Choices and Priorities

1. Choices and Priorities Justin F. Keogan keoganj@tcd.ie

2. Contents • Processes of Evaluation • Choice and Selection • Organisational Boundaries • Prioritisation

3. Evaluation • Performance Evaluation and Strategic Appraisal • Developing new strategies or reappraisal of existing strategies • Strategic Evaluation and Selection • The prospective appraisal of strategy options and the selection of a preferred strategy • Evaluation and Control of Strategy Outcomes • Post-hoc strategic control following strategy implementation to ensure strategic goals are met Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

4. Pre-strategy evaluation Strategy Formulation Performance Evaluation and Strategic Appraisal • Setting and Reviewing: • Mission • Values • Goals • Objectives • Environmental Analysis • SWOT • Stakeholder mapping • MMD Matrix Generation of Strategy Options Evaluations of Strategy Options Strategy Implementation Post-strategy Evaluation Strategy Evaluation and Selection • Strategy Implementation • Structure • Resources • Change Evaluation and Control of Strategy Outcomes Process of Strategic Management

7. Testing the Quality of Your Strategy • Does your strategy fit with what’s going on in the environment? • Does your strategy exploit your key resources? • Will your envisioned impactors be sustainable? • Are the elements of your strategy internally consistent? • Do you have enough resources to pursue this strategy? • Is your strategy implementable? Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

8. Are the objectives of the strategy appropriate? • Are the major policies and plans appropriate? • Do the results obtained to date confirm or refute critical assumptions on which the strategy rests? Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

9. Four Criteria • Consistency – the strategy must not present mutually inconsistent goals and policies • Consonance – the strategy must represent an adaptive response to the external environment and to the critical changes occurring within it • Advantage – the strategy must provide for the creation and/or maintenance of a competitive advantage in the selection area of activity • Feasibility – the strategy must neither overtax available resources nor create unsolvable sub-problems Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

10. 10 Questions • Is the strategy identifiable and has it made clear either in words or practice? • Is the strategy in someway unique? • Does the strategy exploit fully domestic and international environmental opportunities? • Is the strategy consistent organisational competence and resources, both present and projected? • Are the major provisions of the strategy and the programme of major policies of which it is comprised internally consistent? Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

11. 10 Questions • Is the chosen level of risk feasible in economic and personal terms? • Is the strategy appropriate to the personnel values and aspirations of the key managers? • Is the strategy appropriate to the desired level of contribution to society? • Does the strategy constitute a clear stimulus to organisational effort and commitment? • Are there early indicators of the responsiveness of markets and market segments to the strategy? Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

12. Testing the Quality of Your Strategy • These test need to be applied throughout the strategy process, and especially as strategies emerge • Strategy is not static; it needs to be adjusted and evolve on an ongoing basis • Opportunities and threats arise after formal strategy making process are complete • Strategy is not primarily about planning; it is about intentional, well informed and integrated choices Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

13. Strategic analysis Identifies the organisation’s circumstances Strategic Options Identifies possibilities for development • Assessment of suitability • Establishing the rationale • Screening options • Acceptability • Risk • Return • Stakeholder reactions Feasibility • Selection of strategies • Planned • Forced • Learning • Command

14. Suitability • Does the strategy address the circumstances that the organisation is operating in? • Is it preparing the organisation for the challenges it is facing? • Is it facilitating the organisation to take advantage of opportunities presented to it? • Is it using our main strengths? • Does it address any of our weaknesses? • Is it politically and culturally acceptable? Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

15. Suitability • Does the action involved in the attempt to achieve this strategy make sense? • Is it worth pursuing? Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

16. Screening • Process of comparing the advantages and disadvantages of different strategies • What are the other options? • How do they compare with each other? • Always include the “do nothing scenario” Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

17. Screening • Ranking • Strategies are assessed against predetermined factors; SWOT, availability of resources, stakeholder expectations • Strategies are scored and ranked • Can help identify mismatches between its present position and the implications of various strategic options Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

18. Screening • Decision trees • Options are progressively eliminated by introducing future criteria • Scenario planning • Options are matched to different scenarios • Contingency plans are prepared • Important to select relevant scenarios Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

19. Business environments can be categorized into one of four broad levels of uncertainty. The analytic approach for determining the likely future environment varies for each level. Increasing Complexity and Uncertainty “Predictable Future” “Discrete Scenarios” “Range of Scenarios” “Future Unknown” 1 2 3 ? • A single forecast precise enough for determining strategic direction • Example • Competitive strategyagainst a low-cost airline entrant • A few discrete outcomes that define the likely future environment • Example • U.S. long-distance telephone carriers’ strategy to enter the deregulated local service market • A range of possible outcomes, but no natural scenarios are evident • Examples • Entering emerging markets, such as India • Developing or acquiring emerging technologies in consumer electronics • No basis to forecast future except for analogies and non-linear dynamic models • Examples • Developing a market entry strategy for post-Communist Russia in 1992

20. Acceptability • Concerned with the expected performance or impact of the strategies if implemented • Risk / return • Cost-benefit analysis • Looks at wider costs and benefits • Examines hard to quantify, intangible aspects • Very good for making explicit the reasoning behind strategic choices Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

21. Acceptability • Stakeholder reactions • Link back to stakeholder mapping Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

22. Feasibility • Concerned with whether an organisation has the resources and competencies to deliver a strategy • Budget cycle makes it difficult to plan from a financial point of view • What will it take to make the strategy a success? • Do we have people who are capable of that? • Link back to strategic capability assessment – competency audit Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

23. Strategic Choice Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

24. Strategic Choice Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

25. Strategic Choice Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

26. Strategic Choice Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

27. Organisation Boundaries • Deciding what to do • What activities should be brought inside the organisation? • Bring in the wrong activities • Lose strategic focus • Bloated and bureaucratic • Don’t bring in the right activities • Lose relevance re raison d’être • Hollow organisation lacking competency and capacity development Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

28. Transaction Cost Economics • Ways of governing • Market governance • Intermediate governance • Hierarchical governance • What is the most efficient way to govern the exchange? Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

29. Transaction Cost Economics • Two relevant issues • Cost of governance mechanism • Threat of opportunism in exchange • Market governance – cheap • Hierarchical governance - expensive Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

30. Transaction Cost Economics • If it was only due to the cost of governance, markets would be used all the time • Opportunism – the possibility of unfair advantage • Transaction specific investment • e.g. oil pipeline • It is better to own the pipeline rather than to pay for it through the market Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

31. Capabilities • An organisation can access through the market or intermediate means if it doesn’t have them – e.g. training – buy • For other activities, finance, personnel, etc. it makes more sense to incorporate them into the organisation in hierarchical governance • For capabilities to play a significant role in boundary decisions, it must be costly for an organisation to create these capabilities on its own or to acquire another organisation that has them Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

32. Four Reasons Behind Costs • Historical – right place, right time • Path dependency • Cultural embeddedness – Japanese companies • Social complexity • Vision – Disney • Product image - Volvo • Safety – Swiss Banks • Casual ambiguity • Where did the capability come from? • Sources are not always known • Multiple sources over time Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

33. Costs and Capabilities • It can be costly to acquire capabilities • Legal constraints • Acquisition may reduce the value of the acquired organisation • Due to willingness of staff to stay • Willingness of clients to stay • Motivation of staff Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

34. Costs and Capabilities • Costly to reverse • Unwanted baggage • Leveraging difficulties • Integration problems • Culture, systems and approach Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

35. Enterprise Estonia • Amalgamation of seven different agencies – can you see how this development was related to transaction cost economics? Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

36. Prioritisation • Lack of prioritisation is a weakness in many public organisations • From your environmental analysis and objective setting, you’ll see that you don’t have the capacity to deal with all the threats and opportunities presented • Shortages of resources and capabilities • Thus the need for priorities Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

37. Prioritisation • Commit resources to the most important actions • What if something expected happens? • Invested resources versus diverting resources Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

38. Prioritisation • Principles • Must aid decision making • Staff and resources should follow Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

39. Case Study • National Disease Surveillance Study • Ranked priorities • 1 Vital • 2 Necessary • 3 Controllable • 4 Development capacity • Along the following criteria with a series of questions under each heading Stop everything to do this Revaluate all activity Proceed with caution Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

40. Criteria • Raison d’être • Legislation, Policy, Remit • Access to Resources and Manpower • Development of Organisation and Institutional Linkages • Visibility and Communications • Achievement of Excellence Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

41. Result 4,072 person days 1,460 515 268 Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

42. The sums • 220 days a year per person • 4,072 = 18 staff • 1,460 = 6 staff • 515 = 2½ staff • 268 = 1+ • They needed 28-29 staff • Problem – they only had 18 staff Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

43. Assumptions • No outbreaks or unplanned work • Absolute flexibility of expertise (non-existent) • Their real needs were closer to 35 staff • Most staff were chronically and acutely overworked Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

44. Use of priorities • Assist in clearing management thinking • Reality check – what’s possible • Rational for resources • Rational for NOT doing things – what do we drop? Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3

45. Prioritisation • Set criteria • Meaningful in terms of their application to your work? • Would you put the criteria in an order of priority? • Do these criteria help distinguish between the urgent and the important? • Will the order of these criteria change as the organization develops? Training of staff of Enterprise Estonia Justin F. Keogan ES01.07.01-1.1.2.3