1. McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Implementation Chapter 10

3. 10-3 Learning Objectives 1.Understand how short-term objectives are used in strategy implementation 2.Identify and apply the qualities of good short-term objectives to your own experiences 3.Illustrate what is meant by functional tactics and how they are used in strategy implementation 4.Gain a general sense of what outsourcing is and how it becomes a choice in functional tactics decisions for strategy implementation 5.Understand what policies are and how to use them to empower operating personnel 6.Understand the use of financial reward in executive compensation 7.Identify different types of executive compensation and when to use each in strategy implementation

4. 10-4 Short-Term Objectives Short-term objectives measurable outcomes achievable or intended to be achieved in one year or less.

5. 10-5 Short-Term Objectives (contd.) Short-term objectives “operationalize” long-term objectives. Discussion about and agreement on short-term objectives help raise issues and potential conflicts within an organization Short-term objectives assist strategy implementation by identifying measurable outcomes of action plans or functional activities, which can be used to make feedback, correction, and evaluation more relevant and acceptable

6. 10-6 Ex. 10.2 Potential Conflicting Objectives and Priorities

7. 10-7 Short-Term Objectives Short-Term Objectives provide:  Specificity  Time frame for completion  Who is responsible—Accountability

8. 10-8 Qualities of Effective Short-Term Objectives  Measurable  Priorities  Cascading: From long-term objectives to short- term objectives

9. 10-9 Qualities of Effective Short-Term Objectives (contd.) Measurable Measurable activity Measurable outcomes Priorities Simple ranking Relative priority / Weights Linked to Long-Term Objectives Cascading effect

10. 10-10 Ex. 10.3 Creating Measurable Objectives

11. 10-11 Ex. 10.4 Milliken Global Environmental Objectives

12. 10-12 Functional Tactics  Detailed statements of the “means” or activities that will be used by a company to achieve short-term objectives and establish competitive advantage.

13. 10-13 Functional Tactics (contd.) In a sense, functional tactics translate thought into action Every value chain activity in a company executes functional tactics that support the business’s strategy and help accomplish strategic objectives

14. 10-14 Differences Between Business Strategies and Functional Tactics  Functional tactics are different from business or corporate strategies in three fundamental ways:  Specificity  Time horizon  Participants who develop them

15. 10-15 Ex. 10.5 The Value-Added Benefit of Short-Term Objectives and Specific Functional Tactics

16. 10-16 Ex. 10.6 Specificity in Functional Tactics vs. Business Strategy

17. 10-17 Outsourcing  Obtaining work previously done by employees inside the company from sources outside the company

18. 10-18 Ex. 10.8 Outsourcing is Increasing

19. 10-19 Empowering Operating Personnel: Policies  Empowerment is the act of allowing an individual or team the right and flexibility to make decisions and initiate action

20. 10-20 Empowering Operating Personnel: Policies (contd.)  Policies are broad, precedent-setting decisions that guide or substitute for repetitive or time- sensitive managerial decision making.

21. 10-21 Creating Policies That Empower 1.Policies establish indirect control over independent action 2.Policies promote uniform handling of similar activities 3.Policies ensure quicker decisions by standardizing answers to recurring questions 4.Policies institutionalize basic aspects of organization behavior

22. 10-22 Creating Policies That Empower (contd.) 5.Policies reduce uncertainty in repetitive and day-to- day decision making 6.Policies counteract resistance 7.Policies offer predetermined answers to routine problems 8.Policies afford managers a mechanism for avoiding hasty decisions

23. 10-23 Innovation Time Out Policy  Refers to what is usually an official company guideline, or policy, establishing an amount of time during each work week an employee, or specific types of employees (e.g., engineers) can at their choice set aside from their regular assignment to work on innovative, new ideas they are thinking about.

24. 10-24 Advantages of Formal, Written Policies 1.They require managers to think through the policy’s meaning, content, and intended use 2.They reduce misunderstanding 3.They make equitable and consistent treatment of problems more likely 4.They ensure unalterable transmission of policies 5.They communicate the authorization or sanction of policies more clearly 6.They supply a convenient and authoritative reference 7.They systematically enhance indirect control and organization wide coordination of the key purposes of policies

25. 10-25 Bonus Compensation Plans  Stock options  The right, or “option” to purchase company stock at a fixed price at some future

26. 10-26 Bonus Compensation Plans (contd.)  Restricted stock  Stock given to an employee who is prohibited or “restricted” from selling the stock for a certain time period and not at all if they leave the company before that time period.

27. 10-27 Bonus Compensation Plans (contd.)  Golden handcuffs  A form of executive compensation where compensation is deferred (either a restricted stock plan or bonus income deferred in a series of annual installments).

28. 10-28 Bonus Compensation Plans (contd.)  Golden parachutes  A form of bonus compensation that guarantees a substantial cash payment if the executive quits, is fired, or simply retires.  Cash bonuses  Payment of periodic (quarterly or annual) cash bonuses.

29. 10-29 Key Terms  Empowerment  Functional tactics  Golden handcuffs  Golden parachute  Innovation Time Out policy  Outsourcing  Policies  Restricted stock

30. 10-30 Key Terms (contd.)  Short-term objective  Social computing  Social Computing Guidelines  Stock options