Chp:4 Performance analysis

Baldrige performance excellence - LSCWORM

The Baldrige model assesses and organisation across seven categories:

 Leadership – how the organisation’s leadership guides, governs and sustains the organisation’s
performance.

 Strategy – the ability to successfully plan, develop and implement strategies.

 Customers – the success in building and sustaining strong, lasting relationships with customers.

 Workforce – how the organisation enables and empowers its workforce to achieve organisational
goals

 Operations – the design and effectiveness of organisational processes and whether these are
improving and meeting strategic needs.

 Results – the performance and improvement of the organisation relative to competitors, in the key
categories of the model.

 Measurement, analysis, and knowledge management – how data is stored, managed, analysed and
used within the organisation.

Chp:5 Strategic Choice

Bowman's Strategy Clock
The model was developed by economists Cliff Bowman and David Faulkner
An alternative way of identifying strategies that might lead to competitive
advantage is to look at ‘market facing’ generic strategies. This approach is based
on the assumption that competitive advantage is achieved if a firm supplies
what customers want better or more effectively than its competitors. Better
could mean a more suitable product or service, or could mean a cheaper one of
adequate quality. In effect, customers are looking for what they perceive as best
‘value for money’.
Routes 1 and 2 are price-based strategies.  1 = no frills Commodity-like
products and services. Very price-sensitive customers. Simple products and
services where innovation is quickly imitated – price is a key competitive
weapon. Costs are kept low because the product/service is very basic. 
2 = low price Aim for a low price without sacrificing perceived quality or
benefits. In the long-run, the low price strategy must be supported by a low cost
base.
3 = hybrid strategy Achieves differentiation, but also keeps prices down. This
implies high volumes or some other way in which costs can be kept low despite
the inherent costs of differentiation.
Routes 4 and 5 are differentiation strategies.
 4 = differentiation Offering better products and services at higher selling
prices. Products and services need to be targeted carefully if customers are
going to be willing to pay a premium price.
 5 = focused differentiation Offering high perceived benefits at high prices.
Often this approach relies on powerful branding. New ventures often start with
focused strategies, but then become less focused as they grow and need to
address new markets.
 6, 7, 8 = failure strategies Ordinary products and services being sold at high
prices. Can only work if there is a protected monopoly. Some organisations try
option 8 by sneakily reducing benefits while maintaining prices.

Chp:5 Strategic Choice

Growth strategies
Growth strategies are explored through the use of the Ansoff matrix
Ansoff’s product/market matrix provides a summary of strategic options for an
organisation when looking to expand.
IN summary, the matrix illustrates that an organisation can expand using
existing or new products into existing or new markets. The level of risk
associated with each strategy is:
X-AXIS
Existing Market
New Marker
Y-AXIS
Existing Product, New Product
Option 1 EM,EP –Mkt Penetration and Internal Efficiency - low risk as the
product and the market are known – the risk here is attempting to sell a product
in the marketplace when demand is falling (e.g. video players).
Market penetration/growth.  This typically involves the use of a
new/improved competitive strategy. Key risks:   competitor reaction can
lead to stagnation

Option 2 EM,NP - Product development - higher risk – although the market is

known there is a risk that customers will not like the enhanced or new product
(e.g. a mobile telephone that can double as an MP3 player).
Product development   New products could arise from R&D, joint ventures,
buying in other people's products, copying innovations of rivals or licensing. It
might also come from product augmentation (for example, by upgrading
software capabilities). Key risks:   KAPLAN PUBLISHING market size
and demand are unknown can lead to cannibalisation of existing products

Option 3 – NM,EP - Market development - again higher risk – the product is

known but the marketplace is not. The main risks relate to poor sales strategy or
poor market research indicating that customers want the product when they do
not (e.g. Asda retreating from Germany).
Market development  This involves finding new markets for existing
products.  These could be new segments in current markets (e.g. new age
groups) or overseas markets. Key risks:  needs a new external analysis  puts
a strain on existing strategic capabilities
Option 4 – NM,NP – Diversification - highest risk option – both the market and
the product are new combining the risks from Options 2 and 3. While the risk is
highest here, so are potential returns if the new product can be successfully sold
in the new market.
Diversification  This involves moving away from existing core activities and
offer a new product to a new customer.  More details are available elsewhere
in this chapter. Key risks:  combines the risks of product and market
development  need good corporate parenting skills (covered in detail in the
next chapter)

Chp:7 Governance general principles

Chp: 8 Approaches to governance

Chp: 9 Stakeholders and corporate social responsibility

Stakeholders as ‘any person or group that can affect or be affected by the
policies or activities of an organisation’.
The matrix was designed to track interested parties and evaluate their viewpoint
in the context of some change in business strategy.
Power relates to the amount of influence (or power) that the stakeholder group
can have over the organisation. However, the fact that a group has power does
not necessarily mean that their power will be used. The level of interest
indicates whether the stakeholder is actively interested in the performance of the
organisation. The amount of influence the group has depends on their level of
power.
Low interest – low power – MINIMAL EFFORT- These stakeholders typically
include small shareholders and the general public. They have low interest in the
organisation primarily due to lack of power to change strategy or influence
corporate governance.
High interest – low power – KEEP INFORMED - These stakeholders would
like to affect the strategy or influence corporate governance of the organisation
but do not have the power to do this. Stakeholders include staff, customers and
suppliers, particularly where the organisation provides a significant percentage
of sales or purchases for those organisations. Environmental pressure groups
would also be placed in this category as they will seek to influence company
strategy, normally by attempting to persuade high power groups to take action.
Low interest – high power – KEEP SATISFIED – AA These stakeholders
normally have a low interest in the organisation, but they do have the ability to
affect strategy and/or influence corporate governance should they choose to do
so. Stakeholders in this group include the national government and in some
situations institutional shareholders. The latter may well be happy to let the
organisation operate as it wants to, but will exercise their power if they see their
stake being threatened.
High interest – high power – KEY PLAYERS - These stakeholders have a high
interest in the organisation and have the ability to affect strategy and/or
influence corporate governance. Stakeholders include directors, major
shareholders and trade unions.
Chp: 10 Effective leadership
Behavioural/Style Theory

Contingency/contextual theories
Chp:12 Reporting to stakeholders
Chp :13 Management internal control System and Reporting
Management levels BY Anthony

Chp: 14 Audit and Compliance

Chp: 15 Identification, assessment and measurement of risk
The Internal Control—Integrated Framework (the COSO Framework) was
developed by the Committee of Sponsoring Organizations (COSO) of the
Treadway Commission.

CHP 16 : Managing, monitoring and mitigating risk

Risk management: TARA (or SARA)
Transference. In some circumstances, risk can be transferred wholly or in part to
a third party, so that if an adverse event occurs, the third party suffers all or
most of the loss. A common example of risk transfer is insurance. Businesses
arrange a wide range of insurance policies for protection against possible losses.
This strategy is also sometimes referred to as sharing. Risk sharing. An
organisation might transfer its exposures to strategic risk by sharing the risk
with a joint venture partner or franchisees.
Avoidance. An organisation might choose to avoid a risk altogether. However,
since risks are unavoidable in business ventures, they can be avoided only by
not investing (or withdrawing from the business area completely). The same
applies to not-for-profit organisations: risk is unavoidable in the activities they
undertake.
Reduction/mitigation. A third strategy is to reduce the risk, either by limiting
exposure in a particular area or attempting to decrease the adverse effects
should that risk actually crystallise.
Acceptance. The final strategy is to simply accept that the risk may occur and
decide to deal with the consequences in that particular situation. The strategy is
appropriate normally where the adverse effect is minimal. For example,
there is nearly always a risk of rain but, unless the business activity cannot take
place when it rains, then the risk of rain occurring is not normally insured
against.

Chp: 24 Managing strategic change

Kurt Lewin
Kurt Lewin developed a simple model for achieving successful change and
overcoming resistance in three steps:

Unfreezing The first element of the model is to break down and remove the
current resistance to change. Staff need to be convinced that the current system
is not successful and needs to change. Failures in the current culture, whether
that be in its structure, people’s routines or organisational controls etc. need to
be examined and explained. The benefits of a proposed new system need to be
clearly communicated to staff – this may require some of the strong leadership
styles explored in the next part of this chapter. The aim is to motivate staff to
make the change and to reduce their level of resistance. Their attitudes are
‘unfrozen’, they are no longer ‘stuck in their ways’, and they are now willing to
make the change.
Changing - The new system and the associated changes can now be
implemented. Again, this may require hands-on leadership and it will most
certainly require good communication. Some change will have to be supported
by additional training and resources.
Refreezing The new system now needs to become part of the organisational
culture. It needs to feel natural to staff. This may require a new reward structure
linked to the new system, new rules/controls, new targets etc. Organisations will
create new stories around the success of the change, they should aim to
celebrate successes and communicate to staff how the expected benefits are
being achieved. This should help imbed the change as part of the old culture.
The aim is to ensure that staff do not fall back on old habits and want to return
to the old culture and way of doing things. Some argue that the refreezing step
is outdated in contemporary business due to the continuous need for change.
They find it unnecessary to spend time freezing a new state when chances are it
will need to be re-evaluated and possibly changed again in the immediate
future. However, without the refreezing step, there is a high chance that people
will revert back to the old way of doing things. Taking one step forward and two
steps back can be a common theme when organisations overlook the refreezing
step in anticipation of future change.

The context for change (Balogun and Hope Hailey)

Chp: 18 Organizing for Success
Organizational structure by Henry Mintzberg

Mintzberg identified five basic parts or elements within an organisation: –

There is a strategic apex, consisting of the managers who make the key
policy decisions. – SIMPLE STRUCTURE BY
There is an operating core, consisting of the employees who do the basic
operational work of making goods or providing services for customers.
PROFESSIONAL BUREAUCRACY
The middle line consists of the middle managers who link the strategic
apex to the operating core. - DIVISOONAL
 There is a technostructure, which consists of the technical experts and
analysts who plan and control the work of others in the organisation (such
as accountants) – Machine Bureaucracy
. – Finally, there are support staff who provide internal services, such as
building cleaning and maintenance, car fleet management and legal
services.
The ‘adhocracy’, a complex and disorderly structure in which procedures
and processes are not formalised and core activities are carried out by
project teams. This structure is suited to a complex and dynamic
environment. There are two types of adhocracy:

Harmon’s process-strategy matrix

According to Paul Harmon a process-strategy matrix is a matrix formed by an
estimate of:
 the strategic importance of a process on the horizontal axis
 the process complexity and dynamics on the vertical axis.
This matrix can be used to determine how to manage individual processes.

HH – Undertake PROCESS IMPROVEMENT -Processes that lie at the upper-

right are complex, dynamic and of high strategic importance. These are usually
the processes that provide the organisation with its competitive advantage and
should be nurtured accordingly. These processes should get constant attention
and are the ones that should be considered for redesign – any improvements are
likely to bring large benefits to the organisation.
 LL – MINIMAL EFFORT - Processes that fall in the lower-left are of little
complexity, do not change very often and do not have much strategic
importance. They should be given the minimum resources necessary for
efficient functioning.
LH – OUTSOURCE- Processes in the top left of the matrix are very complex
but are not core activities of the organisation (and are not likely to be valued by
customers). Spending time and effort on these processes will distract from core
processes and bring very little benefit. These are the processes which should be
outsourced.
HL – AUTOMATE TO SAVE COSTS - Processes in the bottom right of the
matrix are valued by customers but they are likely to be stable and easily copied
by rivals due to a lack of complexity. These processes should be automated in
order to either improve efficiency and/or reduce costs.

Chp: 17 Professionalism, ethical codes and the public interest