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Chapter 9

Chapter 9. Structuring the Company for Entrepreneurship. Question 1: What is organizational structure and why are they created?. Introduction. Structure refers to the formal pattern of how people and jobs are grouped and how the activities of different people or functions are connected

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Chapter 9

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  1. Chapter 9 Structuring the Company for Entrepreneurship

  2. Question 1: What is organizational structure and why are they created?

  3. Introduction Structure refers to the formal pattern of how people and jobs are grouped and how the activities of different people or functions are connected Structures are created to bring order and logicto company operations Once formalized, the structure is not static

  4. Question 2: What are the two (2) core issues firms face when designing their structure?

  5. The Components of Structure • Two (2) components (or issues) of structure • Differentiationis about the ways decision-making authority is distributed, tasks are grouped, and people are assigned to tasks. • Integration refers to the ways in which people and functions are coordinated.

  6. The Components of Structure How many levels should there be in the organization? What should be the targeted span of control? How centralized or decentralized should operations be? How formal or informal should structural relations be? Should the interaction emphasize functional specialization or cross-functional interaction?

  7. Question 3: When considering key design questions, what four (4) major policy areas determine the final structure?

  8. The Components of Structure Answering these questions comes down to four (4) major policy areas: Specialization—the number and types of specialties to be used or performed in the organization Shape—the number of people forming departments at each level Distribution of power—power distribution within and between levels Departmentalization—the forming of people into departments, groups, or areas

  9. Question 4: How does Greiner (1972) suggest that organizational structures evolve over the life cycle of the business? In other words, what are the steps of structural evolution?

  10. How Structures Evolve Greiner (1972) Structural Evolution

  11. Question 5: How do firms know when to change their structure?

  12. Question 6: Why is it important to link strategy with structure?

  13. Question 7: What are the different types of structure? Briefly describe.

  14. Types of Structures: Simple structure—highly informal with top-down coordination Machine bureaucracy—ridged structure with standardized work roles Organic—limited hierarchy with highly-flexible structure Divisional—self-contained business unites with separate production and marketing functions for each

  15. Elements of Mechanistic vs. Organic Organizational Structures Mechanistic Structure • Operating Styles – must be uniform and restricted • Reluctant adaptation – with insistence on holding fast to tried-and-true management principles despite changes in business conditions • Tight control – through sophisticated control systems

  16. Mechanistic More benign or controllable external environment Conservative management style is more appropriate Mechanistic/bureaucratic structure is effective

  17. Elements of Mechanistic vs. Organic Organizational Structures Organic Structure • Operating styles – allowed to vary freely • Free adaptation – by the organization to changing circumstances • Loose, informal control – with emphasis on norm of cooperation

  18. Organic More hostile external environment Management style must be more entrepreneurial Organic structure is needed to facilitate entrepreneurship

  19. Question 8: Under what structural conditions does the book suggest entrepreneurship take place?

  20. An Entrepreneurial Structure and the Concept of Cycling An entrepreneurial structure is subject to continual experimentation and change “Organizational designs that facilitate variety, change, and speed are sources of competitive advantage. These designs are difficult to execute and copy because they are intricate blends of many different design policies.” -Galbraith, 1995

  21. An Entrepreneurial Structure Covin and Slevin (1990) propose some additional elements: • Managers allowed to freely vary their operating styles • Authority that is assigned based on the expertise of the individual • Free adaptation of the organization to changing circumstances • An emphasis on results rather than processes or procedures

  22. Covin and Slevin (cont.) • Loose, informal controls with an emphasis on a norm of cooperation • Flexible on-the-job behavior, shaped by requirements of the situation and personality of the employee • Frequent use of group participation and group consensus • Open channels of communication with free flow of information

  23. Question 9: What is the process of entrepreneurial structure cycling? Why does it occur?

  24. MANAGEMENT Pseudo-entrepreneurialfirms Effectiveentrepreneurialfirms Entrepreneurial 2 1 3 4 Unstructuredunadventurousfirms Efficientbureaucraticfirms Conservative Organic Mechanistic

  25. Structures to Support New Product/Service Development Projects When deciding which type of organizational structure will be most effective, management must decide to what extent the structure is more: Simple versus Complex Centralized versus Decentralized Formal versus Informal Autonomous versus Integrated Highly Specialized versus More Generalist Full-time versus Part-time

  26. Question 10: What are the three (3) different entrepreneurial project approaches? Briefly describe.

  27. The Entrepreneurial Project Development Framework Table 9-5 Ray of Light projects • No budget • Not approved • Early conceptualizing

  28. The Entrepreneurial Project Development Framework (Table 9.5) Emerging Potential Projects • Seed capital • Approved by Opportunity Review Board • Concept refinement/prototype testing

  29. The Entrepreneurial Project Development Framework (Table 9.5) Mainstream Development Projects • Formal budget • Approved by senior mgt/directors • Formal NPD process

  30. Question 11: Why is considering project structural designs based on these three (3) approaches beneficial?

  31. The Entrepreneurial Project Development Framework (Table 9.5) More innovation because matching characteristics Innovation clearly corporate-wide task Likelihood of interfunctional coordination higher Ray of light and emerging potential projects bring more flexibility and speed to innovation process

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