Chapter 12: Managing Internal Operations

Managing Internal Operations12ChapterScreen graphics created by:Jana F. Kuzmicki, Ph.D.Troy State University-Florida and Western Region Chapter RoadmapMarshaling Resources to Support the Strategy Execution EffortInstituting Policies and Procedures that Facilitate Strategy ExecutionAdopting Best Practices and Striving for Continuous ImprovementInstalling Information and Operating SystemsTying Rewards and Incentives Directly to Good Strategy ExecutionAllocating Resources toSupport Strategy Execution Allocating resources in ways to support effective strategy execution involves Funding strategic initiatives that can makea contribution to strategy implementationFunding efforts to strengthen competenciesand capabilities or to create new onesShifting resources — downsizing some areas,upsizing others, killing activities no longer justified,and funding new activities with a critical strategy roleFig. 12.1: How Prescribed Policies and Procedures Facilitate Strategy ExecutionCreating Strategy-SupportivePolicies and ProceduresRole of new policiesChannel behaviors and decisionsto promote strategy executionCounteract tendencies ofpeople to resist chosen strategyToo much policy can be as stifling as Wrong policy or as Chaotic as no policyOften, the best policy is empowering employees, letting them operate between the “white lines” anyway they think bestInstituting Best Practicesand Continuous ImprovementSearching out and adopting best practicesis integral to effective implementationBenchmarking is the backbone of the process of identifying, studying, and implementing best practicesKey tools to promote continuous improvementTQMSix sigma quality controlBusiness process reengineeringWhat Is a Best Practice?Any activity that at leastone company has provedworks particularly wellA path to operating excellenceBest PracticesCharacteristics of BenchmarkingInvolves determining how well a firm performs particular activities and processes when compared against“Best in industry” or “Best in world” performersGoal – Promote achievement of operating excellencein performing strategy-critical activitiesCaution – Exact duplication of best practicesof other firms is not feasible due to differencesin implementation situationsBest approach – Best practices of other firms need to be modified or adapted to fit a firm’s own specific situationFig. 12.2: From Benchmarking and Best-Practice Implementation to Operating ExcellenceWhat Is Total Quality Management?A philosophy of managing a set of business practices that emphasizesContinuous improvement in all phases of operations100 percent accuracy in performing activitiesInvolvement and empowermentof employees at all levelsTeam-based work designBenchmarking andTotal customer satisfaction Popular TQM Approaches Deming’s 14 PointsBaldridge AwardCriteria The Juran Trilogy Crosby’s 14 Quality StepsImplementing a Philosophyof Continuous ImprovementReform the corporate cultureInstill enthusiasm to do thingsright throughout companyStrive to achieve little steps forwardeach day (what the Japanese call kaizen)Ignite creativity in employees to improveperformance of value-chain activitiesPreach there is no such thing as good enoughWhat Is Six Sigma Quality Control?A disciplined, statistics-based system aimed atHaving not more than 3.4 defects per million iterations for any business practice -- from manufacturing to customer transactionsDMAIC process (Design, Measure, Analyze, Improve, Control)An improvement system for existing processes falling below specification and needing incremental improvementA great tool for improving performance when there are wide variations in how well an activity is performedDMADV process (Define, Measure, Analyze, Design, Verify)An improvement system used to develop new processes or products at Six Sigma quality levelsTQM vs. Process ReengineeringReengineeringAims at quantum gains of 30 to 50% or moreTQMStresses incremental progressTechniques are not mutually exclusiveReengineering – Used to produce a good basic design yielding dramatic improvementsTQM – Used to perfect process, gradually improving efficiency and effectivenessInstalling Strategy-Supportive Information and Operating SystemsEssential to promote successful strategy executionTypes of support systemsOn-line data systemsInternet and company intranetsElectronic mailE-commerce systemsMobilizing information and creating systemsto use knowledge effectively can yieldCompetitive advantageWhat Areas ShouldInformation Systems Address?Customer dataOperations dataEmployee dataSupplier/partner/collaborative ally dataFinancial performance dataExercising Adequate ControlOver Empowered EmployeesChallengeHow to ensure actions of employeesstay within acceptable boundsControl approachesManagerial control Establish boundaries on what not todo, allowing freedom to act with limitsTrack and review daily operating performancePeer-based controlGaining Commitment: Componentsof an Effective Reward SystemMonetary IncentivesBase pay increasesPerformance bonusesProfit sharing plans Stock optionsRetirement packagesPiecework incentivesNon-monetary IncentivesPraiseConstructive criticismSpecial recognitionMore, or less, job securityStimulating assignmentsMore, or less, autonomyRapid promotion Linking the Reward Systemto Performance OutcomesTying rewards to the achievement of strategic and financial performance targets is management’s single most powerful tool to win the commitment of company personnel to effective strategy executionObjectives in designing the reward systemGenerously reward thoseachieving objectivesDeny rewards to those who don’tMake the desired strategic and financial outcomes the dominant basis for designing incentives, evaluating efforts, and handing out rewards