Strategy Implementation: Short-Term Objectives, Functional Tactics, Rewards, and Empowerment

1. CHAPTER 9 Implementing Strategy Through Short-Term Objectives, Functional Tactics, Reward System, and Employee Empowerment

2. Chapter Topics • Short-Term Objectives • Functional tactics that Implement Business Strategies • Empowering Operating Personnel: The Role of Policies • Executive Bonus Compensation Plans

3. Strategy Implementation “Planning their Work” “Working their Plan” Strategy Formulation Strategy Implementation

4. Strategy Implementation Identify short-term objectives Communicate policies to empower people Initiate specific functional tactics Design effective rewards

5. What are Short-Term Objectives? Provide specific guidance for what is to be done, translating vision into action

6. Role of Short-Term Objectives in Implementing Strategy • “Operationalize” long-term objectives • Raise issues and potential conflicts requiring coordination to avoid dysfunctional consequences • Identify measurable outcomes of functional activities to be used to make feedback, correction, and evaluation more relevant and acceptable

7. Ex. 9-1: Potential Conflicting Objectives and Priorities Chief Executive Officer Finance and Accounting Manufacturing Marketing • Distribution channels • Customer service • Inventory obsolescence • Communications and data processing • Carrying inventory • Production supply alternatives • Warehousing • Transportation Responsibilities • More inventory • Frequent short runs • Fast order processing • Fast delivery • Field warehousing • Less inventory • Long production runs Objectives • Cheap order processing • Lowest cost routing • Less warehousing • Plant warehousing

8. Relationship of Action Plans to Short-Term Objectives Specificity – Identify functional activities to be undertaken to build competitive advantage Identify who is responsible for each action in the plan Provide a clear time frame for completion

9. Qualities of Effective Short-Term Objectives Measurable Linked to long-term objectives Priorities

10. Ex. 9-3: Creating Measurable Objectives(Selected)

11. Value-Added Benefits of Short-Term Objectives Give operating personnel a better understanding of their role in a firm’s mission Provide basis for accomplishing conflicting concerns Provide basis for strategic control Motivation – clarify personnel and group roles in a firm’s strategies

12. What are Functional Tactics? Key, routine activities that must be undertaken in each functional area to provide the business’s products and services Translate grand strategies into action designed to accomplish specific short-term objectives

13. Ex. 9-4: Functional Tactics at General Cinema Corporation Functional Tactics Functional Tactics – Marketing Seek only first-run films by outbidding competition in each local market; provide primarily family-oriented movies , and maintain an admission price only slightly above that of local competition Soft drink bottling Corporate Strategy Business Strategies Corporate Strategy Achieve 15-20 percent annual growth through existing businesses and carefully selected diversification into leisure-oriented, consumer-oriented product/service businesses to absorb increasing cash flow from theater and soft drink bottling operations Concentration and market development selective Maintain and selectively expand leading nationwide position in the movie exhibition industry to provide positive cash flow for corporate diversification Functional Tactics – Finance Use lease or sale and leaseback arrangements of each theater to maximize cash flow for corporate expansions; seek profitability thru’ volume, not higher ticket prices Movie exhibition Functional Tactics – Operations Use multiscreen facilities with minimal maintenance requirements and a joint service area to serve each minitheater Sunkist products

14. Business Strategies and Functional Tactics … are different in three ways Time horizon Participants who develop them Specificity

15. Differences Between Business Strategies and Functional Tactics • General managers establish long-term objectives and overall business strategies • Operating managers establish short-term objectives and functional tactics leading to business level success

16. Empowerment and Policies Training, self-managed work groups, eliminating whole levels of management in organizations, and aggressive use of automation are some of the ways of empowering employees. At the heart of empowerment is the need to ensure that decision making is consistent with the mission, strategy, and tactics of the business while at the same time allowing considerable latitude to operating personnel. One way operating managers do this is through the use of policies

17. What Are Policies? Policies are directives designed to guide the thinking, decisions, and actions of managers and their subordinates in implementing a firm’s strategy

18. Role of Policies in Implementing Strategy • Previously referred to as standard operating procedures, policies increase managerial effectiveness by • Standardizing many routine decisions • Clarifying discretion managers and employees can exercise in implementing functional tactics • Should be derived from functional tactics with key purpose of aiding strategy execution

19. Why Policies Empower People • Establish indirect control over independent action by clearly stating how things are to be done now • Promote uniform handling of similar activities • Ensure quicker decisions by standardizing answers to previously answered questions • Institutionalize basic aspects of organizational behavior

20. Why Policies Empower People(contd.) • Reduce uncertainty in repetitive and day-to-day decision making • Counter resistance to or rejection of chosen strategies by organization members • Offer predetermined answers to routine problems • Afford managers a mechanism for avoiding hasty and ill-conceived decisions in changing operations

21. Advantages of Formal Written Policies • Require managers to think through policy’s meaning, content, and intended use • Reduce misunderstanding • Make equitable and consistent treatment of problems more likely • Ensure unalterable transmission of policies • Communicate authorization or sanction of policies more clearly • Supply a convenient and authoritative reference • Systematically enhance indirect control and organization-wide coordination of the key purpose of policies

22. Executive Bonus Compensation Plans The goal of an executive bonus compensation plan is to motivate executives to achieve maximization of shareholder wealth – the underlying goal of most firms

23. Executive Bonus Compensation Plans Major Plan Types Stock Options Restricted Stock Cash Golden Handcuffs Golden Parachutes

24. Ex. 9-8: Types of Executive Bonus Compensation Plans

25. Ex. 9-8 (contd.)

26. Ex. 9-8 (contd.)

27. Ex. 9-9: Compensation Plan Selection Matrix

28. Ex. 9-9 (contd.)

29. Ex. 9-9 (contd.)

30. Ex. 9-9 (contd.)