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  • Answer: B
  • Answer: D
  • True. In a decentralized structure, man agers and employees develop their own answers and action plans, make decisions in their areas of responsibility, and are held accountable for results. A decentralized structure shortens organizational response times and spurs new ideas, creative thinking and innovation, and greater involvement of managers and employees. In addition, in a decentralized structure jobs can be defined more broadly, fewer managers are needed, electronic communication systems provide quick, direct access to data, and there are often gains in employee morale and productivity.

Transcript

  • 1. 11 Building an Organization Chapter Title Capable of Good Strategy Execution
  • 2. “A second-rate strategy perfectly executed will beat a first-rate strategypoorly executed every Richardtime.” M. Kovacevich 11-2
  • 3. Chapter RoadmapA Framework for Executing Strategy The Principal Managerial Components of the Strategy Execution Process Buildingan Organization Capable of Good Strategy Execution Staffing the Organization Building Core Competencies and Competitive Capabilities Execution-Related Aspects of Organizing the Work Effort Current Organizational Trends 11-3
  • 4. Crafting vs. Executing Strategy Crafting the Strategy Executing the Strategy Primarily a market-driven  Primarily an operations- activity driven activity Successful strategy making  Successful strategy depends on execution depends on  Business vision  Doing a good job of  Perceptive analysis of working through others market conditions and  Good organization- company capabilities building  Attracting and pleasing  Building competitive customers capabilities  Outcompeting rivals  Creating a strategy-  Using company supportive culture capabilities to forge a  Getting things done and competitive advantage delivering good results 11-4
  • 5. Executing the Strategy Anaction-oriented, make-things happen task involving management’s ability to Implementation  Direct organizational change involves . . .  Achieve continuous improvement in operations and business processes  Move toward operating excellence  Create and nurture a strategy-supportive culture  Consistently meet or beat performance targets Tougher and more time-consuming than crafting strategy 11-5
  • 6. Implementing a New Strategy Requires practiced Leadership Implementing a new strategy takes expert leadership to  Convincingly communicate reasons for the new strategy  Overcome pockets of doubt  Secure commitment of concerned parties  Build harmony and enthusiasm  Get all implementation pieces in place and coordinated 11-6
  • 7. Why Executing Strategy Is a Tough Management Job Overcoming resistance to change Wide array of demanding managerial activities to be performed Numerous ways to tackle each activity Number of complex issues to be worked out Demands good people management skills Requires launching and managing a variety of initiatives simultaneously Hardto integrate efforts of many different work groups into a smoothly-functioning whole 11-7
  • 8. Who Are the Strategy Implementers? Implementing and executing strategy involves a company’s whole management team and all employees  Just as every part of a watch plays a role in making the watch function properly, it takes all pieces of an organization working cohesively for a strategy to be well-executed Top-levelmanagers must lead the process and coordinate major initiatives  But they must rely on cooperation of  Middle and lower-level managers to see things go well in various parts of an organization and  Employees to perform their roles competently 11-8
  • 9. Goals of the Strategy Implementing-Executing Process Unite total organization behind strategy See that activities are done in a manner that is conducive to best strategy execution Generatecommitment so an enthusiastic movement emerges to carry out strategy Fithow organization conducts its operations to strategy requirements 11-9
  • 10. Fig. 11.1: The Eight Components of the Strategy Execution Process 11-12
  • 11. What Top Executives Have to Do in Leading the Implementation Process Communicate the case for change Build harmony on how to proceed Arouseenthusiasm for the strategy to turn implementation process into a companywide crusade Empower subordinates to keep process moving Establish measures of progress and deadlines Reward those who achieve implementation milestones Direct resources to the right places Personally lead strategic change process and the drive for operating excellence 11-13
  • 12. Test Your KnowledgeManagements handling of the strategy implementation/executionprocess can be considered successful A. so long as a company is profitable. B. if and when the company meets or beats its performance targets and shows good progress in achieving its strategic vision for the company. C. once the companys management team convinces a majority of company personnel that the company is headed in the right direction. D. if management is able to put the strategy in place within 6 months. E. once a capable top management team has been hired, employees have been appropriately empowered, and effective training programs for company personnel have been put in place. 11-14
  • 13. BUILDING A CAPABLE ORGANIZATION —WHAT IS INVOLVED? 11-15
  • 14. Fig. 11.2: The Three Components of Building anOrganization Capable of Proficient Strategy Execution 11-16
  • 15. Putting Together a Strong Management Team Assembling a capable management team is a cornerstone of the organization-building task Find the right people to fill each slot  Existing management team may be suitable  Core executive group may need strengthening  Promote from within  Bring in skilled outsiders 11-17
  • 16. Selecting the Management Team: Key Considerations Determine mix of  Backgrounds  Experiences and know-how  Beliefs and values  Styles of managing and personalities Personal chemistry must be right Talent base needs to be appropriate Pickinga solid management team needs to be acted on early in implementation process 11-18
  • 17. Recruiting and Retaining Talented Employees: Implementation Issues The quality of a company’s people is an essential ingredient of successful strategy execution Biggest challenge facing companies  How to recruit and retain the best and brightest talent with strong skill sets and management potential Intellectualcapital, not tangible assets, is increasingly being viewed as the most important investment  Talented people are a prime source of competitive advantage 11-19
  • 18. Building Core Competencies and Competitive Capabilities Crafting the strategy involves  Identifying the desired competencies and capabilities to build into the strategy to help achieve a competitive advantage Good strategy execution requires  Putting desired competencies and capabilities in place,  Upgrading them as needed, and  Modifying them as market conditions evolve 11-22
  • 19. Example: Intel’s Core Competence Design and mass production of complex chips for personal computers 11-23
  • 20. Example: Procter & Gamble’s Core CompetenciesSuperb marketing-distribution skills and R&D capabilities in five core technologies - fats,oils, skin chemistry, surfactants, emulsifiers 11-24
  • 21. Example: General Electric’s Core CompetenciesDeveloping professional managers with broad problem-solving skills and proven ability to grow global businesses 11-25
  • 22. Example: Disney’s Core Competencies Theme park operation and family entertainment 11-26
  • 23. Example: Dell’s Core Competencies Capabilities to deliver state-of-the-art products to customers within days of next-generation components coming available and at attractively low costs 11-27
  • 24. Example: Toyota’s Core CompetenceLegendary “production system” giving it the capability to produce high-quality vehicles at relatively low costs 11-28
  • 25. Three-Stage Process of Developing Competencies and Capabilities1. Develop ability to do something2. As experience builds, ability can translate into a competence or capability3. If ability continues to be polished and refined, it can become a distinctive competence, providing a path to competitive advantage! 11-29
  • 26. Step 1 in Developing Competencies Develop ability to do something  Select people with relevant skills/experience  Broaden or expand individual abilities as needed  shape efforts and work products of individuals into a cooperative effort to create organizational ability 11-30
  • 27. Step 2 in Developing Competencies As experience builds and company learns how to perform the activity consistently well and at acceptable cost, the ability evolves into a competence or capability Typically, a capability or competence emerges from establishing and nurturing collaborative relationships between  Individuals and groups in different departments and/or  A company and its external allies 11-31
  • 28. Step 3 in Developing Competencies Ifcompany masters the activity, performing it better than rivals, the “capability” or “competence” becomes a  Distinctive competence and  Holds potential for competitive advantage This is the optimal outcome of the process of building capabilities-competencies! 11-32
  • 29. Managing the Process of Building Competences: Four Key Traits1. Competencies are bundles of skills and know-how growing from combined efforts of cross-functional departments2. Normally, competencies emerge incrementally from various company efforts to respond to market conditions3. Leveraging competencies into competitive advantage requires concentrating more effort and talent than rivals on strengthening competencies to create valuable capabilities4. Sustaining competitive advantage requires adjusting competencies to new conditions 11-33
  • 30. Approaches to Developing Competencies Internal development involves either  Strengthening the company’s base of skills, knowledge, and intellect or  Coordinating and networking the efforts of various work groups and departments Partnering with key suppliers, forming strategic alliances, or maybe even outsourcing certain activities to specialists Buying a company that has the required capabilities and integrating these competences into the firm’s value chain 11-34
  • 31. Updating Competencies and Capabilities as Conditions Change Competenciesand capabilities must continuously be modified and perhaps even replaced with new ones due to  New strategic requirements  Evolving market conditions  Changing customer expectations Ongoing efforts to keep core competencies up-to- date can provide a basis for sustaining both  Effective strategy execution and  Competitive advantage 11-35
  • 32. Strategic Role of Employee Training Training plays a critical role in implementation when a firm shifts to a strategy requiring different  Skills or core competences  Competitive capabilities  Managerial approaches  Operating methods Types of training approaches  Internal “universities”  Orientation sessions for new employees  Tuition reimbursement programs  Online training courses 11-36
  • 33. Competitive Advantage Potentialof Competencies and Capabilities When it is difficult to outstrategize rivals with a superior strategy . . . . . . Best avenue to industry leadership is to out-compete rivals with superior strategy execution! Building competencies and capabilities rivals can’t match is one of the best ways to out-compete them! 11-37
  • 34. Test Your KnowledgeWhen it is difficult or impossible to out-strategize rivals (beatthem with a superior strategy), the other main avenue tocompetitive advantage is to A. institute a lower cost organization structure. B. outcompete them with smarter managers. C. do a better job of selecting and training employees. D. outexecute them (beat them by performing certain value chain activities in superior fashion). E. do a better job of empowering and motivating employees. 11-38
  • 35. Execution-Related Aspects of Organizing Work Efforts Few hard and fast rules for organizing  One Big Rule: Role and purpose of organization structure is to support and facilitate good strategy execution! Each firm’s structure is distinctive, reflecting  Prior arrangements and internal politics  Executive judgments and preferences about how to arrange reporting relationships  How best to integrate and coordinate work effort of different work groups and departments CEO Vice President Vice President Vice President 11-39
  • 36. Fig. 11.3: Structuring the Work Effortto Promote Successful Strategy Execution 11-40
  • 37. Step 1: Decide Which Value Chain Activities to Perform Internally and Which to Outsource Involvesdeciding which activities are essential to strategic success  Most strategies entail certain crucial business processes or activities that must be performed exceedingly well or in closely coordinated fashion if the strategy is to be executed with real proficiency  These processes/activities usually Critical need to be performed internally activities  Other activities, such as routine administrative housekeeping and some support functions, may be candidates for outsourcing 11-41
  • 38. Appeal of Outsourcing Outsourcingnon-critical activities allows a firm to concentrate its energies and resources on those value-chain activities where it  Can create unique value  Can be best in the industry  Needs direct control to  Build core competencies  Achieve competitive advantage  Manage key customer-supplier-distributor relationships 11-44
  • 39. Dangers of OutsourcingA company must guard against hollow out its knowledge base and capabilities Way to guard against pitfalls of outsourcing  Avoid sourcing key components from a single supplier  Use two or three suppliers to minimize dependence on any one supplier  Regularly evaluate suppliers  Work closely with key suppliers 11-46
  • 40. Step 2: Make Strategy-Critical Activities the Main Building Blocks Assign managers of strategy-critical activities a visible, influential position Avoid fragmenting responsibility for strategy-critical activities across many departments Assign Providecoordinating linkages managers key roles between related work groups Primary Support activities functions  join into a valuable Strategic Coordi- Valuable competitive capability relation- nation capability ships 11-47
  • 41. What Types of Organizational Structures Fit Which Strategies?A company operating in one business  Functional department structureA company with operations in various parts of the world  Geographic organizational unitsA vertically integrated company  Divisional organizational structureA diversified company  Individual businesses, with each business unit operating as independent profit center 11-48
  • 42. Step 3: Determine How Much Authority to Delegate to Whom In a centralized structure  Top managers retain authority for most decisions In a decentralized structure  Managers and employees are empowered to make decisions Trend in most companies  Shift from authoritarian to decentralized structures stressing empowerment 11-49
  • 43. 11-50
  • 44. Characteristics of Centralized Decision Making Top executives retain authority  For most strategic and operating decisions and  Keep a tight restriction on lower-level managers Minimal discretionary authority is granted to  Frontline supervisors  Rank-and-file employees Key advantage – Tight control by top managers fixes accountability Disadvantages  Lengthens response time to changing conditions  Does not encourage responsibility among lower-level managers and employees  Discourages lower-level managers and employees from exercising initiative 11-51
  • 45. Advantages of a Decentralized Structure Creates a more horizontal structure with fewer management layers Managers and employees develop their own answers and action plans  Make decisions in their areas of responsibility  Held accountable for results Shortens organizational response times and spurs  New ideas  Creative thinking and innovation  Greater involvement of managers and employees Jobs can be defined more broadly Fewer managers are needed Electronic communication systems provide quick, direct access to data Genuine gains in morale and productivity 11-52
  • 46. Maintaining Control in a Decentralized Structure Place limits on authority empowered employees can exercise Hold people accountable for their decisions Institutecompensation incentives that reward employees for doing their jobs in a manner contributing to good company performance Create a corporate culture where there’s strong peer pressure on employees to act responsibly 11-53
  • 47. For Discussion: Your OpinionA decentralized organization structure is more likelyto further the cause of good strategy execution than isa centralized organization structure. True or false?Explain. 11-54
  • 48. Step 4: Provide for Internal Cross-Unit Coordination Classicmethod of coordinating activities – Have related units report to single manager  Upper-level managers have clout to coordinate efforts of their units Supportactivities should be woven into structure to  Maximize performance of primary activities  Contain costs of support activities Formal reporting relationships often need to be supplemented to facilitate coordination 11-55
  • 49. Examples of Fragmented Strategy-Critical Activities Filling customer orders Speeding new products to market Improving product quality Supply chain management Building capability to conduct business via the Internet Obtainingfeedback from customers, making product modifications to meet their needs 11-57
  • 50. Coordinating Mechanisms to Supplement the Basic Organization Structure Cross-functional task forces Dual reporting relationships Informal networking Voluntary cooperation Incentive compensation tied to group performance Teamwork and cross- departmental cooperation 11-58
  • 51. Step 5: Provide for Collaboration With Outsiders Need multiple ties at multiple levels to ensure  Communication  Coordination and control Findways to produce collaborative efforts to enhance firm’s capabilities and resource strengths Whilecollaborative relationships present opportunities, nothing valuable is realized until the relationship develops into an engine for better organizational performance 11-59
  • 52. Roles of Relationship Managers With Strategic Partners Get right people together Promote good bonding. See plans for specific activities are developed and implemented Helpadjust internal procedures and communication systems to  flatten operating dissimilarities  Nurture interpersonal ties 11-60
  • 53. Current Organizational Trends Numerous companies have completed the task of remodeling traditional, hierarchical structures built on  Functional specialization and  Centralized authority Corporatedownsizing movement in the late 1980s and early 1990s was aimed at  Recasting authoritarian, pyramidal organizational structures  Into flatter, decentralized structures 11-61
  • 54. Drawbacks of Centralized Authoritarian Structures Centralized or authoritarian structures have often turned out to be a liability where  Customer preferences shift from standardized to customized products  Product life-cycles grow shorter  Flexible manufacturing replaces mass production  Customers want to be treated as individuals  Pace of technological change accelerates  Market conditions are fluid 11-62
  • 55. Organizational Structures of the Future: Overall Themes Revolutionary changes in how work is organized have been triggered by  New strategic priorities  Rapidly shifting competitive conditions Tools of organizational design include  Empowered managers and workers The future  Reengineered work processes structure will be . . .  Self-directed work teams  Rapid incorporation of Internet technology  Networking with outsiders 11-63
  • 56. Characteristics of Organizations of the Future Extensiveuse of Internet technology and e-commerce business practices Fewer barriers between  Different vertical ranks Change & Learning  Functions and disciplines  Units in different geographic locations  Company and its suppliers, distributors, strategic allies, and customers Capacity for change and rapid learning Collaborative efforts among people in different functions and geographic locations 11-64