Strategy a View from the Top Chapter 2: How Strategy and Performance are Linked

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Strategy a View from the TopChapter 2How
Strategy and Performance are Linked

• Crystal Hill
• Stephen Lechtenberg
• Anand McGee
• Allison Purtell
• Jason Torres

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Level 5 Leadership

• Top Leadership defines a significant difference
  between good and great companies
• Common characteristic of the great companies
  assessed in Good to Great displays an unusual
  mix of intense determination and profound humility

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Nature of the Leadership Team

• The process of securing individuals with level 5
  leadership abilities must be undertaken BEFORE a
  strategy should be developed
• Worthwhile for firms to spend extra time and
  energy on personnel searchers because with the
  right people in the right positions many
  companies problems dissipate.
• Must have a willingness to identify and assess
  defining facts in a company and its larger
  business environment

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Metaphor of the Hedgehog

• Simplicity can sometimes lead to greatness
• When confronted by predators the hedgehogs
  simple but effective response of rolling into a
  ball can rarely be overcome by its more clever
  predators such as a fox
• Being Good to Great is not doing many things
  well but instead doing ONE thing better than
  anyone else

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Criteria to Achieve Hedgehog Concept

• Determine what the company can and cannot be the
  best at
• Determine what drives the companys economic
  engine
• Determine what the companys people are deeply
  passionate about

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The Flywheel Effect

• Advantageous business cycle by making decisions
  that reinforce the companys hedgehog
  competencies execs initiate positive momentum
  results in positive outcomes which serve to
  energize investment/loyalty of the staff
• The Doom Loop reactive decision making an
  overextension into too many diverse areas of
  concentration following short lived trends
  frequent changes in leadership and personnel
  loss of moral and disappointing results.

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Other Items of Importance

• Have an overarching organizational culture of
  discipline
• Businesses should not depend on technology alone
• Companies need a set of core values

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The 42 Formula

• A study aimed at identifying the must have
  management practices concluded companies that
  outperformed their industry peers excelled at 4
  primary management practices
• Strategy
• Execution
• Culture
• Structure
• These strengths were augmented with at least 2 of
  the 4 secondary management practices
• Talent
• Innovation
• Leadership
• Mergers/Partnerships

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Strategy and Performance A Conceptual Framework
Purpose
Leadership
Strategy
Structure
Processes
Systems
People
Culture
Performance/Control
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Strategy Purpose and Leadership

• Strategy-structure-systems paradigm dominated the
  20th century
• The principal strength was that it minimized
  human initiative with disciplined planning and
  control systems
• Lost effectiveness with the rise of global
  competition
• Move from chief strategist to chief
  facilitator
• Sought ways to involve employees at all levels in
  the strategic management process
• Strategic discipline and control secured through
  commitment

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Strategy and Organizational Change

• Keys to effective organizational change
• Structure
• Systems
• Processes
• People
• Culture
• Successful implementation of a new strategy
  requires change in all of these.
• Also style skills and superordinate goals are
  as important as strategy or structure when
  bringing about change.

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Structure

• Choosing structure involves identifying
  dimensions that allow the organization adapt and
  evolve strategically.
• Goal is to create an environment that
• Allocates resources effectively
• Is naturally self correcting as strategic changes
  need to be made
• No matter which form is used transparency is
  critical
• Lines of authority need to be clear
• Responsibilities must be clearly defined

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Structure

• Types of Structure
• Functional particular task requires many
  specialists
• Geographic company operates in a diverse set of
  regions
• Decentralized reduce complexity in
  multibusiness environment
• Strategic business- defines grouping businesses
  that share key strategic elements
• Matrix structures- allow multiple channels of
  authority

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Systems and Processes

• The right systems and processes can enhance an
  organizations effectiveness and ability to cope
  with change
• Supporting Systems Planning Budgeting
  Accounting Information Reward and Incentive
• Processes
• Systematic way of doing things
• Formal or informal

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Culture

• Elements of Strong Culture
• Leaders who demonstrate strong values that align
  with competitive conditions
• Company commitment to operating under pervasive
  principles not easily abandoned
• Concern for employees customers and shareholders
• Elements of Weak Culture
• Employees report experiencing separateness from
  the organization
• Prevalence of political maneuvering
• Hostility toward change

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Culture

• A companys corporate culture is a shared system
  of values assumptions and beliefs among a
  firms employees that provides guidance on how to
  think perceive and act.
• Manifested through
• Artifacts
• Shared values
• Basic assumptions

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The Balanced Scorecard

• A set of measures designed to provide strategists
  with a quick comprehensive view of the business.
  
• It helps to answer four basic questions
• How do customers see us
• At what must we excel
• Can we continue to improve and create value
• How do we look to our companys shareholders

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The Balanced Scorecard(cont.)

• Customer driven
• The scorecard uses four management processes
• Translating a vision
• Communication
• Improving business planning
• Gathering feedback and learning

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Performance and Control

• Most methods for measuring and evaluating
  performance are focused on outcome control.
• The company directly monitors specific business
  units through behavior control to maximize
  performance.

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The Role of the Board

• Fundamentals of board revolve around creating a
  culture of high performance
• To direct the company and determine and
  prioritize what they should focus its attention
  and focus on.
• Six specific tasks

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The Role of the Board

• In order to create a high performance culture
  a board should complete these 6 tasks
• Define its role agenda and information needs
• Ensure that management not only performs but
  performs with integrity
• Set expectations about the tone and culture
• Formulate corporate strategy with management
• Ensure that the corporate culture aligns
• Help management understand expectations