DPM 4106_Lecture_9 and 10_20231 (2).ppt

Lecture STRATEGY REVIEW AND EVALUATION AND THE BALANCED SCORECARD  Part A STRATEGY REVIEW AND EVALUATION  The Nature of Strategy Evaluation Strategy evaluation includes three basic activities: Examining the underlying bases/assumptions of a organisation’...

Lecture STRATEGY REVIEW AND EVALUATION AND THE BALANCED SCORECARD  Part A STRATEGY REVIEW AND EVALUATION  The Nature of Strategy Evaluation Strategy evaluation includes three basic activities: Examining the underlying bases/assumptions of a organisation’s strategy Comparing expected results with actual results Taking corrective actions to ensure that performance conforms to plans  Strategy Evaluation: Some Important Points (1/2) Adequate and timely feedback is the cornerstone of effective strategy evaluation. Strategy evaluation can be no better than the information on which it is based. Strategy evaluation can be a sensitive undertaking. Too much emphasis on evaluating strategies may be expensive and counterproductive. No one likes to be evaluated too closely. (Information fatigue and stifling of initiative)  Strategy Evaluation: Some Important Points (2/2) Strategy evaluation can lead to: strategy-formulation changes, strategy-implementation changes, both formulation and implementation changes, or no changes at all. Rumelt’s Criteria for Evaluating Strategies Consistency Consonance Feasibility Advantage.  Rumelt’s Criteria to Evaluate Strategy Consistency: A strategy must present consistent goals and policies. Example: Increasing access to primary health care (strategy) while at the same time reducing the number of community health centers regionally. (policy) Consonance: Consonance refers to the need to examine sets of trends, as well as individual trends, when evaluating strategies. (The overall crime rate may have reduced but the incidence of domestic violence may have gone up) Disaggregation of data required 7  Feasibility: Whether the strategy can be attained within the limits of physical, human and financial resources of the organisation. Advantage: Examining the competitive advantages associated with the strategy. Competitive advantages normally are the result of superiority in one of the three areas: Resources, Skills, and Position.  Why Strategy Evaluation is becoming more and more difficult 1. A dramatic increase in the environment’s complexity…….. Variety of demands /regulations/oversight bodies and stakeholder groups 2. The increasing difficulty of predicting the future with accuracy….. #rate and magnitude of change 3. The increasing number of variables. 4. The rapid rate of obsolescence of even the best plans The Process of Evaluating Strategies  The Process of Evaluating Strategies Strategy evaluation should: initiate managerial questioning of expectations and assumptions; trigger a review of objectives and values; should stimulate creativity in generating alternatives and formulating criteria of evaluation. ….2  be continuous rather than periodic as this allows benchmarks of progress to be established and more effectively monitored. combine patience with a willingness to promptly take corrective actions when necessary STRATEGY-EVALUATION ACTIVITIES (1a)Reviewing the Bases of Strategy How have competitors reacted to our strategies? How have competitors’ strategies changed? Have major competitors’ strengths and weaknesses changed? Why are competitors making certain strategic changes? Why are some competitors’ strategies more successful than others? ….2  How satisfied are our competitors with their present market positions and profitability? How far can our major competitors be pushed before retaliating? How could we more effectively cooperate with our competitors? (1b) Key Questions to Address in Evaluating Strategies 1. Are our internal strengths still strengths? 2. Have we added other internal strengths? If so, what are they? 3. Are our internal weaknesses still 4. weaknesses? 5. Do we now have other internal weaknesses? If so, what are they? …..2 6. Are our external opportunities still opportunities? 6. Are there now other external opportunities? If so, what are they? 7. Are our external threats still threats? 8. Are there now other external threats? If so, what are they? 9. How are major competitors likely to respond to particular strategies?  (2) Measuring Organisational Performance Strategists use common quantitative criteria to make three critical comparisons: Comparing the organisation’s performance over different time periods Comparing the organisation’s performance to competitors’ Comparing the organisation’s performance to industry averages …..2 (3) Taking Corrective Actions  (4) Prepare Contingency Plans Contingency plans are alternative plans that can be put into effect if certain key events do not occur as expected. Two Thoughts on Contingency Plans: Only high-priority areas require the insurance of contingency plans. Strategists cannot and should not try to cover all bases by planning for all possible contingencies.  (5) Auditing Auditing “a systematic process of : – objectively obtaining and evaluating evidence regarding actions and events, and – communicating the results to interested users”  Part B Ethics, Corporate Social Responsibility and the Balanced Score Card  Ethics concerns principles of right or wrong conduct. Business ethics involves the application of general ethical principles to the actions and decisions of businesses and the conduct of their personnel. Business Ethics SOURCES OF ETHICAL STSNDARDS Sources for Ethical Standards The School of The School of Integrated Ethical Ethical Social Contracts Universalism Relativism Theory  THE SCHOOL OF ETHICAL UNIVERSALISM Ethical Universalism holds that: common understandings across multiple cultures and countries about what constitutes right and wrong give rise to universal ethical standards that apply to all societies, all organisations, and all business people. Effect on Business Ethics – At times, whether a business-related action is right or wrong is judged by universal standards.  THE SCHOOL OF ETHICAL RELATIVISM Ethical Relativism holds that: differing beliefs, customs, and behavioral norms across countries and cultures give rise to multiple sets of standards of what is ethically right or wrong. Effect on Business Ethics – Whether business-related actions are right or wrong depends on local ethical standards.  THE SCHOOL OF INTEGRATED SOCIAL CONTRACTS THEORY: According to integrated social contracts theory: the universal ethical principles derived from the collective views of multiple societies are combined into a “social contract” that all individuals and organisations have a duty to observe in all situations. Within the boundaries of this social contract: local cultures or groups can specify what additional actions may or may not be ethically permissible. However: adherence to universal or “first-order” ethical norms should always take precedence over local or “second-order” norms. CONSEQUENCES OF ETHICALLY QUESTIONABLE STRATEGIES When Strategies Fail the Ethical Litmus Test Can Lead to Devastating Value of the Sizable Criminal image and Business drops civil fines and Charges public relations as investors lawsuits and problems lose confidence Convictions WHAT ARE THE DRIVERS OF UNETHICAL STRATEGIES AND BUSINESS BEHAVIOR? Faulty Oversight and Self Dealing Unethical Strategie Pressure for s and Short-term Business Performance Behaviors A Corrupt Environment Costs of Ethical Wrongdoing The Costs Companies Incur When Ethical Wrongdoing Is Discovered Corporate Social Responsibility  Corporate Social Responsibility Corporate Social responsibility actions an organisation takes beyond what is legally required to protect or enhance the well-being of living things  Should Firms Pay Attention to CSR View #1: suggests that organisations have tremendous social obligations. View #2: suggests that organisations have no obligation to do any more for society than is legally required Corporate social responsibility (CSR) refers to an organisation’s duty to: operate in an honorable manner, provide good working conditions for employees, encourage workforce diversity, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large. The Five Components of a Corporate Social Responsibility Strategy The Triple Bottom Line: Excelling on Three Measures of Organisational Performance Profit Peopl e Plane t  Benefits of CSR CSR strategies and environmental sustainability strategies that both provide valuable social benefits and fulfill customer needs in a superior fashion can lead to competitive advantage.  Socially responsible strategies that create value for customers and lower costs can improve organisation profits and shareholder value at the same time that they address other stakeholder interests. There’s little hard evidence indicating shareholders are disadvantaged in any meaningful way by a organisation’s actions to be socially responsible. Caution: Corporate social agendas that address only social issues may help boost a organisation’s reputation for corporate citizenship but are unlikely to improve its competitive strength in the marketplace. The Balanced Scorecard  The Balanced Scorecard What is it? The Balanced Scorecard is a management tool that provides stakeholders with a comprehensive measure of how the organization is progressing towards the achievement of its strategic goals.  The Balanced Scorecard Balances financial and non-financial measures Balances short and long-term measures Balances performance drivers (leading indicators) with outcome measures Leads to strategic focus and organizational alignment.  The Balanced Scorecard Why do it? To achieve strategic objectives. To provide quality with fewer resources and eliminate non-value added efforts. To align customer priorities and expectations with the organisation. To track progress. To evaluate process changes. To continually improve. To increase accountability The Balanced Scorecard  The Balanced Scorecard Financial Measures Funding/cost Magnitude Resources produced/unit cost Percent change from last period Risk assessment Cost / Benefit  The Balanced Scorecard Customer Measures Customer/potential customer groups (market segments) aligned with products & services used Satisfaction: prompt, courteous, expert Complaint tracking and trending These are leading indicators: dissatisfied customers will quickly find other suppliers  The Balanced Scorecard Process Measures How well are internal processes running? Do products/services conform to customer requirements: dependable, accurate, complete Designed by those who know processes most intimately Mission-oriented and focused on process improvement  The Balanced Scorecard Learning/Growth (People) Measures In a learning organization, people are the main resource Individual and institutional learning: hiring, training, technical tools, mentoring and development Communication  Final Points:The Balanced Scorecard The Balance Scorecard is a Feedback Tool It is not a Strategy or Quality program Think of it as a “Dashboard” The End