LO1 Gain command of what managers must do to build an

organization capable of good strategy execution.

LO2 Learn why resource allocation should always be based
on strategic priorities.
LO3 Understand why policies and procedures should be
designed to facilitate good strategy execution.
LO4 Understand how process management programs that
drive continuous improvement help an organization
achieve operating excellence.
LO5 Recognize the role of information and operating
systems in enabling company personnel to carry out
their strategic roles proficiently.
10-2

(contd)
LO6 Learn how and why the use of well-designed
incentives and rewards can be managements single
most powerful tool for promoting operating excellence.
LO7 Gain an understanding of how and why a companys
culture can aid the drive for proficient strategy
execution.
LO8 Understand what constitutes effective managerial
leadership in achieving superior strategy execution.

10-3

Crafting versus Implementing Strategy

Crafting Strategy

Implementing Strategy

Market-and resource-

Execution of operations-

driven activities
Success depends on

driven activities
Successful depends on
managements ability to

Attracting and pleasing

customers
Outcompeting rivals
The firms collection of
resources and capabilities

Direct change
Allocate resources
Build capabilities
Build strategy-supportive
policies and culture
Deliver good results

10-4

CORE CONCEPT
Good strategy execution requires a team effort.
All managers
managers have
have strategy
strategy executing
executing
responsibility in their
their areas
areas of
of authority,
authority, and
and all
all
employees
employees are
are active
active participants
participants in
in the
the strategy
strategy
execution process.

10-5

Who Is Responsible for Implementation

of the Chosen Strategy?
The organizations chief executive officer and other
senior managers are ultimately responsible for
ensuring that the strategy is executed successfully.
It is middle and lower-level managers who must see
to it that frontline employees and work groups
competently perform strategy-critical activities that
allow companywide performance targets to be met.
Requires all managers thinking about:
What does my area have to do to implement its part of the

strategic plan, and what should I do to get these things

accomplished effectively and efficiently?

10-6

Principal Managerial Components

of the Strategy Execution Process
1. Building an organization with the capabilities,
people, and structure needed to execute the
strategy successfully.
2. Allocating ample resources to strategy-critical
activities.
3. Ensuring that policies and procedures facilitate
rather than impede effective strategy execution.
4. Adopting process management programs that
drive continuous improvement in how strategy
execution activities are performed.

10-7

Principal Managerial Components of

the Strategy Execution Process (contd)
5. Installing information and operating systems that
enable company personnel to perform essential
activities.
6. Tying rewards directly to the achievement of
performance objectives.
7. Fostering a corporate culture that promotes good
strategy execution.
8. Exerting the internal leadership needed to propel
implementation forward.

10-8

FIGURE 10.1

The Eight Components of Strategy Execution

10-9

Building an Organization with the

Capabilities, People, and Structure
Needed for Good Strategy Execution
Organization
building actions

Staffing the
organizations
workforce

Acquiring, developing,
and strengthening
strategy-supportive
resources and
capabilities

Structuring the
organization and
work effort

10-10

Staffing the Organization

Building Managerial Talent
Assembling a capable management team is a
cornerstone organization-building task:
Put people with strong strategy implementation skills

and a results orientation in key managerial posts.

Replace weak executives, strengthening the skills

of those who remain, and bringing in fresh outsiders.

10-11

Recruiting and Retaining

a Capable Workforce
The quality of a firms people is an essential
ingredient of successful strategy execution.
Staffing the right people at all levels is required to

ensure competent performance of value chain

activities.
Find, develop, and then retain engaged employees

with excellent compensation packages, opportunities

for rapid advancement and professional growth, and
challenging and interesting assignments.

10-12

Tactics for Recruiting and Retaining

a High-Performance Workforce
Put extra effort into screening and evaluating job applicants
selecting for skill sets, energy, initiative, judgment, aptitudes
for learning, and adaptability to the firms culture.
Invest in training programs that continue throughout
employees careers.
Provide promising employees with challenging, interesting,
and skill-stretching assignments.
Rotate people through jobs that span functional and
geographic boundaries.
Retain high-performing employees via promotions, salary
increases, performance bonuses, stock options and equity
ownership, fringe benefit packages, and other perks.
Coach average performers to improve their skills and
capabilities, weeding out underperformers and benchwarmers.
10-13

Acquiring, Developing, and Strengthening

Key Resources and Capabilities
Good strategy execution requires:
Putting key resources and capabilities into place.
Refreshing and strengthening them as needed.
Modifying them as market conditions evolve.

Organization building requires deciding

when and how to recalibrate competencies
and capabilities.

10-14

Three Approaches to Building and

Strengthening Capabilities
Developing dynamic
capabilities to manage
organizational change

Become proficient
in developing
capabilities
internally

Acquire
capabilities
through mergers
and acquisitions

Accessing
capabilities via
collaborative
partnerships

10-15

Accessing Capabilities Through

Collaborative Partnerships
Outsource the function or activity
requiring new capabilities to an
outside provider to conserve resources

Acquiring
capabilities
from an external
source via
collaborative
partnerships

Collaborate with a firm that has

complementary resources and
capabilities in a partnership to
achieve a shared strategic objective.
Engage in a collaborative partnership
to learn how the partner performs
activities, internalizing its methods,
and thereby acquiring its capabilities.
10-16

Concepts &
TOYOTAS LEGENDARY PRODUCTION SYSTEMA CAPABILITY
Connections 10.1 THAT TRANSLATES INTO COMPETITIVE ADVANTAGE
The heart of Toyotas strategy in motor vehicles is to
outcompete rivals by manufacturing world-class, quality
vehicles at lower costs and selling them at competitive
price levels. Executing this strategy requires top-notch
manufacturing capability and super-efficient management
of people, equipment, and materials. Toyota began
conscious efforts to improve its manufacturing competence
more than 50 years ago. Through tireless trial and error, the
company gradually took what started as a loose collection
of techniques and practices and integrated them into a fullfledged process that has come to be known as the Toyota
Production System (TPS). The TPS drives all plant
operations and the companys supply chain management
practices. TPS is grounded in the following principles,
practices, and techniques:
Use just-in-time delivery of parts and components to the
point of vehicle assembly.
Develop people who can come up with unique ideas for
production improvements.
Emphasize continuous improvement.
Empower workers to stop the assembly line when theres
a problem or a defect is spotted.
Deal with defects only when they occur.
Ask yourself Why? five times.
Organize all jobs around human motion to create a
production/assembly system with no wasted effort.
Find where a part is made cheaply and use that price as a
benchmark.

The TPS utilizes a unique vocabulary of terms (such as

kanban, takt-time, jikoda, kaizen, heijunka, monozukuri, poka
yoke, and muda ) that facilitates precise discussion of
specific TPS elements. In 2003, Toyota established a Global
Production Center to efficiently train large numbers of shopfloor experts in the latest TPS methods and better operate an
increasing number of production sites worldwide. Since then,
additional upgrades and refinements have been introduced,
some in response to the large number of defects in Toyota
vehicles that surfaced in 20092010.
There is widespread agreement that Toyotas ongoing effort
to refine and improve on its renowned TPS gives it important
manufacturing capabilities that are the envy of other motor
vehicle manufacturers. Not only have such auto manufacturers as Ford, Daimler, Volkswagen, and General Motors
attempted to emulate key elements of TPS, but elements of
Toyotas production philosophy have been adopted by
hospitals and postal services.
Sources: Information posted at www.toyotageorgetown.com;
Hirotaka Takeuchi, Emi Osono, and Norihiko Shimizu, The
Contradictions that Drive Toyotas Success, Harvard
Business Review 86, no. 6 (June 2008), pp. 96104; and
Taiichi Ohno, Toyota Production System: Beyond Large-Scale
Production (New York:Sheridan Books, 1988).

10-17

Matching Organizational Structure

to the Strategy
Key value chain activities that deliver value
to the customer are critical to its proficient
strategic performance.
Structure follows strategya changed
strategy requires a new or different structure
and new or different key activities and
capabilities.
Attempting a new strategy with an outdated

organizational structure is unwise.

10-18

Types of Organizational Structures

Functional (or Departmental) Structure
Organizes strategy critical activities into functional,

product, geographic, process, or customer groups

Multidivisional (or Divisional) Structure

Organizes value chain activities involved in making a

product or service available to consumers into a

common (self-contained) division

Matrix Structure
Allows for dual reporting relationships between

divisional heads and departmental heads

10-19

Organizational Structure and

Authority in Decision Making
In a centralized structure:
Top managers retain authority for most decisions.

In a decentralized structure:
Decision-making authority is pushed down to the

lowest organizational level capable of making timely,

informed, competent decisions.

The trend in most companies

A shift from authoritarian to decentralized structures

stressing empowerment
10-20

Characteristics of
Centralized Decision Making
Retention of authority by top executives
Command and control paradigm reins in lower-level managers

Minimal discretionary authority

Frontline supervisors and rank-and-file employees must seek

prior approval by their superiors for their actions

Key advantage
Easy to know who is accountable when things do not go well

Disadvantages
Bureaucracy creates sluggish response to changing conditions
Large firms with widely scattered operations require that

decision making authority be granted to on-site managers

10-21

Exercising Control Over the Actions

of Empowered Employees
Place limits on the authority that empowered
personnel can exercise
Hold employees accountable for their decisions
Institute compensation incentives that reward
people for doing their jobs in a manner that
contributes to good company performance
Create a corporate culture where there is strong peer
pressure for employees to act responsibly

10-22

Facilitating Collaboration with External

Partners and Strategic Allies
Actively manage collaborative relationships:
Appoint relationship managers with responsibility for

fostering strategic partnership success through:

Getting the right people together

Promoting good rapport
Facilitating the flow of information
Nurturing interpersonal communication and cooperation
Ensuring effective coordination.

Adopt a network structure that links independent

organizations involved in cooperative arrangements

to achieve some common undertaking.

10-23

CORE CONCEPT
A network
network structure
structure is the arrangement linking a
number
number of
of independent
independent organizations involved in
some common
common undertaking.
undertaking.

10-24

Allocating Resources to
Strategy-Critical Activities
Reasons for the allocation process include:
To determine what funding is needed to execute new strategic

initiatives
To bolster value-creating processes
To strengthen the firms capabilities and competencies

Allocating resources to support strategy execution

involves:
Funding promising proposals; turning down those that do not
Providing the proper amount of funding to support new strategic

initiatives
Reallocation of resources to support new strategies

10-25

Instituting Strategy Supportive

Policies and Procedures
Strategy execution is facilitated by policies
and procedures that:
Help enforce the needed consistency in how

particular strategy critical activities are performed.

Provide top-down guidance regarding how certain

things need to be done.

Promote a work climate that facilitates good strategy

execution.

10-26

When Do Policies and Procedures

Become Excessive?
Too much policy:
Can be confusing and erect obstacles to good

strategy implementation.
Is inappropriate when individual creativity and

initiative are more essential to good strategy

execution than standardization and strict conformity.

There is wisdom in a middle approach:

Prescribe enough policies to place boundaries on

employees actions; then empower them to act within

these boundaries in ways they think makes sense.
10-27

Striving for Continuous Improvement

in Processes and Activities

Key tools for continuous

improvement

Business
process
reengineering

Total quality
management
(TQM) programs

Six Sigma
quality control
techniques

10-28

Management Tools for

Continuous Improvement
Business process reengineering
Involves pulling the pieces of strategy-critical activities

out of different departments and unifying their

performance in a single department or crossfunctional work group

Total quality management (TQM)

Emphasizes continuous improvement in all phases of

operations, 100% accuracy in performing tasks,

involvement and empowerment of employees at all
levels and departments, team-based work design,
benchmarking, and total customer satisfaction.
10-29

Management Tools for

Continuous Improvement (contd)
Six Sigma
Is a statistics-based quality control system aimed at

producing not more than 3.4 defects per million

iterations for any business processfrom
manufacturing to customer transactions.
Seeks to define, measure, analyze, improve, and

control variability in the organizations processes.

Improves the efficiency of operating activities and

processes, but its rigidity can also stifle innovation.

10-30

Concepts &
WHIRLPOOLS USE OF SIX SIGMA
Connections 10.2 TO PROMOTE OPERATING EXCELLENCE

10-31

The Difference between

Business Process Reengineering and
Continuous Improvement Programs
Business process reengineering aims at
quantum gains of 30 to 50%
Continuous improvement programs stress
incremental progressthe never-ending
pursuit of inch-by-inch quality gains.
Business Process Reengineering
TQM

10-32

Installing Information and

Operating Systems
Execution of strategies and value-creating
internal processes depend on a number of
internal operating systems.
Information systems are needed to track and
report data on:
Customers
Operations
Employees
Suppliers
Finances
10-33

Trends in Information Systems

Up-to-the-minute reporting:
Manufacturers have daily production reports
Retail companies have real-time inventory and sales

records for each item

Manufacturers and retailers are able to use online
systems to monitor inventories and track shipments
and deliveries

Real-time information systems permit

managers to quickly intervene changes if
initiatives and operations drift off course

10-34

Using Rewards and Incentives to

Promote Better Strategy Execution
Rewards should motivate employees to
focus on what results must be achieved and
not on simply performing their jobs.
Reward systems should include both
monetary and non-monetary incentives.

10-35

Guidelines for Designing

Monetary Incentive Plans
Tie incentives to strategy
execution and financial
performance

Make performance payoff

a major piece of the total
compensation package

Have incentives that

extend to all managers
and all workers

Administer the reward

system with scrupulous
objectivity and fairness

Compensation
Incentives

Set performance targets

that individuals or teams
can personally affect

Keep time between

achievement and reward
as short as possible

10-36

Common Non-Monetary Rewards

Used to Enhance Motivation
Provide attractive perks and fringe benefits
Adopt promotion from within policies
Act on suggestions from employees
Create a work atmosphere where there is genuine
sincerity, caring, and mutual respect among all
employees
Share information with employees about financial
performance, strategy, operational measures, market
conditions, and competitors actions
Have attractive office spaces and facilities
10-37

Concepts &
Connections 10.3

WHAT COMPANIES DO TO MOTIVATE AND

REWARD EMPLOYEES

10-38

Instilling a Corporate Culture that

Promotes Good Strategy Execution
A corporate culture :
Is the firms organizational DNAits approach to

people management
Is comprised of shared core values, beliefs, and

business principles that are engrained in employee

behaviors and attitudes
defines its operating stylethe chemistry of the firms

work environment (how we do things around here)

10-39

CORE CONCEPT
Corporate
Corporate culture
culture is
is a firms internal
internal work
work
climate and is shaped
shaped by
by its
its core
core values,
values, beliefs,
beliefs,
and business principles. A
A firms culture is
important
important because
because itit influences
influences its
its traditions,
traditions,
work practices, and style of operating.

10-40

High-Performance Cultures
Standout cultural traits include:
A can-do spirit
Pride in doing things right
No-excuses accountability
A results-oriented work climate in which people go

the extra mile to achieve performance targets.

10-41

Characteristics of
High-Performance Cultures
A strong sense of involvement by all
employees
An emphasis on individual initiative and
creativity
Clear statement of performance expectations
Prompt addressing of critical issues
Constructive pressure to achieve good results

10-42

Adaptive Cultures
Adaptive cultures are well-suited to fastchanging industries
Characteristics of adaptive cultures include:
Willingness to accept change and embrace challenge

of introducing and executing new strategies.

Internal entrepreneurship on the part of individuals
and groups is encouraged and rewarded.
Adopting a proactive approach to identifying issues,
evaluating the implications and options, and quickly
moving ahead with workable solutions

10-43

Concepts &
Connections 10.4

THE CULTURE THAT DRIVES INNOVATION

AT W.L. GORE & ASSOCIATES

10-44

Unhealthy Corporate Cultures

Highly politicized internal environment
Issues are resolved on the basis of political clout

Hostility to change
Avoid risks; experimentation and efforts to alter status quo are

discouraged

Insular, inwardly-focused Not-invented-here mindset

Personnel discount the need to look outside for best practices

Disregard for high ethical standards

Presence of incompatible, clashing subcultures

10-45

FIGURE 10.2

Steps in Changing a Problem Culture

10-46

Making a Compelling Case

for a Culture Change
Cite reasons the current strategy has
to be modified and why new strategic
initiatives are being undertaken.

Why the
need for
change?

Cite why and how current behavioral

norms and work practices are
obstacles to new strategic initiatives
Explain how new behaviors and work
practices will produce better results.

10-47

Substantive Culture-Changing Actions

1. Replace key executives who stonewall needed
organizational and cultural changes.
2. Promote individuals who advocate for the shift to a
different culture and who can serve as role models
for the desired cultural behavior.
3. Appoint outsiders with desired cultural attributes
to high-profile positionsnew-breed managers
send an unambiguous message that a new era is
dawning.
4. Screen candidates for new positions carefully,
hiring only those who fit in with the new culture.

10-48

Substantive Culture-Changing Actions

(contd)
5. Mandate that all personnel attend culture-training
programs to better understand the culture-related
actions and behaviors that are expected.
6. Design compensation incentives that boost the pay
of teams and individuals who display the desired
cultural behaviors, while hitting change-resisters in
the pocketbook.
7. Revise policies and procedures in ways that will
help drive cultural change.

10-49

Symbolic Culture Changing Actions

Lead by executive exampleexecutives must
be alert to the fact that company personnel
will be watching their actions and decisions
to see if they are walking the talk.
Executives promote the strategyculture fit
by appearing at ceremonial functions to
celebrate the culture and praise individuals
and groups that get with the program.

10-50

Leading the Strategy Execution Process

Managers at all levels of the firm must:
1. Stay on top of what is happening and closely

monitoring progress by engaging in managing by

walking around (MBWA)
2. Put constructive pressure on the organization to

achieve good results and operating excellence.

3. Not delay in initiating corrective actions to improve

strategy execution and achieve the targeted

performance results.

10-51

Putting Constructive Pressure on

Organizational Units to Achieve
Good Results and Operating Excellence
Focus attention on
continuous improvement

Treat employees with

dignity and respect

Encourage employee
initiative and creativity

Set stretch objectives

and clearly communicate
expectations

Fostering
a resultsoriented, highperformance
culture

Use motivation and

compensation to reward
high performance

Celebrate individual,
group, and company
successes

10-52

Pushing Corrective Actions to Improve

Both the Companys Strategy and
Its Execution

Deciding when
adjustments are
needed

Making
corrective
adjustments

Deciding what
adjustments to
make

10-53