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Chapter Learning Objectives: Grasp why it is critical for company managers to think long and hard about where a company needs to head and why. Understand the importance of setting both strategic and financial objectives. Recognize that the task of crafting a company strategy draws on the entrepreneurial talents of managers at all organizational levels. Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to achieve companywide performance targets. Become aware of what a company must do to achieve operating excellence and to execute its strategy proficiently. Understand why the strategic management process is ongoing, not an everynowandthen task. Learn what leadership skills management must exhibit to drive strategy execution forward. Become aware of the role and responsibility of a company’s board of directors in overseeing the strategic management process. Chapter Roadmap: What Does the StrategyMaking, StrategyExecuting process Entail? Phase 1: Developing a Strategic Vision Phase 2: Setting Objectives Phase 3: Crafting a Strategy Phase 4: Implementing and Executing the Strategy Phase 5: Evaluating Performance and Initiating Corrective Adjustments Leading the Strategic Management Process Corporate Governance: The Role of the Board of Directors in the StrategyMaking, StrategyExecuting Process
Chapter 2: Leading the Process of Crafting and Executing Strategy Screen graphics created by: Jana F Kuzmicki, Ph.D Troy University McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc All rights reserved Chapter Learning Objectives Grasp why it is critical for company managers to think long and hard about where a company needs to head and why Understand the importance of setting both strategic and financial objectives Recognize that the task of crafting a company strategy draws on the entrepreneurial talents of managers at all organizational levels Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to achieve companywide performance targets Become aware of what a company must to achieve operating excellence and to execute its strategy proficiently Understand why the strategic management process is ongoing, not an every-now-and-then task Learn what leadership skills management must exhibit to drive strategy execution forward Become aware of the role and responsibility of a company’s board of directors in overseeing the strategic management process 2-2 Chapter Roadmap What Does the Strategy-Making, Strategy- Executing process Entail? Phase 1: Developing a Strategic Vision Phase 2: Setting Objectives Phase 3: Crafting a Strategy Phase 4: Implementing and Executing the Strategy Phase 5: Evaluating Performance and Initiating Corrective Adjustments Leading the Strategic Management Process Corporate Governance: The Role of the Board of Directors in the Strategy-Making, StrategyExecuting Process 2-3 Figure 2.1: The Strategy-Making, Strategy-Executing Process 2-4 Developing a Strategic Vision Phase Involves thinking strategically about Future direction of company Changes in company’s product/market/customer technology to improve Current market position Future prospects A strategic vision describes the route a company intends to take in developing and strengthening its business It lays out the company’s strategic course in preparing for the future 2-5 Key Elements of a Strategic Vision Delineates management’s aspirations for the business Provides a panoramic view of “where we are going” Charts a strategic path Is distinctive and specific to a particular organization Avoids use of generic language that is dull and boring and that could apply to most any company Captures the emotions of employees and steers them in a common direction Is challenging and a bit beyond a company’s immediate reach 2-6 Role of a Strategic Vision A well-conceived, well-communicated vision functions as a valuable managerial tool to Give the organization a sense of direction, mold organizational identity, and create a committed enterprise Illuminate the company’s directional path Provide managers with a reference point to Make strategic decisions Translate the vision into hard-edged objectives and strategies Prepare the company for the future A strategic vision exists only as words and has no organizational impact unless and until it wins the commitment of company personnel and energizes them to act in ways that move the company along the intended strategic path! 2-7 Table 2.2: Characteristics of an Effectively Worded Vision Statement 2-8 Table 2.3: Common Shortcomings in Company Vision Statements 2-9 Strategic Vision vs Mission A strategic vision concerns a firm’s future business path - “where we are going” Markets to be pursued A company’s mission statement typically focuses on its present business purpose - “who we are and what we do” Future product/market/ customer/technology focus Current product and service offerings Kind of company management is trying to create Customer needs and customer groups being served Geographic coverage 2-10 Implementing and Executing Strategy Phase Operations-oriented activity aimed at performing core business activities in a strategy-supportive manner Tougher and more time-consuming than crafting strategy Key tasks include Improving the efficiency with which the strategy is being executed Showing measurable progress in achieving both operating excellence and targeted results 2-38 What Does Implementing and Executing the Strategy Involve? Building a capable organization Allocating resources to strategy-critical activities Establishing strategy-supportive policies Instituting best practices and programs for continuous improvement Installing information, communication, and operating systems Motivating people to pursue the target objectives Tying rewards to achievement of results Creating a strategy-supportive corporate culture Exerting the leadership necessary to drive the process forward and keep improving 2-39 Evaluating Performance and Making Corrective Adjustments Phase Crafting and implementing a strategy is not a one-time exercise Customer needs and competitive conditions change New opportunities appear; technology advances; any number of other outside developments occur One or more aspects of executing the strategy may not be going well New managers with different ideas take over Organizational learning occurs All these trigger a need for corrective actions and adjustments on an as-needed basis 2-40 Monitoring, Evaluating, and Adjusting as Needed Taking actions to adjust to the march of events tends to result in one or more of the following Altering long-term direction and/or redefining the mission/vision Raising, lowering, or changing performance objectives Modifying the strategy Improving strategy execution 2-41 Leading the Strategic Management Process Diverse leadership challenges include Exerting take-charge leadership Being a spark plug for change and action Ramrodding things through Achieving results Leading the strategic management process can involve various styles and approaches Being a hard-nosed authoritarian Being a perceptive listener Being a compromising decision maker Delegating authority to people closest to the action Being a coach Assuming a highly visible role in guiding the process Making brief ceremonial appearances 2-42 Things a Chief Strategy Implementer Must Do to Be Successful Stay on top of what’s happening Make sure company has a good strategic plan Put constructive pressure on company to achieve good results Push corrective actions to improve overall strategic performance Lead development of stronger core competencies and competitive capabilities Display ethical integrity and lead social responsibility initiatives 2-43 Role #1: Stay on Top of What’s Happening Develop a broad network of formal and informal sources of information Talk with many people at all levels Be an avid practitioner of MBWA Observe situation firsthand Monitor operating results regularly Get feedback from customers Watch competitive reactions of rivals 2-44 Role #2: Make Sure Company Has a Good Strategic Plan Two key responsibilities of CEO and top-level executives Effectively communicate company’s vision, objectives, and major strategy components to down-the-line managers and key personnel Exercise due diligence in reviewing lower-level strategies for consistency and support of higherlevel strategies Effective leadership minimizes potential for conflict between different levels in the strategy hierarchy 2-45 Role #3: Put Constructive Pressure on Company to Achieve Good Results Successful leaders spend time Mobilizing organizational energy behind Good strategy execution and Operating excellence Nurturing a results-oriented work climate Promoting enabling cultural drivers Strong sense of involvement on part of company personnel Emphasis on individual initiative and creativity Respect for contributions of individuals and groups Pride in doing things right 2-46 Role #4: Push Corrective Actions to Improve Strategy-Making and Strategy-Execution Requires deciding When adjustments are needed What adjustments to make Involves Adjusting long-term direction, objectives, and strategy on an as-needed basis in response to unfolding events and changing circumstances Promoting fresh initiatives to bring internal activities and behavior into better alignment with strategy Making changes to pick up the pace when results fall short of performance targets 2-47 Role #5: Promote Stronger Core Competencies and Capabilities Top management intervention is required to establish better or new Resource strengths and competencies Competitive capabilities Senior managers must lead the effort because Competencies reside in combined efforts of different work groups and departments, thus requiring cross-functional collaboration Stronger competencies and capabilities can lead to a competitive edge over rivals 2-48 Role #6: Display Ethics Leadership and Lead Social Responsibility Initiatives Set an excellent example in Our ethics code is Displaying ethical behaviors Demonstrating character and personal integrity in actions and decisions Declare unequivocal support for high ethical standards and expect all employees to conduct themselves in an ethical fashion Encourage compliance and establish tough consequences for unethical behavior 2-49 Corporate Governance: Strategic Role of a Board of Directors Exercise strong oversight to ensure five tasks of strategic management are executed to benefit Shareholders or Stakeholders Make sure executive actions are not only proper but also aligned with interests of stakeholders 2-50 Obligations of a Board of Directors Be inquiring critics and overseers Evaluate caliber of senior executives’ strategy-making and strategy-executing skills Institute a compensation plan for top executives rewarding them for results that serve interests of Stakeholders and Shareholders Oversee a company’s financial accounting and reporting practices 2-51 Key Responsibilities of Board Members Be well informed about a company’s performance Guide and judge CEO and other top executives Exhibit courage to curb inappropriate or unduly risky management actions Confirm that CEO is doing what board expects Provide insight and advice to management Be intensely involved in debating pros and cons Board very important oversight role in of keymembers actionshave andadecisions the strategy-making, strategy-executing process! 2-52 ... Performance and Initiating Corrective Adjustments Leading the Strategic Management Process Corporate Governance: The Role of the Board of Directors in the Strategy- Making, StrategyExecuting Process. .. drive strategy execution forward Become aware of the role and responsibility of a company’s board of directors in overseeing the strategic management process 2-2 Chapter Roadmap What Does the Strategy- Making,... Strategy- Making, Strategy- Executing process Entail? Phase 1: Developing a Strategic Vision Phase 2: Setting Objectives Phase 3: Crafting a Strategy Phase 4: Implementing and Executing the Strategy