CHAPTER 10

1. CHAPTER 10 Implementing Strategy: Structure, Leadership, and Culture

2. Chapter Topics • Structuring an Effective Organization • Organizational Leadership • Organizational Culture • Appendix – Primary Organizational Structures and their Strategy-Related Pros and Cons

3. Ex. 10-2: What a Difference a Century Can Make(Contrasting Views of the Corporation))

4. Ex. 10-2 (contd.)

5. Key Levers to Implement Strategy • Structure (organization of firm’s activities) • Leadership (style, staffing, and skills) • Culture (shared values creating behavioral norms)

6. Trends Driving Organizational Structure Speed of Decision Making Internet Globalization

7. Conclusions of Research on Organizational Structure • A single-product firm or single dominant business firm should employ a functional structure • A firm in several lines of business that are somehow related should employ a multidivisional structure • A firm in several unrelated lines of business should be organized into strategic business units • Early achievement of a strategy-structure fit can be a competitive advantage

8. Restructuring to Support Strategically Critical Activities • Concept – Some activities within a business’s value chain are more critical to the success of the strategy than others • Considerations in restructuring • Strategically critical activities must be the central building blocks for designing the organization structure • Organizational structure must be designed to help coordinate and integrate support activities to • Maximize their support of strategy-critical primary activities • Minimize their costs and time spent on internal coordination

9. Reengineering Strategic Business Processes (BPR) • Concept – Involves reorganizing a company to create value for the customer by eliminating barriers that create distance between employees and customers • Potential outcomes of BPR • Reduces fragmentation by crossing traditional department lines • Reduces overhead by compressing formerly separate tasks that are strategically intertwined in the process of focusing on the customer

10. Steps Involved in BPR • Develop a flow chart of the total business process • Try to simplify the process first, eliminating unnecessary tasks and streamlining remaining tasks • Determine which parts of the process can be automated • Benchmark strategy-critical activities • Consider outsourcing non-critical activities • Design a structure for performing remaining activities and reorganize personnel accordingly

11. Downsizing, Self-Management, and Outsourcing • Downsizing – Eliminating employees, particularly middle managers, in a company • Self-management – Delegating work to lower, operating levels of an organization • Outsourcing – Obtaining work previously done by employees inside a company from sources outside the company

12. Product-Teams The product-team structure assigns functional managers and specialists (e.g., engineering, marketing, financial, R&D, operations) to a new product, project, or process team that is empowered to make major decisions about their product

13. Ex. 10-5: Product-Team Structure Chief Executive Officer Research and Development Engineering Operations Finance Sales and Marketing Product or process teams

14. Virtual Organization A temporary network of independent companies – suppliers, customers, subcontractors, even competitors – linked primarily by information technology to share skills, access to markets, and costs

15. Key Considerations of Organizational Leadership Organizational leadership involves action on two fronts Providing the management skill to cope with the ramifications of constant change Guiding the organization to deal with constant change

16. Strategic Leadership: Embracing Change Clarifying strategic intent Activities involved in galvanizing commitment to change Building an organization Shaping organizational culture

17. Strategic Intent An articulation of a simple criterion or characterization of what the company must become to establish and sustain global leadership

18. Ex. 10-11: What Competencies Should Managers Possess? The Required Competencies of Business Leaders The Leadership Needs of Organization • The ability to: • build confidence • build enthusiasm • cooperate • deliver results • form networks • influence others • use information • business literacy • creativity • cross-cultural effectiveness • empathy • flexibility • proactivity • problem solving • relation building • teamwork • vision

19. Ex. 10-12: Management Processes and Levels of Management RENEWAL PROCESS Attracting resources and capabilities and developing the business Providing institutional leadership through shaping and embedding corporate purpose and challenging embedded assumptions Developing operating managers and supporting their activities. Maintaining organizational trust INTEGRATION PROCESS Managing operational interdependencies and personal networks Linking skills, knowledge, and resources across units. Reconciling short-term performance and long-term ambition Creating corporate direction. Developing and nurturing organizational values Creating and pursuing opportunities. Managing continuous performance improvement ENTREPRENEURIAL PROCESS Establishing performance standards Renewing, developing, and supporting initiatives Front-Line Management Middle Management Top Management

20. What is Organizational Culture? The set of important assumptions (often unstated) that members of an organization share in common.

21. Ex. 10-13: Managing the Strategy-Culture Relationship Link changes to basic mission and fundamental organizational norms Reformulate strategy or prepare carefully for long-term, difficult cultural change Changes in key organizational factors that are necessary to implement the new strategy Many 1 4 2 3 Synergistic – focus on reinforcing culture Few Manage around the culture High Low Potential compatibility of changes with existing culture

22. Ex. 10-A: Functional Organizational Structure

23. Strategic Advantages Achieves efficiency through specialization Develops functional expertise Differentiates and delegates day-to-day operating decisions Retains centralized control of strategic decisions Tightly links structure to strategy by designing key activities as separate units Strategic Disadvantages Promotes narrow specialization and functional rivalry or conflict Creates difficulties in functional coordination and interfunctional decision making Limits development of general managers Has a strong potential for interfunctional conflict –priority placed on functional areas, not the entire business Ex. 10-A: Functional Organizational Structure

24. Ex. 10-A (contd.)Process-Oriented Functional Structure

25. Ex. 10-B: Geographic Organizational Structure

26. Strategic Advantages Allows tailoring of strategy to needs of each geographic market Delegates profit/loss responsibility to lowest strategic-level Improves functional coordination within the target market Takes advantage of economies of local operations Provides excellent training grounds for higher level general managers Strategic Disadvantages Poses problem of deciding whether headquarters should impose geographic uniformity or geographic diversity should be allowed Makes it more difficult to maintain consistent company image/reputation from area to area Adds layer of management to run the geographic units Can result in duplication of staff services at headquarters and district levels Ex. 10-B: Geographic Organizational Structure

27. Ex. 10-C: Divisional or Strategic Business Unit Structure Chief Executive Officer VP-Admn Services VP-Operating Support GM Division/SBU A GM Division/SBU B GM Division/SBU C Manager, HR Personnel Personnel Manager, Acctg/ Finance Acctg/Control Acctg/Control Division Planning Division Planning Manager, R&D Manager Marketing/Sales Marketing Marketing Manager Prod/Operation Prod/Operation Prod/Operation

28. Strategic Advantages Forces coordination and necessary authority down to the appropriate level for rapid response Places strategy development and implementation in closer proximity to the unique environments of the division/SBUs Frees CEO for broader strategic decision making Sharply focuses accountability for performance Retains functional specialization within each division/SBU Provides good training ground for strategic managers Increases focus on products, markets, and quick response to change Strategic Disadvantages Fosters potentially dysfunctional competition for corporate-level resources Presents the problem of determining how much authority should be given to division/SBU managers Creates a potential for policy inconsistencies among divisions/SBUs Presents the problem of distributing corporate overhead costs in a way that’s acceptable to division managers with profit responsibility Increases costs incurred through duplication of functions Creates difficulty maintaining overall corporate image Ex. 10-C: Divisional or Strategic Business Unit Structure

29. Ex. 10-D: Matrix Organizational Structure Chief Executive Officer Vice President, Engineering Vice President, Production Vice President, Purchasing Vice President, Administration Project Manager A Engineering Staff Production Staff Purchasing Agent Administration Coordinator Project Manager B Engineering Staff Production Staff Purchasing Agent Administration Coordinator Project Manager C Engineering Staff Administration Coordinator Production Staff Purchasing Agent

30. Strategic Advantages Accomodates a wide variety of project-oriented business activity Provides good training grounds for strategic managers Maximizes efficient use of functional managers Fosters creativity and multiple sources of diversity Gives middle management broader exposure to strategic issues Strategic Disadvantages May result in confusion and contradictory policies Necessitates tremendous horizontal and vertical coordination Can proliferate information logjams and excess reporting Can trigger turf battles and loss of accountability Ex. 10-D: Matrix Organizational Structure