio of resources and capabilities with which to perform strategy-critical value chain activities. ○ If the strategy being implemented has important new elements, company managers may have to acquire new resources, significantly broaden or deepen certain capabilities, or even add entirely new competencies in order to put the strategic initiatives in place and execute them proficiently. ○ But even when a company's strategy has not changed materially, good strategy execution still involves continually upgrading the firm's resources and capabilities to keep them in top form and perform value chain activities ever more proficiently.

○ In the course of crafting strategy, managers may well have well have identified the strategy-critical resources and capabilities it needs. ○ But getting the strategy execution process underway requires • acquiring or developing these resources and capabilities, • putting them into place, • upgrading them as needed, and then • modifying them as market conditions evolve.

Recruiting, Training, and Retaining Capable Employees Staffing the organization with the right kinds of people must extend to all kinds of company personnel for value chain activities to be performed competently. ○ In many industries, adding to a company's talent base and building intellectual capital are more important to good strategy execution than are additional investments in capital projects.

○ Make a concerted effort to recruit the best and brightest people they can find and then retain them with excellent compensation packages, opportunities for rapid advancement and professional growth, and interesting assignments. ○ In high-tech companies, the challenge is to staff work groups with gifted, imaginative, and energetic people who can bring life to new ideas quickly and inject into the organization what one Dell executive calls "hum"