TUE 11:00 AM Parallel - Planning and Routine Following in Strategy

Full Report:

Key performance indicators in professional service firms - a dynamic perspective, by Oliver Grasl (transentis management consulting GmbH, Germany)
Four major factors affect the performance of project based professional service firms: The ratio of senior to junior staff referred to as the firm's leverage, the average fee charged per unit of time, the percentage of billable time referred to as utilisation, and the profit margin. However, in the specific case study, the company was financially successful (based on these four factors), but the company was not satisfied with the growth rate. This paper takes a holistic approach to analysing the performance of these KPI's at a particular professional service firm based on the time senior staff allocates to the following tasks: project acquisition and delivery, contact and customer maintenance, service innovation and development and hiring junior staff. Based on scenario-analysis of a system dynamics model it was concluded that standardisation of products (meaning that it is easier for junior staff to do a certain task without the help of senior staff) was a good policy to increase the growth rate. However, the model also showed that there are limits to growth.

Decision Rules and Organizational Dynamics, by Scott Rockart (presenter, Duke University, United States), Shayne Gary, Elena Vidal
What forces shape the dynamics of individual organizations and the dynamics of organizational populations? The origin of this paper goes back to Weber (1922). The authors look at how much difference exists in firms' decision rules and how those differences help explain differences in the patterns of growth and decline among competing firms. Two types of decision rules are distinguished: low level rules that govern behavior and high level rules that change the low level rules. Using a large data set of German consumer magazines - observed quarterly from 1972 to 2006 - magazines' decision rules are estimated and compared on a few key dimensions: pricing to advertisers; pricing to readers; and the number of editorial pages to be included in the magazine. Next, these rules are embedded into a system dynamics model of magazine operations developed by Hall (1976) to evaluate how fully differences in decision rules explain differences in firm dynamics. At this moment, the model displays a reasonable fit for a number of magazines. However, next steps will be taken: refine rule estimation, look for higher level rule-development, refine magazine model, and characterize the fit across magazines. Hopefully, this style of research, taking rich models based on case studies of individual organizations and generalizing them to explain the varied dynamics of entire populations of organizations, will have two contributions. First, it will show the extent to which differences in rules in organizations explain differences in organizational dynamics. Second, it will allow to leverage the body of existing carefully executed SD case studies into a broader and still richer basis for understanding firm dynamics.

Supporting Strategic Conversations: The Significance of the Model Building Process, by Susan Howick (presenter, University of Strathclyde, United Kingdom), Colin Eden

Susan reported on the use of both qualitative modelling (Journey Making) and quantitative system dynamics simulation modelling for a strategy making process in a UK police force. The main focus of the work is on the tension between the supply of resources (i.e. police officers) and the demands placed on those officers.
In this project, the strategic enquiry initiated in the qualitative strategy making process was continued during the quantitative system dynamics simulation model building process. This meant that the skills required to progress the strategic enquiry were required in parallel with the simulation model building skills. Therefore, the strategic conversation that took place was facilitated by 2 modellers - one modeller had the responsibility of protecting the veracity of the model building process and the other had the responsibility of protecting the strategic enquiry process.
The process of building the system dynamics model was used to stimulate a strategic conversation with the client group. It was anticipated that this process would enable the client to explore, and more fully understand, the impact of the key drivers they had judged to be a successful strategy. In this study the aspects of quantification and completing a running model became more significant than expected and supplemented in important ways the benefits from the strategic conversation prompted by the modelling. Indeed the feedback elements of system dynamics modelling turned out to be less important than the flow modelling. Warren (2008) demonstrates how understanding stocks and flows can be as important as modelling feedback relationships.
Three key strategic conversations emerged: the management of quality with respect to staff, measuring productivity, and the role of public expectations. The work raises issues for both model building processes and the strategic management of any public organization.

Kim van Oorschot