Managers implementing and executing a new or different strategy must identify the resource requirements of each new strategic initiative and then consider whether the current pattern of resource allocation and the budgets of the various subunits are suitable. Every organizational unit needs to have the people, equipment, facilities, and other resources to carry out its part of the strategic plan (but no more than what it really needs). Implementing a new strategy often entails shifting resources from one area to another— downsizing units that are overstaffed and overfunded, upsizing those more critical to strategic success, and killing projects and activities that are no longer justified. Anytime a company alters its strategy, managers should review existing policies and operating procedures, proactively revise or discard those that are out of sync, and formulate new ones to facilitate execution of new strategic initiatives. Prescribing new or freshly revised policies and operating procedures aids the task of strategy execution (1) by providing top-down guidance to operating managers, supervisory personnel, and employees regarding how certain things need to be done and what the boundaries are on independent actions and decisions; (2) by enforcing consistency in how particular strategy-critical activities are performed in geographically scattered operating units; and (3) by promoting the creation of a work climate and corporate culture that fosters good strategy execution. Thick policy manuals are usually unnecessary. Indeed, when individual creativity and initiative are more essential to good execution than standardization and conformity, it is better to give people the freedom to do things however they see fit and hold them accountable for good results rather than try to control their behavior with policies and guidelines for every situation.
Competent strategy execution entails visible, unyielding managerial commitment to best practices and continuous improvement. Benchmarking, the discovery and adoption of best practices, reengineering core business processes, and continuous improvement initiatives like total quality management (TQM) or Six-Sigma programs all aim at improved efficiency, lower costs, better product quality, and greater customer satisfaction. These initiatives are important tools for learning how to execute a strategymore proficiently. Benchmarking, part of the process of discovering best practices, provides a realistic basis for setting performance targets. Instituting "best-in-industry" or "best-in-world" operating practices in most or all value chain activities provides a means for taking strategy execution to a higher plateau of competence and nurturing a high-performance work environment. Business process reengineering is a way to make quantum progress toward becoming a world-class organization, while TQM and Six- Sigma programs instill a commitment to continuous improvement and operating excellence. An organization bent on continuous improvement is a valuable competitive asset—one that, over time, can yield important competitive capabilities (in reducing costs, speeding new products to market, or improving product quality, service, or customer satisfaction) and be a source of competitive advantage.
Company strategies can't be implemented or executed well without a number of support systems to carry on business operations. Well-conceived state-of-the-art support systems can not only facilitate better strategy execution but also strengthen organizational capabilities enough to provide a competitive edge over rivals. In the age of the Internet, real-time information and control systems, growing use of e-commerce technologies and business practices, company intranets, and wireless communications capabilities, companies can't hope to outexecute their competitors without cutting-edge information systems and technologically sophisticated operating capabilities that enable fast, efficient, and effective organization action.
Strategy-supportive motivational practices and reward systems are powerful management tools for gaining employee commitment. The key to creating a reward system that promotes good strategy execution is to make strategically relevant measures of performance the dominating basis for designing incentives, evaluating individual and group efforts, and handing out rewards. Positive motivational practices generally work better than negative ones, but there is a place for both. There's also a place for both monetary and nonmonetary incentives.
For an incentive compensation system to work well, (1) the monetary payoff should be a major percentage of the compensation package, (2) the use of incentives should extend to all managers and workers, (3) the system should be administered with care and fairness, (4) the incentives should be linked to performance targets spelled out in the strategic plan, (5) each individual's performance targets should involve outcomes the person can personally affect, (6) rewards should promptly follow the determination of good performance, (7) monetary rewards should be supplemented with liberal use of nonmonetary rewards, and (8) skirting the system to reward nonperformers or subpar results should be scrupulously avoided.
Successful managers do several things in leading the drive for good strategy execution and operating excellence. First, they stay on top of things. They keep a finger on the organization's pulse by spending considerable time outside their offices, listening and talking to organization members, coaching, cheerleading, and picking up important information. Second, they are active and visible in putting constructive pressure on the organization to achieve good results and operating excellence. This entails (1) promoting an esprit de corps that mobilizes and energizes organization members to execute strategy in a competent fashion and deliver the targeted results and (2) championing innovative ideas for improvement and promoting the use of best practices and benchmarking to measure the progress being made in performing value chain activities in first-rate fashion. Third, wise leaders exert their clout in developing competencies and competitive capabilities that enable better execution. Fourth, they serve as a role model in displaying high ethical standards, and they insist that company personnel conduct the company's business ethically and in a socially responsible manner. They demonstrate unequivocal and visible commitment to the ethics enforcement process. Fifth and finally, when a company's strategy execution effort is not delivering good results and the organization is not making measurable progress toward operating excellence, it is the leader's responsibility to step forward and push corrective actions.
