MADM 760 - CH 11 & 12

Strong cultures and strategy

- when strong culture embodies appropriate values, can be a valuable resource -effective strategy execution occurs when values are reinforced in strategies, including culture (same page)

Influences on organizational culture

-Founders - Views and assumptions concerning an organization's distinctive competence comprise one of the most important elements of culture -Stories are also an important component of culture

Executing Strategic Change - 3 steps

1. Recognize the need for change -key managers need to be aware of the need -simple at first but difficult if views of performance differ -best time to initiate change is when organization is functionally well 2. Create a shared vision =leaders must inspire organizational members with a vision of what the organization can become if members are willing to change. =CEO should lead effort, and model high performance standards -Effectively communicate vision to all members of orgainzation 3. Institutionalize change -"Change starts at the top" -building a lasting change takes time *Concise, accurate, and timely information is critical at all three stages *Leaders should be accessible to all members and customers *Top down change efforts are not always successful - not tested, or don't have buy in, bottom up approaches are suggested

What are two key factors that are imperative for strategic control?

1. The need to know how well the firm is performing. -Without strategic control, there are no clear benchmarks 2. Organizational and environmental uncertainty. -serves as a means of accounting for last-minute changes during the implementation process

5-step strategic control process

1. Top management determines the focus of control by identifying internal factors that can serve as effective measures for the success or failure of a strategy, as well as outside factors that could trigger responses from the organization. 2. Standards (i.e., benchmarks) are established for internal factors with which the actual performance of the organization can be compared after the strategy is implemented. 3. Management measures, or evaluates, the company's actual performance both quantitatively and qualitatively. 4. Performance evaluations are compared with the previously established standards. 5. If performance meets or exceeds the standards, corrective action is usually not necessary. If performance falls below the standard, then management usually takes remedial action.

3 key points for crises planning

1. organizational leaders should take crisis management seriously. Sooner or later, every organization will face a crisis, and survival may hinge on the organization's ability to manage the situation properly. 2. steps should be taken to prevent or reduce the likelihood of crisis events whenever such action is practicable. 3. even when a crisis cannot be avoided, it should be handled appropriately.

3 reasons why firms are not as prepared as they should be for a crisis

1. some executives view crisis events as largely unpredictable or unavoidable and therefore not worthy of precious managerial time and resources. 2. many managers feel that they lack the time to adequately prepare for potential crises. 3. some leaders recognize the need for crisis planning and are willing to commit the time but simply lack the expertise necessary to make the appropriate preparations

5 ways top executives can shape culture

1. systematically pay attention to areas of key importance and strategy's success. 2. leader's reactions to critical incidents and organizational crises. 3. serve as a deliberate role model, teacher, or coach. 4. process of allocating rewards and status 5. shaping culture to modify procedures for recruiting, selecting, promoting, and terminating employees.

What does organizational culture enable a firm to do?

Adapt to environmental changes and to coordinate and integrate its internal operations

Crisis Planning - During the crisis

An organizational spokesperson should communicate effectively with the public to minimize the effect of the crisis.

Is the focus of strategic control internal or external?

BOTH. Top management aligns the internal operations of the enterprise with its external environment. -Relies on quantitative and qualitative performance measures, helps maintain alignments between firm and environment.

Strategic leadership

CEO - organization's principal leader, sets tone for activities Manager - exhibits managerial leadership when securing cooperation of others in accomplishing a goal. developing strategies and empowering individuals throughout the organization to put those strategies into action determining the firm's strategic direction, aligning the firm's strategy with its culture, modeling and communicating high ethical standards, and initiating changes in the firm's strategy when necessary

Crisis Planning - After the crisis

Communication with the public should continue as needed, and the cause of the crisis should be uncovered. Understanding the cause can help executives minimize the likelihood that the crisis will occur again and improve preparation for the crisis if it does

Strategic change of a great magnitude can be difficult to implement because...

Employees resist change - for personal factors, lack of information about the change, and poor design of the support system.

What has to be monitored?

Firms have little/no influence over external environment, macroenvironmental and industry forces have to be continuously monitored because shifts can greatly impact the firm. strategic control consists of modifying the company's operations to more effectively defend itself against external threats that may arise or become known.

Sources of quality assessment and data

Fortune - assesses quality by asking executives, outside directors, and financial analysts to judge outputs of the largest firms in the United States Consumer Reports - excellent source of product quality data, evaluating hundreds of products from cars to medications each year J.D. Power Customer Satisfaction Index - specific published information for automobile industry Internet- as a broad resource for quality assessments for a specific industry

What happens during the strategic control process?

Gaps between the intended and realized strategies (i.e., what was planned and what really happened) are identified and addressed.

What happens when the strategy does not fit the culture?

It is necessary to change one or both. All things considered, changing a strategy is easier than changing culture. Both are often required for organizations to be successful.

Strategic control as a "continuous improvement" dimension

Managers should use strategic control to look for opportunities to enhance performance, not just use it when performance is in decline.

Market Share/Relative Market Share

Market share is a common measure of performance for a firm. As market share increases, control over the external environment, economies of scale, and profitability are all likely to be enhanced. changes in relative market share may serve as a strategic control gauge for both internal and external factors

What is a key problem with measuring performance?

One measure can be pursued at the detriment of another. *the focus should not consider past performance

What are key basis for exerting strategic control?

Organizational comparisons with rivals are a key basis for exerting strategic control.

Product/Service Quality

Over the years, there has been a positive relationship between product/service quality including both the conformance of a product or service to internal standards and the ultimate consumer's perception of quality—and the financial performance of those firms Conforming to internal quality standards alone is not sufficient. Products and services must also meet the expectations of users, including both objective and subjective measures

PIMS (profit impact of market strategy) program

PIMS is a database that contains quantitative and qualitative information on the performance of thousands of firms and more than 5,000 business units

What is the most commonly utilized performance measure?

Profitability is the most commonly utilized performance measure and is therefore a popular means of gauging performance and exerting strategic control **return on investment (ROI), return on assets (ROA), return on sales (ROS), and return on equity (ROE), and growth in revenues. A qualitative judgment may be made about factors such as changes in product or service quality.

Characteristics of benchmarks

Realistic performance targets, or benchmarks, should be established for managers throughout the organization, and they should also be specific. Without specificity, it is difficult to assess the effectiveness of a strategy after it is implemented if clear targets are not identified in advance

What does research suggest about crisis preparation?

Research suggests that prompt, clear, and accurate responses are critical.

Steps 3-5: Exerting Strategic Control

Step 3: performance be measured Step 4: compared with previously established standards Step 5: followed by corrective action if necessary -Corrective action should be taken at all levels if actual performance is less than the standard that has been established unless extraordinary causes of the discrepancy can be identified It is most desirable for strategic managers to consider and anticipate possible corrective measures before a strategy is implemented whenever possible.

Where and when should strategic control occur?

Strategic control should occur constantly at various organizational levels and within various functions of the organization

Diversity as differences in thinking

Strikingly similar to weak culture can hinder firm performance

T/F Strategic change is more common in some industries than others.

TRUE. Airline industry - Southwest, moved into Denver and Philly and seemed to stray away from low-cost position, and low cost upstarts eroded SW's cost advantage.+

Step 1: The focus of strategic control

The first step of the strategic control process is to determine the focus of the control. It is important to align the focus with the ongoing strategy to be assessed so that its success or failure can be evaluated accordingly This step creates the context for strategic control by concentrating management effort on areas directly linked to strategic success.

Step 2: Strategic Control Standards (Benchmarks)

The second step of the strategic control process is to identify specific strategic control standards directly linked to the strategy. executives are clarifying the specific performance measures that will be employed to evaluate strategic success or failure

Diversity

The term can be defined in a number of ways, however. Some use it to reference differences over which individuals clearly have no choice, such as age, race, ethnicity, gender, and physical disability Others extend this definition to include behaviors over which individuals exert control, such as marital status, religion, and sexual preference Still others use the term simply to reference differences in ways of thinking. **Research linking diversity and firm performance is largely inconclusive

T/F Most leaders exhibit both transactional and transformational styles, to varying degrees.

True.

When is crisis preparation critical?

When the crisis can be AVOIDED.

Innovation

a complex process and is conceptualized, measured, and controlled through a variety of means Expenditures on developing new or improved products and processes also tend to increase the level of innovation It should not be assumed that all innovation-related expenditures yield the same payback

Leadership Style

a consistent pattern of behavior that a leader exhibits in the process of governing and making decisions Regardless of style, participation can help build employee commitment to the firm's goals and strategies and is generally seen as a positive approach to decision making *NO SINGLE BEST LEADERSHIP STYLE

Value of diverse ways of thinking

appears to be MOST CRITICAL when a strategy is being formulated

balanced scorecard

approach to measuring performance. When a balanced scorecard is used, performance measurement is not based on a single quantitative factor but on an array of quantitative and qualitative factors, such as ROA, market share, customer loyalty and satisfaction, speed, and innovation The key to employing a balanced scorecard is to identify a combination of performance measures tailored specifically to the firm and its strategic objectives

Implementing a balanced scorecard approach

can be challenging, some managers focus on individual measures at the expense of overall performance. May engage in activities that undermine the long-term health and profitability of the firm to meet an objective.

Strong culture

characterized by deeply rooted values and ways of thinking that regulate firm behavior. -top managers model that behavior, create peer pressure that others should behave likewise -built over a decade or longer

Who implements strategic control?

chief executive officer (CEO), the board of directors, or even individuals outside the top management team The influence of the board and others notwithstanding, ongoing strategic control is largely a function performed by the top management team

The values that define a firm's culture should be

clear, easy to understand by all employees, embodied at the top of the organization, and reinforced over time.

Inert Cultures

conservative, encourage maintenance of existing resources

Strategic Control

consists of determining the extent to which the organization's strategies are successful in attaining its goals and objectives

Strategies that _________________ cultural norms are more difficult to execute.

contradict

What is a key component of strategic control?

crisis management

subcultures

cultures that form within the organization

Crisis Planning - Before the crisis

develop a management team that plans for worst case scenarios and define a standard operating procedure that should be implemented prior to any crisis even. -Proactive organizations that continually assess their vulnerabilities and threats and develop crisis management plans tend to be adequately equipped when a crisis occurs.

Formal control

direct control, official structure

Diversity and top management

diverse thinking among top managers lead to more creative, comprehensive, and effective strategies.

Adaptive cultures are especially important for firms that...

emphasize high growth or innovation, as well as those that operate in turbulent environments

Organizational culture can ______________ or __________________ the firm's strategic actions.

facilitate, hinder

Informal control

indirect control, norms, behaviors, and expectations that evolve when individuals and groups come into contact with one another dynamic and flexible and does not require managerial decree to change informal relationships can promote or impede strategy implementation and can play a greater role than the formal organization Attempts to modify organization's culture organization's value system is unclear or even contradictory, the informal organization will ultimately develop its own, more consistent set of values and rewards management can influence but cannot control the informal organization An effective means of influencing the informal organization is to develop and promote a formal organization that is consistent with the core values of the firm The informal organization becomes dysfunctional when it develops means to address inconsistencies in the formal organization.

Transformational leadership

inspire involvement in a mission, giving followers a vision or higher calling, thereby seeking more dramatic changes in organizational performance associated with strategies that emphasize innovation not always dynamic, vibrant, charismatic

managerial leadership

is generally concerned with the short-term, day-to-day activities

weak culture

lacks values and ways of thinking that are widely accepted by members of the organization no clear widely accepted business philosophy managers approaches inconsistent

Cultural change is a ________ process.

long, will not change overnight and efforts often fail to lack of understanding how long it takes to change a culture

Creative destruction

managers consciously and constantly destroy old ways of doing things by recombining their elements into new forms

adaptive culture

members of an organization are willing and eager to embrace any change that is consistent with the core values -Emphasize innovation, new developments, and encourage initiative

What factors bring about change?

need to address increased competition, improve quality or service, reduce costs, or align the firm with the practices and expectation of its partners.

Emotional Intelligence

one's collection of psychological attributes, such as motivation, empathy, self-awareness, and social skills. socially oriented, and understand their own needs as well as those of their subordinates are more likely to gain the trust, confidence, and support necessary to lead their organizations.

Best practices

processes or activities that have been successful in other firms— may be adopted as a means of improving performance.

Crisis Management

refers to the process of planning for and implementing the response to a wide range of negative events that could severely affect an organization

Strong culture - unhealthy and destructive

strains firm performance strong emphasis on politics disregard for ethical standards territorialism among departments strong resistance to change

Studies have shown that firms with "strategically appropriate cultures"...

tend to outperform other corporations whose cultures do not fit as well with their strategies.

Potential organizational crises

terrorism, fires, natural disasters, economic crises, political unrest, bioterrorism Some more likely to occur in certain industries

competitive benchmarking

the process of measuring a firm's performance against that of the top performers, usually in the same industry.

Organizational culture

the shared values and patterns of belief and behavior that are accepted and practiced by the members of a particular organization -work practices -traditions -accepted work practice -defines how managers and workers treat each other

Less diversity is required for...

those responsible for executing a strategy - typically middle/lower level managers

Self-reference critierion

unconscious reference to one's own cultural values as a standard of judgment.

Transactional leadership

use the authority of their office to exchange rewards such as pay and status for employees' work efforts and generally seek to enhance an organization's performance steadily, but not dramatically. Most appropriate for PREDICTABLE environments.