MPCS Execution People.ppt best presentation
- 1. Copyright © 2014 by The McGraw-Hill Education All rights reserved. 19e Global Edition THOMPSON | PETERAF | GAMBLE | STRICKLAND CHAPTER 10 BUILDING AN ORGANIZATION CAPABLE OF BUILDING AN ORGANIZATION CAPABLE OF GOOD STRATEGY EXECUTION: PEOPLE, GOOD STRATEGY EXECUTION: PEOPLE, CAPABILITIES, AND STRUCTURE CAPABILITIES, AND STRUCTURE MANAGEMENT POLICIES & CORPORATE STRATEGY
- 2. 10–2 1. Gain command of what managers must do to execute strategy successfully. 2. Learn why hiring, training, and retaining the right people constitute a key component of the strategy execution process. 3. Understand that good strategy execution requires continuously building and upgrading the organization’s resources and capabilities. 4. Recognize what issues to consider in establishing a strategy- supportive organizational structure and organizing the work effort. 5. Become aware of the pros and cons of centralized and decentralized decision making in implementing the chosen strategy.
- 3. EXECUTING STRATEGY EXECUTING STRATEGY Strategy Execution Strategy Execution ● Is operations-driven, involving management of both Is operations-driven, involving management of both people and business processes. people and business processes. ● Is a job for the whole management team, not just a Is a job for the whole management team, not just a few senior managers. few senior managers. ● Can take years longer to develop as a real Can take years longer to develop as a real proficiency than implementing strategy. proficiency than implementing strategy. ● Requires a determined commitment to change, Requires a determined commitment to change, action, and performance. action, and performance. 10–3
- 4. A FRAMEWORK FOR EXECUTING A FRAMEWORK FOR EXECUTING STRATEGY STRATEGY Committing to Executing a Strategy: Committing to Executing a Strategy: ● Entails figuring out the specific techniques, actions, Entails figuring out the specific techniques, actions, and behaviors necessary for a smooth strategy- and behaviors necessary for a smooth strategy- supportive operation. supportive operation. ● Following through to get things done and deliver Following through to get things done and deliver results. results. ● Making things happen (leadership) and making them Making things happen (leadership) and making them happen right (management). happen right (management). 10–4
- 5. FIGURE 10.1 The 10 Basic Tasks of the Strategy Execution Process Chapter 10 Chapter 12 Chapter 11 The Action Agenda for Executing Strategy 10–5
- 6. 1. 1. Staff the organization with Staff the organization with managers and employees managers and employees capable of executing the capable of executing the strategy well. strategy well. 2. 2. Build the organization’s Build the organization’s capabilities required for capabilities required for successful strategy execution. successful strategy execution. 3. 3. Create a strategy-supportive Create a strategy-supportive organizational structure. organizational structure. 4. 4. Allocate sufficient budgetary Allocate sufficient budgetary (and other) resources to the (and other) resources to the strategy execution effort. strategy execution effort. 5. 5. Institute policies and Institute policies and procedures that facilitate procedures that facilitate strategy execution. strategy execution. 6. 6. Adopt best practices and business Adopt best practices and business processes that drive continuous processes that drive continuous improvement of execution activities. improvement of execution activities. 7. 7. Install information and operating Install information and operating systems that enable personnel to systems that enable personnel to carry out their strategic roles carry out their strategic roles proficiently. proficiently. 8. 8. Tie rewards and incentives directly Tie rewards and incentives directly to the achievement of strategic and to the achievement of strategic and financial targets. financial targets. 9. 9. Instill a corporate culture that Instill a corporate culture that promotes good strategy execution. promotes good strategy execution. 10. 10.Exercise the internal leadership Exercise the internal leadership needed to propel strategy needed to propel strategy implementation forward. implementation forward. THE PRINCIPAL COMPONENTS OF THE PRINCIPAL COMPONENTS OF THE STRATEGY EXECUTION PROCESS THE STRATEGY EXECUTION PROCESS 10–6
- 7. STRATEGIC MANAGEMENT PRINCIPLE STRATEGIC MANAGEMENT PRINCIPLE ♦ When strategies fail, it is often because of poor When strategies fail, it is often because of poor execution. Strategy execution is therefore a execution. Strategy execution is therefore a critical managerial endeavor. critical managerial endeavor. ♦ The two best signs of good strategy execution The two best signs of good strategy execution are whether a company is meeting or beating are whether a company is meeting or beating its performance targets and whether they are its performance targets and whether they are performing value chain activities in a manner performing value chain activities in a manner that is conducive to companywide operating that is conducive to companywide operating excellence. excellence. 10–7
- 8. BUILDING AN ORGANIZATION CAPABLE BUILDING AN ORGANIZATION CAPABLE OF GOOD STRATEGY EXECUTION: OF GOOD STRATEGY EXECUTION: THREE KEY ACTIONS THREE KEY ACTIONS 1. 1. Staffing Staffing: : Assemble a strong management Assemble a strong management team and a cadre of competent employees. team and a cadre of competent employees. 2. 2. Developing Developing: Renew, upgrade, and revise : Renew, upgrade, and revise resources and capabilities to match chosen resources and capabilities to match chosen strategy. strategy. 3. 3. Structuring Structuring: Create strategy-supportive : Create strategy-supportive organization capable of good strategy organization capable of good strategy execution. execution. 10–8
- 9. FIGURE 10.2 Building an Organization Capable of Proficient Strategy Execution: Three Types of Paramount Actions 10–9
- 10. STRATEGIC MANAGEMENT PRINCIPLE STRATEGIC MANAGEMENT PRINCIPLE ♦ Putting together a talented management team Putting together a talented management team with the right mix of experiences, skills, and with the right mix of experiences, skills, and abilities to get things done is one of the first abilities to get things done is one of the first steps to take in launching the strategy- steps to take in launching the strategy- executing process. executing process. 10–10
- 11. STAFFING THE ORGANIZATION STAFFING THE ORGANIZATION Putting Together a Strong Management Team: Putting Together a Strong Management Team: ● Planners who ask tough questions and figure out Planners who ask tough questions and figure out what needs to be done. what needs to be done. ● Implementers who can select, manage, and lead the Implementers who can select, manage, and lead the right people. right people. ● Executors who turn decisions into actions that drive Executors who turn decisions into actions that drive the changes that produce sustainable competitive the changes that produce sustainable competitive advantage. advantage. Key Takeaway: Key Takeaway: ● A critical mass of talented activist managers A critical mass of talented activist managers 10–11
- 12. STRATEGIC MANAGEMENT PRINCIPLE STRATEGIC MANAGEMENT PRINCIPLE ♦ In many industries, adding to a company’s In many industries, adding to a company’s talent base and building intellectual capital are talent base and building intellectual capital are more important to good strategy execution than more important to good strategy execution than additional investments in capital projects. additional investments in capital projects. 10–12
- 13. RECRUITING, TRAINING, AND RECRUITING, TRAINING, AND RETAINING CAPABLE EMPLOYEES RETAINING CAPABLE EMPLOYEES Intensively screen and evaluate applicants to ensure Intensively screen and evaluate applicants to ensure selecting those who are best-suited and best-fitted. selecting those who are best-suited and best-fitted. Provide training programs throughout employee careers. Provide training programs throughout employee careers. Rotate promising people through challenging, and skill- Rotate promising people through challenging, and skill- stretching international assignments. stretching international assignments. Make the work environment stimulating and engaging Make the work environment stimulating and engaging so that the firm is considered a great place to work. so that the firm is considered a great place to work. Use an assortment of financial incentives and other perks Use an assortment of financial incentives and other perks to retain employees. to retain employees. Coach average performers to improve their skills and Coach average performers to improve their skills and capabilities, while weeding out underperformers. capabilities, while weeding out underperformers. 10–13
- 14. STRATEGIC MANAGEMENT PRINCIPLE STRATEGIC MANAGEMENT PRINCIPLE ♦ The best companies make a point of recruiting The best companies make a point of recruiting and retaining talented employees—the and retaining talented employees—the objective is to make the firm’s entire workforce objective is to make the firm’s entire workforce (managers and rank-and-file employees) a (managers and rank-and-file employees) a genuine competitive asset. genuine competitive asset. 10–14
- 15. ILLUSTRATION CAPSULE 10.1 ILLUSTRATION CAPSULE 10.1 “ “Build From Within”: P&G’s Approach Build From Within”: P&G’s Approach to Management Development to Management Development ♦ Why would you want to work as a manager for Why would you want to work as a manager for Proctor and Gamble? Proctor and Gamble? ♦ What long-term organizational problems could What long-term organizational problems could result from a heavy reliance on promote-from- result from a heavy reliance on promote-from- within? within? 10–15
- 16. ACQUIRING, DEVELOPING, ACQUIRING, DEVELOPING, AND STRENGTHENING AND STRENGTHENING KEY RESOURCES AND CAPABILITIES KEY RESOURCES AND CAPABILITIES Develop Develop capabilities capabilities internally internally Acquire capabilities through mergers and acquisitions Access capabilities via collaborative partnerships Approaches to Build Building and Strengthening Capabilities 10–16
- 17. STRATEGIC MANAGEMENT PRINCIPLE STRATEGIC MANAGEMENT PRINCIPLE ♦ Building new competencies and capabilities is Building new competencies and capabilities is a multistage process that occurs over a period a multistage process that occurs over a period of months and years. It is not something that is of months and years. It is not something that is accomplished overnight. accomplished overnight. 10–17
- 18. DEVELOPING CAPABILITIES DEVELOPING CAPABILITIES INTERNALLY INTERNALLY Coordinate and Coordinate and integrate the efforts integrate the efforts of work groups and of work groups and departments departments Strengthen the firm’s base of skills, knowledge, and intellect Managerial Actions to Develop Competencies and Capabilities 10–18
- 19. STRATEGIC MANAGEMENT PRINCIPLE STRATEGIC MANAGEMENT PRINCIPLE ♦ A company’s capabilities must be continually A company’s capabilities must be continually refreshed and renewed to remain aligned with refreshed and renewed to remain aligned with changing customer expectations, altered changing customer expectations, altered competitive conditions, and new strategic competitive conditions, and new strategic initiatives. initiatives. 10–19
- 20. SETTING STRETCH GOALS: SETTING STRETCH GOALS: FROM CAPABILITY TO COMPETENCE FROM CAPABILITY TO COMPETENCE Thinking strategically about a firm’s knowledge and skills base Thinking strategically about a firm’s opportunities and challenges Setting a stretch goal of developing an organizational ability to do something well Evolving the ability into a competence or capability by performing it well and at an acceptable cost Refreshing, updating, and upgrading competencies and capabilities as necessary to gain and maintain competitive advantage 10–20
- 21. ACQUIRING CAPABILITIES THROUGH ACQUIRING CAPABILITIES THROUGH MERGERS AND ACQUISITIONS MERGERS AND ACQUISITIONS A Question of A Question of Market Opportunity Market Opportunity When a market opportunity can slip by faster than a needed capability can be created internally. A Question of A Question of Competitive Necessity Competitive Necessity When industry conditions, technology, or competitors are moving at such a rapid clip that time is of the essence. A Question of A Question of Successful Integration Successful Integration Tacit knowledge and complex routines may not transfer readily from one organizational unit to another. 10–21
- 22. ILLUSTRATION CAPSULE 10.2 ILLUSTRATION CAPSULE 10.2 Toyota’s Legendary Production System: A Capability Toyota’s Legendary Production System: A Capability that Translates into Competitive Advantage that Translates into Competitive Advantage ♦ What about the Toyota Production System (TPS) What about the Toyota Production System (TPS) makes it so difficult for competitors to imitate makes it so difficult for competitors to imitate successfully? successfully? ♦ What is the relationship between continuous What is the relationship between continuous improvement and efficiency in the TPS? improvement and efficiency in the TPS? ♦ Why would an Ishikawa (fish bone) diagram be Why would an Ishikawa (fish bone) diagram be helpful in solving problems in the TPS? helpful in solving problems in the TPS? 10–22
- 23. ACCESSING CAPABILITIES ACCESSING CAPABILITIES THROUGH COLLABORATIVE THROUGH COLLABORATIVE PARTNERSHIPS PARTNERSHIPS Outsource the Outsource the function requiring function requiring the capabilities to the capabilities to a key supplier or a key supplier or another provider another provider Collaborate with a firm that has complementary resources and capabilities Engage in a collaborative partnership for the purpose of learning how the partner does things Approaches to acquiring capabilities from an external source 10–23
- 24. THE STRATEGIC ROLE OF THE STRATEGIC ROLE OF EMPLOYEE TRAINING EMPLOYEE TRAINING Training Is Important In: Training Is Important In: ● Executing a strategy that requires different skills, Executing a strategy that requires different skills, competitive capabilities, and operating methods. competitive capabilities, and operating methods. ● Organizational efforts to build skills-based Organizational efforts to build skills-based competencies. competencies. ● Supplying technical know-how to employees Supplying technical know-how to employees when rapidly changing technology puts a firm when rapidly changing technology puts a firm in danger of losing its ability to compete. in danger of losing its ability to compete. 10–24
- 25. STRATEGY EXECUTION CAPABILITIES STRATEGY EXECUTION CAPABILITIES AND COMPETITIVE ADVANTAGE AND COMPETITIVE ADVANTAGE Superior Strategy Execution Capabilities: Superior Strategy Execution Capabilities: ● Are difficult to imitate and socially complex process Are difficult to imitate and socially complex process that take a long time to develop. that take a long time to develop. ● Maximize organizational resources and competitive Maximize organizational resources and competitive capabilities in support of the business model. capabilities in support of the business model. ● Lower costs and permit firms to deliver more value Lower costs and permit firms to deliver more value to customers. to customers. ● Enable a firm to react more quickly to market Enable a firm to react more quickly to market changes, beat competitors to market with new changes, beat competitors to market with new products and services, and gain uncontested products and services, and gain uncontested market dominance. market dominance. 10–25
- 26. STRATEGIC MANAGEMENT PRINCIPLE STRATEGIC MANAGEMENT PRINCIPLE ♦ Superior strategy execution capabilities are Superior strategy execution capabilities are the only source of sustainable competitive the only source of sustainable competitive advantage when strategies are easy for advantage when strategies are easy for rivals to copy. rivals to copy. 10–26
- 27. MATCHING ORGANIZATIONAL MATCHING ORGANIZATIONAL STRUCTURE TO THE STRATEGY STRUCTURE TO THE STRATEGY Ensuring that Structure Follows Strategy By: Ensuring that Structure Follows Strategy By: ● Deciding which value chain activities to perform Deciding which value chain activities to perform internally and which to outsource. internally and which to outsource. ● Aligning the firm’s organizational structure with its Aligning the firm’s organizational structure with its strategy. strategy. ● Determining how much authority to delegate. Determining how much authority to delegate. ● Facilitating collaboration with external partners and Facilitating collaboration with external partners and strategic allies. strategic allies. 10–27
- 28. FIGURE 10.3 Structuring the Work Effort to Promote Successful Strategy Execution 10–28
- 29. DECIDING WHICH VALUE CHAIN DECIDING WHICH VALUE CHAIN ACTIVITIES TO PERFORM INTERNALLY ACTIVITIES TO PERFORM INTERNALLY AND WHICH TO OUTSOURCE AND WHICH TO OUTSOURCE Outsourcing’s Execution-Related Benefits: Outsourcing’s Execution-Related Benefits: ● Helps in outclassing rivals in strategy-critical activities Helps in outclassing rivals in strategy-critical activities and in turning a core competence into a distinctive and in turning a core competence into a distinctive competence. competence. ● Decreases bureaucracies, flattens structure, speeds Decreases bureaucracies, flattens structure, speeds decision making, and shortens respond time to decision making, and shortens respond time to changing market conditions. changing market conditions. ● Adds to a firm’s capabilities and contributes to better Adds to a firm’s capabilities and contributes to better strategy execution through partnerships with strategy execution through partnerships with suppliers and channel partners. suppliers and channel partners. 10–29
- 30. STRATEGIC MANAGEMENT PRINCIPLE STRATEGIC MANAGEMENT PRINCIPLE ♦ Wisely choosing which activities to perform Wisely choosing which activities to perform internally and which to outsource can lead to internally and which to outsource can lead to several strategy-executing advantages—lower several strategy-executing advantages—lower costs, heightened strategic focus, less internal costs, heightened strategic focus, less internal bureaucracy, speedier decision making, and a bureaucracy, speedier decision making, and a better arsenal of organizational capabilities. better arsenal of organizational capabilities. 10–30
- 31. ALIGNING THE FIRM’S ORGANIZATIONAL ALIGNING THE FIRM’S ORGANIZATIONAL STRUCTURE WITH ITS STRATEGY STRUCTURE WITH ITS STRATEGY Organizational Structure Organizational Structure ● Comprises the formal and informal arrangement Comprises the formal and informal arrangement of tasks, responsibilities, lines of authority, and of tasks, responsibilities, lines of authority, and reporting relationships for the firm. reporting relationships for the firm. Structure Is Aligned with Strategy When: Structure Is Aligned with Strategy When: ● Its design contributes to the creation of value for Its design contributes to the creation of value for customers. customers. ● Its parts are aligned with one another and also Its parts are aligned with one another and also matched to the requirements of the strategy. matched to the requirements of the strategy. ● It lowers operating costs through lower bureaucratic It lowers operating costs through lower bureaucratic costs and operational efficiencies. costs and operational efficiencies. 10–31
- 32. CORE CONCEPT CORE CONCEPT ♦ A firm’s organizational structure comprises the A firm’s organizational structure comprises the formal and informal arrangement of tasks, formal and informal arrangement of tasks, responsibilities, lines of authority, and reporting responsibilities, lines of authority, and reporting relationships by which the firm is administered. relationships by which the firm is administered. 10–32
- 33. ♦ How important is outsourcing to How important is outsourcing to Apple’s marketplace success? Apple’s marketplace success? ♦ Is outsourcing to low-wage overseas Is outsourcing to low-wage overseas manufacturers to avoid paying higher manufacturers to avoid paying higher wages in markets where it sells the wages in markets where it sells the majority of its products a failure of majority of its products a failure of corporate social responsibility by Apple? corporate social responsibility by Apple? ILLUSTRATION CAPSULE 10.3 ILLUSTRATION CAPSULE 10.3 Which Value Chain Activities Does Apple Which Value Chain Activities Does Apple Outsource and Why? Outsource and Why? 10–33
- 34. MATCHING TYPE OF ORGANIZATIONAL MATCHING TYPE OF ORGANIZATIONAL STRUCTURE TO STRATEGY EXECUTION STRUCTURE TO STRATEGY EXECUTION REQUIREMENTS REQUIREMENTS Simple Structure (Line-and-Staff) Functional Structure (Departmental or Unitary) Multidivisional Structure (Divisional or M-form) Matrix Structure (Composite or Combination) Strategy Execution Requirements: Chosen Strategy Capabilities and Competencies Centralized or Decentralized Control 10–34
- 35. CORE CONCEPTS CORE CONCEPTS ♦ A A simple structure simple structure ( (line-and-staff structure line-and-staff structure) ) consists of a central executive (often the consists of a central executive (often the owner-manager) who handles all major owner-manager) who handles all major decisions and oversees all operations with the decisions and oversees all operations with the help of a small staff. help of a small staff. ♦ A A functional structure functional structure is organized into is organized into functional departments, with departmental functional departments, with departmental managers who report to the CEO and managers who report to the CEO and small corporate staff. small corporate staff. 10–35
- 36. CORE CONCEPTS CORE CONCEPTS ♦ A A multidivisional structure multidivisional structure is a decentralized is a decentralized structure consisting of a set of operating structure consisting of a set of operating divisions organized along business, product, divisions organized along business, product, customer group, or geographic lines, and a customer group, or geographic lines, and a central corporate headquarters that allocates central corporate headquarters that allocates resources, provides support functions, and resources, provides support functions, and monitors divisional activities. monitors divisional activities. ♦ A A matrix structure matrix structure combines two or more combines two or more organizational forms, with multiple organizational forms, with multiple reporting relationships. It is used reporting relationships. It is used to foster cross-unit collaboration. to foster cross-unit collaboration. 10–36
- 37. DETERMINING HOW MUCH DETERMINING HOW MUCH AUTHORITY TO DELEGATE AUTHORITY TO DELEGATE Organizational Organizational Approach to Approach to Decision- Decision- Making Making Decentralized Decentralized Decision Decision Making Making Centralized Centralized Decision Decision Making Making Authority is retained by top management Authority delegated to lower-level managers and employees 10–37
- 38. TABLE 10.1 Advantages and Disadvantages of Centralized versus Decentralized Decision Making Centralized Centralized Organizational Structures Organizational Structures Decentralized Decentralized Organizational Structures Organizational Structures Basic Tenets Basic Tenets • Decisions on most matters of importance should be in the hands of top-level managers who have the experience, expertise, and judgment to decide what is the best course of action • Lower-level personnel have neither the knowledge, the time, nor the inclination to properly manage the tasks they are performing • Strong control from the top is a more effective means for coordinating the firm’s actions • Decision-making authority should be put in the hands of the people closest to, and most familiar with, the situation • Those with decision-making authority should be trained to exercise good judgment • A firm that draws on the combined intellectual capital of all its employees can outperform a command-and- control firm 10–38
- 39. Centralized Centralized Organizational Structures Organizational Structures Decentralized Decentralized Organizational Structures Organizational Structures Chief Advantages Chief Advantages • Fixes accountability through tight control from the top • Eliminates potential for conflicting goals and actions on the part of lower-level managers • Facilitates quick decision making and strong leadership under crisis situations • Encourages employees to exercise initiative and act responsibly • Promotes greater motivation and involvement in the business on the part of more company personnel • Spurs new ideas and creative thinking • Allows fast response to market change • Entails fewer layers of management Advantages and Disadvantages of Centralized versus Decentralized Decision Making (cont’d) TABLE 10.1 10–39
- 40. Centralized Centralized Organizational Structures Organizational Structures Decentralized Decentralized Organizational Structures Organizational Structures Primary Disadvantages Primary Disadvantages • Lengthens response times by those closest to the market conditions because they must seek approval for their actions • Does not encourage responsibility among lower-level managers and rank-and-file employees • Discourages lower-level managers and rank-and-file employees from exercising any initiative • Higher-level managers may be unaware of actions taken by empowered personnel under their supervision • Puts the organization at risk if empowered employees happen to make “bad” decisions • Can impair cross-unit collaboration Advantages and Disadvantages of Centralized versus Decentralized Decision Making (cont’d) TABLE 10.1 10–40
- 41. STRATEGIC MANAGEMENT PRINCIPLE STRATEGIC MANAGEMENT PRINCIPLE ♦ The ultimate goal of decentralized decision The ultimate goal of decentralized decision making is to put authority in the hands of those making is to put authority in the hands of those persons closest to and most knowledgeable persons closest to and most knowledgeable about the situation. about the situation. 10–41
- 42. CAPTURING CROSS-BUSINESS CAPTURING CROSS-BUSINESS STRATEGIC FIT IN A DECENTRALIZED STRATEGIC FIT IN A DECENTRALIZED STRUCTURE STRUCTURE Centralizing related functions Centralizing related functions requiring close coordination requiring close coordination at the corporate level at the corporate level Enforcing close cross- Enforcing close cross- business collaboration to business collaboration to avoid duplication of effort avoid duplication of effort Capturing Cross-Business Strategic Fit 10–42
- 43. STRATEGIC MANAGEMENT PRINCIPLE STRATEGIC MANAGEMENT PRINCIPLE ♦ Efforts to decentralize decision making and Efforts to decentralize decision making and give company personnel some leeway in give company personnel some leeway in conducting operations must be tempered with conducting operations must be tempered with the need to maintain adequate control and the need to maintain adequate control and cross-unit coordination. cross-unit coordination. 10–43
- 44. FACILITATING COLLABORATION WITH FACILITATING COLLABORATION WITH EXTERNAL PARTNERS AND EXTERNAL PARTNERS AND STRATEGIC ALLIES STRATEGIC ALLIES Strategic alliances Outsourcing arrangements Joint ventures Cooperative partnerships Creating a Creating a Network Network Structure: Structure: Using Using “relationship “relationship managers” managers” to build and to build and maintain maintain cooperative cooperative arrangements arrangements of value both of value both parties parties 10–44
- 45. CORE CONCEPT CORE CONCEPT ♦ A A network structure network structure is the arrangement is the arrangement linking a number of independent organizations linking a number of independent organizations involved in some common undertaking. involved in some common undertaking. 10–45
- 46. FURTHER PERSPECTIVES ON FURTHER PERSPECTIVES ON STRUCTURING THE WORK EFFORT STRUCTURING THE WORK EFFORT Pick a basic Pick a basic organizational organizational design that design that matches matches structure to structure to strategy strategy Supplement design with appropriate coordinating mechanisms Institute collaborative networking and communication arrangements Matching Structure to Strategy Matching Structure to Strategy 10–46