Business Strategy Presentation1

1©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightChapter OutlineLinking Budgets to StrategyCreating Strategy-Supportive PoliciesInstituting Best Practices and a Commitment to Continuous ImprovementInstalling Support SystemsStrategy-Supportive Motivational Practices and Reward Systems2©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightLinking Budgets to StrategyAllocating resources in ways that support effective strategy execution involves Funding capital projects that can make a contribution to strategy implementationFunding efforts to strengthencompetencies 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 role3©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightHow Policies and ProceduresAid Strategy ImplementationProvide top-down guidance regarding expected behaviorsHelp align internal actions with strategy, channeling efforts along the intended pathEnforce consistency in performance of activities in geographically scattered unitsServe as powerful lever for changing corporate culture to produce stronger fit with a new strategy 4©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightCharacteristics of BenchmarkingInvolves determining how wella firm performsparticular activitiesand processesagainst“Best in industry”and/or “Best in world”performersRepresents a solid methodologyto identify options to improveCaution-Exact duplicationof best practicesof other firms is not feasibledue to differences in implementation situationsBest approach-Best practicesof other firms need to be modified or adaptedto a firm’s own specific situationBest Practices5©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightWhat is Total Quality Management?TQMis 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 empowerment of employees at all levels,Team-based work design,Benchmarking, andFully satisfying customer expectations6©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightGoals of Quality Improvement ProgramsDefect-free manufactureSuperior product qualitySuperior customer serviceTotal customer satisfaction7©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightPopular TQM ApproachesDeming’s 14 Points1992 Baldridge Award CriteriaThe Juran TrilogyCrosby’s 14 Quality Steps8©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightTable 12.1: Components ofPopular TQM Approaches1.Constancy of purpose2.Adopt the philosophy3.Don’t rely on mass inspection4.Don’t award business on price5.Constant improvement6.Training7.Leadership8.Drive out fear9.Break down barriers10.Eliminate slogans and exhortations11.Eliminate quotas12.Pride of workmanship13.Education and retraining14.Plan of actionDeming’s 14 Points9©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightThe Juran TrilogyQuality PlanningQuality ControlQuality Improvement•Set goals•Identify customers and their needs•Develop products and processes•Evaluate performance•Compare to goals and adapt•Establish infrastructure•Identify projects and teams•Provide resources and training•Establish controls Table 12.1: Components ofPopular TQM Approaches10©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyright1.Management commitment2.Quality improvement teams3.Quality measurement4.Cost of quality evaluation5.Quality awareness6.Corrective action7.Zero-defects committee8.Supervisor training9.Zero-defects day10.Goal-setting11.Error cause removal12.Recognition13.Quality councils14.Do it over againCrosby’s 14 Quality StepsTable 12.1: Components ofPopular TQM Approaches11©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyright1992 Baldridge Award Criteria (1000 points)Quality1. Leadership (90 points)2. Information & analysis (80 points)3. Strategic quality planning (60 points)4. Human resource development (150 points)5. Management of process quality (140 points)6. Quality & operation results (180 points)7. Customer focus & satisfaction (300 points)Table 12.1: Components ofPopular TQM Approaches12©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightTwelve Aspects Common to TQM and Continuous Improvement Programs1.Committed leadership2.Adoption and communication of TQM3.Closer customer relationships4.Closer supplier relationships5.Benchmarking6.Increased training7.Open organization8.Employee empowerment9.Zero-defects mentality10.Flexible manufacturing11.Process improvement12.Measurement13©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightInstalling Support SystemsEssential to promote successful strategy executionTypes of support systemsOn-line data systemsInternet and company intranetsElectronic mailE-commerce systemsMobilizing information and creating systems to use knowledge effectively can yieldCompetitive advantage14©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightWhat Areas ShouldInformation Systems Address?Customer dataOperations dataEmployee dataSupplier/partner/collaborative ally dataFinancial performance data15©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightExercising Adequate ControlOver Empowered EmployeesChallengeHow to ensure actions of employees stay within acceptable boundsPurpose of diagnostic control systemsRelieve managers of burden of constant monitoringControl methodsEstablish boundaries on what not to do, allowing freedom to act with limitsFace-to-face meetings to assess performance16©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightGaining Commitment: Componentsof an Effective Reward SystemMonetary IncentivesSalary raisesPerformance bonuses Stock optionsRetirement packagesPromotionsPerksNon-monetary IncentivesPraiseConstructive criticismSpecial recognitionMore, or less, job securityInteresting assignmentsMore, or less, job responsibility17©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightApproaches: Motivating Peopleto Execute the Strategy WellInspire employees to do their bestGet employees to buy into strategyStructure individual efforts in teams to facilitate a supportive climateAllow employees to participate in decisions about their jobsMake jobs interesting and satisfyingDevise strategy-supportive motivational approaches18©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightLinking the Reward Systemto Performance OutcomesRewards are the single most powerful tool to win commitmentto the strategyObjectivesGenerously reward those achieving objectivesDeny rewards to those who don’tMake strategic performance measures the dominant basis for designing incentives, evaluating efforts, and handing out rewards19©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightKey Considerations inDesigning Reward SystemsCreate a results-orientedsystemRewardpeople for results, not for activityDefine jobs in terms of what to achieve Incorporate severalperformance measuresTie incentive compensation to relevant outcomesTop executives—Key measures of overallfirm performanceDepartment heads, teams, and individuals Incentives tied to achieving performance targets in their areas of responsibility20©2001 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinCopyrightGuidelines for Designing anEffective Compensation System1.Payoff must be a major, not minor, piece of total compensation package2.Incentive plan should extend to all employees3.Administer system with scrupulous fairness4.Link incentives to achieving only the performance targets in strategic plan5.Targets each person is expected to achieve must involve outcomes that can be personally affected6.Keep time between performance review and payment short7.Make liberal use of non-monetary rewards8.Avoid ways of rewarding non-performers