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