Organization Theory: Strategy Implementation Process

1. Organization Theory: Strategy Implementation Process Designing Organizations Steven E. Phelan

2. Preview • Galbraith, Designing Organizations • Two cases – AHA and USA Today • GOAL • To gain valuable insights into organizational design by contrasting Galbraith’s ideas with our own experiences and applying those ideas to actual cases

3. Six Organization Shapers • Buyer Power • Buyers are gaining power and learning how to use it • Variety and solutions • Customers do not want bundle of products and services • They want them integrated into a solution • The Internet • The web site becomes a single face to the customer forcing functions to integrate

4. Six Organization Shapers • Multiple dimensions (of organizations) • Functions, products, geographies (old) • Segments, solutions, channels, processes (new) • Change • Rapid change requires management to re-learn and re-decide • To make more decisions more frequently • It requires more decentralized management and networks of decision makers

5. Six Organization Shapers • More variety, more comprehensive solutions – FASTER! • Shorter lead times, shorter cycle times • Speed is a force for decentralization • Share an example of one of these six forces in your own organization

6. Competitive Advantage • An organization design that facilitates • Variety, • Change, • Speed, and • Integration is a source of competitive advantageIt is difficult to execute but also difficult to copy

7. Tradeoffs • Hype • There has been an overselling of credible ideas • Teamwork, reengineering, virtual organizations etc. • Any organizational design requires tradeoffs and will have positives and negatives

8. The Star Model Strategy People Structure Focus of text Rewards Processes

9. The Star Model • Strategy • Is the company’s formula for winning! • Goals, mission, objectives, values • Delineates products, markets, value proposition, competitive advantage • First part of the model to be addressed • Establishes criteria for choosing among different organizational forms • Drives resource allocation

10. Structure • Specialization • Type and number of job specialties • Shape • Span of control – flat vs. tall structures • Distribution of power • Centralization vs. decentralization • Departmentalization • Function, product, process, market or geography

11. Processes • Vertical processes • Business planning, budgeting, resource allocation decisions • Horizontal (or lateral) processes • Designed around the work flow • Cross functional • Value chain emphasis

12. Rewards • Purpose • To align the goals of the employees with the goals of the organization • Some Issues • Individual vs. Team • Function vs. Cross function (‘citizenship’) • Monetary vs. Non-monetary rewards • Rewards must be congruent with other parts of organization design

13. People • Human resources • Recruiting, selection, rotation, training, development • Creating the skills and mind-sets needed to implement the strategy • Must also develop organizational capabilities • Flexibility, ability to work with others • Knowledge management

14. Implications • Structure is only one facet of design • Structure usually overemphasized • status and power issues • Processes, rewards, and people are becoming more important • Congruence • Different strategies lead to different organizations! • All policies must be aligned and in harmony

15. Matching strategy and structure • Specialization • Trend toward less specialization and more job rotation in low skill tasks • better speed, motivation, coordination. Why? • More specialization in high skill tasks • It is difficult to read academic papers even in the same field or sub-field

16. Matching strategy and structure • Shape • Trend towards wider spans and flatter structures • Faster decisions, lower overheads • Conference board study • Found span of control from 0-127 • Modes at 7 (traditional), 17 (sales), and 75 (self-managing teams) • Function of: experience, work similarity, independence of workers, ease of measurement

17. Matching strategy and structure • Distribution of Power • Centralization vs. decentralization • But, also includes horizontal distribution of power among departments • Power shifting from accountants and production to sales, marketing, purchasing(!?) • When 80% of parts are outsourced, purchasing becomes important

18. Matching strategy and structure • Departmentalization • Suggest departments arise when org size>24 • Consider: • Functional • Product • Market • Geographical • Process • Hybrid • What are the (dis)advantages of each?

19. Processes • Most of the activity in an organization does not follow the vertical hierarchical structure • Structure only address primary focus (e.g. segments) • Rationale • All the dimensions not handled by the structure require coordination through lateral management processes (i.e. across departments) • Need to coordinate responses to: • Governments, regulators, customers, functions, vendors, products, strategic partners, unions, regulators, technologies, solutions

20. Observations about Process • Lateral processes • ‘general management equivalents’ • Variety & Change • -> more decentralization • No functional management can handle multiple products in multiple markets • Interdependence & Speed • -> more cross-department coordination • Internet and need for CRM increases this force

21. Costs and Benefits of Laterality • Benefits • Make more decisions • Make different kinds of decisions • Make better and faster decisions • Costs • Loss of top management control • Time involved in cross-functional work • Increased conflict

22. Five Types of Lateral Processes • Voluntary (or informal) • E-coordination • Formal group • Full-time integrators • Project managers, brand managers, process managers etc. • Matrix organization • Level of coordination grows but so does cost and difficulty of implementation

23. Fostering Voluntary Processes • Interdepartmental rotation • Interdepartmental events • Co-location • Mirror image departments • Consistent reward and measurement systems

24. E-Coordination • Intranets • ISS uses a web site to coordinate the behavior of various crews at multiple sites throughout the day • Customer requests, crew assignments, performance evaluations etc. • CRM • People at customer interface record all contacts with customer and have access to previous history • Customers are managed in a consistent and knowledgeable way • Rules can be set to prompt selling opportunities at each point of contact

25. Formal Groups • Basis • Same as structure: function, product, market, geography, work flow • Strategy sets priorities. • Charter • Scope, mission, authority • Issues, resources, timeframe

26. Formal Groups • Staffing • Have an informed representative from each affected department with authority to commit • Conflict • Train in conflict mgt skills • Determine procedure for resolving conflicts • Be prepared for conflict! • Disagreement over means and ends = GOOD • Ad hominem attacks = BAD

27. Formal Groups • Rewards • Team performance should count as much as line performance in evaluations (!) • Leader Role • Teams may not need a formal leader (!) • Most groups designate a leader • Usually from most affected (interested) department • But, leader role may change to those most capable of handling a particular issue • Leader role may also rotate

28. Formal Groups • Can be simple • Film crew put together for one project • Team to design a single integrated circuit • Characteristics • Often rewards tightly linked to results • Project manager given lots of control (and accountability)

29. Formal Groups • Can be complex • Platform teams in automobile industry • Minivans, sedans, trucks • Each platform has sub-teams • Chassis, power train, engine, interior, exterior etc.

30. Formal Groups • Special challenges • Coordination • Keep information flows open to reduce duplication of effort • E-coordination is handy • Conflict management • Important to determine overall strategic priorities and who has burden of proof for shifting priorities • E.g. PC product managers have to make case for deviating from lowest cost components

31. Integrator Roles • Key Decisions • Determine structural basis • Product, brand, segment, project, process, geography • Determine who • good networker, good interpersonal skills • “influence without authority” • Provide status • Appropriate rewards, budget authority, big office, support staff, etc. • Last resort – matrix structure, dual authority • Provide support • Information systems, planning processes

32. Case 1: USA Today • Identify the problem(s) • Recommend: • A strategy • A structure • A set of key lateral processes • A reward system, and • An HR strategy • That will solve (or at least address) the problem(s) at USA Today