Twelve Chapter Implementing Strategy: Budgets, Policies, Best Practices, Support Systems, and Rewards Linking Budgets to Strategy 1. Budgets are crucial to successful strategy implementation because Each organization unit should have the resources needed to perform its part of the strategic plan; They protect the firm's financial conditions and eliminate the wasting of cash; Too little funding deprives sub-units of the capacity to carry out their piece of the strategic plan; Too much funding wastes organization'l resources and reduces financial performance; Changes in strategy often require shifting resources from one are to another; 2. New strategies often entail budget reallocations because a. More money will be needed to create an information system to support a new strategy. b. The accompanying policy revisions and compensation incentives tend to require different levels of funding than before. c. The value chain activities and org'l units central to the old strategy are not necessarily centerstage in the new strategy. d. The task of empowering employees is usually expensive. 3. Forceful actions to reallocate operating funds and move people into different org'l units a. Signal a strong commitment to implementing strategic change and help give the credibility to the implementation process. b. Can be dysfunctional in trying to implement a new strategy because of anxiety and insecurity. c. Tend to impede the task of empowering employees and shifting to new culture. d. Are rarely necessary in implementing a new strategy unless the new strategy entails a racially different set of value chain activities. Creating Strategy-Supportive Policies and Procedures 4. Policies and operating procedures can aid the task of implementing strategy by Helping align actions and behavior with strategy; Placing desirable boundaries on independent action; Giving org'l members clear direction in implementing strategy; Channeling group efforts in ways that support better strategy execution; Helping ensure that worker eligibility for incentive bonuses is measured consistently and awarded fairly; Helping enforce needed consistency in how particular value chain activities are performed in geographically scattered organization unit. 5. Which one of the following is not a benefit of prescribing policies and operating procedures to aid management's task of implementing strategy? a. Helping align actions and behavior with strategy; b. Providing top-down guidance to operating managers, supervisory personnel, and employees regarding how things need to be done and what behavior is expected. c. Acting as a lever for helping change corporate culture in ways that promote a stronger fit with strategy. d. Helping build employee commitment to using best practices and TQM tools.
Instituting Best Practices, TQM, Continuous Improvement 6. Common features of TQM A zero-defects mentality Employee empowerment Benchmarking Continuous improvements Closer customer and supplier relationships 7. To build a total quality culture and instill commitment to achieve the target performance outcomes that competent strategy execution requires, managers can take such action steps as a. Developing a quality vision and specific, measurable quality goals. b. Screening out job applicants who don't have the aptitudes or the right attitudes for quality-based performance. c. Narrowing employee empowerment boundaries and insisting on standardized performance of most tasks. d. Both a and b are correct 8. The big difference b/n reengineering vs. continuous improvement programs like TQM is that Reengineering is a tool for achieving dramatic improvements in performing a business process; TQM is a follow-on program to perfect the process and gradually improve both its efficiency and effectiveness. Installing Support Systems 9. Installing information system is an important strategy-implementing task because every firm needs to Gather and store data; Track key performance indicators; Identify and diagnose problems; Report strategy-critical information Accurate information is an essential guide to action 10. From a strategy-implementing perspective, well conceived, state-of-art support systems Serve to mobilize information and assist in focusing knowledge and resources. Can speed decision-making and shorten org'l response times; Can enhance org'l capabilities; Can be a basis for competitive advantage; 11. Which the of following is not an example of a support system for assisting better strategy implementation and execution? a. An inventory control and sales tracking system. b. A sophisticated cost accounting system which can track profits and losses on each item in a company's product line. c. A formalized program for screening, testing, hiring, and training new employees to be friendly, courteous, and helpful in their contacts with customers. d. A brochure explaining how to use a VCR. e. A computerized reservation system for a hotel chain. Motivation, Incentives, Reward System
Compensation = Wage or salary + Benefits + Nonrecurring financial rewards + nonpecuniary rewards Wage or salary: rate of pay per unit of time or output; Employee benefits (fringe benefits): indirect and recurring monetary rewards from employment; retirement and insurance plans, vacation and personal days off, health care, child, elder, and sick care. NFR: monetary rewards that a person can earn through employment but do not occur automatically; commissions in sales promotions, prizes won in special absenteeism control programs, profit sharing, earnings per share, labor cost/total cost ratio, market share, etc. Nonpecuniary rewards: noneconomic rewards associated with employment; EG. Colleagues, company reputation, a sense of accomplishment in one's job, a sense of power from one's work, increased participation and autonomy, team building and self-managed teams; 12. Two goals of every compensation system: To influence individuals who participate in labor force to make personal decisions about employment that are congruent with the organization's needs; For the compensation system to operate effectively w/n a range of constraints; Mgt.'s most powerful strategy-implementing tool is a system of rewards and incentives tied tightly to the achievement of the targeted strategic performance. 13. A good way to establish a tight link b/n strategy and the reward structure is to Treat the achievement of agreed-upon performance a outcomes as a "contract"; Compare actual performance against the contracted-for outcomes; Reward individuals and groups who achieve their assigned performance target; Deny rewards to those who don't. 14. First goal of compensation: To elicit desired behaviors from employees: Motivate people to join the organization; Motivate people to stay with the organization; Motivate people in the organization to perform at high levels; 15. Second goal of compensation: To achieve the first goal w/n a set of constraints The organization's ability to pay; Legislation; Labor union; Internal labor market => internal compensation equity; External labor market => external compensation equity; 16. Which of the following is not a sound guideline for designing a strategy-supportive reward and incentive system? a. The reward system must be administered with meticulous care and fairness. b. The payoff for meeting or beating performance targets must be b major piece of the total compensation package. c. The incentive plan should apply to managers and employees at levels.
d. Ways should be found to reward deserving non-performers who do not fare well under the incentive system. e. Incentives must be tightly linked to achieving the performance objectives contained in the strategic plan. 17. Which of the following is not a desirable feature of well-designed compensation and reward system? a. Linking incentives tightly to performance targets that are critical to successful execution of the company's strategy. b. Keeping the time b/n performance reviews and payment of the rewards short. c. Making sure that the performance targets that each individual is expected to achieve involve outcomes that the individual can affect. d. Generous rewards for people who turn in outstanding performances. e. A reward system that avoids 50 percent non-monetary rewards and a work environment that avoids placing pressure on managers and employees to achieve high performance levels. 18. A well-designed reward system needs to feature a. 50-50 balance b/n positive and negative rewards. b. Motivational incentives that build wholehearted commitment to proficient strategy execution and winning attitudes among employees. c. Job descriptions that clearly spell out each activity that each employee has to do to execute the firm's strategy. d. Extensive training of employees in using best practices.