Welcome to Class 14 Welcome to Class 14

Research: Research:

Qualitative DomainQualitative DomainPart 1Part 1

Chapter 7Chapter 7

Qualitative Performance

Qualitative performance data Qualitative performance data is information associated with an organization's:

 

1. Tactical and Strategic planning processes

2. Decision-making

3. Behaviors

4. Interaction with each of its stakeholders

Qualitative performance data is a window Qualitative performance data is a window into a firm's personality and character.into a firm's personality and character.

Generally, it is NOT POSSIBLE NOT POSSIBLE to measure the

impact of qualitative performance in quantifiable terms – BUT …

– this should not be mistaken as a zero-influence factor.

The consequences of qualitative performance are at least as significantat least as significant in determining a firm's long-term viability as its financial performance.

Resources

Quantitative & Qualitative

ResourcesCorporations have two major classes of crucial valuables:

(1) Quantitative resources(2) Qualitative resources

The techniques and competence with which TMTs corral, coalesce, and utilize these can determine whether a corporation achieves its goals and objectives.

The focus of The focus of this lecture is on qualitative resourcesthis lecture is on qualitative resources however however quantitative resources are highlighted for comparison purposes.quantitative resources are highlighted for comparison purposes.

1. Quantitative Resources $$$

Quantitative resources = tangible and intangible assets

These resources can be measured and managed in numericalnumerical terms.

Tangible assetsTangible assets = = facilities, equipment, inventories, receivables, investments, financial resources, etc.

Intangible assetsIntangible assets = = patents, copyrights, goodwill, etc. (Intangibles lack physical substance andand are classified as

–– noncurrent noncurrent – – items on the firm's balance sheet)

Also known as Financial ResourcesAlso known as Financial Resources

2. Qualitative Resources

Qualitative resources are sometimes referred to as intangible resourcesresources.

These resources offer great value to an organization but their precise worth cannot be measured or managed in the same way as quantitative resources.

Although it is impossibleimpossible to establish a precise value for qualitative resources, they contribute significantly to a firm’s long-term viability.

Qualitative resources include such things as:

The KKnowledge, SSkills, and AAbilities of all of its employees The Reputation of the firm The Positive Relationships the firm has established Its record of positive and productive –

Decision-making, Decision-making, Actions, Actions, andand Behaviors Behaviors

Its Infrastructure – Communication Networks, Operational systems and procedures, etc.

Scenario and strategic planning expertise

Qualitative resources coalesce to form Qualitative resources coalesce to form a company’s core capabilitiesa company’s core capabilities

Action = what you doAction = what you doBehavior = how you do itBehavior = how you do it

Performance

Qualitative Performance

Sustainable success by any corporation is correlated to its qualitative performance

There are two primary areas of qualitative performance:

Both OC and SP are propelled by unique performance drivers and among these drivers none is more significant than

(1) Organizational Citizenship (OC) (2) Strategic Positioning (SP)

"cultureculture."

Organizational CitizenshipOrganizational Citizenship

Organizational Citizenship (OC)(OC) = = a category of specific corporate behaviors and relationships.

OC reveals the firms PERSONALITY and CHARACTER.

A significant influence on OC is the firm’s

corporate culturecorporate culture..

Assessing Organizational Citizenship = investigating a series of behaviors, actions, and decisions that reflect a firm’s:

Create a database for OOrganizational CCitizenship by:

1.Identifying strategic and tactical decisions by TMTs

2.Examining the associated actions and behaviors

1. Core personality – (how key personnel act and react to situations, conditions, and people)

2. Core character – (how they are likely to act and react to changing situations and conditions)

Investigating Corporate RelationshipsInvestigating Corporate Relationships

Requires patience and perseverance.

Do not expect to discover clear, unbiased, definitive information.

Information related to relationships is, by its very nature, subjective (It is dependent upon perspective).

It is important to filter data collected. Search for collaborating information to validate the initial finding.

Strengthening the "Researcher-created" Database

Two-pronged approach – for Reliability and Comparability

1) Collect qualitative information on the target company from a variety of sources –

Filter the information – compare the opinions of different sources Filter the information – compare the opinions of different sources and look for irrational biases within sources. Eliminate the and look for irrational biases within sources. Eliminate the conclusions of sites that reflect these biases. conclusions of sites that reflect these biases.

2) Collect similar data on other organizations – Cross-company comparisons help determine whether the target Cross-company comparisons help determine whether the target company is behaving within industry normscompany is behaving within industry norms

Create a list of questions to guide the investigation

Does the company seem to be sensitive to local communities?

Is it responsive to local concerns?

Does it have publicized or well-known difficulties with governmental agencies, customers, competitors, or its own board of directors?

Does the firm encourage its employees to be culturally sensitive?

Does the firm appear to appreciate and respect its employees?

What type of relationship does the firm maintain with its competitors? (Competitors do not have to be enemies.)

See your textbook for an extensive list of questions

Organizational Citizenship

Employees

Customers

Competitors

Directors

Government

Environment

Community/Culture

Stockholders

Communication

Public Persona

Vendors (Suppliers)

Strategic Positioning

Strategic Positioning (SP) = a category of a firm’s creative and planning processes.

This area of examination sheds light on the firm's commitment to:

(1) Being innovative, creative, and visionary

(2) Predicting and adapting to environmental changes

(3) Recruiting, developing, and retaining talented employees

(4) Executing strategic and tactical plans effectively

Competitive viability is dependent upon TMTs Competitive viability is dependent upon TMTs who can craft strategically sound plans. who can craft strategically sound plans.

There are two types of TMTs:(1) strategically (1) strategically incompetentincompetent (2) strategically (2) strategically competentcompetent

It is important to It is important to identifyidentify which type is leading your target company which type is leading your target company

(1) Strategic Incompetence = Strategic Incompetence = Those who simply point out strategic alternatives but fail to pursue these or do so erratically and inconsistently (talkers and pointers)

(2) Strategic Competence = Strategic Competence = Those who actually take the appropriate actions to strategically position the firm as it moves continuously closer to its primary goals and objectives (the doers)

Strategic IncompetenceIncompetent TMTs can easily be identified. They will:

Continuously find excuses for their failures

Continuously pursue the same strategy and expect different results

Attempt to justify the validity of their failed strategies by blaming the business environment (recession, inflation, hyper-competition, etc.) for unfulfilled goals and objectives

Strategic Competence

Competent TMTs can be easily identified.

They are willing to acknowledge their strategic and tactical They are willing to acknowledge their strategic and tactical errors and use these as a spring board for future errors and use these as a spring board for future improvements. improvements.

They do not repeat their mistakes.They do not repeat their mistakes.

They think out of the box. They think big, they think They think out of the box. They think big, they think

on on a a global scaleglobal scale..

They think – They think – INTERNATIONAL TRADEINTERNATIONAL TRADE

What is international trade?What is international trade?

Why is it important to strategic positioning? Why is it important to strategic positioning?

International trade = The exchange of products and services between countries.

International trade = The potential for unimaginable opportunities that can ensure corporate growth and prosperity.

Does the company's TMT think GLOBALLY? Has it taken any actions toward participating in the global market? If so, have these been effective? What plans have been announced for diversification or

divestitures? Do these seem realistic? Do Strategies appear to suggest growth in revenue and profits? Is there a clear plan for growth in appropriate areas? Is the Human Resource Management Department part of upper management or is it simply a service department? Respect for the value of human resources is an important ticket on the train to strategic success.

(See your textbook for an extensive list of questions)(See your textbook for an extensive list of questions)

Create a list of questions to guide data collection related to a firm’s Strategic Positioning

Performance Grading Scale 1 to 5

Directions for Grading FollowDirections for Grading FollowPLEASE study these carefullyPLEASE study these carefully

End: Research: Qualitative Domain – Part 1

Assignment: Assignment:

1.1.Study the Study the following slidesfollowing slides2.2.Re-Read Re-Read “Carefully” “Carefully” Chapter 7Chapter 7

Grading Scale 1 to 5

1 = Really Bad2 = Bad3 = Do not know4 = Good5 = Excellent

Organizational Citizenship Organizational Citizenship – Looking for OutliersLooking for Outliers

Employee RelationsEmployee Relations[1][1] Strikes, discontent, class action lawsuits, violence[5][5] Employee satisfaction, widely acknowledged as a good place to work, awards and recognitions for employee sensitivity Customer RelationsCustomer Relations[1][1] Product recalls, misleading advertising, class action lawsuits, customer service department is considered more like a customer insult department[5][5] Customer satisfaction, reputation for quality products and/or services, strong, friendly,

and helpful customer service department Competitor RelationsCompetitor Relations[1][1] Price wars, name calling in advertising, lawsuits[5][5] Apparent mutual respect, does not sue or attack competitor in advertising campaign, has

strategic partnerships

Grading Extremes – 1 and 5Grading Extremes – 1 and 5

Relationship with DirectorsRelationship with Directors[1][1] Publicized discontent, public criticism of management by directors, rated as Board of Shame by Fortune 500 Magazine[5][5] Large number of external directors, maintain excellent relationship with those directors, rated as the Board of Fame by Fortune 500 Magazine Government RelationsGovernment Relations[1][1] Attorney general lawsuits, SEC or IRS investigations, other governmental problems[5][5] Received awards and highly recognized for good business practices, no record of governmental problems, awarded government contracts  Environmental RecordEnvironmental Record[1][1] Apparent total lack of concern for the aesthetic and general physical environment[5][5] Received awards for environmental sensitivity, consistently known as an environmentally concerned corporate citizen

Community/Cultural SensitivityCommunity/Cultural Sensitivity[1][1] Careless decisions that impact a community with no input from citizens, opens facilities

in spite of massive public protest, shows defiance and distain for those with differing opinions, closes facilities with no apparent concern for workers[5][5] Received awards and highly recognized as a good corporate citizen, supports community and social/cultural activities

Stockholder SatisfactionStockholder Satisfaction[1][1] Publicized discontent, calls for resignation of officers, class action suits, losses, restatement of earnings[5] [5] Stockholders appear very satisfied (market price of stock rising), corporate earnings are

solid, dividends appear appropriate, market position increasing, assets and earned capital increasing

 

Communication with the PublicCommunication with the Public[1] [1] Secretive, closed to public comment, condescending in comments, refuses to acknowledge or accept any responsibility for bad results[5][5] Openness, honesty, comfortable with probing questions, no attempt to hide information

from the public 

Public PersonaPublic Persona[1][1] Poor public image, profit more important than any other factor, facilities uninviting, company considered to be a bully[5][5] Solid public image, consider a good guy company, in all respects is viewed highly by customers and non-customers, considered by a wide range of constituents as committed to doing the right things  

Vendor RelationsVendor Relations[1][1] Notoriously late in paying debts, lawsuits by suppliers, bankers, and/or other creditors[5][5] Apparent solid respect by suppliers and other creditors, possesses exclusive licensing agreements

Grading Scale 1 to 5

1 = Really Bad2 = Bad3 = Do not know4 = Good5 = Excellent

Vision and MissionVision and Mission [1][1] Vision and Mission statements hard to find, unclear and confusing, or not readily available

[5][5] They are prominently displayed on the company website and/or in other obviously visible places and they appear to be

focused, clear, and logical

Strategic Positioning Strategic Positioning – Looking for OutliersLooking for Outliers

Grading Extremes Grading Extremes – 11 and 55

Competitive AdvantageCompetitive Advantage[1][1] The market share of the target company appears to be diminishing. The

company appears to be behind the eight ball, getting caught off guard by competition. For the corporate-level strategy consideration, the corporation has not yet established synergies between the companies within its portfolio and there is no evidence that this will happen soon. The company is in a weak position to deal with competitive threats.

[5][5] The target company appears to have a solid rapport with its primary customer base. Strong customer loyalty is obvious. Its products and services are widely recognized. Its name is widely recognized. Its market share is expanding. Its line of products and/or services is expanding and they appear innovative. For corporate-level strategies, synergies have been created between companies within the portfolio and the corporation is in a strong position to deal with competitive threats and to capitalize upon new opportunities.

General EnvironmentGeneral Environment(Competing companies have little or no control over the general

environment. It includes such things as demographic, sociocultural, political/legal, economic, and technological changes.)

[1][1] The target company is frequently caught off guard by general environmental changes. The Management Discussion and Analysis section of the target’s annual report indicates that executives blame general environmental changes for all of the company problems. (It was not our fault; we simply could do nothing about the environment.

[5][5] Company anticipates changes and exhibits the ability to adapt so that it can capitalize on new opportunities that may evolve from a changing general environment.

InnovationInnovation[1] [1] The Company is continually caught off guard by competitive

development of new ideas, products, and/or services. The target company does not innovate and does not support KSA development by employees.

[5] [5] The Company has a long tradition of promoting new thoughts and ideas. It is innovative and has a reputation for new discoveries and/or acquisition of new technologies,

systems, copyrights, patents and/or the development of new types of services. The Company encourages KSA development of employees at all levels of the organization.

Plans and ProgressPlans and Progress[1][1] The Company’s is significantly less than stellar. The company’s

strategy is confused and unsuccessful. The Company’s financial health is not strong and does not show systemic improvement. The Company has formed no strategic partnerships or if it has, they appear lacking in synergy or diversions from the Company’s core competencies. Company shows no significant interest in expansion. Management does not have a global mentality.

[5] [5] The Company has a history of successful expansion and acquisitions. Its plans are announced every year, often in the annual report and they seem well conceived and logical. Progress is admirable and progress reports are publicly announced. The Company continues to experience internal growth as well as growth related to acquisitions and/or new acquisitions.

End Class 14 End Class 14

Research: Research:

Qualitative DomainQualitative DomainPart 1Part 1

Chapter 7Chapter 7