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Currently viewing the tag: "Competitive Advantage"

8721604279?profile=RESIZE_400xProblem Solving is a fundamental life skill indispensable for survival of an individual.  It is honed in every person to varying degrees.  It is especially a useful skill to embody Leadership Development.

Problem Solving skill can be taught and learnt.

MIT defines Problem Solving as:

The process of identifying a problem, developing possible solution paths, and taking the appropriate course of action.

Problem Solving is a process that can be approached using various strategies but each Strategy usually follows the same theme, consisting of:

  • Identifying the Root Cause of the Problem.
  • Logically Analyzing all the Details of the Problem.
  • Formulating a Solution.
  • Effectively Communicating and taking Action.

Problem Solving Strategies consist of steps that help identify the Problem and choose the best solution.  There are 2 basic types of Strategies:

  1. Algorithmic Strategies – customary step-by-step instructions to solving Problems. For example, in algebra: multiply and divide before adding or subtracting.
  2. Heuristic Strategies – general guides used to identify possible solutions.  An example would be IDEAL—Identify Problem, Define Context, Explore Strategies, Act on solution, and Learn.

A certain Mindset is required to be developed for becoming a great Problem Solver.  There are 6 traits experts have identified that shape the Mindset of a great Problem Solver.  A great Problem Solver will always:

  1. Be Constantly Curious.
  2. Be an Imperfectionist.
  3. Adopt a Dragonfly-eye View.
  4. Pursue Occurrent Behavior.
  5. Leverage Collective Intelligence.
  6. Practice Show and Tell.

Problem Solving Mindset is valuable for any person especially professionals, particularly an entrepreneur, manager, or someone in the leadership role in an organization.  A team of skillful problem solvers can become a notable source of Competitive Advantage for an organization.

Let us delve a little deeper into some of the Mindsets that make great Problem Solvers.

Be Constantly Curious

Innate human partialities frequently blind us to a range of solutions too early in the Problem Solving Process.  Superior and increasingly creative solutions arise from being Curious about the wide-ranging possible answers.  Very young children embody this trait.  They are resolute in figuring things out hence their never-ending and high-energy inquisitiveness.

Improved results are generated by accepting uncertainty, constantly asking questions like why is this solution better, or why not the other one?

Be an Imperfectionist

Absolute knowledge is virtually non-existent, especially for Complex Business and Societal Problems.  Accepting that our knowledge is Imperfect can bring about more effective Problem Solving.  Constant revision based on new evidence is key to good Problem Solving.  This is possible when we begin by confronting solutions that imply certainty.  And, this brings out tacit assumptions about probabilities and makes it easier to assess alternatives.

Most Problem Solving involves a great deal of trial and error.  We form hypotheses, dive into data for validation, and either refine our premise or discard it.

Adopt a Dragonfly-eye view

The purpose is to gaze beyond the usual arrangement into which our pattern-recognizing brains want to gather perceptions.  This facilitates identification of obscured opportunities and threats.

A good example of this is the approach experts took to tackle a major public health threat.  They framed the Problem in larger social context—taking the Dragonfly-eye view—garnering wider support and success.  Confronted with a complex social map and a ballooning infection rate, the Problem was tackled by widening its definition.  The frame was shifted from a traditional epidemiological transmission model at known hotspots to one where, another affliction of a particular sub-set of the impacted population was targeted because it was more relatable.  The major public health threat was made into a sub-set of the larger issue.  The solution was implemented in 600 communities and was eventually ascribed with preventing more than 600,000 infections.

Interested in learning more about Problem Solving Mindsets? You can download an editable PowerPoint on Problem Solving Mindsets here on the Flevy documents marketplace.

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– Roderick Cameron, Founding Partner at SGFE Ltd

8662133692?profile=RESIZE_400xA significant number of Mergers remain unsuccessful, because companies do not employ a thorough and disciplined approach to realizing Post-Merger Integration Synergies.  In reasons for failure, we hear remarks like:

  • Targets were set several months earlier by the top management without consulting the line managers, or taking ground realities into consideration.
  • Assumption base for setting targets was untested.
  • Targets were met but the timeframe for achieving them made them ineffective—in terms of diminished returns, shareholder disappointment, or depressed share value.
  • Desired Synergies were achieved but at a very high cost or fairly weakened morale.

A disciplined and rational approach to pursuing Merger Synergies is key to successful Post-Merger Integration (PMI).  Companies that authenticate and set pragmatic yet ambitious Post-Merger Integration Synergy targets do the following to exceed targets and achieve substantial share price premium and a significant Competitive Advantage:

  • Advise Integration Leaders on how to aim high.
  • Give managers—responsible for achieving targets—a say in target-setting process.
  • Create detailed plans with built-in accountabilities.
  • Pursue their targets aggressively.

Successful PMI Synergies—be it in Cost OptimizationStrategic Sourcing, Greater Revenues or any other Cost or Revenue realm—have the common characteristic of leaders pursuing synergies with speed, rigor, discipline, and pragmatism with lots of analysis, planning, preparation, and fine-tuning before the close.

Success can be ensured time and again if the 6 Strategies for Post-Merger Integration Synergies are followed to the letter:

  1. Link Due Diligence (DD) and Post-Merger Integration (PMI)
  2. Leverage Clean Teams
  3. Establish Stretch Targets
  4. Rapidly Iterate to Targets
  5. Pursue Both Revenue and Cost Synergies
  6. Institute Performance Management

Implementation of the 6 Synergy Strategies involves adopting High-Engagement and Rapid Iteration approach which yields effective Stretch Target Validation and High Level of Line Accountability.

Let us delve a little deeper into 2 of these PMI Synergy Strategies.

Link Due Diligence (DD) and Post-Merger Integration (PMI)

Linking DD to PMI ensures realistic estimates on part of the DD team thus avoiding formulation of broad-brushed and imprecise Synergies.  Linking also guarantees greater amount of ownership and accountability at the same time enabling more compelling Stretch Targets.  Linking of DD to PMI is necessary because:

  • Under pressure to complete the M&A, Due Diligence teams frame assumptions with little knowledge of the levers influencing Synergies or the challenges involved in achieving them.
  • Due Diligence teams typically project more value in Cost Reduction and enhanced Revenues based on erroneous assumptions—without taking into account either the Operating Model (of the former entities and the freshly created one) or the difference / overlap in Customer Base.

Successful Mergers ensure a harmonized hand-off from Due Diligence teams to Integration Planning teams by ensuring the following:

  • Placing members of the Mergers and Acquisition team on the Post-Merger Integration (PMI) team to produce a greater degree of ownership and continuity.
  • Involving Business Unit Heads in target setting at the Due Diligence stage and ensuring ownership and accountability.
  • Linking of Due Diligence and PMI to enable setting of more profound Stretch Targets.
  • Analyzing and detailing drivers of saving at a high-level for creating Synergy Targets and Ranges which make later improvements possible based on subsequent information. These targets and ranges enable evaluation of potential gains from new company’s Operating Model. 

Leverage Clean Teams

Clean team is an independent group that is tasked with the collection and analysis of sensitive company data—pre-closure—with the guidance of management.  Clean team may comprise of third-party members or employees who can be reassigned out of business in case of deal failure eradicating the risk of compromising confidential information.  Clean team is formed by legal contract based on protocols agreed to by both company’s legal departments.  Clean teams help by:

  • Accelerating PMI planning.
  • Enabling the acquiring company to have a clearer picture of the target company without violating anti-trust regulation or confidentiality agreements.
  • Assessing risks and enabling companies to achieve Synergies faster.
  • Keeping sensitive information of both sides safe—pre-closure—yet embark on planning and preparation even before close in order to save precious time and keep customer confidence high.
  • Aiding companies accomplish 3 core integration activities before closing—compiling wide-range baseline data, vetting Synergy targets, and preparing options for key decisions.
  • Empowering companies to avoid / diminish confusion caused by overlap in client assignments and sales people.
  • Assisting provision of clear information to customers regarding products and services thus avoiding drop in sales.

Interested in learning more about the 6 Strategies for Post-Merger Integration Synergies?  You can download an editable PowerPoint on Post-Merger Integration (PMI): 6 Strategies for Synergies here on the Flevy documents marketplace.

Want to Achieve Excellence in Post-merger Integration (PMI)?

Gain the knowledge and develop the expertise to become an expert in Post-merger Integration (PMI).  Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts.  Click here for full details.

M&A is an extremely common strategy for growth.  M&A transactions always look great on paper.  This is why the buyer typically pays a 10-35% premium over the of the target company’s market value.

However, when it comes time for the Post-merger Integration (PMI), are we really able to capture the expected value?  Studies show only 20% of organizations capture projected revenue synergies and only 40% capture cost synergies.  Not to mention, the PMI process is typically very painful, drawn out, and politically charged, often resulting in the loss of key personnel.

Learn about our Post-merger Integration (PMI) Best Practice Frameworks here.

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“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients.  In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”

– Roderick Cameron, Founding Partner at SGFE Ltd

8589000693?profile=RESIZE_400xStrategy is about the methods used to attain goals.  It’s the “how” of achieving goals—desired future conditions and circumstances towards which effort and resources are spent until their achievement.

If Strategy has any meaning at all, it is in relation to some aim or end in view.

Strategy is 1 of the 4 dimensions of an enterprise structure:

  1. Goals of the organization.
  2. Resources at our disposal.
  3. Strategies for achieving above-mentioned goals –i.e., the methods used to deploy the resources.
  4. Tactics—i.e., the ways in which the deployed resources are used.

Strategy and tactics – integral part of Strategy Development – bridge the gap between goals and the methods used to achieve those goals.  These 4 dimensions of enterprise structure relate to one or both of the 2 domains; Policy and Management.  Policies determine the goals of an enterprise, whereas attaining goals is typically a matter of Management.  Tactics belong to the managers; strategy is the combined realm of the governors and managers; whereas resources are controlled jointly.

The employed resources through use of Strategies and Tactics give us “certain” conditions.  Inspecting them in light of the “desired” conditions enables us to determine future employment of the resources and thus emerges a pattern of actions and decisions which makes Strategy an adaptive and evolving view of what is required, to achieve goals.

We take a look at various perspectives on and definitions of Strategy, as explained by 8 of the most impactful and renowned Strategists in modern times.  Familiarity with the perspectives of these strategists enables us to develop a more holistic and thorough understanding of the topic, helping us improve our strategic thinking, decision making, and analytical skills.  All of these experts agree on the fact that Strategy is a means to implement a policy or a view envisioned by those who matter.  Let’s see how the following strategists define Strategy:

  1. Michael Porter
  2. Henry Mintzberg
  3. Treacy and Wiersema
  4. H. Liddell Hart
  5. George Steiner
  6. Kenneth Andrews
  7. Kepner-Tregoe
  8. Michel Robert

Let’s break down how a few of these renown strategists define “Strategy.”

Michael Porter

Michael Porter, the father of modern Business Strategy, views Competitive Strategy as “intentionally opting a collection of activities that are dissimilar to the competitors in order to provide a unique mix of value”– i.e. Competitive Advantage.  Porter states that Strategy is about:

  • A competitive position.
  • Differentiating yourself in the eyes of the customer.
  • Adding value through a collection of activities different from competitors.

Henry Mintzberg

Mintzberg is credited with co-creating the Organigraph.  He has written extensively on management and business Strategy.  His contribution to Organizational Theory in the form of “The Organizational Configurations Framework” is a model that describes 6 valid organizational configurations or Organizational Design.

Mintzberg argues that the contrast of changing realities with intentions necessitates accommodation, generating Strategy.  According to him Strategy is a combination of:

  • The Perspective – Vision and Direction.
  • The Position – Decisions to offer particular products or services in particular markets.
  • The Plan – a means of getting from here to there.
  • A Pattern in actions over time – for example, a company that regularly markets very expensive products is using a “high end” Strategy.

Treacy and Wiersema

Treacy and Wiersema’s Value Discipline Model talks about 3 different value disciplines: Customer IntimacyProduct Leadership, and Operational Excellence.  Their research on market leading organizations reveals that they outdid their competitors through mastering 1 of these 3 disciplines.

Treacy and Wiersema assert that companies achieve leadership positions by narrowing, not broadening, their business focus on any one of the following:

  • Operational Excellence – lead the industry in terms of price and convenience and is based on the Strategy of production and delivery of products or services. It implies world-class marketing, manufacturing, and distribution processes.
  • Customer Intimacy – Long-term customer loyalty and customer profitability is based on the Strategy of tailoring and shaping products to the increasingly fine definitions of Customer-centric Design.
  • Product Leadership – concentrates on quick commercialization of new ideas. It hinges on market-focused R&D as well as organizational nimbleness and agility.

Interested in learning more about the 8 definitions of Strategy?  You can download an editable PowerPoint on 8 Perspectives on Strategy here on the Flevy documents marketplace.

Want to Achieve Excellence in Strategy Development?

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“Strategy without Tactics is the slowest route to victory.  Tactics without Strategy is the noise before defeat.” – Sun Tzu

For effective Strategy Development and Strategic Planning, we must master both Strategy and Tactics.  Our frameworks cover all phases of Strategy, from Strategy Design and Formulation to Strategy Deployment and Execution; as well as all levels of Strategy, from Corporate Strategy to Business Strategy to “Tactical” Strategy.  Many of these methodologies are authored by global strategy consulting firms and have been successfully implemented at their Fortune 100 client organizations.

These frameworks include Porter’s Five Forces, BCG Growth-Share Matrix, Greiner’s Growth Model, Capabilities-driven Strategy (CDS), Business Model Innovation (BMI), Value Chain Analysis (VCA), Endgame Niche Strategies, Value Patterns, Integrated Strategy Model for Value Creation, Scenario Planning, to name a few.

Learn about our Strategy Development Best Practice Frameworks here.

Do You Find Value in This Framework?

You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library.  FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:

“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”

– Bill Branson, Founder at Strategic Business Architects

“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”

– David Coloma, Consulting Area Manager at Cynertia Consulting

“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”

– Roderick Cameron, Founding Partner at SGFE Ltd

8578601065?profile=RESIZE_400xEmployee Engagement has emerged as one of the significant pillars on which the Competitive AdvantageProductivity, and Growth Strategy of an organization rests.  Employee Engagement has many facets.  To assess an organization’s current status of Employee Engagement, executives need to devise a measurement system.  Measuring Employee Engagement is vital in shaping Employee Engagement Strategies that help propel the organization towards growth.

A framework that is quite effective in measuring the existing levels of Employee Engagement and devising strategies based on the individuals’ requirements is the “Employee Engagement Scorecard.”

The Employee Engagement Scorecard comprises of:

  • Metrics for each component of Employee Engagement.
  • A scale for scoring metrics in each component.
  • A comprehensive scorecard that pulls everything together.

The Employee Engagement Scorecard is composed of a number of metrics used to measure the individual employee engagement components.  Each metric is based on a 1 to 5 scale, with 1 being lowest and 5 being highest.  The scorecard was developed through an extensive research process involving academic literature reviews and managerial interviews across the world.

The Employee Engagement Scorecard categorizes engagement scores into 4 groups:

Score of 20 to 39 – Low Engagement Level

Indicates that individual components—e.g., Employee Satisfaction, Employee Identification, Employee Commitment—should be addressed.

Score of 40 to 59 – Somewhat more Engaged

Implies that some Employee Engagement factors require immediate attention.

Score of 60 to 79 – High Level Engagement

Shows that generally the company would operate smoothly and achieve good results but further improvement is needed for growth.

Score of 80 to 100 – Adherence

Signifies that the company observes Employee Engagement Best Practices and the Employee Engagement is at a very high level giving the company an advantage in growth.

The Employee Engagement Scorecard encompasses 5 guiding principles (or dimensions):

  1. Enhance Employee Satisfaction
  2. Promote Employee Identification
  3. Enhance Employee Commitment
  4. Ensure Employee Loyalty
  5. Manage Employee Performance

The 5-dimension Employee Engagement Scorecard has been implemented in 7 countries across the Asian, European and American continents in more than 75 companies.  Let us delve a little deeper into the first 2 dimensions of measurement and key actions needed for Strategy Development.

1. Enhance Employee Satisfaction

Valuable time and resources of the organization may be lost because of dissatisfied employees. Dissatisfied employees tend to be unenthusiastic about work, which negatively affects the quality of work.

Various measures by the management can enhance Employee Satisfaction once the metrics are analyzed, i.e.:

  • Rearranging roles and responsibilities to correspond effectively with employee skill sets and interests.
  • Mentoring employees more actively.
  • Developing effective rewards and benefits systems in line with performance.
  • Offering flexible work hours.

2. Promote Employee Identification

Identifying with the organization is as vital for growth as is employee satisfaction.  A satisfied employee who does not identify with the organization will not be able to embody the organization’s culture and values, and thus will stand out from the ones who do.  This creates dissonance in team building activities which are a necessary part of generating new ideas for employee development.  In such a scenario, the leadership can encourage employee identification by:

  • Offering mentorship programs
  • Creating Idea development platforms
  • Reinforcing the organizational culture and values, to connect the employees with the organizational culture and nurture growth.

Interested in learning more about the Employee Engagement Measurement & Improvement and the results of its implementation in 75 companies? You can download an editable PowerPoint on Employee Engagement Measurement & Improvement here on the Flevy documents marketplace.

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Gain the knowledge and develop the expertise to become an expert in Human Resource Management (HRM).  Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts.  Click here for full details.

The purpose of Human Resources (HR) is to ensure our organization achieves success through our people.  Without the right people in place—at all levels of the organization—we will never be able to execute our Strategy effectively.

This begs the question: Does your organization view HR as a support function or a strategic one? Research shows leading organizations leverage HR as a strategic function, one that both supports and drives the organization’s Strategy.  In fact, having strong HRM capabilities is a source of Competitive Advantage.

This has never been more true than right now in the Digital Age, as organizations must compete for specialized talent to drive forward their Digital Transformation Strategies.  Beyond just hiring and selection, HR also plays the critical role in retaining talent—by keeping people engaged, motivated, and happy.

Learn about our Human Resource Management (HRM) Best Practice Frameworks here.

Do You Find Value in This Framework?

You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro LibraryFlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:

“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”

– Bill Branson, Founder at Strategic Business Architects

“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”

– David Coloma, Consulting Area Manager at Cynertia Consulting

“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”

– Roderick Cameron, Founding Partner at SGFE Ltd

5 Dimensions of EE - Stock image 2Organizations typically focus on Customer-centric Design in their Strategic Planning and overlook the critical driver of Performance, Growth, and Operational Excellence—their employees.  With cut-throat competition now the norm the realization has become clearer that employees are:

  • The face of the business and create lasting—or perishing—brand impression.
  • Sources of innovation and organizational knowledge.
  • Representation of the company’s service philosophy.
  • Expected to live by its Organizational Culture and values.

Employee Engagement has emerged as one of the significant pillars on which the Competitive Advantage, Productivity, and Growth of an organization rests.  What, exactly, does it mean when an employee is engaged?  Employee Engagement, over the years, has been thought of in terms of:

  • Personal engagement with the organization.
  • Focus on performance of assigned work.
  • Worker burnout.
  • Basic needs (meaningful work, safe workplace, abundant resources).
  • Attention on Cognitive, Emotional and Behavioral components related to an individual’s performance.

Although Employee Engagement is widely seen as an important concept, there has been little consensus on its definition or its components either in business or in the academic literature.

Kumar and Pansari’s 2015 study define Employee Engagement as:

“a multidimensional construct that comprises all of the different facets of the attitudes and behaviors of employees towards the organization”.

The multidimensional construct of Employee Engagement has been synthesized into the following 5 components (or dimensions).

  1. Employee Satisfaction
  2. Employee Identification
  3. Employee Commitment
  4. Employee Loyalty
  5. Employee Performance

The 5 dimensions of Employee Engagement have been found to have a direct correlation with high profitability, as substantiated by a number of research studies:

For instance, a study of 30 companies in the airline, telecom and hotel industries shows a close relationship between Employee Engagement and growth in profits.  After controlling other relevant factors—i.e., GDP level, marketing costs, nature of business, and type of goods, the study found:

  • Highest profitability growth—10% to 15%—in companies with highly engaged employees.
  • Lowest level of profitability growth—0% to 1%—in companies with disengaged employees.

Research reveals that Employee Engagement affects 9 performance outcomes; including Customer Ratings, Profitability, Productivity, Safety Incidents, Shrinkage (theft), Absenteeism, Patient Safety Incidents, Quality (Defects), and Turnover.

The differences in performance between engaged and actively disengaged work units revealed:

  • Top half Employee Engagement scores nearly doubled the odds of success compared with those in the bottom half.
  • Companies with engaged workforces have higher earnings per share (EPS).

These 5 dimensions become the base for measuring Employee Engagement in a meaningful manner that permits managers to identify areas of improvement.  To assess an organization’s current status of Employee Engagement, a measurement system is needed that includes:

  • Metrics for each component of Employee Engagement.
  • A scale for scoring metrics in each component.
  • A comprehensive scorecard that pulls everything together.

Let us delve a little deeper into the first 2 dimensions of Employee Engagement.

Employee Satisfaction

Definition

Employee Satisfaction is the positive reaction employees have to their overall job circumstances, including their supervisors, pay and coworkers.

Details

When employees are satisfied, they tend to be:

  • Committed to their work.
  • Less absent and more productive in terms of quality of goods and services.
  • Connected with the organization’s values and goals.
  • Perceptive about being a part of the organization.

Metrics

The 5 metrics that gauge Employee Engagement in terms of Employee Satisfaction include:

  1. Receiving recognition for a job.
  2. Feeling close to people at work.
  3. Feeling good about working at the organization.
  4. Feeling secure about the job.
  5. Believing that the management is concerned about employees.

We take a look at another dimension central in significance.

Employee Commitment

Definition

Signifies what motivates the employees to do more than what’s in their job descriptions.

Details

Employee Commitment is much higher for the employees who identify with the organization.  This element:

  • Develops over time and is an outcome of shared experiences.
  • Is often an antecedent of loyalty.
  • Induces employees to guard the organization’s secrets.
  • Pushes employees to work for organization’s best interests.

Research has found that employees with the highest levels of commitment:

  • Perform 20% better.
  • Are 87% less likely to leave the organization.

Metrics

The 3 metrics that gauge the Employee Commitment dimension of Employee Engagement include:

  1. Commitment to deliver the brand promise along with knowledge of the brand.
  2. Very committed to delivering the brand promise.
  3. Feels like the organization has a great deal of personal meaning.

Interested in learning more about these foundational pillars to Employee Engagement? You can download an editable PowerPoint on 5 Dimensions of Employee Engagement here on the Flevy documents marketplace.

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“A problem well framed is a problem half-solved.” — Jay Galbraith

Organizational Design is more than just structures. It is having policies and strategies that are aligned with one another.  When this is achieved, it allows organizations to operate at maximum efficiency and achieve Operational Excellence.

The Galbraith Star Model™ is the foundation on which a company bases its design choices. The organization’s design framework consists of a series of design policies that are controllable by management and can influence employee behavior.

Organizations use the Star Model™ framework to overcome the negatives of any structural design. Every organizational structure has positives and negatives associated with it.  If management can identify the negatives of its preferred option, it can better design other policies around the Star Model™ to counter the negatives while achieving the positives.

Understanding the Galbraith Star Model

Galbraith Star Model™ is the organization’s design framework for effective strategy execution. It consists of 5 major components.

 

  1. Strategy. This component is the company’s formula for winning. It is the goals and objectives to be achieved, as well as values and missions to be pursued. It defines the basic direction of the company. Strategy Development is essentially important in specifying sources of Competitive Advantage.
  1. Structure. The second component, the Structure, determines the location of the decision-making power. It is the placement of power and authority in the organization.
  1. Processes. Information and decision processes is a component that cuts across the organization’s structure. It is a means of responding to information technologies. Management processes can either be vertical or lateral. Either way, these are designed around a workflow from new product development to the fulfillment of a customer order. If the structure is the anatomy of the organization, processes are its physiology or functioning.
  1. Rewards. The fourth component provides motivation and incentive for the completion of the strategic direction of the organization. Rewards are recognition that influence the motivation of people to perform and address organizational goals.  It becomes effective only when they form a consistent package in combination with other design choices.
  1. People. People is the fifth component that focuses on influencing and defining an individual’s mindset and skills. It looks into the human resource policies of recruiting, selection, training, and development of people needed by the organization to achieve its strategic direction. HR policies work best when these are consistent with the other connecting design areas.

The five components are essentially important. Each component has its underlying purpose and impact.  How the organization can effectively align the components with each other makes a huge difference in achieving an impact. Further, in this fast-changing business environment, organizations must be keenly aware of the implications of implementing the Star Model™ framework. The Star Model may have its implications, including the interweaving nature of the lines that form the star shape.

The Man Behind the Organizational Design Framework

Dr. Jay Galbraith was an internationally recognized expert on Strategy and Organizational Design.  With more than 45 years of research and practical experience, Dr. Galbraith’s extensive knowledge came from his background in information processing systems, chemical engineering, and organizational behavior.  As the original creator of the Star Model and the Front-Back organization structure, Dr. Galbraith transformed organizations across a broad span of industries including consumer goods, manufacturing, health care, financial services, and telecommunications, among others.

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Many large corporations depend on M&A for growth and executives can boost the value that deals create. But poorly executed M&A can saddle pic 2 Board Excellence M&Ainvestors with weak returns on capital for details. In fact, the margin between success and failure is slim.

Many Boards are reluctant to cross the line between governance and management. The level of engagement is often outside the comfort zone for some executives and directors. As such, they miss opportunities to help senior executives win at M&A.

There is a need to modernize the Board’s role in M&A. Modernizing the role of the Board in M&A can result in the alignment of the Board and management on the need for bolder transactions with more upside potential. Further, this is essential in achieving a competitive advantage.

The 3 Core Opportunities in M&A

There are 3 core opportunities for the Board to play an impactful role in M&A.

  1. Potential for Value Creation. The first core opportunity, potential for Value Creation enables the Board to challenge the executive’s thinking on potential transactions. This is an opportunity for the Board to maintain constant touch with the company’s M&A strategy, the pipeline of potential targets, and emerging deals.
  1. PMI Plans. This is an essential core opportunity that enables the Board to boost value creation to as much as 2-3x the net value. Post-merger Integration (PMI) Plans representat an opportunity to pressure test against stretch growth and cost goals before and after a deal. Greater variation in the quality of post-merger plans exist compared to financial analysis and pricing of transactions.
  1. Competitive Advantage in M&A. Competitive Advantage is a core opportunity that is unrelated to a transaction’s deadline. This is an opportunity to create a competitive advantage through M&A skills. These are corporate assets that can be difficult to copy. Making that decision to create a competitive advantage through M&A can lead to bolder decisions with more upside results.

The 3 core opportunities can promote greater Board engagement. When this happens, discrete deals can be converted into ongoing deal processes and dialogues that can deliver greater value from M&A.

Maximizing Core Opportunities to Attain the Greatest Deal

The potential of the 3 Core Opportunities to embolden the role of the Board in M&A is great. Organizations just need to have a good understanding of each core opportunity and the underlying key areas or dimensions of each key area. Let us take a look at the 1st Core Opportunity: Potential for Value Creation.

The Potential for Value Creation has 3 critical key areas that can challenge that lead opportunistic transaction to succeed. One critical key area is Strategic Fit.

Strategic Fit is key to determining why a company is a better owner than competing buyers. Deals driven by strategy succeed more often when they are part of a stream of similar transactions that support that strategy. This is a key element in Strategy Development.

How can we enhance the role of the Board relative to this key area? The Board can play a vital role in clarifying the relationship between a potential transaction and strategic planning. They are also in the best position to define how the deal will support organic-growth efforts in target markets and provide complementary sources of value creation.

The other key areas under the Potential for Value Creation are Financial Statements and Risks vs. Rewards. The Financial Statements is a key area that can correct the Board’s tendency to put emphasis on price-to-earnings multiples which can be limiting. The Risks vs. Rewards, on the other hand, is a key area that challenges the Board to acknowledge uncertainties in pro forma.

The other 2 Core Opportunities also have their own essential points or dimensions the Board must focus on. Only then can these core opportunities be of the maximum potential of modernizing the Board’s role in M&A and gaining the greatest value.

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Management processes–everything from how a company manages risk to how it gets supplies Global Process Optimization Pic2for factories to how it manages and develops people–are some of the primary ways that global companies impose order and consistency on a diverse set of global operations.  Companies believe that processes can help share knowledge across divisions and regions to achieve operational excellence. Likewise, seamless delivery and service processes can be central to meeting customer expectations.

In a world where the pace of competition is increasing faster than ever, best-in-class processes can create competitive advantages when it comes to innovation and risk management. However, researches have shown that companies are particularly poor at managing processes. Often there are just too many processes. Worst, executives often do not know where to begin; a Leadership Development dilemma.

Global Process Optimization is the strategic approach to building a real Competitive Advantage.  However, it can be a challenge and there are pitfalls that organizations must face.

The Pitfalls of Organizations

Global organizations are particularly poor at managing processes. Processes are considered one of the 3 weakest aspects of organizations and strengthening them is crucial.

Based on a McKinsey survey of executives, executives do not know what their processes are.  Inasmuch as there are just too many processes, these processes do not reflect new customer needs. In fact, there exists a resistance to change that can be damaging to an organization.

Organizations have to understand that processes can go wrong on a global scale and it can bring in a lot of challenges to an organization.

The 3 Core Challenges to Global Organizations

Organizations are faced with 3 core challenges when dealing with processes and transforming them to a global scale.

Global Process Optimization pic1

  1. A Plethora of Processes. When there are a plethora of processes, there are just too many processes and too little value.  This happens when executives are unable to differentiate between processes that are essential to creating global value and those that are inessential but offer benefits if these are consistent.  Executives also fail to differentiate between processes that are crucial to customers or those that create value and those that do not. A plethora of processes is also created when the operation is in various locations or as a result of M&A activity.
  1. Overstandardization. How do you know that overstandardization exists? It is when processes are so rigid that they are slow to respond to new growth. As a result, there is a dramatic decrease in local responsiveness. This core challenge often arises because there is just too much concern about maximizing control and reducing risk.
  1. Resistance to Change. This is the third core challenge faced when change is introduced and there is resistance. Resistance to change often occurs when there is difficulty in changing customer-facing processes until the organization is faced with customer backlash. Executives often fail to understand customers’ preference for standard global service. The thinking is often directed towards country-specific variations which are not often what customers like.

Overcoming the 3 core challenges can be done. Organizations just need to take on a 3-phase approach that will ensure that all global processes are enabling performance. These are Prioritize, Optimize, and Implement. A 3-phase approach is an effective tool towards approaching Global Process Optimization in a strategic manner where value is maximized at minimal cost and complexity.

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Value Chain1The Value Chain concept, first described by Dr. Michael Porter in 1985, is a series of actions that a firm—in a specific industry—accomplishes to produce a valuable product or service for the market.  The value chain notion visualizes the process view of an organization, perceiving a manufacturing or service organization as a system comprised of subsystems of inputs, transformation processes, and outputs.

Another way to define the Value Chain principle is, “transforming business inputs into outputs, thereby creating a value much better than the original cost of producing those outputs.”  These inputs, processes, and outputs entail acquiring and utilizing resources—finances, workforce, materials, equipment, buildings, and land.

An industry Value Chain includes the suppliers that provide the inputs, creation of products by a firm, distribution value chains, till the products reach the customers.  The way Value Chain activities are planned and executed determines the costs and profits.

Value chains consist of set of activities that products must undergo to add value to them.  These activities can be classified into 2 groups:

  • Primary Activities
  • Secondary Activities

Primary activities in Porter’s Value Chain are associated with the production, sale, upkeep, and support of a product or service offering, including:

  • Inbound Logistics
  • Operations
  • Outbound Logistics
  • Marketing and Sales
  • Service

 The secondary activities and processes in Porter’s Value Chain support the primary activities.  For instance:

  • Procurement
  • Human resource management
  • Technological development
  • Infrastructure

Value Chain Analysis Benefits

The analysis of a Value Chain offers a number of benefits, including:

  • Identification of bottlenecks and making rapid improvements
  • Opportunities to fine-tune based on transforming marketplace and competition
  • Bringing out the real needs of an organization
  • Cost reduction
  • Competitive differentiation
  • Increased profitability and business success
  • Increased efficiency
  • Decreased waste
  • Delivery of high-quality products at lower costs
  • Retailers can monitor each action throughout the entire process from product creation to storage and distribution to customers.

Value Chain Analysis (VCA) Approach

Businesses seeking competitive advantage often turn to Value Chain models to identify opportunities for cost savings and differentiation in the production cycle.  The Value Chain Analysis (VCA) process encompasses the following 3 steps:

  • Activity Analysis
  • Value Analysis
  • Evaluation and Planning

Activity Analysis

The first step in Value Chain Analysis necessitates identification of activities that are essential to undertake in order to deliver product or service offerings.  Key activities in this stage include:

  • Listing the critical processes necessary to serve the customers—e.g., marketing, sales, order taking, distribution, and support—visually on a flowchart for better understanding.
    • This should be done by involving the entire team to gather a rich response and to have their support on the decisions made afterwards.
  • Listing the other important non-client facing processes—e.g., hiring individuals with skills critical for the organization, motivating and developing them, or choosing and utilizing technology to gain competitive advantage.
  • This stage also entails gathering customers’ input on the organization’s product or service offerings and ways to continuously improve.

Value Analysis

The second phase of the Value Chain Analysis necessitates identifying tasks required under each primary activity that create maximum value.  This phase is characterized by:

  • Ascertaining the key actions for each specific activity identified during the first phase.
  • Thinking through the “value factors”— elements admired by the customers about the way each activity is executed.
    • For example, for the order taking process, customers value quick response to their call, courteous behavior, correct order entry, prompt response to queries, and quick resolution of their issues.
  • Citing the value factors next to each activity on the flowchart.
  • Jotting down the key actions to be done or changes to be made to under each Value Factor.

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In today’s business environment, learning and knowledge have become key success factors internationally and intangible resources are of vital knowledge management strategyimportance. The struggle between competing firms has moved from tangible resources to intangible resources where knowledge and the ability to use knowledge have crucial roles.

Organizations are becoming more global, multilingual, and multicultural with people being required to work smarter and faster. People have become more connected with them being expected to be “on” all the time and the response time measured in minutes instead of weeks.

Indeed, today’s work environment has become more complex with businesses being threatened by the vulnerability, uncertainty, and crisis that could have been prevented if Knowledge was better managed. Better KM can help companies anticipate uncertainties and design strategies to lessen their impact.

While managers would like to take a strategic approach to avoid an impending crisis, often they find themselves fire-fighting. With a Knowledge Management Strategy, corporate executives can better manage the complex, chaotic, and non-predictable environment, in which companies must achieve performance.

Putting Strategy on Knowledge Management

Knowledge is important to efficiency and productivity. Hence it is critical that organizations manage their Knowledge effectively and strategically. Having a strategy for Knowledge Management will provide companies a plan to better manage information and knowledge for the benefit of the organization.

Effectively, a good KM Strategy can gain senior management commitment to KM initiatives and attract resources for implementation. In the end, it can provide the basis against which the organization can measure its progress.

Taking the 3 Knowledge Management Strategies to Fore

Companies are now feeling the pressure of the need to be more competitive. Taking on a Knowledge Management Strategy can lead competing firms to take the high road to success.

KM Strategy 1: Reckless Negligence
Reckless Negligence is doing little or nothing to improve capabilities in information, data, and KM. This is one strategy that has ceased to be viable in today’s business environment.

KM Strategy 2: Knowledge Competence
The goal of Knowledge Competence is to be an efficient and effective company with sufficient emphasis on responsible management of Knowledge. To date, at least 50% of the companies in the world are in this category.

KM Strategy 3: Knowledge as a Competitive Advantage
The goal of Knowledge as a Competitive Advantage is to up the ante in the spirit of continuous improvement. Undertaking the third strategy involves making KM a critical capability of the organization.  At least 20% of the companies in this world are in this category. This is often adopted by Knowledge-Intensive Industries.

Essentially, our company must create a robust Knowledge environment. However, this can only be achieved when 8 KM critical success factors are put in place.

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