Module 1

Strategic Thinking and Planning

The Blind Men and the Elephant

M01 - Strategic Thinking and Planning 2

Strategy Safari

“We are the blind people and strategy

formation is our elephant. Since no
one has had the vision to see the entire
beast, Everyone has grabbed hold of
some part or other and "railed on in utter
ignorance" about the rest. We certainly
do not get an elephant by adding up its
parts. An elephant is more than that.
Yet to comprehend the whole we also
need to understand the parts.”
-

Mintzberg et al (2002)

M01 - Strategic Thinking and Planning 3

Introductory Questions

What is Strategy?

What is Strategic Thinking?

What is Strategic Planning?

What is Strategic Management?

M01 - Strategic Thinking and Planning 4

Definitions

Strategy is an act, device or plan used to achieve

victory- Aristotle, 400 BC

Strategic Thinking is a way of thinking towards the end

of victory or success (synthesis)

Strategic Planning is the process needed to design and

implement Strategic Thinking (analysis)

M01 - Strategic Thinking and Planning 5

Strategic Management

Strategy Strategy Strategic

Formulation Execution Management

M01 - Strategic Thinking and Planning 6

 Strategic Thinking and Planning at a Glance

Define the Future

Endpoint through
Strategic Thinking

Understand the Situation

Today and Build the Case
for Change

Strategic planning will get

you there

M01 - Strategic Thinking and Planning 7

Strategy Vs. Plan
Strategy

Plan Contingency Plans

(with milestones & responsibilities)

M01 - Strategic Thinking and Planning 8

Sun Tzu’s Approach to Strategic Planning, 500 BC

Sun Tzu’s Steps to Strategic Planning:

1. Assess Situation
2. Formulate Goals and Strategies
3. Evaluate Strategies
4. Implement Strategy
5. Manage Performance

M01 - Strategic Thinking and Planning 9

 The Strategic Management Process

7 Steps to Strategic Management

Long-Term Cycle (3-5 Years)

Assess
Analyze Review Vision Set Objectives,
Strategic
Environment & Mission KPIs & Targets
Choices

Manage
Budget and Create Action
Performance/
Implement Plans
Refresh

Short-Term Cycle (Annual)

M01 - Strategic Thinking and Planning 10

Benefits of Strategic Management

Manage Empower
Resources Staff

Guide Promote
Decisions Accountability

Provide Strategic Manage

Purpose Management Performance

M01 - Strategic Thinking and Planning 11

 Strategic Success

Most Organizations have a Vision, but few Realize it

97% 80% 52% 33%

Some Significant
Strategic
Vision Strategic Strategic
Plan
Success Success

Source (*) Strategic Performance Measurement & Management, Bus. Intelligence, Renaissance Worldwide

M01 - Strategic Thinking and Planning 12

Team Activity

The previous slide mentions that only 33% of organizations

achieve considerable success in their strategy execution.

In teams please brainstorm all the possible reasons for this

low percentage.

Present and defend your results to class.

M01 - Strategic Thinking and Planning 13

Strategy and Structure

“Structure follows Strategy”

Alfred Chandler, Business Professor

M01 - Strategic Thinking and Planning 14

 The Organization is a Vehicle to Implement Strategy

PARC1 Framework

Architecture Routines

People Culture

Organization

Source (1) Stanford Executive Program in Strategy & Organization

M01 - Strategic Thinking and Planning 15

 People

Talent
Architecture Routines
Motivations and fears

People Culture Attitudes

Organization
Personal Interests

Networks and relationships

M01 - Strategic Thinking and Planning 16

 Architecture

Structure
Architecture Routines
Boundaries

People Culture Financing/Ownership

Organization

M01 - Strategic Thinking and Planning 17

 Routines

Policies, processes & procedures

Architecture Routines
Information

People Culture Resource allocation

Organization
Performance management

Decision-making

M01 - Strategic Thinking and Planning 18

 Culture

What really matters?

Architecture Routines
How do we interpret actions?

People Culture What meanings do words hold?

Organization
How do we respond to situations?

M01 - Strategic Thinking and Planning 19

Team Activity

In teams please identify all the possible challenges that

modern organizations, including yours, are presently
facing.

Specify the impact of each challenge upon the business.

Finally, highlight how do you propose to meet each one of

those challenges.

M01 - Strategic Thinking and Planning 20

Module 2

Analysis of the Environment

The Strategic Management Process

Assess
Analyze Review Vision Set Objectives,
Strategic
Environment & Mission KPIs & Targets
Choices

Manage
Budget & Create Action
Performance/
Implement Plans
Refresh

M02: Analysis of the Environment 2

Why Analyze?

Doctors never Managers never

prescribe prescribe a strategy
medication before before diagnosing
diagnosing a patient the environment

M02: Analysis of the Environment 3

The 5 Cs of Strategic Analysis

• Segmentation
Customers • Income level

• Disruptive technologies
Competitors • Prices, distribution, location..

• Cost structure
Costs • Profitability

• Know how, skills, competencies

Capabilities • Talent

• Market structure
Context • Market forces

M1 - Strategic Management & Strategic Thinking 4

M02- Strategic Managment 5
 Porter’s 5 Forces Impact Potential Industry Earnings (PIE)

We aim to create value, and capture some of it. Porter’s 5 Forces help
us analyze the environment when:

1 2 3 4 5

Buyers Suppliers Substitutes

Act as One Rivalry Entry
have are
(Bargaining is Intense is Easy
Power)
Leverage Available

M02: Analysis of the Environment 6

 Creating and Capturing Value

Buyers

Value
Value YOU Captured
Created
YOU

Suppliers

M02: Analysis of the Environment 7

 Creating and Capturing Value

Rivals, Entrants
Buyers

Buyers
Value YOU
YOU Value
Created YOU Captured

Suppliers
Suppliers

Substitutes

M02: Analysis of the Environment 8

SWOT Analysis

What
 Developed by Albert Humphrey in the ‘60s & ‘70s

 Acronym for Strengths, Weaknesses, Opportunities &

Threats

 Tool to capture and analyze the environment of a

situation, project or business

 Allows analysis of both internal and external

environments

 Provides a foundation for strategic planning

M02: Analysis of the Environment 9

Why Use SWOT?

Why
 Allows complex information to be presented
systematically

 Aligns common purpose and understanding

 Associates core capabilities with successes & failures

 Identifies opportunities and threats as they arise

 Cheap to implement

M02: Analysis of the Environment 10

Who Should Use SWOT?

Who
SWOT analysis can be implemented at different levels:

 Individual

 Project

 Business Unit

 Company

M02: Analysis of the Environment 11

SWOT Analysis

Environmental
Analysis

Internal External
Environment Environment

Strengths Weaknesses Opportunities Threats

M02: Analysis of the Environment 12

What are the Organization’s Internal Strengths?

Company characteristics that:

 Give us a competitive advantage

over others
 Enable us to compete on quality,
cost or both
 Should be utilized fully

Examples:
• Abundant financial reserves
• Strong brand equity
Strengths • Economies of scale
• Superior talent

M02: Analysis of the Environment 13

What are the Organization’s Internal Weaknesses?

Company characteristics that:

 Disadvantage us relative to others

 Curtail our ability to attain objectives
 Are controllable and should be
minimized or eliminated

Examples:
• Inefficient distribution
• Outdated technology
• Poor product image
Weaknesses • Under-trained employees

M02: Analysis of the Environment 14

What External Opportunities Exist for the Organization?

External circumstances that allow us to:

 Increase our sales volume

 Increase our sales price
 Improve our cost structure

Examples:
• Rival firms are complacent
• Changing customer needs
• Economic boom
• Government deregulation
Opportunities
M02: Analysis of the Environment 15
What External Threats Loom over the Organization?

External circumstances that:

 May negatively impact profits

 Threaten our existence
 Are beyond our control

Examples:
• New product innovations
• New market entrants
• Changing customer needs
• Political instability
Threats
M02: Analysis of the Environment 16
 SWOT Tips

Dos Do Nots
• Be specific • Disguise weaknesses
• Record all thoughts and • Lose sight of influences and
ideas trends
• Be selective in final • Allow SWOT to become a
evaluation blame-laying exercise
• Involve the right people • Ignore outcomes at later
• Communicate purpose and stages of strategic
benefits managament process
• Choose a suitable facilitator
• Be open to change

M02: Analysis of the Environment 17

Plotting SWOT Analysis

Strengths Weaknesses
Internal
 High retention among management team  Over dependent on debt
 Key customer account acquired  Lack of awareness amongst prospective
 Diverse product portfolio customers
 Impeccable safety record for past 3 years  Small premises
 Reliable IT infrastructure  Absence of strong sales/marketing expertise
 Strong connections with government  No succession plans in place
 Flat hierarchy allows quick decision-making  High turnover among technical staff

Opportunities Threats
External

 Market segment is poised for rapid growth  Major player may enter market segment
 Export markets offer great potential  New technology may make products obsolete
 Distribution channels can support new  Economic slowdown could reduce demand
products  Euro/Yen may weaken against $
 Scope to diversify into related markets  Market segment's growth could attract major
 Increased government spending competition

 Reasons to Feel Good   Reasons to Worry 

M02: Analysis of the Environment 18
Common Areas Covered in SWOT

Strengths Weaknesses
Internal
 Experience, knowledge  Gap in experience, knowledge
 Unique characteristics  Financial aspects
 Resources  Reliability and trust
 Location  Loss of key staff
 Competence, capabilities
 Quality, reputation

Opportunities Threats
External

 Strategic alliances, partnerships  Loss af alliances and partners

 Product development  Price inflation/deflation
 Import, export  Strong competition
 Innovation and technology  Competitors new products and innovation
development  Political influences
 Geographical factors

 Reasons to Feel Good   Reasons to Worry 

M02: Analysis of the Environment 19
SWOT Analysis for McDonald’s (Illustrative)

Strengths Weaknesses
Internal
 Internatinoally recognized brand  High staff turnover
 Global operations  Minimal focus on organic foods
 Prime store locations  Limited variation in seasonal products
 Lean operations  Quality consistency concerns due to
 Grade A ingredients franchised operations
 Strong supplier relations  Focus on products regarded as unhealthy

Opportunities Threats
External

 Opening more joint ventures  Lawsuits against unhealthy foods

 Be responsive to healthier options  Food contamination risks as e-coli
 Social responsiblilty initiatives  Trends towards healthy living
 Expanding to new markets  Economic downturn in primary markets

 Reasons to Feel Good   Reasons to Worry 

M02: Analysis of the Environment 20
PEDESTL Framework Aids External Analysis (SWOT)

PEDESTL Framework

Political Economic Demographic Environmental

..

Social Technological Legal

M02: Analysis of the Environment 21

 Fundamentals of PEDESTL Framework

How will the current/upcoming

political situation affect us?
How will social trends
impact us?
Political
How will the fluctuations in Social
the economy affect us?
How can we benefit from
Economic new technology?

How will changes in the Technological

demography impact us?
How will current legislation
Demographic
and/or potential new laws
How will the focus on HSE affect us?
impact our products or
operations? Legal
Environmental
M02: Analysis of the Environment 22
Team Activity

In teams please conduct a full

SWOT analysis for SATORP.

Specify what can be gleaned

from your analysis.

Present to class.

M1 - Strategic Management & Strategic Thinking 23

Module 3

Vision and Mission Statements

The Strategic Management Process

Assess
Analyze Review Vision Set Objectives,
Strategic
Environment & Mission KPIs & Targets
Choices

Manage
Budget and Create Action
Performance/
Implement Plans
Refresh

M03: Vision and Mission Statements 2

A Quote on Vision

“It is a terrible thing to

see but have no vision”
Helen Keller
First Deaf and Blind person to earn a
Bachelor of Arts degree (1904)

M03: Vision and Mission Statements 3

 The Bridge of Strategic Management

Strategy starts with

articulating a vision...

...and ends when

that vision is reality

M03: Vision and Mission Statements 4

 What is a Vision?

A vision outlines what an organization aspires for itself or for the

world in which it operates

Desired qualities of a Vision:

Clear Memorable Single Minded

Vivid Cultural “Wow” Factor

M03: Vision and Mission Statements 5

 There is a Fine Line Between…

Vision Hallucination

 “Dubai will be one of the leading business and tourist locations in the world”
- Sheikh Mohammed bin Rashid Al Maktoum (1990s)

 “We should commit to landing a man on the moon and returning him safely
to the earth” - John F Kennedy (1960s)

 “A computer on every desk and in every home using great software as an

empowering tool” - Bill Gates (1984)

M03: Vision and Mission Statements 6

Examples of Vision Statements

A personal computer in every home running

Microsoft software

To put joy in kids’ hearts and a smile on

parents’ faces

To fill the earth with the light and warmth of

hospitality

…to create solutions essential to a better,

safer and healthier life for people everywhere

M03: Vision and Mission Statements 7

Examples of Vision Statements

Our vision for Emaar is its transformation

into one of the most valuable lifestyle
developers in the world beyond real estate
development.

The Logistics Company for the World

M03: Vision and Mission Statements 8

 What is a Mission?

A mission defines the purpose of an organization, its “reason for

existence”. It aims to communicate how the vision is to be achieved.

Constituents of a mission:

Organizational Aim Competitive Advantage

Operational Scope Logic & Values

M03: Vision and Mission Statements 9

Examples of Mission Statements

To become a one-stop, global solution provider for lifestyle,

including homes, work, play, leisure, retail, health, education,
finance and industry. Emaar of tomorrow will become
synonymous to "Quality Lifestyle across the Globe”

Offering highest quality logistics solutions based on strong local

expertise and the most extensive global network. Customers
trust DHL as the preferred express and logistics partner, leading
the industry in terms of quality, profitability and market share

Supplying the finest products and leading the industry in

nutrition research and education. We support this by adhering
to the highest ethical conduct in business dealings, treatment
of employees, and socio-environmental policies

M03: Vision and Mission Statements 10

 Why Have a Vision and Mission?

Purpose of Vision & Mission

Provide
Meaning
Raise Empower
Standards Employees
Vision &
Mission
Provide Bring
Continuity Unity
Provide
Focus

M03: Vision and Mission Statements 11

 What are Values?

Values represent what an organization stands for and provide a

foundation for its culture. They guide behavior and decision-making

Values should…

Support Be Worded
Vision/Mission Uniquely

Intangibles Number 4 to 7

M03: Vision and Mission Statements 12

Vision and Mission
Sharq
Our vision is to be a Leader in the Petrochemical
Industry through Business Excellence.

Our mission is to operate petrochemical

plants safely, efficiently and profitably;
to supply outstanding quality products
exceeding our customers’ satisfaction
through qualified national human
resources and well developed quality
systems; to pursue further opportunities
for expansion and debottlenecking.

M03- Strategic Planning 13

ADCO’s Mission

“ADCO acts on behalf of its Shareholder(s) to explore,

develop and produce hydrocarbons within its area of
operations. In meeting our Shareholders’ aspirations,
we will operate at maximum efficiency and optimum
cost with minimum impact on the environment and we
will avoid harm to people. We will promote an
environment of continuous improvement while
maintaining the highest standards of honesty and
integrity in all aspects of our business. We will achieve
the 75% UAE National employment objective in 2017.”

‫التخطيط والتفكير اإلستراتيجي‬ 14

MAF – Carrefour Mission
To Our Customers
• The best price and the best merchandise in a pleasant shopping experience in
every store and in every country.
To Our Employees
• The possibility of growth and fulfillment in a trusting environment, providing
challenging jobs and motivational compensation.
To Our Shareholders
• A sustained return on their investment and the growth prospects of a global
retailer.
To Our Suppliers
• Markets, customer intelligence, and cooperation to improve products through
long-term mutually beneficial relationships.
To Local and National Communities
• A deep commitment to the community, as a socially responsible economic actor
and a good corporate citizen.

M03- Strategic Planning 15

SATORP Vision and Mission

Vision
To be the Middle East and Asia’s leading performer
In refining and petrochemicals with a passion for
the environment

Mission
Maximize added value and meet our
stakeholders’ expectations by:
• Building and operating a full conversion
refinery.
• Being reliable and cost efficient in our
business.
• Conforming to the highest safety, health,
environment and quality standards.
M03- Strategic Planning 16
SATORP 4-P Values

People
• We respect the diversity of our people and fully support their welfare. We
are committed to the development of our work force

Pride
• We take pride in what we do. We are committed to excellence, safety,
quality and environment.

Professionalism
• We conduct our business with competence in an ethical, responsible and
accountable manner.

Partnership
• We synergize with our stakeholders to build productive, collaborative and
trusting relationships. We adopt team spirit and openness to achieve our
business.

M03: Vision and Mission Statements 17

The Link Between Strategy and Performance

M03: Vision and Mission Statements 18

Getting Key Result Performance Balanced
Ready High Areas Indicators Scorecard

In 4 areas: Financial,
S.W.O.T. People, Process &
Customer

Measurability Scale
Analysis

Vision & Critical Behavioral Competency

Success
Mission Factors Standards Framework Recruitment &
Selection
Standards

Organizational
Strategic Training Needs
Goals

Performance
Appraisal
Strategic Core Corporate
Low Criteria
Plan Values Culture

M03- Strategic Planning 19

Importance of KRAs

Set Goals and Targets

Prioritize activities and improve time and work

management

Make Better Decision that Can Add Value

Clarify Roles of Department and Individual

Focus on Results Rather on Activities

Align Roles to Organization’s Business and Strategic Plan

Communicate Roles’ Purposes to Others

M03- Strategic Planning 20
General KRAs Examples

Output Market Size

Customer Service Production

Sales
Customer Satisfaction
Quality
Career Development
Budget
Time Management
Product Development
Personal Development
Profitability

Cost Efficiency Others?

M03- Strategic Planning 21

Team Activity

Consider SATORP’s vision, mission and

values.

Identify all the possible KRAs embedded

into the three texts.

Can you identify some competencies and

values as well?

M03: Vision and Mission Statements 22

Module 4

Assessing Strategic Choices

The Strategic Management Process

Assess
Analyze Review Vision Set Objectives,
Strategic
Environment & Mission KPIs & Targets
Choices

Manage
Budget and Create Action
Performance/
Implement Plans
Refresh

M04: Assessing Strategic Choices 2

 Strategic Choices
A strategy defines three primary elements

What are the

Where to play? How to win?
Priorities?

How do we What is my Where are our

create & capture competitive resources best
value? advantage? invested?

M04: Assessing Strategic Choices 3

Key Elements of Strategy

 Alternative that would maximize

Goal shareholder value

 Defines area of operation

Scope  Geographic scope, product lines and
customer segments
 Provides basis to create & capture value
Competitive Advantage  Positional Advantage (Have)
 Capability Advantage (Do)

 Explains linkages in the strategy

Core Capabilities  Clarifies assumptions
 Explains argument for success

M04: Assessing Strategic Choices 4

Types of Strategy

Competitive Advantage
• Something that gives the organization
advantage over its rivals in the market
• Technical competency, talented employees,
economies of scale etc.
• Give examples of specific firms

Cost Advantage
• Strategy to secure a cost advantage of some
kind
• Lower fixed cost, lower average cost per unit,
lower labor cost etc.
• Give example of specific firms

M02- Strategic Managment 5

Types of Strategy

Market Dominance
• Internal growth
• Acquisitions and takeovers
• Give examples of specific firms

New Product Development

• Keep ahead of rivals
• Set the price
• Give examples of specific firms

M02- Strategic Managment 6

Types of Strategy

Contraction/Expansion
• Focus on what you are good at
• Seek to expand in a range of markets
• Give examples of specific firms

Price Leadership
• Through dominating the industry
• Others will follow you
• Give examples of specific firms

Global
• Seek to expand globally
• Give examples of specific firms
M02- Strategic Managment 7
Types of Strategy

Restructuring
• Complete re-thing of the way the
business is organized
• Give examples of specific firms

M02- Strategic Managment 8

 IKEA’s Cost Differentiation and Leadership

• Prices are 30-50 % below

competitors
• Prior to the Fargrik mug, their
original 50-cent mug “Bang” was
redesigned 3 times to maximize
number of mugs on a pallet
• They moved from 864 mugs to
2024 through improvements such
as creating a shorter mug with a
new handle
IKEA FÄRGRIK
• These changes reduced shipping Mug
costs by 60 percent

M04: Assessing Strategic Choices 9

 Value Chain
ILLUSTRATIVE
The Value Chain is the string of activities performed by an
organization to create value

Economics of the Value Chain

Total Value Total Cost
Value
Cost
16 - 17 = -1

Inbound Outbound Marketing Post Sale

Operations
Logistics Logistics & Sales Service

M04: Assessing Strategic Choices 10

 Value Chain Innovation

Innovation is a breakthrough in value optimization that provides

first mover advantage in a newly created market space

Optimize returns at each step of the value chain

Increase Decrease Create Eliminate

Source (1) Blue Ocean Strategy, by Renee Mauborgne and Chan Kim

M04: Assessing Strategic Choices 11

 Value Chain

Economics of the Value Chain

Total Value Total Cost
Value
Cost
16
18 - 11
17 = -1
7

Inbound Outbound Marketing Post Sale

Operations
Logistics Logistics & Sales Service

M04: Assessing Strategic Choices 12

Cirque Du Soleil Value Curve

M04: Assessing Strategic Choices 13

Founder of Cirque du Soleil

Guy Laliberté
CEO

Street
Net Worth
Performer Value Innovation = USD2.6 Billion
(Fire Eater)

M04: Assessing Strategic Choices 14

Module 5

Strategic Objectives, KPIs and Targets

The Strategic Management Process

Assess Set Objectives,

Analyze Review Vision
Strategic KPIs and
Environment & Mission
Choices Targets

Manage
Budget & Create Action
Performance/
Implement Plans
Refresh

M5 - Strategic Objectives, KPIs & Targets 2

Strategic Alignment Vision & Mission

Company
Objectives Key Result Areas
(KRAs)
Department
Objectives
Key Performance
Indicators (KPIs)
Individual
Objectives

Performance
Reward
Monitoring

Development Annual Improvement Performance

Plans Appraisals Action Plans Reviews
M5 - Strategic Objectives, KPIs & Targets 3
Strategic Alignment - The Cascading of Objectives
Organizational Level
KRAs KPIs Targets Initiatives
Market Size Market Share 10% 15% Acquisition/Merger

Departmental Level (Sales)

KRAs KPIs Targets Initiatives
Sales Growth % Increase 15% 22% After Sales Services
in Overall Sales Customer Base
per Quarter Discounting

Individual Level (Salesman)

KRAs KPIs Targets Initiatives
New Sales # of New 10 15 Sales Pitching
Customers
Av. Rev./Customer 200 350 Sales Calls
M5 - Strategic Objectives, KPIs & Targets 4
Strategic Objectives – Organizational KRAs

Strategic Objective

Strategic KPIs (SKPIs) Targets

Strategic Objective
Vision Mission
Strategic KPIs (SKPIs) Targets

Strategic Objective

Strategic KPIs (SKPIs) Targets

M5 - Strategic Objectives, KPIs & Targets 5

Criteria for Setting Strategic Objectives

 No Rules
How Many
 Range from 4 to 12
Objectives?
 The fewer, the better

 Long Term
 Broad Scope
Criteria  Converts Mission to Action (All 4 Perspectives)
 Consistent and Aligned
 Sustains Strategy (Competitive Advantage)

M5 - Strategic Objectives, KPIs & Targets 6

Examples of Strategic Objectives

Increase employee productivity

Improve product quality

Enhance localization

Attract, develop and retain the best

Maximize return on investments

Increase customer satisfaction

Increase asset utilization

Develop distribution network

M5 - Strategic Objectives, KPIs & Targets 7

The 4 Scorecard Components

Financial
Perspective
How Do We Look To
Resource Providers?

Vision
Customer Internal Process
Perspective Mission Perspective
How Do Customers Are We Efficient and
See Us? Effective?

Innovation & Learning

Perspective

Are We Competent?
M5 - Strategic Objectives, KPIs & Targets 8
 Balanced Scorecard – A Strategic Tool

Financial
KRAs KPIs TARGETS INITIATIVES

Customer Vision Internal Processes

KRAs KPIs TARGETS INITIATIVES Mission KRAs KPIs TARGETS INITIATIVES

Learning & Growth

KRAs KPIs TARGETS INITIATIVES

M5 - Strategic Objectives, KPIs & Targets 9

BSC Asks 4 Rhetorical Questions

Is our strategy yielding

results?

How should we appear

to our customers?

What processes must

we excel at?

How will we continue

to improve?

M5 - Strategic Objectives, KPIs & Targets 10

Critical Success Factors

Results

Competencies

Values

M5 - Strategic Objectives, KPIs & Targets 11

Measuring Results

M5 - Strategic Objectives, KPIs & Targets 12

Organizational Performance Measures (KPIs)

• A Key Performance Indicator (KPI) is a

Quantitative Measure that Uses a Specific Unit
to track Performance
• Use 1-2 Strategic KPIs to Measure Each
Strategic Objective.

Percentage
Number
%
Index Score Ratio …

M5 - Strategic Objectives, KPIs & Targets 13

KRAs and KPIs - Examples

KRAs KPIs

• Ratio of Profits To Sales

Profitability • Ratio of Profit to Capital
• Return on Investment

• # of Customer Complaints
Service Quality • # of Quality Initiative Introduced
• Defect Ratio

• Ratio of Actual to Budget

Cost Control • Average Cost Per Unit Produced
• Average Cost per Trained Employee

M5 - Strategic Objectives, KPIs & Targets 14

KRAs and KPIs - Examples

KRAs KPIs

Employee • Employee Turnover Rate

• Absenteeism Rate
Satisfaction • Employee Engagement Rate

• Average Employee Productivity

Productivity • Average Revenue per Employee
• Sales Volume per Outlet

Customer • Market Share

• Index of Customer Satisfaction
Satisfaction • Sales Volume per Quarter

M5 - Strategic Objectives, KPIs & Targets 15

Characteristics of the Right KPIs

Has a clear unit

Simple and Linked to a Key
of measure
‘fat-free’ Result Area
(UOM)

Has a clear and Can be

Support right
specific reported ‘on
behaviour
formula demand’

Cost effective
Owned by one
to monitor and Verifiable
individual
report

M5 - Strategic Objectives, KPIs & Targets 16

 KPIs Can Either be Lead or Lag

KPI: Percent
increase in Company’s strategic
KPI: Percent
quarterly objective: “Achieve
increase in
customer Profitable Growth”
gross margin
subscriptions

Lead indicator Lag indicator

• Measure whether an
• Measure whether an
organization has
organization is on track
achieved fulfilled its
towards achieving its
strategic objective as an
strategic objective
end result

M5 - Strategic Objectives, KPIs & Targets 17

 More Examples of KPIs

Lead Lag

 Training Days/Employee  % Increase on Morale Survey

 Number of Reports Introduced  % Market Share
 Number of Published Surveys  School Ranking in UAE
 Number of Sales Visits Made  Net Income/Sales Ratio
 Defects per Production Shift  Revenue/Bad Debt Ratio

M5 - Strategic Objectives, KPIs & Targets 18

 KPI Cards

KPI Cards are an essential tool for managing KPIs

Sample KPI Card

KPI: Market Share REF: 014
KPI Type (Strategic KPI)
Reporting Frequency (Quarterly)
Objective or Initiative Link (Increase Market Share)
Data Source (Industry Index Report)
Calculation Method (Total Sales/Industry Sales x 100)
Value Pattern (Increasing)
Target (20% for each Q in 2015)
Aggregation Method (Q measured independently)
Owner Director of Sales

M5 - Strategic Objectives, KPIs & Targets 19

Where is the KPI?

Increase average revenue per customer from AED

1,500,000 to LL 2,000,000 by EOY 2015

• The anatomy of a KPI:

– Direction
– Target LL 2,000,000 (33% increase)
– Time frame End of 2012
– Benchmark Are we doing well?

Discussion: What is benchmarking? Why is it done?

M5 - Strategic Objectives, KPIs & Targets 20

Where is the KPI?

Decrease the average cost per new hire by 15%

compared to previous year by end of 2015.

Increase system availability by 2% by the end of quarter

two of 2015.

Decrease product defect ratio from 0.5 % to 0.2% by end

of quarter three of 2015.

Decrease customer average delivery time from 10 days

to 5 days by end of Q3.

M5 - Strategic Objectives, KPIs & Targets 21

SMART Targets

M5 - Strategic Objectives, KPIs & Targets 22

Your Targets Must
Be Written and
Documented

M5 - Strategic Objectives, KPIs & Targets 23

Team Activity
Complete The Below Worksheet for Your Department

Strategic KRAs KPIs Target Initiative

Perspective
Financial

Customer

Internal

Learning

M5 - Strategic Objectives, KPIs & Targets 24

Module VI

Developing Operating Plans

M06: Developing Operating Plans 1

The Strategic Management Process

Assess
Analyze Review Vision Set Objectives,
Strategic
Environment & Mission KPIs & Targets
Choices

Manage
Budget & Create Action
Performance/
Implement Plans
Refresh

M06: Developing Operating Plans 2

 From Strategic Plan to Action Plan
Action Plan
Initiative
S. Objective OKPIs Targets
Vision
SKPIs Targets
Initiative
OKPIs Targets
S. Objective

SKPIs Targets Initiative

OKPIs Targets
Mission
S. Objective
Initiative
SKPIs Targets OKPIs Targets

M06: Developing Operating Plans 3

 Initiatives

Definition of Initiative

Narrow, short or medium-term undertakings that an

organization must achieve to realize its Strategic Plan

Ask “How do we
2+ Initiatives Focus on
Achieve a Finite Time Line
per KPI Outputs
Target?”

M06: Developing Operating Plans 4

Example of Initiatives

KPI/Target Initiative
Identify Optimal Routes
KPI: % increase in distribution
channels Upgrade Infrastructure
Target: 20%
Overhaul Information Systems

Develop Job Descriptions

KPI: Cycle Time to Fill Vacancy Develop Recruitment Policy

Target: 60 Days
Partner with Rec. Agency

M06: Developing Operating Plans 5

 Effective Project Action Plans

 Defines individual workstreams clearly

 Specifies start date, end date and milestones

 Assigns responsibilities and accountabilities

Action Plan
Criteria  Assigns budgeted resources

 Tracks progress

 Presents information visually

M06: Developing Operating Plans 6

The Balanced Scorecard- Airline Example

M06: Developing Operating Plans 7

The Strategic Management Process

Assess
Analyze Review Vision Set Objectives,
Strategic
Environment & Mission KPIs & Targets
Choices

Manage
Budget & Create Action
Performance/
Implement Plans
Refresh

M06: Developing Operating Plans 8

Quotes on Performance Management

“You can only manage what

you can measure”
-Peter Drucker, Management Guru

“What gets measured gets

done, what gets recognized
gets done best”
-Anonymous

M06: Developing Operating Plans 9

Why Performance Management?

Provides objective basis for monitoring strategy implementation

Enables informed decision-making

Establishes focus on priorities

Provides basis for management reporting

Promotes performance and accountability based culture

M06: Developing Operating Plans 10

 Control Process

Control is carried out periodically

 Monthly Measure
 Quarterly
 Bi-Annually
 Annually

Improve Control Analyze

Some measures and reports

Report are carried out daily, weekly
or in real time

M06: Developing Operating Plans 11

 What Promotes Good Performance Management (PM)?

CSF for Effective PM

Performance
Management

Critical Success Factors

Leadership Clear Control Stakeholder

Involvement Strategy Capabilities Management

M06: Developing Operating Plans 12

 Survey: Barriers to Strategy Execution?

Year: 2010
Participants: +1,000 HBR

Only 37% say their companies are

“Very good” or “Excellent” at strategy execution

M06: Developing Operating Plans 13

Don’t Blame the Economy

Only

23%
...blamed economic conditions for
limiting their ability to execute strategy

M06: Developing Operating Plans 14

Who Thinks the Company is Good at Strategy?

48% ...of those involved in

creating it, but only...

33% ...of those who have no role

in creating it

M06: Developing Operating Plans 15

Is Strategy Formulation Everyone’s Job at your Company?

ONLY

33% ...said yes, while

59% ...said that leaving people out

of strategy formulation
creates a sense of division

M06: Developing Operating Plans 16

Can you state your company’s strategy?

53% ...of
implementers
cannot state
the company’s
strategy in full

M06: Developing Operating Plans 17

 The Most Cited Obstacles to Execution

+
Not Making Strategy
Weak Leadership Meaningful
Importance of obstacle

Lack of Measurement No Accountability

Focus on Short Term

Not Enough Time

Resistance to Change

_
Popularity of response +
M06: Developing Operating Plans 18
Survey Conclusion

When employees are disengaged from strategy,

day to day decisions will deviate from the
company’s goals in ways that destroy value

Get employees involved in strategic formulation

to close the gap between strategy and
execution

M06: Developing Operating Plans 19

For Further Reading

M06: Developing Operating Plans 20

Email us at: [email protected]