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CHAPTER 11
Strategy and Performance Excellence
Teaching Notes
This chapter centers on strategic management for quality and performance excellence. While leadership
is acknowledged as the driver for an effective TQ focus, strategic planning makes it happen. Thus,
leaders must understand how to develop and deploy quality-based business plans throughout the
organization.
Key objectives for this chapter are:
• To define strategy as the pattern of decisions that determines and reveals a company’s goals,
policies, and plans to meet the needs of its stakeholders. Strategic planning is the process of
envisioning the organization’s future and developing the necessary goals, objectives, and action
plans to achieve that future.
• To explore the goal of strategy development, which is envisioning the future for purposes of
decision making and resource allocation. Effective strategy development requires a systematic
process that involves participation by all necessary stakeholders, ensures that relevant and
important data and information are captured and analyzed, addresses both short– and long-term
time horizons, addresses key strategic challenges, and leads to innovation and sustainability.
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The Organizational Profile provides a frame of reference to help an organization better
understand the internal and external factors that shape its operating environment.
• To understand that strategic challenges, which refer to those pressures that exert a decisive
influence on an organization’s likelihood of future success, are frequently driven by an
organization’s future competitive position relative to other providers of similar products or
services.
• To further understand that the steps of strategy development lead to strategies, strategic
objectives, and action plans that set the direction for achieving the mission.
• To become aware that key practices for effective strategic planning include active participation
by both top management and lower-level employees, a strong customer focus, supplier
involvement, and well-established measurement and feedback systems.
initiatives.
• To further learn that the effectiveness of an organization depends in substantial part on its
organizational structure—the clarification of authority, responsibility, reporting lines, and
performance standards among individuals at each level of the organization. Common
organizational structures are the line, line and staff, and matrix organization. Organizational
structure for quality must reflect individual company differences and provide the flexibility and
ability to change. Companies must understand that processes, rather than hierarchical reporting
relationships, drive quality within the organization.
• To examine the impact of work systems, core competencies, outsourcing, and vertical
Strategy and Performance Excellence 3
functions are acquired and consolidated within a firm. The decision to outsource or vertically
integrate should be strategically driven.
ANSWERS TO QUALITY IN PRACTICE FEATURES
Integrating Six Sigma with Strategic Planning at Cigna
1. Suggest how Six Sigma might be used to help Cigna address its five strategic imperatives? Is
their approach consistent with the discussion of Six Sigma and competitive strategy at the end of
this chapter?
Cigna has five strategic imperatives:
a. Establish a meaningful cost advantage relative to the competition.
b. Help improve the health and well-being of members and the people Cigna insures.
c. Bring innovative products and services to market.
d. Become the partner of choice to its customers.
e. Create a winning environment in the organization.
Six Sigma can and does help meet these strategic imperatives. Cigna’s Holistic Six Sigma Model shows
how Six Sigma is being used to help it address its five strategic imperatives. Their approach appears to
be consistent with the discussion of Six Sigma and competitive strategy at the end of this chapter. Six
Sigma is a way to turn performance improvement needs into reality. To be effective, it must be
integrated into strategic planning processes. In Cigna, their Holistic Six Sigma Model corresponds to
the three levels of strategy: corporate, strategic business unit (SBU), and competitive (tactical). At the
2. Can you think of specific types of Six Sigma projects that might support Cigna’s strategic
imperatives?
Some Six Sigma projects that might support the objectives could include: 1) cost reduction projects in
areas such as underwriting or claims handling, in order to establish a meaningful cost advantage
Strategy and Performance Excellence 4
Strategic Planning at Branch Smith Printing Division
1. Compare Branch-Smith’s approach to the generic strategic planning process described in this
chapter. What are some of its unique features?
It is unusual to find such a comprehensive planning process in a small business. Second, they have been
especially careful to include monthly tracking and updates to permit them to proactively respond to
opportunities and risks. Although the company covers the key stages of the strategic planning process
presented in the chapter – environmental assessment, strategies, strategic objectives, and action plans –
they have tailored the process to their organization.
The first noticeable difference in Branch-Smith’s process and the generic process in the chapter
is that Branch-Smith has built in Step 1 specifically for reflection of the previous year’s process and
time for improvements to be made. Step 1 also directly ties strategic planning to leadership systems,
which is a vital connection. A second difference is that Branch-Smith uses step 5 to develop both short
2. Branch-Smith’s current objectives are “1) To continuously improve business results through a
process improvement focus, partnership with our suppliers, and strong financial performance. 2)
To become the partner of choice for our customers through: a targeted marketing plan, excellent
execution to customer requirements, and relationship development. To become the partner of
choice, our value package must be continually improved. 3) To become the employer of choice
through: a caring, involved culture; continually improving training systems; providing growth
opportunities; and industry leading compensation, benefits, and reward and recognition systems.
We extend the same quality environment to coworkers as we extend to customers.” How do these
objectives address the strategic challenges cited in the case? What types of activities might the
company deploy to achieve these objectives?
Branch-Smith’s strategic challenges revolve around the competitiveness of the industry. The company
competes on its ability to service customers needing high quality, short run, quick turnaround orders.
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a. To continuously improves business results through process improvement focus, partnership
with our suppliers, and strong financial performance This objective addresses the strategic
challenges of the highly competitive market in publishing. Because of the high competitiveness, in
order to deliver strong financial performance, they must deliver both top and bottom line growth. The
way that they deliver top line growth with increased sales in their niche market is to ensure that they
can offer continually improving competitive prices. In order to decrease their prices without profits they
b. To become the partner of choice for our customers through: a targeted marketing plan,
excellent execution to customer requirements, and relationship development. To become the
partner of choice, our value package must be continually improved. This objective addresses the
strategic challenge of a highly competitive market that results is low margins for large volume printing,
and as a result, an inability to effective serve the low volume demand without incurring high costs.
Branch-Smith focuses its targeted marketing plan at publishers who need low volume and completely
c. To become the employer of choice through: a caring, involved culture: continually improving
training systems; providing growth opportunities; and industry leading compensation, benefits,
and reward and recognition systems. We extend the same quality environment to coworkers as
we extend to customers. This addresses an implied challenge based on the highly competitive printing
industry with many other publishers in the same space. The implied challenge is that with numerous
competitors there will always be a draw for their top talent to those organization because of the direct
transfer of skill and the fact that Branch-Smith is a leader in a niche portion of the business that other
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ANSWERS TO REVIEW QUESTIONS
1. What is a strategy? What does a good strategy provide for an organization?
Strategy is the pattern of decisions that determines and reveals a company’s goals, policies, and plans
to meet the needs of its stakeholders. Strategic planning is the process of envisioning the
organization’s future and developing the necessary goals, objectives, and action plans to achieve that
2. Why is strategic planning important for all organizations?
Strategic planning important for all organizations because a strategy provides a roadmap to achieve a
vision of what the organization should and could be three, five, or more years in the future. Strategic
3. Summarize the key practices for a strategic focus on performance excellence.
The key practices for a strategic focus on performance excellence include:
• Understand the organization’s operating environment and its key relationships with customers,
suppliers, partners, and stakeholders.
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• Gather and analyze relevant data and information pertaining to such factors as the organizations
strengths, weaknesses, opportunities, and threats; emerging trends in technology, markets,
customer preferences, competitions, and the regulatory environment; long-term organizational
sustainability; and the ability to execute strategic plans.
• Develop and refine a systematic approach for conducting strategic planning and setting strategic
objectives, including identifying blind spots, leveraging strengths, and addressing challenges over
appropriate time horizons.
4. Explain the elements of a typical strategic planning process.
The steps in the strategic planning process are shown in such examples as Eastman Chemical Company
(Figure 11.1) and Park Place Lexus (Figure 11.2). Once the company’s mission, vision, and guiding
principles have been determined, the organization must assess the gap as to where it is now, and where
it wants to be as described in its vision. Using this assessment, it must then develop goals, strategies,
and objectives that will enable it to bridge this gap.
Key business factors include:
5. Define mission, vision, and guiding principles. What is the purpose of each?
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The purpose, or mission, of the organization is a statement of “why the organization is in business.” In
the past, the purpose of the organization was frequently stated in terms of products or services produced
or profitability to stockholders. TQ-focused firms are now stating their purpose in terms of their
customer focus and their commitment to strive for higher levels of quality.
The vision statement is a statement of guiding values, principles, and direction of expected
6. What factors are examined in an environmental assessment?
An environmental assessment of key factors, will typically include
• The organization’s strengths, weaknesses, opportunities, and threats (SWOT), which would
include Porter’s five competitive forces
• The ability to execute the strategic plan
7. What is the purpose of the Baldrige Organizational Profile? Summarize the information
contained in the Organizational Profile. Why is knowing this information important?
The Baldrige Organizational Profile provides a frame of reference to help an organization better
understand the internal and external factors that shape its operating environment, the key requirements
for current and future business success and organizational sustainability; and the needs, opportunities,
and constraints placed on the organization’s performance management system.
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unique; and that set it apart from other organizations. Those strengths can help to sustain a competitive
advantage.
8. What are strategic challenges? Why is it important to understand them in strategic planning?
The term strategic challenges refers to those pressures that exert a decisive influence on an
organization’s likelihood of future success. It is important to understand them in strategic planning
because they frequently are driven by an organization’s future competitive position relative to other
9. Explain the difference between strategies, strategic objectives, and action plans.
Strategies are broad statements that set the direction for the organization to take in realizing its mission
and vision. Strategic objectives are what an organization must change or improve to remain or become
competitive. Action plans are things that an organization must do to achieve its strategic objectives. A
10. What is strategy deployment? How does it differ from strategy development?
Strategy deployment involves developing specific action plans to achieve strategic objectives,
ensuring that adequate financial and other resources are available to accomplish the action plans,
developing contingencies should circumstances require a shift in plans and rapid execution of new
11. Explain the concept of hoshin kanri and provide a simplified description of this process.
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Hoshin kanri, known as policy deployment or management by planning in the U.S.A., is the Japanese
process of deploying management strategy. Various companies have various definitions for policy
12. How does catchball play an important role in policy deployment?
Catchball is the term for the negotiating process used within an organization to determine long– and
short-term quality objectives. Leaders communicate mid-term objectives and measures to middle
managers who develop short-term objectives and recommend necessary resources, targets, and
roles/responsibilities. Catchball is not an autocratic, top-down management style. It marshals the
collective expertise of the whole organization and results in realistic and achievable objectives that do
not conflict.
13. Why is it important to address human resource plans in strategic planning?
It is important to address human resource plans in strategic planning because whenever an organization
14. List and explain the seven management and planning tools.
The seven management and planning tools described in this chapter include:
1. Affinity diagrams—This is a tool for organizing a large number of ideas, opinions, and facts
relating to a broad problem or subject area, i.e. a vision statement.
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3. Tree diagram—Maps out the paths and tasks necessary to complete a specific project or reach a
specified goal.
4. Matrix diagrams—These are “spreadsheets” that graphically display relationships between ideas,
activities, or other dimensions in such a way as to provide logical connecting points between each
item.
15. Describe the key contextual factors that affect organizational structure. What implications do
they have for quality?
Key contextual factors that affect organizational structure include:
• Company organizational and organizational guidelines
• Management style
• Customer influences
• Company size
16. Describe the types of organizational structure commonly used. What are the advantages or
disadvantages of each?
Many variations of organization structure exist, but they are commonly based on one of the following
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17. What types of organizational structures are common in TQ-based organizations today?
TQ focused organizations are often taking a process view of organization. Therefore, they are
increasingly structuring their organization around functional or cross-functional teams. To carry out the
18. What are core competencies? Why is it important to understand them?
Core competencies are an organization’s areas of greatest expertise that provide a sustainable
competitive advantage in the marketplace or service environment. A core competency should meet
three conditions:
a. contribute significantly to customer benefits
b. provide access to many products and markets
c. be difficult for competitors to imitate
19. Explain the strategic role of work systems design. How should outsourcing and vertical
integration decisions be made from a strategic context?
Work systems coordinate the internal work processes and the external resources necessary to develop,
produce, and deliver products and services to customers and to succeed in marketplace. Work systems
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shores. The opposite of outsourcing is vertical integration, by which certain business functions are
acquired and consolidated within a firm. The decision to outsource or vertically integrate should be
ANSWERS TO DISCUSSION QUESTIONS
1. The Johnson & Johnson credo was written in 1943 by its chairman Robert Wood Johnson: “We
believe our first responsibility is to the doctors, nurses, and patients, to mothers and fathers, and all
others who use our products and services. In meeting their needs, everything we do must be of high
quality.” What would you expect to see in Johnson & Johnson’s strategic planning approaches that
reflect this philosophy?
The Johnson and Johnson credo serves as a reminder to every employee of their ultimate responsibility to
their direct customers (doctors and nurses, for many products) and the ultimate consumer — patients,
mothers, and fathers, for their product quality. In its leadership approaches, J&J would have to ensure that
2. Examine the following mission statements. Do you think they have a true purpose or are they
merely cosmetic devices because someone felt that no major organization can be seen without one?
a. Our single focus will continue to be helping customers all over the world succeed in their
businesses. When we do that— when we make them winners— then employees, dealers, and
stockholders win as well.
b. XYZ strives to understand and fulfill the needs of all our customers by providing the highest level
of reliability and service at all times.
c. XYZ creates value by providing transportation-related products and services with superior
quality, safety, and environmental care to demanding customers in selected segments.
d. We are dedicated to being the world’ s best at bringing people together— giving them easy
access to each other and to the information and services they want and need— anytime, anywhere.
e. To serve the most vulnerable.