Management By Objectives help improve the implementation of strategy.

A company works to reach its strategic goals through an action plan. “An action plan states what actions are going to be taken, by whom, during what time frame, and with what expected results.” (Hunger and Wheelen. 2008. pg. 253) Action plans are used to drive programs set within a specific company strategy.

Action plans are a very useful tool in the evaluation and control of a strategy. They can help determine areas that may require adjustments in daily operations. An action plan will set responsibilities into motion and the detailed direction will act as a motivating factor. Furthermore, action plans develop a time table for anticipated progress and completion. They evaluate the targeted financial results of the actions and offer alternative scenarios as needed.

An action plan is a primary driver. The plan itself determines what resources will be used to accomplish the anticipated results. However, employee’s are assigned to tasks, with the emphasis on the activity, not the results or resources needed to accomplish the task and achieve the desired results in an efficient manner. In contrast, Management By Objectives (MBO) strives to increase the performance of a company by synchronizing goals and objectives throughout the operations. “MBO links organizational objectives and the behavior of individuals.” (Hunger and Wheelen. 2008. pg. 255). It matches employee competencies to individual tasks within the plan. MBO assigns the best man or woman for the job.

Management by objectives is a logical and organized process that allows management to focus on obtainable goals and to achieve the best possible results from available resources. Furthermore, it works to increase a company’s performance by matching goals and employee objectives throughout the corporation. “The principles behind Management By Objectives (MBO) is to make sure that everyone within the organization has a clear understanding of the aims, or objectives, of that organization, as well as awareness of their own goals and responsibilities in achieving those aims. The complete MBO system is to get plans, which automatically achieve those of the organization.” (Management Help. Date. Para. 6)

Action plans focus on creating a system and applying resources to a function based on a broad spectrum of options. The plan starts with a desired result and is formulated and executed by management, driving it to fit within the development. Managers work toward the end result by assigning tasks to employees without a relevant connection to the entire plan. They provide detailed agendas to follow step by step, leaving little room for employee input. Management dictates the execution of the plan regardless of inefficiencies or imperfections.

MBO breaks down the process to an individual level, based on employee competencies and expertise. It matches goals with specific performance “Management by Objectives (MBO) is about setting your self objectives and then breaking these down into more specific goals or key results.” (Management Help. Date. Para. 5) Management clearly advises employees of the goals and objectives of the plan, and states the overall desired results. They then allow the employees to use their knowledge and competency to work towards the assigned goals. Since these employees have the greatest knowledge of their job, they are given the responsibility to create success in the individual task. “MBO managers focus on the result, not the activity. They delegate tasks by negotiating a contract of goals with their subordinates without dictating a detailed roadmap for implementation.” (Management Help. Date. Para. 5)

MBO will help improve the implementation of strategy in many ways. MBO creates focus on individual tasks for management and empowered employees. Instead of diluting focus with concern on multiple tasks within an action plan, each manager and employee knows what is expected of them, and develops a more detailed focus on an individually assigned task.

MBO fosters organizational characteristics within groups and units. Management and employees are provided details and acknowledge the desired results. In order to succeed, they have to work together in an organized fashion to build individual results into combined unit results. It’s a system of building blocks. Management and empowered employees accomplish individual tasks that when combined, formulate the unit task and ultimately develop into the overall company goal.

MBO motivates individuals to perform at high levels. Since employees are provided with important decision making processes and responsibilities, MBO’s fosters a sense of pride and importance related to the individual task. “Empowerment recognizes ‘the demise’ of the command-and-control system, but remains a term of power and rank. A manager should view members of his or her team much as a conductor regards the players in the orchestra, as individuals whose particular skills contribute to the success of the enterprise.” (Management Help. Date. Para. 16) In addition, individual tasks can be measureable in time and performance as a direct result of the individual’s effort. An individual effort that is performed at sub par levels, can not be blanketed within the overall effort, hiding its lack of effort and deficiencies. Since employees must take ownership of their work, performance levels are increased.

MBO increases the need for cooperation and communication as a team. Since many individuals are working as individual parts of the larger picture, communication is needed for progress and coordination of various efforts. In addition, individuals develop an increased awareness of various aspects of the plan as they are subjected to various communications regarding the plan. The end result is a unification of efforts and an increased knowledge of how each part works together in the process, thus increasing overall employee knowledge and awareness of the functions within the unit.

MBO, as stated earlier, requires a building block system to achieve the overall goals of the plan. This building block system creates synergy among units, in various locations with different cultures, as they work together to complete the company wide plan. As units become familiar with each other and their associated functions within the company, increased resource awareness can develop. Management and employees of various units work together and start developing competitive advantages with increased levels of synergy. This can lead to new productive systems such as virtual teams or even concurrent engineering.


These examples are just a few of the advantages Management By Objectives fosters in the implementation of strategy.


References
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Hunger, David J. & Wheelen, Thomas L. (2008). Concepts on Strategic Management and Business Policy. New Jersey: Pearson Prentice Hall.

eCoach Effective Management. Management By Objectives – The Five Step MBO Process. Retrieved March 7, 2008, from eCoach. Website: http://www.1000ventures.com/business_guide/mgmt_mbo_main.html

The Importance of the Strategy and Culture Mix.

A good mix between strategy and culture is vital to a company’s success when implementing new strategies for a company. If they conflict, research shows that failure rates are high.

Strategies that conflict with strong cultures are likely to experience resistance. A company’s culture is its identity. It states who they are and what they do. “Because an organizations culture can exert a powerful influence on the behavior of all employees, it can strongly affect a company’s ability to shift its strategic direction. A problem for a strong culture is that a change in mission, objectives, strategies, or policies is not likely to be successful if it is in opposition to the accepted culture of a company.” (Hunger and Wheelen. 2008. pg. 248).

However, in the case of a weak culture, strategic changes may be welcome, even if they change the current culture. This was the case when Maytag purchased Admiral, formerly known as Magic Chef. Admiral employees, out of respect for Maytag’s success and leadership in quality, gladly accepted a new culture, based on a strategy they anticipated would develop success for their future.

“An optimal culture is one that best supports the mission and strategy of the company of which it is a part. This means that, like structure and staffing, corporate culture should support the strategy. Unless strategy is in complete agreement with the culture, any significant change in strategy should be followed by a modification on the organization’s culture.” (Hunger and Wheelen. 2008. pg. 248).

Therefore, strategy must fit with culture to be successful for a company. However, to succeed in a competitive market, companies must develop strategies that align a company with success. Properly formulated and implemented strategies result in success within an industry. A company’s culture does not drive this success. It definitely can play a significant role in the ultimate achievement of desired results and the effort, timing and implementation of strategies. Culture does not provide a “roadmap” for a company’s planning to success. It is a considerable factor in the planning implementation, but a company’s ability to reach its goals is a result of the direction provided through strategy.

As such, the strategy-culture compatibility assessment is based on strategy as the dominant driving factor. However, this may vary in different unique situations. The ultimate goal of the compatibility assessment is to evaluate the current correlation between the company culture and the affects of implementing a new strategy. If a possible conflict occurs, it can be addressed in a manner that evaluates possible ways to gradually evolve the culture to match the new strategy. Since strategy is the driving force of a company’s efforts, the assessment also focuses on the current culture effect on its outcome. The assessment can prove that if a culture is too strong, a new strategy may not work. As a result, in some circumstances, culture may actually shape a strategy.

In most circumstances, culture can be gradually adjusted to mesh with a new strategy. It is management’s responsibility to evaluate this connection and try to develop a new strategy that is most inline with the current culture. However, the strategy remains the driving factor in a company’s effort to reach its goal. Only after all attempts to adjust culture have been determined unobtainable, should a company decide to change its strategy.

In evaluating the effects of culture on new strategies, management should follow a process of evaluation based on the strategy-culture compatibility assessment. They should first consider if the planned strategy is compatible with the company culture. If it is, the new strategy is likely to be accepted by the workforce. If they are not inline with each other, management must determine if the culture can be easily modified to make it more compatible with the new strategy.

Once a company determines that the culture can be easily modified to make it more compatible with the new strategy, management must proceed with caution, introducing new culture characteristics. This can be achieved through modifying structures, training and development and establishing new management personnel compatible with the new strategy. If management determines that the culture can not be easily modified consistent with the new strategy, they need to determine if they are willing to make organizational changes, accept delays and increases in cost associated with the new strategy that conflicts with the current culture.

If these factors are acceptable to management, they can implement the new strategy working around the culture. They will need to develop and implement a new organizational structure to move forward with the new strategy. If they are unwilling to accept these factors, they must evaluate their commitment to the new strategy. If they are still convinced that implementing the new strategy is the correct course of action, they should consider finding a “joint venture partner or contract with another company to carry out the new strategy.” (Hunger and Wheelen. 2008. pg. 250). Once management has determined that they are not committed to the new strategy due to the challenges it faces within the culture, they should find a different strategy.

Since numerous efforts are made to modify the culture to work with the strategy, one would conclude that culture follows strategy according to the strategy-culture compatibility assessment.

References
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Hunger, David J. & Wheelen, Thomas L. (2008). Concepts on Strategic Management and Business Policy. New Jersey: Pearson Prentice Hall.

Why is astute strategic planning a must in today’s competitive business world?

Strategic planning is vital to an organizations mission to announce where it’s going (short term and long term), how it will get there and how it can monitor success or failure. A solid strategic plan focuses a company’s energy, provides direction towards goals, and helps adjust to a changing environment.

In today’s business environment, “flying by the seat of your pants” is extremely risky and inefficient. Strategic planning helps an organization define its purpose, goals, objectives and resources – all used by the team to work together. Although it does not guarantee success, it provides focus and unity in vision, a definite competitive advantage over a competitor who lacks a strategic plan. A powerful strategic plan is the foundation for a company’s success. Projections are rarely the same as the plan forecasts. Meaningful strategic plans provide management with the reasons for variances and thus the wisdom for future planning.

With the rapid globalization of our markets, a strong strategic plan is more important than ever before. A strong strategic plan may provide opportunities in uncertain environments created by globalization.

“ . . . environmental uncertainty is an opportunity because it creates a new playing field in which creativity and innovation can play a major part in strategic decisions.” (Concepts in Strategic Management and Business Policy, Wheelen & Hunger, 2008, p. 73)

As more businesses enter this global stage, establishing a strategic plan that encompasses key factors associated with both local and global aspects of business, is vital to its success. Conducting international risk assessments is vitally important prior to entering a nation’s economic system. Proper business planning will also help in evaluating the economic, technological, political-legal, and socio-cultural variables of a county, as well as analyzing the industry and task environment associated with various countries.

Think globally but act locally. This is more likely obtainable with a successful business plan.

Move Over Tradition - it's Time for the Modern Customer-Oriented Organization Chart

With the advancements in Technology, companies are being forced to reconsider and adjust traditional ways of doing business. Marketing Information Systems have created efficiencies in marketing, streamlining the process for a concentrated and powerful customer focus.

Companies have the ability to focus directly on more isolated, concentrated and relevant profitable customers. As a result, the flow and responsibilities associated with a traditional organizational chart have evolved into a customer centric focal design, referred to as the modern customer-oriented organizational chart. Although both organizational charts involve the same or similar features, it is the manner and layout of these features that differentiates these 2 styles.

Traditionally, an organizational chart was designed from the top down, according to management. The upper management resided at the top of the pyramid as the critical point of decision making, driving the organizational leadership. In tier 3, middle management worked closely with upper management in addition to the frontline personnel, located in tier 2. The frontline personnel worked directly with the customers, located at the bottom of the pyramid in tier 1. Frontline personnel serviced the customers as well as mediated customer information to middle management.

In a traditional organizational chart, the structure is established in a way that relies on tier hierarchy, where critical consumer information is forced to flow upwards. As the flow of information progresses further up the pyramid, the accuracy and aspects of the information can become diluted. This type of organizational flow can be compared to the childhood game, “telephone.” The goal is to have a number of children share information. Starting from the first person in line, a message is transferred from one child to another until it reaches the last child in line. The desired result is to have the message relayed at the end of the line, exactly as initiated with the first child. Typically, as the message travels along the line of children, it changes in meaning, relevancy and impact.

The traditional organizational chart structure has a similar shortfall in design. The decision makers in top management don’t have an accurate pulse of the customer. Upper management makes decisions that affect the products and services offered by the company. If the message from the consumer becomes distorted as it moves along the chain of command, management’s current and future decisions are unlikely to address consumer concerns. “Managers who believe the customer is the company’s only true “profit center” consider the traditional organizational chart, a pyramid with the president at the top and, management in the middle, and frontline people and customers at the bottom, obsolete.” (Kotler and Keller. 2009. pg. 120)

The traditional organizational chart focuses attention on the decisions and responsibilities of upper management. Customers, located at the bottom of the pyramid, are typically unseen and unintentionally considered irrelevant in the decisions made by management. Although management may intend to use customer related information passed up the pyramid in making decisions, many times the consumer factor is minimized and decisions regarding the company operations overshadow any consumer input. As a result, a large number of decisions are made in the interest of the company, as opposed to the consumer, who ultimately makes the purchase. This can be critical to a company’s success because if the company doesn’t address consumer issues, frustrations, needs, opportunities and desires, they will experience substantial losses in market share as numerous consumers defect to other market opportunities.

In contrast, the modern customer-oriented organizational chart inverts the traditional chart, focusing the importance on the consumer. “At the top are customers; next in importance are frontline people who meet, serve, and satisfy customers; under them are the middle managers, whose job is to support the frontline people so they can serve customers well; and at the base is top management, whose job is to hire and support good middle managers.” (Kotler and Keller. 2009. pg. 120) Customers are also extending along side the entire length of the pyramid. As such, “managers at every level must be personally involved in knowing, meeting, and serving customers.” (Kotler and Keller. 2009. pg. 120)

This new style of information flow is much more precise. It allows upper management to make decisions that are inline and directly related to consumers as they now can relate to their input. “Some companies have created an ongoing mechanism that keeps senior managers permanently plugged in to frontline customer feedback.” (Kotler and Keller. 2009. pg. 138) This new approach places all focus, at whatever level, on the needs of the consumer. Decisions are now made on optimal operational factors that will ultimately serve the consumer in the most efficient and profitable manner.

The traditional organizational chart and the new modern customer-oriented organizational chart are similar in that they share the relational dependency among the 3 company tiers (top management, middle management and frontline people). In both styles, business units and personnel must work together in assigned roles, reporting structures and job responsibilities. The roles in frontline people and middle management are relatively similar among the 2 styles. However, the biggest difference is that the new modern customer-oriented organizational chart demonstrates the recognized importance of all levels to be available to service and support the consumer.

In the traditional style, frontline people were the only directly connected group to the consumer. In the new modern style, all levels of management as well as employees are focused on being available to directly service the consumer. A perfect example of upper management’s involvement in daily operations and interactions with customers is the CEO of Dominos. “As a continuation of Domino's Big Taste Bailout campaign, Domino's CEO Dave Brandon, made the first of two surprise deliveries in Killeen, Texas to Angela Waldrep, the first lucky winner.” (Trading Markets. 2009. para. 1) In the past, top executives would never have considered being part of the front line service. However, in today’s ultra competitive business environment, an expanding number of top executives recognize the incredible insight that can be gained through such frontline experiences.

References
Kotler, P., Keller, K. L. (2009). Marketing Management. New Jersey: Pearson Prentice Hall.

Trading Markets. Domino's Pizza CEO Delivers Pizza for a Year Prize to Killeen Resident. 2009. Retrieved June 15, 2009 from Trading Markets. Website: http://www.tradingmarkets.com/.site/news/Stock%20News/2254713/