Realizing Strategy

1. Realizing Strategy Foundations of Strategy CH.9 Kevin Langford Devin Newman Nick Capodagli Caitlin McPherson

2. Introduction • Formulating a strategy without taking into account the conditions in which it will be implemented will result in a poorly designed strategy.

3. Objectives • Opening Case: BP Oil Spill • The Organizational Challenge • Organizational Design • Management Systems • Corporate Culture • Summary

4. Opening Case: BP and the Oil Spill

5. The Organizational Challenge • “Every organized human activity- from making pots to placing a man on the moon- gives rise to two fundamental and opposing requirements: the division of labor into various tasks and the coordination of these tasks to accomplish the activity.” – Henry Mintzberg • These two requirements are difficult to reconcile simultaneously and is one of the central problems for organizations.

6. Specialization and Division of Labor • The fundamental source of efficiency in production is specialization through the division of labor into separate tasks. • Example: Henry Ford and the Model T. • But specialization comes at a cost: the more a production process is divided between different specialists, the more complex is the challenge of integrating the efforts of individual specialists. • The Cooperation Problem • The Coordination Problem

7. Samuel Adams: The Brew Crew • “It takes the right combination of creativity, curiosity and respect for the craft to brew up a great team. Sure, we may have our differences when it comes to favorite beer style or food pairing, but the one thing we all agree on is that we do what we do for one simple reason: FOR THE LOVE OF BEER.” • Tasting & Evaluation • Step 1: Appearance • Step 2: Aroma • Step 3: Taste • Step 4: Body • Step 5: Finish

8. The Cooperation Problem • Arises from differing goals in terms of the concept of agency. • Agency Relationship: exists when one party (the principal) contracts with another party (the agent) to act on behalf of the principal. • The problem for the principal is ensuring that the agent acts in his or her interest. • EX: Shareholders (principal) and managers (agents) • Some ways to overcome the agency problem: • Bureaucratic Controls • Performance incentives • Shared Values

9. The Coordination Problem • The desire to cooperate is not enough to ensure that organizational members integrate their efforts. Unless individuals can find ways of coordinating their efforts, production doesn’t happen. • Some ways/devices to ensure coordination: • Rules and instructions • Routines • Mutual Adjustment • (These all depends on the types of activity being performed)

10. Organizational Design • Hierarchy and Coordination

11. Organizational Design • Defining Organizational Units • What basis are individuals assigned to organizational units? • Tasks • Products • Geography • Process

12. Management Systems • Provide the mechanisms of communication, decision making, and control that allow companies to coordinate activities • There are four different types of management systems • Information • Strategic Planning • Financial • Human Resources

13. Organizational Design • Alternative Structure Forms • Functional • Multidivisional • Matrix

14. Information and Strategic Planning • Information • Admin. hierarchies are founded on vertical info flows: upward flow of information to the manager and the downward flow of instructions • Regular, real time, performance feed back has allowed employees to take responsibility for quality control and reducing need for constant management • Strategic Planning • Consists of 5 major aspects • A statement of goals • Set of assumptions • Qualitative statement • Specific action steps • Set of financial projections

15. Financial and Human Resources • Financial • The lifeline and blood of the company • The top mechanism by which management seeks to control the business • Consists of two major budgets • Capital expenditure budget • Operating budget • Human Resources • Establishes an incentive system that supports the strategic plan and ensuring each employee has the competence to stick to that plan • The main problem human resources faces is getting employees to act in line with the goals of the company

16. Corporate Culture • Edgar Schein defines as: • A pattern of shared basic assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way you perceive, think and feel in relation to those problems. • OR “the way things get done around here”

17. Corporate Culture • Is typically used to refer the values and ways of thinking that senior managers wish to encourage within their organization • Whereas organizational culture refers to the diverse cultural patterns that exist in the informal organization.

18. Describing and Classifying Cultures

19. Schein’s 3 Different Levels of Understanding Culture

20. Can Organizational Cultures Be Changed? • Strong corporate cultures play to employees ‘hearts’ rather than their ‘heads’ and encourage loyalty and commitment. • Strong cultures built by recruiting ‘right’ people, holding induction events, establishing corporate rights and ceremonies that reinforce the approved ways to behave, holding team briefings, organizing social activities. • If changes is values are not seen as authentic they will be met with cynicism and resistance.

21. Corporate Culture and Organizational Performance • Studies haven’t been able to show those with stronger corporate cultures out perform those without. • “For an organization’s culture to confer a competitive advantage it needs to be valuable, rare and inimitable. If it were easy to engineer then it would cease to be rare and inimitable and all companies could create strong corporate cultures.”

22. Summary • Planned strategy and realized strategy • Covered the key issues that underpin the design of an organization's structures and systems and influence the ways in which and organization attempts to develop a strong corporate culture.

23. Questions?