STRATEGY A VIEW FROM THE TOPCHAPTER 2:
“HOW STRATEGY AND PERFORMANCE ARE LINKED”
Crystal HillStephen LechtenbergAnand McGeeAllison PurtellJason Torres
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
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
Metaphor of the Hedgehog
Simplicity can sometimes lead to greatness
When confronted by predators, the hedgehog’s 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
Criteria to Achieve “Hedgehog Concept”
Determine what the company can and cannot be the best at
Determine what drives the company’s economic engine
Determine what the company’s people are deeply passionate about
The “Flywheel Effect” Advantageous business cycle: by making
decisions that reinforce the company’s “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.
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
The 4+2 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
Strategy and Performance: A Conceptual Framework
Purpose
Leadership
Strategy
Structure
Processes
Systems
People Culture
Performance/Control
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
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.
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
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
Systems and Processes
The right systems and processes can enhance an organization’s 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
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
Culture
A company’s corporate culture is a shared system of values, assumptions, and beliefs among a firm’s employees that provides guidance on how to think, perceive, and act.
Manifested through: Artifacts Shared values Basic assumptions
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 company’s
shareholders?
The Balanced Scorecard(cont.) Customer driven The scorecard uses four management
processes: Translating a vision Communication Improving business planning Gathering feedback and learning
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.
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 it’s attention and focus on.
Six specific tasks
The Role of the Board
In order to create a “high performance culture”, a board should complete these 6 tasks:1. Define it’s role, agenda, and information needs2. Ensure that management not only performs, but
performs with integrity3. Set expectations about the tone and culture4. Formulate corporate strategy with management5. Ensure that the corporate culture aligns6. Help management understand expectations