STRATEGY A VIEW FROM THE TOP
CHAPTER 2:
“HOW STRATEGY AND PERFORMANCE ARE
LINKED”
Crystal Hill
Stephen Lechtenberg
Anand McGee
Allison Purtell
Jason Torres
Level 5 Leadership


Top Leadership defines a significant difference
between good and great companies
Common characteristic of the great companies
assessed in “Good to Great,” displays an
unusual mix of intense determination and
profound humility
Nature of the Leadership Team

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The process of securing individuals with level 5
leadership abilities must be undertaken BEFORE a
strategy should be developed
Worthwhile for firms to spend extra time and
energy on personnel searchers because with the
right people in the right positions, many companies
problems dissipate.
Must have a willingness to identify and assess
defining facts in a company and its larger business
environment
Metaphor of the Hedgehog
Simplicity can sometimes lead to greatness


When confronted by predators, the hedgehog’s simple,
but effective response of rolling into a ball can rarely be
overcome by its more clever predators, such as a fox
Being Good to Great is not doing many things well, but
instead doing ONE thing better than anyone else
Criteria to Achieve “Hedgehog Concept”
Determine what the company can and cannot
be the best at
 Determine what drives the company’s
economic engine
 Determine what the company’s people are
deeply passionate about

The “Flywheel Effect”


Advantageous business cycle: by making decisions
that reinforce the company’s “hedgehog”
competencies, execs initiate positive momentum,
results in positive outcomes, which serve to energize
investment/loyalty of the staff
The Doom Loop: reactive decision making, an
overextension into too many diverse areas of
concentration, following short lived trends, frequent
changes in leadership and personnel, loss of moral,
and disappointing results.
Other Items of Importance:



Have an overarching organizational culture of
discipline
Businesses should not depend on technology
alone
Companies need a set of core values
The 4+2 Formula

A study aimed at identifying the must have management
practices concluded companies that outperformed their
industry peers excelled at 4 primary management
practices:

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


Strategy
Execution
Culture
Structure
These strengths were augmented with at least 2 of the 4
secondary management practices

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Talent
Innovation
Leadership
Mergers/Partnerships
Strategy and Performance:
A Conceptual Framework
Purpose
Strategy
Leadership
Structure
Systems
Processes
People
Culture
Performance/Control
Strategy, Purpose, and Leadership

Strategy-structure-systems paradigm dominated the
20th century
 The
principal strength was that it minimized human
initiative with disciplined planning and control systems
 Lost effectiveness with the rise of global competition

Move from “chief strategist” to “chief facilitator”
 Sought
ways to involve employees at all levels in the
strategic management process
 Strategic discipline and control secured through
commitment
Strategy and Organizational Change

Keys to effective organizational change
Structure
 Systems
 Processes
 People
 Culture



Successful implementation of a new strategy requires
change in all of these.
Also, style, skills, and superordinate goals are as
important as strategy or structure when bringing about
change.
Structure


Choosing structure involves identifying dimensions that
allow the organization adapt and evolve strategically.
Goal is to create an environment that
Allocates resources effectively
 Is naturally self correcting as strategic changes need to be
made


No matter which form is used, transparency is critical
Lines of authority need to be clear
 Responsibilities must be clearly defined

Structure

Types of Structure
 Functional
– particular task requires many specialists
 Geographic – company operates in a diverse set of
regions
 Decentralized – reduce complexity in multibusiness
environment
 Strategic business- defines grouping businesses that
share key strategic elements
 Matrix structures- allow multiple channels of authority
Systems and Processes

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
The right systems and processes can enhance an
organization’s effectiveness and ability to cope with
change
Supporting Systems: Planning, Budgeting,
Accounting, Information, Reward, and Incentive
Processes
 Systematic
way of doing things
 Formal or informal
Culture

Elements of Strong Culture
Leaders who demonstrate strong values that align with
competitive conditions
 Company commitment to operating under pervasive
principles not easily abandoned
 Concern for employees, customers and shareholders


Elements of Weak Culture
Employees report experiencing separateness from the
organization
 Prevalence of political maneuvering
 Hostility toward change

Culture


A company’s corporate culture is a shared system of
values, assumptions, and beliefs among a firm’s
employees that provides guidance on how to think,
perceive, and act.
Manifested through:
 Artifacts
 Shared
values
 Basic assumptions
The Balanced Scorecard


A set of measures designed to provide strategists
with a quick, comprehensive view of the business.
It helps to answer four basic questions:
 How
do customers see us?
 At what must we excel?
 Can we continue to improve and create value?
 How do we look to our company’s shareholders?
The Balanced Scorecard(cont.)


Customer driven
The scorecard uses four management processes:
 Translating
a vision
 Communication
 Improving business planning
 Gathering feedback and learning
Performance and Control
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Most methods for measuring and evaluating
performance are focused on outcome control.
The company directly monitors specific business units
through behavior control to maximize performance.
The Role of the Board

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Fundamentals of board revolve around creating a
“culture of high performance”
To “direct” the company and determine and
prioritize what they should focus it’s attention and
focus on.
Six specific tasks
The Role of the Board

In order to create a “high performance culture”, a
board should complete these 6 tasks:
1.
2.
3.
4.
5.
6.
Define it’s role, agenda, and information needs
Ensure that management not only performs, but
performs with integrity
Set expectations about the tone and culture
Formulate corporate strategy with management
Ensure that the corporate culture aligns
Help management understand expectations