CHAPTER 11
Strategy and Performance Excellence
Teaching Notes
This chapter centers on strategic management as the basis of all managerial activities relating to
total quality management. Leadership is acknowledged as the “driver” for an effective TQ focus,
but this chapter focuses on the planning process, while leaving the details of leadership theory to
be addressed in Chapter 13. Strategic planning and management have become more important in
organizations that aspire to high quality levels, so leaders must understand how to “deploy” plans
and quality efforts throughout the organization.
One of the key functions of strategic focus is to provide “alignment” of quality goals and plans
with the overall strategy of the firm. Poor deployment of quality can generally be traced back to
poor strategy development and alignment. The internal environment of the organization must
also develop and encourage alignment, as well as the focus on “doing” quality at the grassroots
level.
Students should be encouraged to focus on what to do, how to do it, when to do it, and how
strategic leadership must actively be involved in doing it as they look at strategic quality
planning and management. The Baldrige Criteria provide a frame of reference for assessing
organizational effectiveness and for benchmarking strategic planning. Key objectives for this
chapter should include:
• 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
Strategy and Performance Excellence 2
• To develop the process and content of strategy development, related to quality, which
• To learn how the Baldrige Organizational Profile addresses the basic characteristics of
the organization, organizational relationships, the competitive environment, the
advantages an organization has and the challenges that it faces, and its approach to
performance improvement. 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 appreciate that strategic challenges, which refer to those pressures that exert a
• 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
• To understand how the Seven Management and Planning Tools help managers to
implement policy deployment and are useful in other areas of quality planning. These
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• 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.
• To examine the impact of work systems, core competencies, outsourcing, and vertical
integration on how work is structured and performed under the guidance of a strategic
plan. Work systems refers to how the work of an organization is accomplished. Work
The Instructor’s Resource materials found on the website, have a number of Baldrige video clips
which give an inside view of organizations that have received the Baldrige award. One of those,
features Baldrige award recipient, Texas Nameplate Corporation. It has a number of scenes that
ANSWERS TO QUALITY IN PRACTICE KEY ISSUES
Integrating Six Sigma with Strategic Planning at Cigna
1. 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.
Strategy and Performance Excellence 4
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
2. 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
Strategic Planning at Branch Smith Printing Division
1. Branch-Smith’s strategic planning process (SPP) is unique in several ways. First, 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
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2. 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. To cost-effectively serve their niche, they use appropriate
technology and management of customer and partner relationships. Objective 1 points at
the need for effective process improvement and healthy supplier relationships in order to
enhance financial performance. Objective 2 reinforces their customer focus and their goal
ANSWERS TO REVIEW QUESTIONS
1. 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 future. A good strategy should build a
2. 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 planning also provides a framework for improvement and
3. The key practices for a strategic focus on performance excellence include:
Strategy and Performance Excellence 6
• Understand the organization’s operating environment and its key relationships with
customers, suppliers, partners, and stakeholders.
• Understand the competitive environment, the principal factors that determine success,
4. 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:
• the nature of a company’s products and services, its principal customers, major
Strategy and Performance Excellence 7
5. 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 growth of an organization or some segment of it, and is generally developed by
6. An environmental assessment of key factors, will typically include
• The organization’s strengths, weaknesses, opportunities, and threats (SWOT)
• Early indications of major shifts in technology, markets, customer preferences,
competition, or the regulatory environment
7. 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
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sustainability; and the needs, opportunities, and constraints placed on the organization’s
performance management system.
Information is sought and classified into two principle categories, including: 1)
organization description, with sub-categories of organization environment and
8. 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
9. 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 strategy might be directed toward becoming a preferred supplier, a low-cost producer,
Strategy and Performance Excellence 9
10. 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
11. 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 deployment. In all cases, it emphasizes organization-wide planning
and setting of priorities, provides resources to meet objectives, and measures
performance as a basis for improving performance. Essentially, it is a TQ-based approach
to executing a strategy, exemplified by the “catchball” process, explained below. (See
Figure 11.3 in the text).
12. 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.
Policy deployment is a planning and implementation method that ties improvement
activities to long-term strategies of the organization. It is driven by data, supported by
13. It is important to address human resource plans in strategic planning because whenever
an organization seeks to do something different, people are invariably impacted. Thus,
organizational change drives the need to plan for necessary human resource changes.
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14. 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.
2. Interrelationship digraphs—Identifies and explores casual relationships among related
concepts or ideas. It shows that every idea can be logically linked with more than one
idea at a time, and allows for “lateral thinking” rather than “linear thinking.”
3. Tree diagram—Maps out the paths and tasks necessary to complete a specific project
or reach a specified goal.
15. Key contextual factors that affect organizational structure include:
• Company organizational and organizational guidelines
• Management style
• Customer influences
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16. Many variations of organization structure exist, but they are commonly based on one of
the following three forms: 1) line organization, 2) line and staff organization, or 3) matrix
organization forms. The line organization is a simple form that is most successful in
17. TQ focused organizations are often taking a process view of organization. Therefore, they
are increasingly structuring their organization around functional or cross-functional
18. 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. provides access to many products and markets
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19. 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 involve the workforce, key suppliers and partners,
contractors, collaborators, and other components of the supply chain needed to produce
ANSWERS TO DISCUSSION QUESTIONS
1. 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 managers (leaders) “walk the talk” of
2. The mission statement of an organization should define the reason for its existence and
answers the question “Why are we in business?” The mission statement should address the
anticipated quality that the organization will strive to attain, how it plans to reach it, and how
it will behave toward its “publics” during the journey.
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3. a) Caterpillar
b) DHL Worldwide Express
ever come across for its clarity, brevity, and focus.)
4. As in 2, above, it is difficult to see how any of these vision statements would inspire
employees or customers to loyalty or long-term commitments to the company or its
products.
a. The first statement is a vague, general statement that will be of little use to the
organization. It would appeal primarily to stockholders
5. This list may vary widely, depending on the imaginations of the students. For example, an
affinity diagram might be used to brainstorm and classify ways to obtain ideas about
6. Core competencies of colleges and universities generally revolve around the traditional
areas of teaching, research, and service. In order for a specific college, such as a college
of business or engineering, to develop a strategic niche, they must do one or several
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7. A complete answer to this question would take up more space than is feasible for this
instructor’s manual. It is suggested that you use the discussion in the text under
SUGGESTIONS FOR PROJECTS, ETC.
1. This project is designed to familiarize students with the Baldrige Organizational Profile
questions and the process of using them to prepare an organizational profile for your
college or a local company. Use the format of the Tri View Bank case study should
provide them with ideas on how those questions might be answered by the
representatives of the target organization when writing the profile.
2. Strategic planning styles will vary widely, depending on such factors as the type of
organization, its size, and the philosophy of the top management. Students will no doubt
find that some organizations will have well-developed mission and vision statements, but
5. As in discussion questions 2, 3, and 4, above, even Fortune 500 companies will often be
4. More and more colleges and universities are developing well-defined mission and vision
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7. As pointed out in review question 15, above: the key contextual factors that affect
organizational structure include:
• Company organizational and organizational guidelines
• Management style
• Customer influences
8. Answers will vary, depending on the organizations compared. For example, Dell’s
strategy is to provide rapid turnaround with high volume, essentially “commodity” type
computers while still providing for custom configurations for each customer. Apple has
ANSWERS TO CASE QUESTIONS
I. A Strategic Bottleneck
The company finally realized that by developing a cooperative culture and creating
common goals it could improve both quality and morale, while contributing substantially
to the “bottom line.” It required a strategic approach with strong leadership support.