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Strategy Implmentation Module I

This document discusses strategy implementation and performance management. It provides examples of how 70% of change initiatives do not achieve their intended results and acquisitions often result in losses. It emphasizes setting goals, measures, organizational structure and culture, and managerial skills to implement strategy successfully. The Balanced Scorecard framework and Objectives and Key Results (OKR) methodology are introduced as tools to cascade strategy throughout an organization.

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Gerardo Perez Valles
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Download as PDF, TXT or read online on Scribd
271 views

Strategy Implmentation Module I

This document discusses strategy implementation and performance management. It provides examples of how 70% of change initiatives do not achieve their intended results and acquisitions often result in losses. It emphasizes setting goals, measures, organizational structure and culture, and managerial skills to implement strategy successfully. The Balanced Scorecard framework and Objectives and Key Results (OKR) methodology are introduced as tools to cascade strategy throughout an organization.

Uploaded by

Gerardo Perez Valles
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Strategy Implementation

Module 1

Introduction into Strategy


Implementation

Translating Strategy into Goals


and Metrics

Nicolai Pogrebnyakov, PhD


Strategy Implementation Examples
Around 70% of change initiatives do not deliver
expected results
On average, acquisitions of public firms result in
5.9% losses in value
US 19802001: $257 billion shareholder value lost in
acquisitions
(Beer and Nohria 2000; Moeller, Schlingemann and Stulz 2003)
Implementing Strategy
Structures:
Goals and measures
Organizational structure
Organizational culture
Managerial skills:
Communication and knowledge sharing
Managing resistance to change
Power and informal networks
Goals of a Performance Management System
Define key objectives central to the organizations
success
Specify strategies and activities the organization
needs to achieve these objectives
Specify measures of performance on these activities
Define targets of performance on these activities
Specify how achieving these targets results in
rewards for managers and employees
Identify information flows that allow the organization
to learn from its experience
(Otley 1999)
Balanced Scorecard

Financial
Objectives Measures Targets Initiatives

Customer Internal business processes


Objectives Measures Targets Initiatives Objectives Measures Targets Initiatives

Learning
Objectives Measures Targets Initiatives

(Kaplan and Norton 1996)


Balanced Scorecard Dimensions

Customer
Time, quality, performance, cost
Internal business processes
Delivery time, time to new product introduction etc.
Learning
Employee skills, data
Financial
Cost reduction, revenue increase
(Kaplan and Norton 1992)
Balanced Scorecard Example: Internal

Internal business processes


Objectives Measures Targets Initiatives
Decrease the Delivery time 20 min. Study cooking
time to serve a (vs. 30 min. process
customer now) Rearrange
kitchen layout
if needed
You are in charge of a restaurant targeting mid-
income clients
Overall strategy: start targeting clients in the upper
segment
Develop 23 objectives and corresponding
measures, targets and initiatives for Customer

Customer
Objectives Measures Targets Initiatives
Overall strategy: start targeting clients in the upper
segment
Customer
Objectives Measures Targets Initiatives
Enhance Menu items 1 new item each Research tastes and
customer for upper- for starters, main preferences
experience segment course and Shortlist 3 candidates
customers dessert Focus groups
Live music 1 live Find a band
performance per Construct stage
week Buy audio equipment
Enhance Share of 50% of Identify local
restaurant local ingredients local suppliers
image ingredients (vs. 20% now) Match to menu item
ingredients or modify
menu
Cascading Measures

Internal business processes


Objectives Measures Targets Initiatives
Organization Reduce Production Reduce Employee
costs costs by 10% training
Administrative Reduce New
costs by 7% equipment
Department / Reduce Production Reduce Upgrade
unit production costs by 5% equipment
costs Reduce
defects
Individual Reduce Number of Reduce Learn to
defects defective by 5% operate
parts upgraded
equipment
Objectives and Key Results
Objective
Medium/longer term
Key results
What to do to fulfill the objective
Shorter term
Measurable
Track progress
(Grove 1995; Schmidt & Rosenberg 2014)
OKR example
Objective:
Open 5 new bank branches in Paris by November
Key results:
Identify branch locations (by Aug 1)
Draft building leasing agreements (by Sep 1)
Renovate buildings (by Oct 15)
Hire (by Oct 1) & train staff (by Oct 25)
Purchase & install equipment (by Oct 25)
Cascade OKRs through levels of organization

Head of EMEA region:


Increase bank presence in Europe
by 5% in the current year

France manager: Germany manager:


Open 5 new bank branches Open 7 new bank branches
in Paris by November in Germany by December


Good Practices in Objectives

1) Measurable or quantifiable
2) Deadline for achievement
3) Responsibility

Increase profits in Shampoo products by 10% in Q3


Decrease employee attrition rate at Manufacturing
By Nov 1 prepare 5 recommendations to
reduce attrition rate by 10% within 6 months
Make retail more efficient
Reduce the time to serve a customer by 5
minutes by Dec 1
Reduce administrative costs by 5% by Dec 1
Sources for Measures
Inside the company:
Discussions with people impacted by the objective
(customers, employees, managers)
Experts
Past performance

Outside the company:


Customers
Market trends
Competitors
(Likierman 2009; Hubbard 2010; Neely et al. 1995)
Stretch objectives: General Electric

1960s1980s 1995 target 1995 actual


Operating margin ~10% 16% 14.4%
Inventory turns ~5 / year 10 7
Immeasurables and Intangibles
Quality
Customer experience
Company image

Customer
Objectives Measures Targets Initiatives
Enhance Share of 50% of Identify local
restaurant local ingredients local suppliers
image ingredients (vs. 20% now) Match to menu item
ingredients or modify
menu

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