Enhancing Organizational Performance

2,917 views
2,835 views

Published on

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
2,917
On SlideShare
0
From Embeds
0
Number of Embeds
19
Actions
Shares
0
Downloads
255
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Enhancing Organizational Performance

  1. 1. Enhancing Organizational Performance IMASA Annual Conference 6 April 2006
  2. 2. STRATEGIC MANAGEMENT <ul><li>Agenda </li></ul><ul><li>The Link between Strategy and Organizational Performance </li></ul><ul><li>What is Strategic Control </li></ul><ul><li>The importance of Strategic Control as an Organization Enhancement Device </li></ul><ul><li>The Relationship between Strategic Control and Competitive Advantage </li></ul><ul><li>Types of Strategic Controls </li></ul><ul><li>Characteristics of Control Systems </li></ul><ul><li>Designing Strategic Control Systems </li></ul><ul><li>An integrated Strategic Control System </li></ul>
  3. 3. MODEL FOR STRATEGY FORMULATION Scenario’s Visions, Missions,Values External Analysis Internal Analysis Functional Level Strategies Business Level Strategies Structure Match Structure & Controls Controls Manage Strategic Change Strategy Implementation
  4. 4. STRATEGIC MANAGEMENT <ul><li>Purpose of Strategic Controls: </li></ul><ul><li>To provide managers with a means to motivate employees towards organizational performance; </li></ul><ul><li>Solicit data on how well the organization is performing </li></ul>
  5. 5. STRATEGIC MANAGEMENT Sam Walton's approach to Control
  6. 6. STRATEGIC MANAGEMENT <ul><li>What is Strategic control? </li></ul><ul><li>“… it is the process by which managers monitor the ongoing activities of an organization and it’s members to evaluate whether activities are being performed efficiently and effectively and to take corrective action to improve performance if they are not…” </li></ul>
  7. 7. STRATEGIC MANAGEMENT <ul><li>The importance of Strategic Control </li></ul><ul><li>The success of a chosen strategy </li></ul><ul><li>The implementation compass </li></ul><ul><li>Organizational performance </li></ul><ul><li>Ensuring competitive advantage </li></ul>
  8. 8. STRATEGIC MANAGEMENT <ul><li>Strategic Control: </li></ul><ul><li>Requires more than re-acting on past performance </li></ul><ul><li>Keeps the organization on track </li></ul><ul><li>Anticipating events that might occur in future </li></ul><ul><li>Allows the organization to respond to new opportunities that may present itself </li></ul>
  9. 9. STRATEGIC MANAGEMENT <ul><li>The importance of Strategic Control </li></ul><ul><li>Control & efficiency: </li></ul><ul><li>Efficiency measures how many units of inputs are being used to produce a single unit of output </li></ul><ul><li>Must also measure how many units are produced </li></ul><ul><li>The control system should contain these measures </li></ul>
  10. 10. STRATEGIC MANAGEMENT <ul><li>The importance of Strategic Control </li></ul><ul><li>Control & quality: </li></ul><ul><li>Organizational control is important because it determine the quality of goods & services </li></ul><ul><li>Can make continuous improvements to quality over time and this gives them a competitive advantage </li></ul><ul><li>Customer complaints is the basis for determining the quality of a product or service </li></ul><ul><li>Total Quality Management can be regarded as control system </li></ul>
  11. 11. STRATEGIC MANAGEMENT <ul><li>The importance of Strategic Control </li></ul><ul><li>Control & Innovation: </li></ul><ul><li>Managers must create an environment in which people feel free to experiment and take risks </li></ul><ul><li>Managers are challenged to build control systems that encourage risk taking </li></ul><ul><li>Measures cost reduction, process improvement and improved quality measures. </li></ul>
  12. 12. STRATEGIC MANAGEMENT <ul><li>Control and Innovation </li></ul><ul><li>Problem: Time wasted due to unavailable parts from central store. Electrical workshop not close to central store (Witbank Municipality) </li></ul><ul><li>Electricians designed a innovative solution through simple measures (trips to stores per electrician per day </li></ul><ul><li>Applied 80/20 principle Established decentralized store </li></ul><ul><li>Major savings </li></ul>
  13. 13. STRATEGIC MANAGEMENT <ul><li>Control & Innovation </li></ul><ul><li>Problem: Time delays at “in house filling station” of Jhb Municipality </li></ul><ul><li>Solution: </li></ul><ul><li>Extend petrol hoses </li></ul><ul><li>More attendants </li></ul><ul><li>Limit filling to “half a tank” </li></ul><ul><li>Ensure all pumps were kept in functional order at all times </li></ul>
  14. 14. STRATEGIC MANAGEMENT <ul><li>The importance of Strategic Control </li></ul><ul><li>Control & Responsiveness to Customers: </li></ul><ul><li>Must establish controls to measure how well employees with customer contact is doing their jobs. </li></ul><ul><li>Monitors employee behaviors </li></ul><ul><li>Identify skills gaps of employees </li></ul><ul><li>People who are monitored behaves differently </li></ul>
  15. 15. STRATEGIC MANAGEMENT <ul><li>Strategic Control Systems </li></ul><ul><li>“… are the formal target setting , measurement and feedback systems that allow strategic managers to evaluate whether the company is achieving on the four building blocks of a competitive advantage..” </li></ul>
  16. 16. STRATEGIC MANAGEMENT <ul><li>Types of Control systems </li></ul><ul><li>Financial controls </li></ul><ul><li>Output controls </li></ul><ul><li>Behavior controls </li></ul><ul><li>Organization culture </li></ul>
  17. 17. STRATEGIC MANAGEMENT <ul><li>Financial controls </li></ul><ul><li>Growth </li></ul><ul><li>Profitability </li></ul><ul><li>ROCE </li></ul><ul><li>Share prices( Private sector) </li></ul><ul><li>Is a favorite control because it is objective </li></ul>
  18. 18. STRATEGIC MANAGEMENT <ul><li>Types of Control systems </li></ul><ul><li>Output controls: It is a system of control in which managers estimate or forecast appropriate performance goals for each division, department and employee and measure achievement against these goals </li></ul><ul><li>Divisional Goals </li></ul><ul><li>Functional Goals </li></ul><ul><li>Individual Goals </li></ul>
  19. 19. STRATEGIC MANAGEMENT <ul><li>Types of Control systems </li></ul><ul><li>Divisional Goal </li></ul><ul><li>Goal: “ To be the number 1 or 2 in the industry in terms of market share” </li></ul>
  20. 20. STRATEGIC MANAGEMENT <ul><li>Types of Control systems </li></ul><ul><li>Behavior controls: “ happens through the establishment of a comprehensive systems of rules and procedures to direct the actions of divisions, functions and individuals </li></ul><ul><li>Operating budgets </li></ul><ul><li>HR rules & regulations </li></ul><ul><li>Standardization </li></ul>
  21. 21. STRATEGIC MANAGEMENT <ul><li>Strategic Control Systems </li></ul><ul><li>Characteristics </li></ul><ul><li>Be flexible to allow managers to respond as necessary to unexpected events; </li></ul><ul><li>Should provide accurate information , giving a true picture of organizational performance; </li></ul><ul><li>Should provide information in a timely manner </li></ul>
  22. 22. STRATEGIC MANAGEMENT <ul><li>Strategic Control Systems </li></ul><ul><li>Four steps to design an effective control system: </li></ul><ul><li>Establish the standards & targets against which performance is to be evaluated; </li></ul><ul><li>Create the measuring & monitoring systems that indicate whether the standards & targets are being reached; </li></ul><ul><li>Compare actual performance against established targets </li></ul><ul><li>Initiate corrective action when it is decided that the standards & targets are not being achieved </li></ul>
  23. 23. STRATEGIC MANAGEMENT <ul><li>The Balanced score card as a Control measure. </li></ul><ul><li>Financial figures are important, however, it is not the only one; </li></ul><ul><li>Financial results are important long after the event therefore not very effective; </li></ul><ul><li>An organization needs a mechanism to supplement financial measures this can be achieved through the Balanced Score Card </li></ul>
  24. 24. STRATEGIC MANAGEMENT <ul><li>Kinds of measures </li></ul><ul><li>Efficiency: Level of production costs, number of hours needed to produce an item, cost of raw materials </li></ul><ul><li>Quality: Number of rejects, number of customer returns, level of product reliability </li></ul><ul><li>Innovation: number of new products introduced, time taken to market; cost of product development </li></ul><ul><li>Responsiveness to customers: number of repeat customers; level of on-time delivery to customers, level of customer service </li></ul>
  25. 25. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL <ul><li>Sets objectives & measures targets & initiatives for 4 organisational areas </li></ul><ul><li>For the balanced scorecard to be effective: </li></ul><ul><ul><li>Objectives & measures in each perspective should reinforce objectives & measures in other perspectives </li></ul></ul><ul><ul><li>Incorporates cause-&-effect relationships among critical variables </li></ul></ul><ul><ul><ul><li>Clarify actions to be taken to co-ordinate strategy. </li></ul></ul></ul>
  26. 26. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL <ul><li>The standard four perspectives in the Balanced Scorecard </li></ul><ul><li>Financial </li></ul><ul><li>Customer </li></ul><ul><li>Internal Business Processes </li></ul><ul><li>Learning and Growth </li></ul>
  27. 27. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL <ul><li>Balanced Scorecard as a link </li></ul><ul><li>Vision & Strategy </li></ul><ul><li>Long term goals and functional tactics </li></ul><ul><li>Key to strategy implementation </li></ul>
  28. 28. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL <ul><li>Financial </li></ul><ul><li>Customer Internal Business </li></ul><ul><li>Learning & Growth </li></ul>Vision & Strategy
  29. 29. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL <ul><li>Developing a Balanced Scorecard </li></ul><ul><li>Consider the fundamental question(s) </li></ul><ul><li>Develop goals </li></ul><ul><li>Identify measures </li></ul><ul><li>Set the targets </li></ul><ul><li>Identify actions </li></ul>
  30. 30. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL Initiatives Targets Measures Goals Fundamental question
  31. 31. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL <ul><li>Internal Business Process Perspective </li></ul><ul><li>Fundamental question: To satisfy our customers, what/which business processes must we excel at? </li></ul>
  32. 32. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL <ul><li>Financial Perspective </li></ul><ul><li>Fundamental question: To succeed financially, how should we appear to our rate payers? </li></ul>
  33. 33. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL <ul><li>Customer Perspective </li></ul><ul><li>Fundamental question: To achieve our vision, how should we appear to our customers? </li></ul>
  34. 34. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL <ul><li>Customer perspective for a cell phone company </li></ul><ul><li>Vision: To become Africa’s leading cellular network with the best customer service and to be the best company to work for in southern Africa </li></ul><ul><li>Fundamental question: To achieve our vision, how should we appear to our customers? </li></ul><ul><li>Goal: To improve customer satisfaction by 15% </li></ul><ul><li>Measure: Customer satisfaction survey </li></ul><ul><li>Target: To decrease customer complaints by 10% before Jan 2006 </li></ul><ul><li>Initiative: Have more customer care specialists available for customer queries over weekends </li></ul>
  35. 35. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL <ul><li>Video “The Balanced Scorecard </li></ul>
  36. 36. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL
  37. 37. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL
  38. 38. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL
  39. 39. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL
  40. 40. THE BALANCED SCORECARD IN STRATEGY IMPLEMENTATION & CONTROL
  41. 41. THE BALANCED SCORECARD AS A STRATEGY IMPLEMENTATION & CONTROL SYSTEM <ul><li>Enables organisations to monitor & evaluate short-term progress in 4 areas </li></ul><ul><ul><li>Evaluate whether strategic objectives are being achieved </li></ul></ul><ul><ul><li>Assess whether assumptions on which strategy is based are valid. </li></ul></ul>

×