Chapter 10

McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives1. Understand how short-term objectives are used in strategy

implementation2. Identify and apply the qualities of good short-term

objectives to your own experiences3. Illustrate what is meant by functional tactics and how they

are used in strategy implementation4. Gain a general sense of what outsourcing is and how it

becomes a choice in functional tactics decisions for strategy implementation

5. Understand what policies are and how to use them to empower operating personnel

6. Understand the use of financial reward in executive compensation

7. Identify different types of executive compensation and when to use each in strategy implementation

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Short-Term Objectives Short-term objectives are measurable

outcomes achievable in one year or less Discussion about short-term objectives

helps raise issues and potential conflicts within an organization

Short-term objectives assist strategy implementation by identifying measurable outcomes of action plans or functional activities, which can be used to make feedback, correction, and evaluation more relevant and acceptable

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Short-Term ObjectivesShort-Term Objectives

provide: Specificity

Time frame for completion

Who is responsible—Accountability

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Qualities of Effective Short-Term Objectives Measurable

Measurable activity Measurable outcomes

Priorities Simple ranking Relative priority / Weights

Linked to Long-Term Objectives Cascading effect

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Ex. 10.3 Creating Measurable Objectives

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Ex. 10.6 Specificity in Functional Tactics vs. Business Strategy

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Short-Term Objectives and Action Plans

Their value-added benefits:They give operating personnel a better

understanding of their role in the firm’s missionThe process of developing them becomes a forum

for raising and resolving conflicts between strategic intent and operational reality

They provide a basis for developing budgets, schedules, trigger points and other sources of strategic control

They can be powerful motivators, especially when connected to the reward system

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Functional Tactics Functional tactics are the key, routine

activities that must be undertaken in each functional area to provide the business’s products and services

In a sense, functional tactics translate thought into action 

Every value chain activity in a company executes functional tactics that support the business’s strategy and help accomplish strategic objectives

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Functional Tactics

Functional tactics are different from business or corporate strategies in three fundamental ways:

1. Time horizon2. Specificity3. Participants who develop them

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Outsourcing Functional Activities Outsourcing is acquiring an

activity, service, or product necessary to provide a company’s products or services from “outside” the people or operations controlled by that acquiring company

Outsourcing can save valuable time and money for many organizations

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Empowering Operating Personnel: Policies

Empowerment is the act of allowing an individual or team the right and flexibility to make decisions and initiate action

Policies are directives designed to guide the thinking, decisions, and actions of managers and their subordinates in implementing a firm’s strategy

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Creating Policies That Empower1. Policies establish indirect control over independent

action2. Policies promote uniform handling of similar activities3. Policies ensure quicker decisions by standardizing

answers to recurring questions4. Policies institutionalize basic aspects of organization

behavior5. Policies reduce uncertainty in repetitive and day-to-

day decision making6. Policies counteract resistance7. Policies offer predetermined answers to routine

problems8. Policies afford managers a mechanism for avoiding

hasty decisions

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Advantages of Formal, Written Policies 1. They require managers to think through the

policy’s meaning, content, and intended use2. They reduce misunderstanding3. They make equitable and consistent treatment

of problems more likely4. They ensure unalterable transmission of policies5. They communicate the authorization or sanction

of policies more clearly6. They supply a convenient and authoritative

reference7. They systematically enhance indirect control

and organization wide coordination of the key purposes of policies

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Bonus Compensation Plans Stock options provide the executive with

the right to purchase company stock at a fixed price in the future

Restricted stock is designed to provide benefits of direct executive stock ownership

Golden handcuffs occur where the stock compensation is deferred until vesting time provisions are met or a bonus is deferred

Golden parachutes are a form of bonus compensation that is designed to retain talented executives

Cash bonuses based on accounting measures

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