Strategic Implementation, Administration and Organization

1. Strategic Implementation, Administration and Organization In Search of Efficiency and Superior Execution

2. Implementation Is Strategy • Distinctive performance is almost entirely a function of deeply engrained repertoires • not one thing a 1000% better but a 1000 things 1% better • organizations consist of many things -- the most critical are its inherent skills or distinctive competencies • distinctive skills -- “thousand thousand little things” are the real source of “unassailable” barriers to imitation

3. THE CRITICAL COMPONENTS OF STRATEGY IMPLEMENTATION • Innovative, dedicated, motivated people • Creative empowering leadership • Organizational structures the match competitive strategies, efficiently • Organizational controls and incentives that efficiently focus people on strategic goals and objectives • appropriate administrative procedures and policies • Organizational arrangements that efficiently “govern” the critical activities. • efficient organizational boundaries • internalized vs out-sourced (in some non-hierarchial organizational arrangement)

4. ORGANIZATIONAL STRUCTURE • Structure follows strategy; but then strategy must follow structure • Objective of organizational structure is to balance: • the economic advantages of specialization, with • the problems and costs of coordination and motivation, i.e. bureaucratic costs • Bureaucratic costs arise from: • supervisory monitoring • motivation problems • coordination activities • opportunism and information distortions

5. GENERIC ORGANIZATIONAL STRUCTURAL FORMS • Three Generic Organizational Structures • U-Forms (Unitary or Functional Structures) • M-Forms (Multidivisional Structures) • H-Forms (Holding or Conglomerate Structures) • Hybrid Organizational Structures • Matrix Structures • Team-based Structures

6. U-FORMS • Functional (or U-Form) Structures group or “chunk” on the basis of their common expertise/experience or because they use the same resources or focus on the same activities • Advantages: • increased specialization • economies of scale in monitoring • critical decision-making is centralized in one “peak” person • Disadvantages: • cannot handle the complexity of multiple activities well • subgoal pursuit problems can become acute • absence of objective measures of performance • operational concerns can divert attention from strategic/competitive/entrepreneurial issues

7. M-FORMS • A Multi-divisional structure is designed to manage diversification while controlling bureaucratic costs and control-loss problems • M-Forms decentralizes operating decision-making to the business unit/division level where all necessary competitive and operational decisions are made. • Strategic decision-making responsibility is retained at the headquarters level. The HQ also monitors division’s performance by using both objective market/output measures and subjective performance measures .

8. M-FORMS • Advantages: • uses objective market/output performance measures, bureaucratic controls, and clan/cultural controls • encourages the exploiting of economies of scope across divisions • frees corporate to focus on strategic concerns • Facilitates diversification and growth • Disadvantages: • Introduces additional levels of hierarchy • Opportunism and information distortion problems • Myopic focus • Divisions may compete at the expense of cooperating • Transfer pricing battles

9. Three Types of M-form and Their Optimal Use • Cooperative Form -- Related-Constrained • SBU Form -- Related-Linked • Competitive Form -- Unrelated

10. H-FORMS • Holding or Conglomerate structures seek to exploit the advantages of internal capital markets

11. ORGANIZATIONAL GOVERNANCE • How do you get people to achieve organizational goals in the most efficient way possible? • Problems in managing/motivating people: • Opportunism • Unrestrained self-interest • Error and mistakes • Ambiguity in measuring performance • Complexity/Inability in giving unambiguous direction

12. Generic Forms of Organizational Governance • Three Generic Forms of Organizational Governance • Market/Output-based Incentive Schemes • profit goals • output quotas • Bureaucratic Monitoring and Control Schemes • Rules and procedures • Standardization and monitoring • Clan or Culture-based Control Schemes • Norms, values, socialization • Internalization of organizational goals

13. Corporate Governance • A relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations. • Internal Governance Mechanisms • External Governance Mechanisms

14. Why Is Corporate Governance Needed • Separation of Ownership and Managerial Control • Agency Relationship • Agency Costs (incentive, monitoring, enforcement costs, and financial losses due to insufficient governance) • Product diversification as an example

15. Internal Governance Mechanisms • Ownership Concentration (blockholders, institutional investors) • Board of Directors (insiders vs. outsiders, diversity; strategic control vs. financial control) • Executive Compensation (salary, bonuses, long-term incentive compensation) • M-form

16. External Governance Mechanisms • Market for Corporate Control • Managerial Defense Tactics (golden parachute, poison pill, etc.)