Strategic Control: Marshalling Resources

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Strategic Control Marshalling Resources
MAN 4720 Strategic Management
Chapter 8B
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Chapter Checklist

• Resource Control
• Informational Control
• Behavioral Control
• Strategic Rewards and Incentives
• Instituting Policies and Procedures
• Structured Approaches to Strategic Control

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Resource Control

• Allocating resources in ways to support effective
  strategy execution involves
• Funding strategic initiatives that can makea
  contribution to strategy implementation
• Funding efforts to strengthen competencies and
  capabilities or to create new ones
• Shifting resources downsizing some areas,
  upsizing others, killing activities no longer
  justified, and funding new activities with a
  critical strategy role

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Resource Control

• Consider utilizing pareto optimal solutions as
  well as global optimal solutions when allocating
  resources
• Allocation of resources is usually the primary
  determinant of pareto optimal solutions

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Resource Control

• Global Optimal Solution
• The total sum of the benefits without regards to
  the individual benefits of a participant/factor
• Pareto-optimal Solution
• No other set of solutions offers any one
  participant/factor a better outcome without
  worsening the outcome of other participants or
  factors

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Resource Control
Global vs. Pareto Optimal Solutions
In Program 1, total revenues for the corporation
is 100,000 units In Program 2, total revenues for
the corporation is 102,000 units, which is an
increase in 2,000 units achieved through resource
allocation. This is a Global Optimal increase for
the corporation but notice that Plant A
experienced a 2,000 unit drop in revenue. This
means that the change in resource allocation from
Program 1 to Program 2 may be a Global Optimal
solution, but it is not Pareto Optimal because
one of the plants suffered a decline in revenue
even though the corporation gained overall.
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Global and Pareto Optimal Solution
Resource Control
In contrast to the previous slide, the change
from Program 1 to Program 2 as a result of
resource allocation is both more Pareto-Optimal
and Global Optimal because not only does the
entire corporation experience increased revenue
from 100,000 units to 102,000 units, but none of
the five plants experience a worse outcome than
what they experienced in Program 1. So although
Plants A, C, and E did not gain any additional
revenue, they still did not lose revenue with the
resource re-allocation and the corporation
enjoyed an increase in revenue overall. The
situation is pareto inefficient when a change is
made with resource allocation that worsens one of
the participants status.
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Informational Control

• Informational control
• Concerned with whether or not the organization is
  doing the right things
• Behavioral control
• Concerned with whether or not the organization is
  doing things right in the implementation of its
  strategy
• Both types of control are necessary conditions
  for success

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Informational Control

• Deals with internal environment and external
  strategic context
• Key question
• Do the organizations goals and strategies still
  fit within the context of the current strategic
  environment?
• Two key issues
• Scan and monitor external environment (general
  and industry)
• Continuously monitor the internal environment

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Behavioral Control

• Behavioral control is focused on
  implementationdoing things right
• Three key control levers
• Culture
• Boundaries
• Rewards

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Behavioral Control

• Boundaries
• Focusing individual efforts on strategic
  priorities
• Short-term objectives Action Plans
• Improving Operational Efficiency and
  Effectiveness
• Minimizing Improper and Unethical Conduct

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Behavior Control

• Management by Objectives (MBO)
• A goal-setting process in which managers and
  subordinates negotiate specific goals and
  objectives for the subordinate to achieve and
  then periodically evaluate their attainment of
  those goals

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Behavior Control

• Management by Objectives
• Specific goals and objectives are established at
  each level of the organization
• Managers and their subordinates together
  determine the subordinates goals
• Managers and their subordinates periodically
  review the subordinates progress toward meeting
  goals

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Instituting Policies and Procedures

• Improving Efficiency and Effectiveness
• Rule-based controls characteristics
• Environments are stable and predictable
• Employees are largely unskilled and
  interchangeable
• Consistency in product and service is critical
• Risk of malfeasance is extremely high
• Policies and procedures
• Interpret the vision and mission statement into
  practical guides for strategy implementation
• Align the actions of personnel with strategy
• Enforce consistency among critical activities

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Instituting Policies and Procedures

• Role of new policies
• Channel behaviors and decisionsto promote
  strategy execution
• Counteract tendencies ofpeople to resist chosen
  strategy
• Too much policy can be as stifling as
• Wrong policy or as
• Chaotic as no policy
• Often, the best policy is empowering employees,
  letting them operate between the white lines
  anyway they think best

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Strategic Rewards and Incentives

• Approaches Motivating People to Execute the
  Strategy Well
• Provide attractive perks and fringe benefits
• Rely on promotion from within when possible
• Make sure ideas and suggestions ofemployees are
  valued and respected
• Create a work atmosphere where there is genuine
  sincerity and mutual respect among all employees
• State strategic vision in inspirational terms to
  make employees feel they are part of something
  worthwhile
• Share financial and strategic information with
  employees
• Have knockout facilities
• Be flexible in how company approaches
  peoplemanagement in multicultural environments

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Strategic Rewards and Incentives

• Balancing Positive vs. Negative Rewards
• Elements of both are necessary
• Challenge and competition arenecessary for
  self-satisfaction
• Prevailing view
• Positive approaches work betterthan negative
  ones in terms of
• Enthusiasm
• Dedication
• Creativity
• Initiative

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Strategic Rewards and Incentives

• Tying rewards to the achievement of strategic and
  financial performance targets is managements
  single most powerful tool to win the commitment
  of company personnel to effective strategy
  execution
• Objectives in designing the reward system
• Generously reward thoseachieving objectives
• Deny rewards to those who dont
• Make the desired strategic and financial
  outcomes the dominant basis for designing
  incentives, evaluating efforts, and handing out
  rewards

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Strategic Rewards and Incentives

• Key Considerations in Designing Reward
  Systems
• Create a results-oriented system
• Reward people for results, not for activity
• Define jobs in terms of what to achieve
• Incorporate several performance measures
• Tie incentive compensation to relevant outcomes
• Top executives Incentives tied tooverall firm
  performance
• Department heads, teams, andindividuals
  Incentives tied toachieving performance
  targetsin their areas of responsibility

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Structured Approaches to Strategic Control

• Searching out and adopting best practicesis
  integral to effective implementation
• Benchmarking is the backbone of theprocess of
  identifying, studying, andimplementing best
  practices
• Three structured approaches to strategic control
• Business Process Reengineering
• TQM
• Six Sigma

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Structured Approaches to Strategic Control

• Business Process Reengineering
• Often the performance of strategicallyrelevant
  activities is scattered acrossseveral functional
  departments
• Creates inefficiencies and often impedes
  performance
• Results in lack of accountability since no one
  functional manager is responsible for optimum
  performance of an entire activity
• Solution Business process reengineering
• Involves pulling strategy-critical processes from
  functional silos to create process departments or
  cross-functional work groups
• Unifies performance of the activity and improves
  howwell the activity is performed and often
  lowers costs
• Promotes operating excellence

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Structured Approaches to Strategic Control

• Business Process Reengineering
• Traditional reorganization
• Incrementalism
• Changes within existing context, constitution
• Reengineering
• Radical redesign of organization according to
  functions, not existing policies
• Reformulation of processes
• Technological Advances
• Behavioral Sciences

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Structured Approaches to Strategic Control

• Business Process Reengineering
• Process mapping
• Flowcharting service delivery
• Emphasis on process
• Customer assessments
• Focus groups
• Surveys
• Meetings with customers/citizens
• Process visioning Latest technology

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Structured Approaches to Strategic Control

• Total Quality Management
• A philosophy of managing a set of business
  practices that emphasizes
• Continuous improvement in all phases of
  operations
• 100 percent accuracy in performing activities
• Involvement and empowermentof employees at all
  levels
• Team-based work design
• Benchmarking and
• Total customer satisfaction

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Structured Approaches to Strategic Control

• The Core of Total Quality Management
• W. Edwards Deming, GM and Toyota
• A Philosophy of Continuous Improvement
• Strive to achieve little steps forwardeach day
  (what the Japanese call kaizen)
• De-emphasizes performance appraisal
• 85 of quality problems caused by management
• Empowerment of employees to control quality
• Most popular of public sector management
  philosophies

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Structured Approaches to Strategic Control

• Demings 14 Points
• Create constancy of purpose toward improvement of
  product and service
• Adopt the new philosophy
• Cease dependence on inspection to achieve quality
  
• End the practice of awarding business on the
  basis of price tag
• Improve constantly and forever the system of
  production and service
• Institute training on the job

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Structured Approaches to Strategic Control

• Demings 14 Points (continued)
• Institute leadership
• Drive out fear
• Break down barriers between departments
• Eliminate slogans, exhortations, and targets for
  the work force asking for zero defects and new
  levels of productivity
• Eliminate work standards and MBO
• Eliminate work standards
• Eliminate management by objective

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Structured Approaches to Strategic Control

• Demings 14 Points (continued)
• Remove Barriers
• Remove barriers that rob the hourly worker of his
  right to pride of workmanship
• Remove barriers that rob people in management and
  in engineering of their right to pride of
  workmanship
• Institute a vigorous program of education
  and self-improvement
• Put everybody in the company to work
  to accomplish the transformation

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Structured Approaches to Strategic Control

• Six Sigma
• A disciplined, statistics-based system aimed at
  having not more than 3.4 defects per million
  iterations for any business practice from
  manufacturing to customer transactions
• Two approaches to Six Sigma
• DMAIC process (Design, Measure, Analyze, Improve,
  Control)
• An improvement system for existing processes
  fallingbelow specification and needing
  incremental improvement
• A great tool for improving performance when there
  are wide variations in how well an activity is
  performed
• DMADV process (Define, Measure, Analyze, Design,
  Verify)
• An improvement system used to develop new
  processes or products at Six Sigma quality levels

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Structured Approaches to Strategic Control

• Six Sigma is based on three principles
• 1. All work is a process
• 2. All processes have variability
• 3. All processes create data to explain
  variability
• A company systematically applying Six Sigma to
  its value chain activities can significantly
  improve the proficiency of strategy
  implementation
• Three challenges in implementing Six Sigma
  quality programs
• 1. Obtain managerial commitment
• 2. Establish a quality culture
• 3. Full involvement of employees

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Structured Approaches to Strategic Control

• The DMAIC Process of Six Sigma
• Define
• What constitutes a defect?
• Measure
• Collect data to find out why, how,and how often
  the defect occurs
• Analyze Involves
• Statistical analysis of the metrics
• Identification of a best practice
• Improve
• Implementation of the documented best practice
• Control
• Employees are trained on the best practice
• Over time, significant improvement in quality
  occurs

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Structured Approaches to Strategic Control

• Business Process Reengineering vs. Total
  Quality Programs
• Reengineering
• Aims at quantum gains of 30 to 50 or more
• Total quality programs
• Stress incremental progress
• Techniques are not mutually exclusive
• Reengineering Used to produce a good basic
  design yielding dramatic improvements
• Total quality programs Used to perfect process,
  gradually improving efficiency and effectiveness