Unit-4
Strategy
Implementation
Dr. Prashant B. Kalaskar

Syllabus
• 4.1: Strategy Implementation: Components of Strategic Plan, Barriers to
Implementation of Strategy, Mintzberg’s 5 P’s, Deliberate & Emergent
Strategies, McKinsey 7S Framework
• 4.2: Organization Structure for Strategy Implementation:
Entrepreneurial, Functional, Divisional, SBU, Matrix Network Structures,
Cellular, Modular Organization, Matching Structure to Strategy,
Organization Design for Stable Vs. Turbulent Environment
• 4.3: Changing Structures & Processes: Reengineering & Strategy
Implementation, Principles of Reengineering, Six Sigma, Process
consisting of Defining, Analyzing, Improving & Establishing Steps, Lean
Six Sigma (Concepts Only)
• 4.4: Corporate Culture: Building Learning Organization, Promoting
Participation thro’ technique of Management by Objectives (MBO), Total
Quality Management (TQM)
• 4.5: Strategy Evaluation: Operations Control & Strategic Control,
Symptoms of Malfunctioning of Strategy, Use of Balanced Score Card for
Strategy Evaluation
Dr. Prashant B. Kalaskar

Strategy Implementation
Dr. Prashant B. Kalaskar
• “Strategies most often fail because they
aren’t executed well.”
Larry Bossidy and Ram Charan
“Successful strategy formulation does not
guarantee successful strategy
implementation.”

Strategic Management Process
Dr. Prashant B. Kalaskar
4
Implement
Strategy
SWOT
Formulate
Strategy –
Corporate,
Business,
Functional
Define new
Mission Goals,
Grand Strategy
Identify Strategic
Factors –
Strengths,
Weaknesses
Identify Strategic
Factors –
Opportunities,
Threats
Scan Internal
Environment – Core
Competence,
Synergy, Value
Creation
Evaluate Current
Mission, Goals,
Strategies
Scan External
Environment –
National, Global

Strategy Implementation
• Strategy implementation is actually putting strategies
in to action.
• The Strategies formulated at various levels of the
organizations are implemented so as to achieve the
objectives taken up at the corporate level.
• Strategy implementation happens in two stages
1) Project Implementation
2) Procedural Implementation
• A poor control on strategy implementation may result
in unexpected situation of Malfunctioning of Strategy
Dr. Prashant B. Kalaskar

Strategy Formulation & Strategic Choice
Dr. Prashant B. Kalaskar
Strategy
Formulation
Strategy
Analysis
Strategy
Choice

Interrelationship of Strategy & Implementation
Dr. Prashant B. Kalaskar
Forward
Linkage
• Strategy implementation needs some
restructure in Organization or in Resources
to match with the strategy.
• Strategy Provides overall direction for
implementation
Backward
Linkage
• Strategies are selected based on current
structure and resources that are available
for effective implementation.
• Circumstances may affect selection of
Strategy

Mintzberg’s Types of Strategies
Dr. Prashant B. Kalaskar
Emergent Strategies
(Alternate Strategies)
Intended
Strategy
(Strategy Formulated)
Unrealised
Strategy
(Unfruitful)
Realised
Strategy
(Implemented)
Intended, emergent and realised strategies
Deliberate Strategy
(Choice of Strategy)

Model of Strategy Implementation
Dr. Prashant B. Kalaskar
Strategic
Plan
Project
Implementation
Procedural
Implementation
Resource
Allocation
Structural
Implementn.
Leadership
Implementn.
Behavioral
Implementn.
Functional
Operational
E
V
A
L
U
A
T
I
O
N
Activating Strategy Managing Change Achieving Effectiveness

What is Strategic Planning?
• Process to establish priorities on what you will
accomplish in the future/objectives
• Allows you to make choices on what you will do and
what you will not do (Action Plans)
• Pulls the entire organization together around a single
game plan for execution (Direction)
• Broad outline on where resources will get allocated
Dr. Prashant B. Kalaskar

Important aspects of Str. Implementation
• Where are we now? (Assessment)
• Where do we need to be? (Gap / Future End
State)
• How will we close the gap (Strategic Plan)
• How will we monitor our progress (Evaluation
Balanced Scorecard)
Dr. Prashant B. Kalaskar

Strategic Planning Model
A B C D E
Dr. Prashant B. Kalaskar
•Environmental
Scan
Assessment
•Background
Information
•Situational
Analysis
•SWOT –
Strength’s,
Weaknesses,
Opportunities,
Threats
•Situation – Past,
Present and Future
•Significant Issues
•Align / Fit with
Capabilities
•Mission & Vision
•Values / Guiding
Principles
•Major Goals
•Specific
Objectives
•Performance
Measurement
•Targets / Standards
of Performance
•Initiatives and
Projects
Baseline Components
•Performance
Management
•Review Progress –
Balanced Scorecard
•Take Corrective
Actions
Down to
Specifics
Evaluate
Where we are Where we want to be How we will do it How are we doing
•Gaps •Action Plans •Feedback
upstream – revise
plans

Assessment Model:
S W O T
Dr. Prashant B. Kalaskar
External Assessment:
Marketplace, competitor’s, social
trends, technology, regulatory
environment, economic cycles .
Internal Assessment:
Organizational assets, resources,
people, culture, systems,
partnerships, suppliers, . . .
Where is your organization in its development RIGHT now?
Assess the Internal and External Environments

Components of a Strategic Plan
• Vision – Developing a clear understanding of what is
your preferred future
• Mission – Developing a sound statement about why
you exist
• Core Values and Beliefs – Describes behaviors and
ideas that are important to your organization
• Strategic Issues – The issues that create a gap between
the ideal and reality
• Operational Plans – How are you going to achieve your
vision?
Dr. Prashant B. Kalaskar

Components of Strategic Planning
Dr. Prashant B. Kalaskar
Mission
Vision
Goals
Objectives
Measures
Why we exist
What we want to be
Indicators and
Monitors of success
Desired level of
performance and timelines
Planned Actions to
Achieve Objectives
O1 O2
AI1 AI2 AI3
M1 M2 M3
T1 T1 T1
Specific outcomes expressed in
measurable terms (NOT activities)
Strategic Plan
Action Plans
Evaluate Progress
Targets
Initiatives
What we must achieve to be successful

Barriers to Implementation of Strategy
• Strategy Formulation
Dr. Prashant B. Kalaskar
Corporate Level
Business Level
Functional Level
• Strategy
Implementation

Barriers to Implementation of Strategy
• Implementing strategy has always been a challenge for
organizations across the industry
• Ability to implement strategy is the deciding factor
between success and failure of a company’s strategy.
• Strategy formulation and strategy implementation are
not two discrete processes but are intertwined
together.
• Planning is no doubt important, but making the plan
work is a bigger challenge which deals with
organizational politics, culture and sometimes
managing change.
Dr. Prashant B. Kalaskar

Barriers to Implementation of Strategy
Dr. Prashant B. Kalaskar
Barriers to Strategy Implementation
Only 5% of
the
workforce
understand
the Vision
Vision Barrier
Only 25%
of the
Managers
have
Incentives
linked to
Strategy
People Barrier
85% of the
executive
teams
spends less
than one
hr/month
discussing
Strategy
Management
Barrier
60% of
organizatio
ns don’t
link budget
to strategy
Resource Barrier

Mintzberg’s 5P’s to Define Strategy
 Plan
 Ploy
 Pattern
 Position
 Perspective
Dr. Prashant B. Kalaskar
Henry Mintzberg

Plan
Dr. Prashant B. Kalaskar
 A plan is an intended
course of action
 For example, a business
makes a plan to increase
their market share
 Plan is not enough on its
own. This is where the
other four Ps come into
play

Ploy Strategy
Dr. Prashant B. Kalaskar
 A strategy can be a ploy
 A ploy is a specific
maneuver intended to gain
an advantage on an
opponent or competitor
 For example, a business
may threaten to introduce
a new product or reduce
price of product to scare
competitors

Ploy Strategy
Dr. Prashant B. Kalaskar
 Mintzberg says that getting the better of
competitors, by plotting to disrupt, dissuade,
discourage, or otherwise influence them, can be part
of a strategy.
 This is where strategy can be a ploy, as well as a plan.
 For example, a grocery chain might threaten to
expand a store, so that a competitor doesn't move
into the same area; or a telecommunications
company might buy up patents that a competitor
could potentially use to launch a rival product

Pattern Strategy
Dr. Prashant B. Kalaskar
 Strategy can be a pattern
 Pattern means a series of
actions
 For example, a business
makes a plan to increase
market share
 Then the business does a
pattern of behavior to follow
the plan
for example, a company that regularly markets very expensive
products is using a "high end" strategy.

Pattern Strategy
Dr. Prashant B. Kalaskar
 Strategic plans and ploys are both deliberate
exercises.
 Strategy emerges from past organizational behavior.
 Rather than being an intentional choice, a consistent
and successful way of doing business can develop
into a strategy.
 Example: A manager who makes decisions that
further enhance an already highly responsive
customer support process than doing anything
intentionally as a part of behavioral pattern

Position Strategy
Dr. Prashant B. Kalaskar
 Strategy can be a position
 Position means place in
relation to competition
 For example, a business
may position itself in the
market as a high quality
service provider
it reflects decisions to offer particular products
or services in particular markets.

Position Strategy
Dr. Prashant B. Kalaskar
 This is how the Organization decides to position their
self in the marketplace.
 This helps to explore the fit between the
organization & the environment, and it helps to
develop a sustainable competitive advantage
 Example: Developing a niche product to avoid
competition or products with differentiation to avoid
competition

Perspective Strategy
Dr. Prashant B. Kalaskar
 Strategy can be a
Perspective
 Perspective is a way of
looking at the world
 For example, different
businesses view
themselves and their
customers differently
that is, vision and direction.

Perspective Strategy
Dr. Prashant B. Kalaskar
 The choices an organization makes about its strategy
rely heavily on its culture & pattern of behavior
 Example: an organization that encourages risk-taking
& innovation from employees might focus on coming
up with innovative products as the main thrust
behind its strategy.
 By contrast, an organization that emphasizes the
reliable processing of data may follow a strategy of
offering these services to other organizations under
outsourcing arrangements.

Example of Mintzberg’s 5
• McDonald’s strategy plan “the Plan to Win” – growth
strategies for McDonald’s by opening new and
improving current McDonald’s restaurants.
• Using growth strategies such as Market penetration,
Product development and also CSR activities – in order
to obtain legitimacy from their stakeholders
Dr. Prashant B. Kalaskar
Plan Strategy

Ploy Strategy
• McDonald’s “Healthy Living” Campaign – Teaching
consumers to eat healthy – thereby McDonalds gain
some “goodwill” by showing that they care about
consumers’ health – thereby they meet consumers’
need
Dr. Prashant B. Kalaskar

Pattern Strategy
• Expansion, expansion, expansion & Quality, Quality &
Quality : McDonald’s expands in every matter and
world corner.
• The chance of growth is grasp at every time and any
time.
Dr. Prashant B. Kalaskar

Position Strategy
• McDonalds’ “Healthy Living” Campaign
• Quality of Service & Food
• Customers will love the quality, service, ambience,
variety of products
• “I am Loving It”
Dr. Prashant B. Kalaskar

Perspective Strategy
Dr. Prashant B. Kalaskar
 Perspective Strategy
McDonalds has focus on sheer productive
efficiency

McKinsey 7 S Model
• The 7-S Framework was first mentioned in "The Art Of
Japanese Management" by Richard Pascale and
Anthony Athos in 1981.
• They had been investigating how Japanese had been so
successful.
• At around the same time, Tom Peters and Robert
Waterman were exploring what makes a company
excellent.
• The 7 S model was born at a meeting of these four
authors in 1978.
• It was taken up as a basic tool by the global management
consultancy company McKinsey.
Dr. Prashant B. Kalaskar

McKinsey 7 S Model
• The McKinsey 7S model is a useful framework
for reviewing an organization's capabilities from
different viewpoints.
• The power of the McKinsey 7S model is that,
managers should take into account all seven of
these factors, to be sure of successful
implementation of a strategy.
Dr. Prashant B. Kalaskar

McKensey 7 S Framework
Dr. Prashant B. Kalaskar

THE HARD S-1- Strategy
• Strategy: the direction and scope of the company
over the long term.
• Ways to achieve competitive advantage.
Examples.
• Low-cost strategy through economic production or
delivery
• Product differentiation through distinct features or
innovative sales.
Dr. Prashant B. Kalaskar

THE HARD S-2- Structure
• Ways in which task and people are specialized and
divided, and authority is distributed.
Four main structures
• Functional Structure
• Divisional Structure
• Matrix Structure
• Network Structure
Dr. Prashant B. Kalaskar

THE HARD S-2- Structure
Dr. Prashant B. Kalaskar
Functional Structure Divisional Structure

THE HARD S-3- Systems
• Formal processes and procedures to manage the
organization.
Examples:
• Performance Measurements
• Reward Systems
• Planning
• Budgeting
• Resource Allocation
• Information System
• Distribution System
Dr. Prashant B. Kalaskar

THE Soft S-1: Staffing
Dr. Prashant B. Kalaskar
 People, their background & competencies.
 Organization’s approach to recruitment,
selection, socialization, training and employee
development is important for effective
staffing.

THE Soft S-2 Skills
• Distinctive competencies in the organization.
• Can be of People, Management Practices,
Systems and/or Technologies.
Dr. Prashant B. Kalaskar

THE Soft S-3 Style
• Leadership style of top management and overall
operating style of organization.
• Impacts norms followed by people, how they
work and interact with each other and
customers.
Dr. Prashant B. Kalaskar

THE Soft S-4 Shared Values
• Core values shared in the organization and
serve as guiding principles of what is important.
• Helps focus attention and provides a broader
sense of purpose.
Dr. Prashant B. Kalaskar

Using the 7-S Model
• Each “S” is consistent with and reinforces the other
S’s.
• Recognize the full range of elements that need to be
changed and focus on the one’s that will have the
greatest effects on performance.
• All seven variables are interconnected- to make
progress in one, adjustments need to be made in
others also.
Dr. Prashant B. Kalaskar

Using the 7-S Model
• Hard S’s (Easier to change)
– Strategy
– Structure &
– Systems
• Softer S’s (Harder to change directly and take longer time)
– Staffing
– Skills
– Style &
– Shared Values
Dr. Prashant B. Kalaskar

Objectives of McKensey 7 S Model
To analyze how well an organization is positioned to
achieve its intended objective
1. Improve the performance of a company
2. Examine the likely effects of future changes within a
company
3. Align departments and processes during a merger or
acquisition
4. Determine how best to implement a proposed
strategy
Dr. Prashant B. Kalaskar

Organizing & Organization
Organizing
“Arranging the activities & resources of the enterprise
in such a way that they systematically contribute to the
enterprise’s goals.”
Organizational structure: “ It refers to formalized
patterns of interactions that link a firm’s tasks,
technologies, and people”
Organization Chart: “A chart that shows the structure
of the organization including the title of each
manager’s position and, by means of connecting lines,
who is accountable to whom and who has authority for
each area”
Dr. Prashant B. Kalaskar

Organization Design & Structure
Organization design
“A process in which managers develop or change their
organization’s structure”
Work specialization
“A component of organization structure that involves
having each discrete step of a job done by a different
individual rather than having one individual do the
whole job”
Dr. Prashant B. Kalaskar

Different Types of Org. Structures
• Functional Structure (U Form)
• Divisional Structure (M Form or H Form)
• Matrix Organization (Matrix Form)
• Network Organization Structure
• Cellular Organization Structure
• Modular Organization Structure
Dr. Prashant B. Kalaskar

Functional Structure
• This kind of organisational structure classifies people
according to the function they perform in the
organization.
• The organisation chart for a functional based
organisation consists of:
Vice President, Sales department, Customer Service
Department, Engineering or production department,
Accounting department and Administrative
department.
Dr. Prashant B. Kalaskar

Functional Structure
Dr. Prashant B. Kalaskar
Production Marketing Accounts Personnel IT
Board of Directors
Chief Executive

Functional Structure
Dr. Prashant B. Kalaskar
Advantages
• Specialisation – each
department focuses
on its own work
• Accountability –
someone is
responsible for the
section
• Clarity – know your
and others’ roles
Disadvantages
• Closed communication
could lead to lack
of focus
• Departments can
become resistant
to change
• Coordination
may take too long time
• Gap between top and
bottom

Divisional Structures
• Divisional Structure
Managers create a series of business units to
produce a specific kind of product for a specific kind
of customer
Dr. Prashant B. Kalaskar

Other Types of Divisional Structures
• Geographic Structure
• Market Structure
Dr. Prashant B. Kalaskar

Other Types of Divisional Structures
Market Structure
• Managers place each distinct product line or business
in its own self-contained division
• Divisional managers have the responsibility for devising
an appropriate business-level strategy for goals
Advantages:
- Specialize in one product area
- Managers become experts in their area
- No direct supervision of division by Top managers
- Improves the use of resources
Dr. Prashant B. Kalaskar

Matrix Design Structure
• An organizational structure that simultaneously
groups people and resources by function and
product
- Complex network
- Flexible & can respond rapidly to the change
- Each employee has two bosses (functional manager
and product manager)
Dr. Prashant B. Kalaskar

Matrix Structure
Dr. Prashant B. Kalaskar

Modular Structure
Modular organization
• An organization in which non-vital functions are
outsourced, which uses the knowledge and expertise
of outside suppliers while retaining strategic control.
Dr. Prashant B. Kalaskar

Matching Structure to Strategy
(Organization Design & Change)
• There is no perfect organizational structure
• There is only structures that match or do not match
with requirements of strategy.
• If they match, it’s a right structure or else is a bad
structure.
• Organization designing is the process to create a right
structure.
• Organization Design means modifying existing
structure to fit the strategic requirement
Dr. Prashant B. Kalaskar

Organization Design
• Organization Design has two dimensions;
1) Structural Dimension
Dr. Prashant B. Kalaskar
2) Contextual Dimension
Formalization
Specialization
Hierarchy of Authority
Centralization &
Decentralization
Professionalism
Personnel Ratios
Environment
Goals & Strategy
Culture
Technology
Size

Structural Dimension
• Formalization: Written documentation, procedures,
regulations & policies
• Specialization: Division of tasks on expertise
• Hierarchy of Authority: Who reports to whom & span
of control
• Centralization & Decentralization: Decision making by
one/top management & decentralization is decision is
delegated to lower levels of management
• Professionalism: formal education & Training
• Personnel Ratios: Deployment of people to various
functions & departments
Dr. Prashant B. Kalaskar

Organizational Structure & Design
• Organizations moves from one stage of growth to next
• Internal & external environment affects organization
design.
• Organization facing a stable environment may use a
functional structure as there will be less
interdepartmental coordination required.
• A turbulent environment requires a rapid response
capability, flexibility & quick decision making.
• In such Turbulent environment Matrix or Divisional
form of Structure is suitable
Dr. Prashant B. Kalaskar

Organizational Structure & Design
• In case of Internal Environment type;
1) A slow or bureaucratic organization may work well
with a functional Structure while,
2) Dynamic & Innovative nature of organization may
require Divisional structure for effective
implementation of strategies.
Dr. Prashant B. Kalaskar

Organizational Change
• Organizational change takes place in two broad
dimensions
1) Structural Changes &
2) Behavioral Changes to absorb impact of changes.
The restructuring can be done either as…
ReOrganization ReEngineering
DeLayering Flatter Structures
Dr. Prashant B. Kalaskar

Organizational Change
 Reorganization/Restructuring: is changing org.
structure matching to the change in external
environment
 Reengineering: Fundamental Rethinking & Radical
Redesigning of business process in areas like product
quality, service, speed etc.
 DeLayering: Reducing the number of layers in
hierarchy for better & improved control
 Flatter Structures: It is the result due to delayering
Dr. Prashant B. Kalaskar

Matching Structures to Strategies
• Change in structure is dependent on change in external
environment.
• Structural changes also requires to compensate the
impact of how people will react to the changed
situations & how to manage the new relationships.
Dr. Prashant B. Kalaskar

Structure for Strategy
• For Example @ Corporate Level Strategy:
1) A company has implemented a STABILITY strategy &
has a simple functional structure working.
2) Now the company has planned to implement
Concentric Diversification .
3) In such case the company should move from a
Functional Structure to a Divisional Structure
4) As products will increase need to have a better
coordination, company can create few departments &
for the related product line
5) Personnel & Finance departments can be retained as
centralized department.
Dr. Prashant B. Kalaskar

Structure for Strategy
• For Example @ Business Level Strategy:
1) A company is pursuing a low cost leadership strategy
in mature industry, can work well with Functional
Structure.
2) Now the company has planned to implement
Differentiation Strategy in a Turbulent environment, a
divisional structure could serve better .
3) In such case the company can cater to changing
customer needs more effectively.
Dr. Prashant B. Kalaskar

Business Process Reengineering (BPR)
• Business Process Re-engineering or BPR is
“The analysis and redesign of workflow and
processes within and between Organizations”
• BPR is the
• Fundamental rethinking and Radical redesign of
Business Processes to achieve Dramatic
improvements in critical measures of performance
.. such as Cost, Quality, Service and Speed.
Dr. Prashant B. Kalaskar

BPR Principles - Derived
• Redesign process steps such that they can be
performed in a correct order.
• Combine several process steps into one.
• Design for parallel sub-processes whenever
possible to reduce waiting time between tasks.
Dr. Prashant B. Kalaskar

BPR Principles - Derived
• Processes may have multiple versions. Remove
complex, exceptions, and special cases.
• Empower human potentials. Give front-line
workers the responsibility to make decisions.
• Provide mechanism (Machines) in the process to
encourage individual, team, and organizational
learning
• An individual without information cannot take
responsibility;
Dr. Prashant B. Kalaskar

A BPR Framework
Dr. Prashant B. Kalaskar
Organization
– Job skills
– Structures
– Reward
– Values
Technology
– Enabling technologies
– Methods and tools
Process
– Core business processes - Value-added
– Customer-focus -Innovation

Approaches to BPR
• Focus on core business processes.
• Use information technology to enable new business
processes, not just to automate existing ones.
• Start with a clean sheet of paper and think out-of-the-
box. (Do not rework old process)
• Consider all aspects of the process.
• Adopt a BPR methodology.
• Use proven methods and tools in analyzing and
redesigning the process.
• Manage the implementation and change process from
the beginning.
Dr. Prashant B. Kalaskar

Reengineering Example: Taco Bell Co.
• We were going backwards fast ... If something was
simple, we made it complex. If it was hard, we figured
out a way to make it impossible.” - Taco Bell CEO
• Customer buy product for $1 are worth about 25 cents.
& 75 cents goes into marketing, advertising, and
overhead.
• Reengineering from the customer’s point of view.
“Are customer willing to pay for these ‘value-added’
activities?” Dr. Prashant B. Kalaskar

Taco Bell Co.
• Corporate Vision: “We want to become
number one in share of stomach.”
Kitchens : Seating capacity
70% : 30% ð 30% : 70%
• Eliminate district managers. Restaurant managers are
given profit-and-loss responsibility. (Rewards based)
• Moving cooking of meat and bean outside.
• Boost peak serving capacity at average restaurant from
$400 an hour to $1,500 a hour.
• $500 millions regional company in 1982 to $3 billion national
company in 1992.
Dr. Prashant B. Kalaskar

What is Six Sigma…?
• Six sigma is a business statistical Strategy.
• Is to identifying defects and removing them
from the process of products to improve quality.
• A defect is defined as any process output that
does not meet customer specifications.
• The term " Sigma " is used to designate the
distribution or spread about the mean (average)
of any process or procedure.
“Process Improvement”
Dr. Prashant B. Kalaskar

What is Six Sigma…?
Dr. Prashant B. Kalaskar
 Six Sigma, is the common measurement index of
"defects-per-unit," where a unit can be virtually
anything--- a component, piece of material,
administrative form, time frame, distance, etc.
The Sigma value indicates how often defects are
likely to occur.
The higher the sigma value, the less likely a process
will produce defects.
As sigma increases, costs go down, cycle time goes
down, and customer satisfaction goes up.

History of Six Sigma
• The Six sigma was founded by Motorola in the
1970s.
• Out of senior executive Art Sundry's criticism of
Motorola’s bad quality.
• They found a connection between increase in
quality and decreases in costs of production.
• Bill Smith, “Father of six sigma” introduce this
quality improvement Methodology to Motorola.
Dr. Prashant B. Kalaskar

Definition of Six Sigma
• Quality management program developed by
Motorola in the 1980s.
• Management philosophy focused on business
process improvements to:
Eliminate waste, rework, and mistakes
Increase customer satisfaction
Increase profitability and competitiveness
Dr. Prashant B. Kalaskar

Six Sigma
Dr. Prashant B. Kalaskar
μ
σ
• Sigma is the Greek letter representing the
standard deviation of a population of data.
• Sigma is a measure
of variation
(the data spread)

What does variation mean?
Dr. Prashant B. Kalaskar
Variation means that a
process does not produce
the same result (the “Y”)
every time.
Some variation will exist in
all processes.
Variation directly affects customer
experiences.
Customers do not feel averages!
-10
-5
0
5
10
15
20

Managing Up the Sigma Scale
Dr. Prashant B. Kalaskar
Sigma % Good % Bad DPMO
1 30.9% 69.1% 691,462
2 69.1% 30.9% 308,538
3 93.3% 6.7% 66,807
4 99.38% 0.62% 6,210
5 99.977% 0.023% 233
6 99.9997% 0.00034% 3.4

Examples of the Sigma Scale
Dr. Prashant B. Kalaskar
In a world at 3 sigma. . .
There are 964 U.S. flight
cancellations per day.
The police make 7 false
arrests every 4 minutes.
In MA, 5,390 newborns are
dropped each year.
In one hour, 47,283
international long distance
calls are accidentally
disconnected.
In a world at 6 sigma. . .
1 U.S. flight is cancelled every 3
weeks.
There are fewer than 4 false
arrests per month.
1 newborn is dropped every 4
years in MA.
It would take more than
2 years to see the same number
of dropped international calls.

Six Sigma Companies
Dr. Prashant B. Kalaskar

Lean Six Sigma
• What is Lean..?
Lean is a methodology that evaluates processes
with a focus on..
Speed
Efficiency
Dr. Prashant B. Kalaskar

Process Improvement
Dr. Prashant B. Kalaskar
1. Initial Perception of problem
2. Clarify Problem
3. Locate Point of Cause
4. Root Cause Analysis
5. Design Solutions
6. Measure
Effectiveness
7. Standardize

Lean Six Sigma Process Improvement
• Lean Six Sigma Seeks to improve the quality of
manufacturing and business process by:
Identifying and removing the causes of defects
(errors) and variation.
Identifying and removing sources of waste within
the process
Focusing on outputs that are critical to customers
Dr. Prashant B. Kalaskar
Define
Measure
AnalyzeImprove
Control

Lean Six Sigma Process Improvement
• LSS is a management philosophy that seeks to drive a
quality culture change through a multi-level based
program
Dr. Prashant B. Kalaskar
Level Training
Green Belt LSS Methodology and basic tool set
Black Belt
Green Belt content plus advanced
data analysis
Master Black Belt
Black belt content plus program
management, leadership skills,
some advanced tools

Background on Lean
• Lean comes out of the industrial engineering world
• Taiichi Ohno – Toyota Production System.
– 1940s-1950s company was on verge of bankruptcy
– Dynamics of industry were changing – moving from mass
production to more flexible, shorter, varied batch runs
(people wanted more colors, different features, more
models, etc).
• Ohno was inspired by 3 observations on a trip to America
– Henry Ford’s assembly line inspired the principle of flow
(keep products moving because no value is added while it
is sitting still)
– The Indy 500 – Rapid Changeover
– The American Grocery Store – led to the Pull system –
material use signals when and how stock needs to be
replenished
Dr. Prashant B. Kalaskar

Path To Lean
Dr. Prashant B. Kalaskar
Theory Waste is Deadly
Application 1. Define Value – act on what is important to the customer
2. Identify Value Stream – understand what steps in the
process add value and which don’t
3. Make it flow – keep the work moving at all times and
eliminate waste that creates delay
4. Let customer pull -- Avoid making more or ordering more
inputs for customer demand you don’t have
5. Pursue perfection -- there is no optimum level of
performance
Focus Flow Focused
Assumptions Non-Value added steps exit
Results Reduced cycle time

The Eight Wastes
1) Overproduction—making or doing more than is required or
earlier than needed.
2) Waiting—for information, materials, people, maintenance, etc.
3) Transport—moving people or goods around or between sites.
4) Poor process design—too many/too few steps, non-
standardization, inspection rather than prevention, etc.
5) Inventory—raw materials, work-in-progress, finished goods,
papers, electronic files, etc.
6) Motion—inefficient layouts or poor ergonomics at work-stations or in
offices.
7) Defects—errors, scrap, rework, non-conformance.
8) Underutilized personnel resources and creativity—ideas that are not
listened to, skills that are not utilized.
Dr. Prashant B. Kalaskar

Lean Methods
• Kaizen Events (or SCORE events)
– Planned and structured process that enables a small group of
people to improve some aspect of their business in a quick,
focused manner.
• Select
• Clarify
• Organize
• Run
• Evaluate
• 5S – this methodology reduces waste through improved
workplace organization and visual management
– Sort, Store, Shine, Standardize and Sustain
• Kanban – a Japanese term that can be translated as “signal,”
“card,” or “sign.”
– Most often a physical signal (paper card of plastic bin), that
indicates when it is time to order more, from whom, and in what
quantity.
Dr. Prashant B. Kalaskar

DMAIC: Lean Methodology
• Define – describe the problem quantifiably and the
underlying process to determine how performance will
be measured.
• Measure – use measures or metrics to understand
performance and the improvement opportunity.
• Analyze – identify the true root cause(s) of the
underlying problem.
• Improve – identify and test the best improvements that
address the root causes.
• Control – identify sustainment strategies that ensure
process performance maintains the improved state.
Dr. Prashant B. Kalaskar

Why Define a Process as a Value Stream?
• A Value Stream
–Focuses attention on what is important for the
customer.
–Identifies all the necessary components to bring a
product or service from conception to
commercialization.
–Identifies waste inherent in processes and works to
remove it.
–Reduces defects in products and deficiencies in
processes.
–Focuses on improving specs and cost. Dr. Prashant B. Kalaskar

What Is Typically Found
Dr. Prashant B. Kalaskar
Lean Value Stream Management starts with defining value in
terms of products and process capabilities to provide the
customer with what they need at the right time and at an
appropriate price.
Value
added
Non-value
added/waste

The Methods
Dr. Prashant B. Kalaskar
Lean
&
Six
Sigma
Improve Speed
Achieve Breakthrough Dashboard Results
Lower Costs
Culture Change
Sustain Performance
Higher Quality
Methods Results

Lean and Six Sigma
Dr. Prashant B. Kalaskar
LEAN = Improvement principles focused on dramatically
improving process speed and eliminating the eight deadly
wastes.
Improve
Process-
Pull
Control
Process
Analyze
Process-
Flow
Measure
Value
Define
Value
SIX SIGMA = Breakthrough Process, Design, or
Improvement Teams focused on eliminating chronic
problems and reducing variation in processes.
Improve ControlAnalyzeMeasureDefine

Lean and Six Sigma
Dr. Prashant B. Kalaskar
Six Sigma = Breakthrough Process Improvement Teams focused on
eliminating chronic problems and reducing variation in processes.
Lean = Rapid Improvement Teams focused on dramatically improving process
speed, and the elimination of the eight deadly wastes.
IMPROVED
EFFICIENCY
Improve
Process-
Pull
Control
Process
Analyze
Process-
Flow
Measure
Value
Define
Value
IMPROVED
EFFECTIVENESS
Improve ControlAnalyzeMeasureDefine

Learning Organization
“A learning organization is an organization skilled at
creating, acquiring, and transferring knowledge, and at
modifying its behavior to reflect new knowledge and
insights”
“New ideas are essential, if learning is to take place”
“Without accompanying changes in the way that work
gets done, only the potential for improvements exist”
Dr. Prashant B. Kalaskar

3 M’s in Learning organizations
• Meaning
Plausible, well grounded definition, actionable and
easy to apply.
• Management
Clear guidelines for practice, filled with operational
advice rather than high aspirations.
• Measurement
Tools for assessing organizations rate and level of
learning to ensure gains have been made.
Dr. Prashant B. Kalaskar

Organization & Qualities
Three distinct stages.
1. Cognitive
• Exposed to new ideas, expand their knowledge and
begin to think differently.
2. Behavioral
• Employees internalize new insights and alter
behavior.
3. Performance Improvement
• Changes in behavior leading to measurable
improvements in results.
Dr. Prashant B. Kalaskar

Levels in the
LEARNING ORGANIZATION
• Individual Learning (IL)
• Organizational Learning (OL)
IL: Sincé the individuals form the bulk of the
organization, they must establish the necessary forms
and processes to enable organizational learning in
order to facilitate change.
OL: is more than the sum of the parts of individual
learning.
An organization does not lose out on its learning abilities
when members leave the organization.
Dr. Prashant B. Kalaskar

Building Blocks of Learning Organisation
• Systematic Problem Solving
• Experimentation
• Learning from Past Experience
• Learning from others.
• Transferring knowledge
• Measuring learning
Each is accompanied by a distinctive mindset, tool kit
and pattern of behavior.
Dr. Prashant B. Kalaskar

Systematic Problem Solving
• Rely on scientific method for diagnosing
problems “plan, do, check, act”
• Statistical analysis
– Generating ideas and collecting information
– Reaching consensus
– Analyzing and displaying data
– Planning actions
Dr. Prashant B. Kalaskar

Experimentation
• On-going programs
– Series of small experiments
– Steady flow of new ideas
– Incentive system
– Need managers and employees trained in evaluating
and performing experiments
Dr. Prashant B. Kalaskar

Learning from Past Experience
• Companies revive successes and failures.
• Assessment done systematically and in an open
and accessible forum
“Those who cannot remember the past are
condemned to repeat it”
Dr. Prashant B. Kalaskar

Learning from Others
• “Most powerful insights come from looking
outside ones immediate environment to gain a
new perspective”
• SIS-Steal Ideas Shamelessly
• Benchmarking
– Ongoing investigation and learning experience that
ensures the best industry practices are uncovered,
analyzed, adapted and implemented.
Dr. Prashant B. Kalaskar

Transferring Knowledge
• Knowledge must be spread quickly and
efficiently throughout the organization
• Maximum impact when shared broadly
– Written reports
– Oral reports
– Site visits and tours
– Personnel rotation programs
– Standardization programs
– Education and training programs
Dr. Prashant B. Kalaskar

Measuring Learning
• “If you can’t measure it, you can’t manage it”
• Actual data comparison
• Learning or experience curves.
– Incomplete measures, ignore other competitive
variables, like quality, delivery or new product
introductions
Dr. Prashant B. Kalaskar

3 types of
Organizational Learning
• SINGLE-LOOP LEARNING
• DOUBLE-LOOP LEARNING
• DEUTERO-LEARNING
Dr. Prashant B. Kalaskar

Single-loop Learning
• This occurs when errors are detected and
corrected.
• Firms continue with their present policies and
goals.
• This is the “Lower-level Learning”, “Not-
Strategic Learning”, “
• This is an “Adaptive Learning”.
Dr. Prashant B. Kalaskar

Double-loop Learning
• This occurs when, in addition to detection and
correction of errors, the organization questions and
modifies its existing norms, procedures, policies and
objectives.
• It involves changing the organization’s knowledge-
base or firm-specific competences or routines.
• It is called as “Higher-Level Learning”,
• “Strategic Learning” :Learning to expand
organization’s capabilities
Dr. Prashant B. Kalaskar

Deutero-learning
• This occurs when organizations learn HOW to
CARRY OUT Single-loop learning and Double-loop
Learning.
• Being aware of ignorace motivates learning.
• Identification of LEARNING STYLES and
FACILITATING FACTORS required to promote
learning.
Dr. Prashant B. Kalaskar

Management by Objective (MBO)
Dr. Prashant B. Kalaskar
MANAGEMENT
By
OBJECTIVE

Management by Objectives (MBO)
• The term “Management by Objectives" was first
popularized by Peter Drucker in his book 'The Practice
of Management in 1954.
• Management by Objectives (MBO) is a process of
agreeing upon objectives within an organization so
that management and employees agree to the
objectives and understand what they are supposed to
do in the organization.
• Objectives can be set in all domains of activities
(production, services, sales, R&D, human resources,
finance, information systems etc.). Dr. Prashant B. Kalaskar

Definition of MBO
• Management By Objectives (MBO) can be
defined as a process whereby the employees
and the superiors come together to identify
common goals, the employees set their goals to
be achieved, the standards to be taken as the
criteria for measurement of their performance
and contribution and deciding the course of
action to be followed.
Dr. Prashant B. Kalaskar

Main Concept
• The principle behind Management by Objectives
(MBO) is to make sure that everybody within the
organization has a clear understanding of the aims, or
objectives of that of organization, as well as awareness
of their own roles and responsibilities in achieving
those aims.
• The complete MBO system is to get managers and
empowered employees acting to implement and
achieve their plans, which automatically achieve those
of the organization.
Dr. Prashant B. Kalaskar

Principles of MBO
• Cascading of organizational vision, goals and
objectives
• Specific objectives for each member
• Participative decision making
• Explicit time period
• Performance evaluation and feedback
Dr. Prashant B. Kalaskar

Process of MBO
Dr. Prashant B. Kalaskar
Appraise
Performance
•Corporate Strategic goals
•Departmental goals
•Individual goals
STEP 1: SET GOALS
STEP 4: APPRAISE OVERALL
PERFORMANCE
Action Plans
Review Progress & Take
Corrective Action
STEP 2: DEVELOP PLANS
STEP 3: REVIEW PROGRESS

The Smart Method
Clarity of goals – With MBO, came the
concept of SMART goals i.e. goals that are:
• Specific
• Measurable
• Achievable
• Relevant, and
• Time bound.
Dr. Prashant B. Kalaskar

MBO: 3 Basic Parts
• All individuals within an organization are assigned a
special set of objectives that they try to reach during
a normal operating period. These objectives are
mutually set and agreed upon by individuals and
their managers.
• Performance reviews are conducted periodically to
determine how close individuals are to attaining
their objectives.
• Rewards are given to individuals on the basis of
how close they come to reaching their goals.
Dr. Prashant B. Kalaskar

Advantages of MBO
• Improves employee motivation
• Improves communication in the organisation
• Flags up and highlights training needs required to
achieve objectives
• Improves overall performance and efficiency
• Attainment of goals can lead to the satisfaction of
Maslow’s higher order needs
Dr. Prashant B. Kalaskar

Disadvantages of MBO
• May demotivate staff if targets are too high and
unrealistic, also if imposed rather than agreed
• Requires the cooperation of all employees to succeed
• Can be bureaucratic and time consuming (meetings,
feedback)
• Can encourage short-term rather a more focused long-
term growth
• Setting targets for certain specialized employees may
be difficult
Dr. Prashant B. Kalaskar

MBO at Intel
A Manager's Guide at Intel provides the following
directions.
Start with a few well-chosen overriding objectives.
Set your subordinates objectives that fit in with
your overriding objectives.
Allow your subordinates to set their own key
results areas (KRA’s) to enable them to meet their
objectives.
Dr. Prashant B. Kalaskar

MBO at Intel
• In Management by Objectives systems at Intel,
objectives are written down for each level of the
organization, and individuals are given specific aims
and targets.
• The principle behind this is to ensure that people know
what the organization is trying to achieve, what their
part of the organization must do to meet those aims,
and how, as individuals, they are expected to help
Dr. Prashant B. Kalaskar

MBO at Microsoft
By Bill Gates
• Eliminate politics, by giving everybody the same
message.
• Keep a flat organization in which all issues are
discussed openly.
• Insist on clear and direct communication.
• Eliminate rivalry between different parts of the
organization
• Empower teams to do their own things
Dr. Prashant B. Kalaskar

Total Quality Management (TQM)
“Quality is everyone’s responsibility”
-Edward Deming
• The integration of all processes and functions of
the firm in the task of ensuring a product’s
quality throughout its life cycle (mfg. & usage) .
• Measurement of Success:
– 100% Customer Satisfaction
• Method of Achievement:
– Continuous Improvement
Dr. Prashant B. Kalaskar

Total Quality Management (TQM)
 TQM is an operating philosophy (experience) and
management tool (SOP) that focuses on continuous
process improvement.
 Everything is a scientific method.
 Do it right the first time through universal
participation.
 Teams as well as individuals that results in customer
satisfaction.
 Internal and External customers ultimately contributes
to co.’s performance.
Dr. Prashant B. Kalaskar

Total Quality Management (TQM)
• 1. The customer makes the ultimate determination of
quality.
• 2. Top management must provide leadership and
support for all quality initiatives.
• 3. Preventing variability is the key to producing high
quality.
• 4. Quality goals are a moving target, thereby requiring
a commitment toward continuous improvement.
• 5. Improving quality requires the establishment of
effective metrics. We must speak with data and facts
not just opinions.
Dr. Prashant B. Kalaskar

Continuous Process Improvement Cycle
Dr. Prashant B. Kalaskar
1. Identify the
opportunity
2. Analyze
the process
3. Develop the
optimal Solution
4. Implement
5. Study
the results
6. Standardize
the solution
7. Plan for
the future
Plan
Do
Act
Check

TQM Six Basic Concepts
1. A committed and involved management to provide
long-term-top-to-bottom organizational support.
2. An unwavering (constant) focus on the customer,
both internally and externally.
3. Effective evaluation of the business and production
process.
4. Continuous improvement of the business and
production process.
5. Treating suppliers as partners.
6. Establish performance measures for the process.
Dr. Prashant B. Kalaskar

7 Important Principles of TQM
• 1. Quality can and must be managed.
• 2. Processes, not people, are the problem.
• 3. Don’t treat symptoms, look for the cure.
• 4. Every employee is responsible for quality.
• 5. Quality must be measurable.
• 6. Quality improvements must be continuous.
• 7. Quality is a long-term investment.
Dr. Prashant B. Kalaskar

5 Main Advantages of TQM
1. Encourages a strategic approach to management at the
operational level through involving multiple departments
in cross-functional improvements and systemic innovation
processes;
2. Provides high ROI through improving efficiency;
3. Works equally well for service and manufacturing sectors;
4. Allows organizations to take advantage of developments
that enable managing operations as cross-functional
processes; and
5. Fits an orientation toward inter – organizational
collaboration and strategic alliances through establishing
a culture of collaboration among different departments
within organization.
Dr. Prashant B. Kalaskar

Benefits of TQM
• Improve quality
• Employee participation and satisfaction
• Teamwork and Working relationships
• Customer satisfaction
• Productivity
• Communication
• Profitability and Market Share
Dr. Prashant B. Kalaskar

TQM techniques that Ford used
• Six Sigma
• Quality Operating System or (QOS)
• Developed their own quality process or 5S.
• The DMAIC process (Define, Measure, Analyze,
Improve, and Control) has built an overall
strategy for consistency in their teams
Dr. Prashant B. Kalaskar

Toyota Corporation uses
• 5S
• Lean manufacturing
• JIT
• Kaizen
• Six Sigma
(5 S: Sort, Store, Shine, Standardize and Sustain)
Dr. Prashant B. Kalaskar

Strategy Evaluation
Strategy Evaluation—the 3 Basics
• Examining the underlying basis (objectives) of
the firm’s strategy
• Comparing actual to expected results
• Taking corrective action to address
performance gaps
Dr. Prashant B. Kalaskar

Need of Strategic Evaluation
 Strategies are formulated on certain assumptions
 Strategies are formulated after analysis of Internal &
External Environmental factors which are dynamic
 Gap in Strategy formulation & implementation
 Assumptions may get changed over Gap period
 Hence Strategies must be evaluated continuously to
adjust the strategies with new requirements of the
present time
 2 ways for Strategic Evaluation:
Strategic & Operational Control
Dr. Prashant B. Kalaskar

Strategic Control
• Strategic control
– It is the process of monitoring and correcting
a firm’s strategy & performance, 2 ways….
– Informational Control: is the ability to respond
effectively to environmental change
– Behavioral Control: is the appropriate balance
and alignment among a firm’s culture,
rewards, and boundaries/limitations
Dr. Prashant B. Kalaskar

Informational Control
• Traditional control system
1. strategies are formulated and top
management sets goals
2. strategies are implemented
3. performance is measured against the
predetermined goal set
Dr. Prashant B. Kalaskar

Contemporary Approach
to Strategic Control
• Informational control
– a method of organizational control in which a firm
gathers and analyzes information from the internal
and external environment in order to obtain the best
fit between the organization’s goals and strategies
and the strategic environment.
Dr. Prashant B. Kalaskar
Formulate
Strategies
Strategic
Control
Implement
Strategies
Informational
Control
Behavioral
Control

Question…?
Top managers at HUL meet every Friday to review
daily operational reports and year-to-date (YTD)
data.
This is an example of……
A. Behavioral control
B. Informational control
C. Strategy formulation
D. Strategy implementation
Dr. Prashant B. Kalaskar

Informational Control
• Primarily concerned with whether or not the
organization is “doing the right things”
• Two key issues/factors
– Scan and monitor external environment
(general and industry)
– Continuously monitor the internal environment
Dr. Prashant B. Kalaskar

Informational Control
• Two key issues
– Scan and monitor external environment
(general and industry)
– Continuously monitor the internal environment
Dr. Prashant B. Kalaskar

Contemporary Approach
to Strategic Control
• Behavioral control
– It is the method of organizational control in
which a firm influences the actions of employees
through culture, rewards, and boundaries.
Behavioral control is focused on implementation
“doing things right”
Dr. Prashant B. Kalaskar
Culture
Bounda
-ries
Rewards

Reasons for an increased emphasis on
culture and rewards
Dr. Prashant B. Kalaskar
1. The competitive
environment is
increasingly
complex and
unpredictable,
demanding both
flexibility and
quick response to
its challenges.
2. The implicit long-
term contract
between the
organization and
its key employees
has been eroded.

Motivating with Rewards and Incentives
• Rewards and incentive systems
– Powerful means of influencing an organization’s
culture
– Focuses efforts on high-priority tasks
– Motivates individual and collective task
performance
– Can be an effective motivator and control
mechanism
Dr. Prashant B. Kalaskar

Types of Strategic Control
1. Premise control
2. Strategic surveillance
3. Special alert control
4. Implementation control
Dr. Prashant B. Kalaskar

1. Premise Control
• Premise control is designed to check
systematically and continuously whether the
premises on which the strategy is based are
still valid (goals)
• Environmental factors
• Industry factors
Dr. Prashant B. Kalaskar

2. Strategic Surveillance
• Strategic surveillance is designed to monitor a
broad range of events inside and outside the
firm that are likely to affect the course of its
strategy (close watch)
• Strategic surveillance must be kept as
unfocused as possible
• Despite its looseness, strategic surveillance
provides an ongoing, broad-based vigilance in
all daily operations
Dr. Prashant B. Kalaskar

3. Special Alert Control
• A special alert control is the thorough, and
often rapid reconsideration of the firm’s
strategy because of a sudden, unexpected
event (emergency plans)
• A drastic event should trigger an immediate
and intense reassessment of the firm’s
strategy and its current strategic situation
• Crisis teams
• Contingency plans
Dr. Prashant B. Kalaskar

4. Implementation Control
• Strategy implementation takes place as series
of steps, programs, investments, and moves
that occur over an extended time
• Implementation control is designed to assess
whether the overall strategy should be
changed in light of the results associated with
the incremental actions that implement the
overall strategy
– Monitoring strategic thrusts
– Milestone reviews
Dr. Prashant B. Kalaskar

Operational Control
Operational control is aimed at;
- Allocation &
- Use of Organizational resources through
evaluation of the performance of individual
units viz. SBU, Functional Divisions, Managers…
- It helps to asses contribution of each unit
towards accomplishment of Organizational
Objectives.
- Operational control is mainly concerned with
“Actions”
Dr. Prashant B. Kalaskar

Difference in Strategic & Operational
Control
Dr. Prashant B. Kalaskar
Attribute Strategic Control Operational Control
Basic Question
Are we moving in Right
Direction?
How are we Performing?
Aim
Proactive; Continuous
questioning
Allocation & Use of Resources
Main Concern
Steering Organization's Future
Direction
Action Control
Focus External Environment Internal Organization
Time Horizon Long Term Short Term
Exercise of
Control
By Top Management By Executive or Middle Level
Main Techniques
Environmental Scanning, Info
Gathering, Review
Budgets, Schedules & MBO

Operational Control Evaluation Process
Dr. Prashant B. Kalaskar
Strategy/Plan/
Objectives
Setting
Standards of
Performance
Actual
Performance
Management
of
Performance
Analyzing
Variances
Feedback
CheckStandards
CheckPerformances
Reformulate

4 Elements of Operational Control
Operational control Cycle contains 4 Elements…..
1) Setting Standards of Performance
2) Measurement of Performance
3) Analyzing Variances
4) Taking Corrective Actions
Dr. Prashant B. Kalaskar

1. Setting of Standards
3 Pronged approach to standard settings;
1) As per strategic requirement, the defined managerial
tasks be connected with KRA’s, Standards can be set
for each KRA’s
2) Special requirements for the for the performance of
the key tasks, can help to determine the type of
standards to be set.
3) KPI’s that can be decided to evaluate these standards
Dr. Prashant B. Kalaskar

1. Setting of Standards
Example:
• Say, one company is using Cost Leadership
Strategy.
• Key Managerial task: overall cost reduction.
• Special requirement: to monitor & reduce costs.
• KPI: reduction in cost of inventory, reduction
cost of production
Dr. Prashant B. Kalaskar

1. Setting Standards
Operational Control can be well exercised using
1) Quantitative Criteria of performance evaluation:
- Performance/Growth of company over last 10 years
- Growth rate, Industry norms, past performances
- Net profit, stock price, dividends rates, Ret. On Capital
2) Qualitative Criteria of performance evaluation:
- Capabilities, Core competencies,
- Risk bearing Capacity,
- Flexibility, Workability
Dr. Prashant B. Kalaskar

2. Measurement of Performance
- Evaluation process operates at Performance level,
as action takes place here
- Performance can be compared against standard
benchmark
- Measuring of performance can be done through;
“Accounting, Reporting & Communication System”
Dr. Prashant B. Kalaskar

3. Analysing Variances
The measurement of actual performance & comparing
it with the set standards provides variances.
There could be 3 situation that may arise;
1) The actual performance matches with set standard
2) The actual performance exceeds the set standard,
i.e. deviates positively from the set standards
3) The actual performance is below the set standard,
i.e. performance deviates negatively from the set
standards
Dr. Prashant B. Kalaskar

Variance Chart for Performance Evaluations
Dr. Prashant B. Kalaskar
Performance Indicators Standard Actual Deviation
Financial Area:
Profit Over Sales (%) 12 10 (-) 2
Dividend (%) 10 10 0
Marketing Area:
Sales Revenue (`) 25 23 (-) 2
No. of Customer Complaints 1.5 1.3 (+) 0.2
Operations Area;
Capacity Utilization (%) 85 90 (+) 5
Man Hours Per Unit 4 3.5 (+) 0.5

Symptoms of Malfunctioning of Strategy
1) Company is not performing as well as against its all close
rivals pr industry as a whole.
2) Company is not performing in terms of stated objectives,
ROI, Market Share, Profitability etc.
3) Corporate culture is not aligned with strategy
4) Implementation of Strategy is Slow
5) Organizational conflicts & interdepartmental bickering are
often symptoms of Strategy Malfunction
6) Managerial problem continue despite changes in
personnel & if they tend to be issue-based rather than
people-based, their strategies may be inconsistent
Dr. Prashant B. Kalaskar

Symptoms of Malfunctioning of Strategy
7) If success for one organizational department means failure
for another department then it is a symptom of
malfunctioning.
8) If policy problems & issues continue to be brought to the
top for resolution, then strategy may be Malfunctioning
9) Overtaxing of available resources is a symptom of
malfunctioning
10) Degree of risk is high as compared to rewards
11) Strategy is inconsistent with changing environment
12) If strategy implementation does not give due cognizance
to time horizon, then it is symptom of strategy is
malfunctioning
Dr. Prashant B. Kalaskar

Balanced Scorecard Methodology
• An alternative approach linking operational
and strategic control, developed by Harvard
Business School professors Robert Kaplan and
David Norton, is a system they names the
balanced scorecard
• The balanced scorecard is a management
system (not only a measurement system) that
enables companies to clarify their strategies,
translate them into action, and provide
meaningful feedback
Dr. Prashant B. Kalaskar

Integrating Shareholder Value and Organizational
Activities across Organizational Levels
Dr. Prashant B. Kalaskar

Balanced Scorecard
Four perspectives:
1. The learning and growth perspective: How well are
we continuously improving and creating value?
2. The business process perspective: What are our
core competencies and areas of operational
excellence?
3. The customer perspective: How satisfied are our
customers?
4. The financial perspective:
How are we doing for our shareholders
Dr. Prashant B. Kalaskar

Balanced Scorecard

For Any Query…..
Dr. Prashant B. Kalaskar
M: 9975770407, 7350520025
pbkalaskar@sinhgad.edu
prashantkalaskar007@gmail.com