This document contains summaries of topics related to strategy implementation and evaluation including: 1. Measuring performance through appropriate financial and non-financial metrics at the corporate, business unit, and functional levels. Key metrics mentioned include ROI, EPS, balanced scorecard. 2. Guidelines for effective controls including monitoring a limited number of leading indicators, ensuring measures are timely and focus on exceptions. 3. Issues with performance measurement including negative side effects of short-term thinking and goal displacement, as well as problems measuring intangibles.

1. WK12.1 AgendaProject presentationOlympic EvaluationExam Part II next Friday August 27, 20101MIB, BBA 2010

2. WK12.2 AgendaEvaluation & SuggestionExam Part II next Friday August 27, 2010LectureMind mapMIB, BBA 20102

3. Strategy ImplementationFormulation vs. Implementation~ Idea vs. Work ResultSuccess story, Failure story?A strategic plan which is executed through programs, budgets, and procedures.Key Implementation QuestionsWho will implement the plan?What must be done to align with the company’s operations in the new direction?How is strategy to be implemented?MIB, BBA 20103

4. 1.) Who will implement the plan?VP of functional areasDirectors of divisionsSBUsPlant managersProject managersUnit headsSupervisorsEmployeesCommunication is the key.Involve all levels in the formulation and implementation MIB, BBA 20104

5. 2.) What must be done?MIB, BBA 20105

6. 3.) How is strategy to be implemented?Structure follows strategy: Always?New strategy is created.New administrative problems emerge.Economic performance declines.New appropriate structure is invented.Profit returns to previous level.Example: KU structure vs. UBU structureCorporate, business, functional strategy?Video ClipsMIB, BBA 20106

7. Organizational Life CycleMIB, BBA 20107

8. Changing Structural Characteristics of Modern OrganizationsOld Organization DesignOne large corporationVertical communicationCentralized, top down decision makingWork/quality teamsFunctional work teamsMinimal trainingSpecialized job design focused on individualsMIB, BBA 20108New Organization DesignMini business units and cooperative relationshipsHorizontal communicationDecentralized participative decision makingOutsourcing and virtual organizationsAutonomous work teamsCross functional work teamsExtensive trainingValue chain, team focused job design

9. Six Sigma: Quality & EfficiencyA business philosophy that uses data and statistical tools to systematically improve quality and process to achieve the highest level of customer satisfaction.Motorola: reduce the defects to 3 parts/millionDMAIC5S: workplace organization methodology(sorting, setting in order, sweeping, standardizing, sustaining)Kaizen:eliminate waste in all systems of an organization through improving standardized activities and processesMIB, BBA 20109

10. Designing Jobs: Satisfaction & MotivationJob enlargement: more workJob rotation: more varietyJob enrichment: more autonomy and controlUse job characteristics model in job redesigning to improve job performance through job enrichmentMIB, BBA 201010

11. International Issues in Strategy ImplementationMNCsInternational Strategic Alliances(add value, contribute key strength but protect core competencies)Stages of International DevelopmentDomestic companyDomestic company with export divisionDomestic company with international divisionMNC with multidomestic emphasisMNC with global emphasisCentralization vs. DecentralizationProduct-group structure: Global product, similar product around the worldGeographic-area structure: Customized product for each regionMIB, BBA 201011Pressures for cost reductionsPressure for local responsiveness

12. Strategy Implementation: Staffing and LeadingStaffing: focuses on the selection and use of employees (hiring, firing, and training).Leading: emphasizes the use of programs to better align employee interests and attitudes with a strategy.MIB, BBA 201012

13. Staffing follows strategy, Hiring & TrainingMIB, BBA 201013

14. Manager & StrategyMIB, BBA 201014

15. Executive SelectionExecutive Succession

16. Insiders

17. Outsiders: No heir, Turnaround

18. Identifying Abilities and Potential

19. Performance appraisal system

20. Assessment centers: IBM, GE, SEARS

21. Job rotation: mix experiencesMIB, BBA 201015

22. Strategy & Managing Corporate CultureAssessing Strategy &Culture CompatibilityCompatible with current culture?

23. Cultural flexibility

24. Organizational change possible

25. Commitment to strategy implementationMIB, BBA 201016

26. Managing Culture After an AcquisitionCommunicate the rationale for strategic changes.Integration: give and take, Renault&NissanAssimilation: adopts the dominant acquiring cultureSeparation: no cultural exchangeDeculturation: destructive method, confusion and stressMIB, BBA 201017

27. Example of an Action PlanSpecific actions to be takenDates to begin and end each actionPerson responsible for carrying out each actionPerson responsible for monitoringExpected financial and physical consequences of each actionContingency planMIB, BBA 201018

28. Other Leading TopicsManagement By ObjectivesTotal Quality Management (TQM):preventionHofstede DimensionPut the right man at the right job at the right timeMIB, BBA 201019

29. WK12.3 AgendaLecture on evaluation & controlMind mapMission Possible ExerciseMonday bring your note book for case study.Exam part II next Friday August 27, 2010.MIB, BBA 201020

30. Evaluation & ControlPerformance data and activity reports How should we start? What’s the evaluation process?MIB, BBA 201021

31. 1.)What to measure?Performance is the end result of activity.Appropriate measures depends on the objective of the strategy.Air Asia, CPFUBU, RU, CUMeasures: financial, customers, process, innovation and learning,human resource, IT, communityMeasure controls at all three levels(Corporate, Business, Functional)MIB, BBA 201022

32. 2.) Appropriate MeasuresMIB, BBA 201023

33. 2.)Appropriate MeasuresLeading indicator, Input Controls: lead to the desire result, can predict the result and can fix the resultControl chartLagging indicator, Output Controls: post mortem study, can not fix or change anything Profit and loss, Market share, ROI, ROEBehavioral Controls: when performance results are hard to measure but the cause and effect between the activities and results is clear.(ISO 14000)MIB, BBA 201024

34. 2.) Appropriate MeasuresTraditional Financial MeasuresROI: Net Income Before Tax/Total AssetComprehensive number to include all revenue, costs, and expensesCan be compared across companiesSensitive to depreciation, focus on short term, reflect business life cycle more than the management effectivenessEPS, ROE, Operating cash flow, Free cash flow

35. Not adequate measures for corporate performance

36. Dot.com measurement examplesMIB, BBA 201025

37. 2.) Appropriate MeasuresOther standard measuresStakeholder Measures: impact of the corporate activities on stakeholder interestsEx: Air Asia New Advertisement Campaign MIB, BBA 201026

38. 2.) Appropriate MeasuresOther standard measures: Shareholder ValueShareholder Value=PV of future CF+Value of the company if liquidated, create wealth? Economic Value Added: invest in the project only if the profit is above the cost of capitalEVA=after tax operating income- (investment in assets x weighted average cost of capital%)Cost of capital: interest payback for debt, shareholders’ earningMarket Value Added: Market Value of a corporation - the capital contributed by shareholders and lenders

39. Ohishi EVA, Thai Bev MVA?MIB, BBA 201027

40. 2.) Appropriate MeasuresOther Standard Measures: Balanced Scorecard for the four areas Financial: ROI, ROE, Cash Flow, sales growthCustomer: market share, customer satisfaction, #of complaints, brand recognition, etc.Internal business process: inventory turnover, waste reduction, respond time, cycle time, down time, etc.Innovation & Learning: turnover rate, job satisfactionMIB, BBA 201028

41. 2.) Appropriate MeasuresOther Standard Measures: Top management and the board of directorsShort Term: Profitability such as ROI, ROE, EPSLong Term: Corporate direction, Team building, Leadership, Measures should come from the vision and mission and can include safety or quality as well.MIB, BBA 201029

42. 2.) Appropriate MeasuresOther Standard Measures: Measures for divisional and functional performance:Responsibility centers(cost, revenue, expense, profit, and investment): evaluate separate from the corporateOther Standard Measures: BenchmarkingLocate the significant point, area or process.Select the measurement.Select the benchmark company.Calculate the gap and find the cause of the gap.Develop the program to close that gap.Implement.MIB, BBA 201030

43. 3-5)Measure and correctionMIB, BBA 201031

44. International Measurement IssuesMIB, BBA 201032

45. Strategic Information SystemEnterprise Resource Planning (ERP)Wiki definition: an integrated computer-based system used to manage internal and external resources, including tangible assets, financial resources, materials, and human resourcesSoftware provider: SAP, PeopleSoft, OracleDivisional and functional IS supportPRISM by Merrill Lynch, MRPERPMIB, BBA 201033

46. Problems and GuidelinesGuidelines for Proper Control Appropriate number of controls 80:20 (monitor only 20% of the factors)

47. Monitor meaningful activities and results regardless of the difficulty in measurement, cooperation measurement?

48. Timely, leading variables

49. Long and short-term

50. Pinpointing exceptions: correction action for results outside tolerance

51. Reward meeting/ exceeding standardsProblems in Measuring Performance Negative Side Effects:Short-term orientation: no time for long term evaluation, just need good result for the present

52. Goal displacement

53. Behavior substitution: quantifiable measures drive out non quantifiable measures, SEARS repair bill, University research number, student number

54. Suboptimization:unit optimization detriment the organization goal, Marketing vs. Manufacturing, Liberal art & other facultiesMeasurable ControllableMIB, BBA 201034

55. Strategic Incentive ManagementWeighted-factor method: Excellent, ME, NI

56. High growth measures: market share, sales growth

57. Low growth measures: ROI, cash generate

58. Long-term evaluation method: Stock or performance units reward to top management who stay with the company and perform well.

59. Strategic funds method: development expense is separate from operation expense, BBA

60. Separate strategic fundsdevelop weighted factor chart for each SBUMeasure performanceMIB, BBA 201035

61. Mind Map SummaryMIB, BBA 201036

62. Mission Possible Exercise State your mission.Write your strategy, implementation, and your control measurement.Summarize to your friend and present to the class.MIB, BBA 201037