Managing Internal Operations: Actions That Promote Good Strategy Execution

A company’s ability to marshal the resources needed to support new strategic initiatives and steer them to the appropriate organizational units has a major impact on the strategy execution process. The funding requirements of a new strategy must drive how capital allocations are made and the size of each unit’s operating budgets.
Underfunding organizational units and activities pivotal to strategic success impedes execution and the drive for operating excellence. A change in strategy of a push for better strategy execution generally requires some changes in work practices and the behavior of company personnel. Well-conceived policies and procedures aid strategy execution: out-of-sync ones are barriers.

Prescribing new policies and operating procedures acts to facilitate strategy execution in three ways:
1. Instituting new policies and procedures provides top-down guidance regarding how certain things now need to be done.
2. Policies and procedures help enforce needed consistency in how particular strategy-critical activities are performed in geographically scattered operating units.
3. Well-conceived policies and procedures promote the creation of a work climate that facilitates good strategy execution.

Managerial efforts to identify and adopt best practices are a powerful tool for promoting operating excellence and better strategy execution. A best practice is any practice that at least one company has proved works particularly well. Benchmarking is the backbone of the process of identifying, studying, and implementing outstanding practices.

In striving for operating excellence, many companies have also come to rely on three other potent management tools: business process reengineering, Six Sigma quality control technique, and total quality management (TQM) programs.
The difference amont those three is that business process reengineering aims at one-time quantum improvement; continous improvement programs like TQM and Six Sigma aim at ongoing incremental improvement. Indeed, these three tools have become globally pervasive techniques for implementing strategies keyed to cost reduction, defect-free
manufacture, superior product quality, superior customer service, and total customer satisfaction.

The purpose of using benchmarking, best practices, business process reengineering,TQM, Six Sigma, or other operational improvement programs is to improve the performance of strategy-critical. Well-conceived state-of-the-art operating systems not only enable better strategy execution but also strengthen organizational capabilities – perhaps enough to provide a competitive edge over rivals. Information system need to cover five broad areas: (1) customer data, (2) operation data, (3) employee data, (4) supplier/partner/collaborative ally data, and (5) financial performance data. Realtime information systems permit company managers to stay on top of implementation initiatives and daily operations, and to intervene if things seem to be drifting off course. Having good information systems and operating data is integral to competent stategy execution and operating excellence.

Tying rewards and incentives to strategy execution should also be planned well. A properly designed reward structure is management’s most powerful tool for mobilizing organizational commitment to successful strategy execution. One of
management’s biggest strategy-executing challenges is to employ motivational techniques that build wholehearted commitment to operating excellence and winning attitudes among employees. A properly designed reward system allign the well-being of organization members with their contributions to competent strategy execution and the achievement of performance targets. The role of the reward system is to allign the well-being of organization members with realizing the company’s vision, so that organization members benefit by helping the company execute its strategy competently and fully satisfy customers.

The related case to this theory is what happen in Jones Lang LaSalle: Reorganizing around the Customer. Jones LaSalle is a real estate advice and transaction services provider company which focused on providing premier service to its targeted customer base. Due to the increasing competition among the real estate because of globalization and information penetration, the company was forced to changed their strategic to more focus on giving value for customer (more responsive to customers); what they really want and how the company can really give what the customer need. So they create an integrated services business.

By the change of the business strategy Jones LaSalle had to do business process reengineering, which in the previous application they focused on the product but now they start selling solution, changed the bonus and incentive/reward system to be more challenging. Instead of based on business unit performance, they tied the reward system to the customer satisfaction and market profitability. The company also start to put information system in place to help the business units getting the needed information to make decision.

Source: Thompson, Crafting and Executing Strategy, Chapter 11