assignment1
RH2015Chapter 8
Strategy Implementation:
Organizing for Action
Learning Objectives
- After reading this chapter you should be able to:
Develop programs, budgets and procedures to implement organizational strategy
Understand the stages of organizational development and the structures that characterize them
Identify obstacles to organizational change
Learning Objectives cont.
Construct matrix and network structures to support flexible and nimble organizational strategies
Design jobs to implement strategy
Strategy Implementation
- Strategy Implementation:
- Sum total of the activities and choices required for the execution of a strategic plan.
- Process by which strategies and policies are put into action through programs, budgets, and procedures.
Strategy Implementation
- Implementation Process Questions:
Who are the people to carry out the strategic plan?
What must be done to align operations with new direction?
How is work going to be coordinated?
Strategy Implementation
Problems in
Implementing
Strategic plans
More time than planned
Unanticipated problems
Activities ineffectively coordinated
Crises deferred attention away
Employees w/o capabilities
Inadequate employee training
Uncontrollable external factors
Inadequate leadership
Poorly defined tasks
Inadequate information systems
Strategy Implementation
- Programs:
- Purpose is to make the strategy “action-oriented.”
- Compare proposed programs and activities with current programs and activities.
Strategy Implementation
- Programs:
- Matrix of change – offers useful guidelines on where, when, and how fast to implement change
- Feasibility
- Sequence execution
- Location
- Pace and nature of change
- Stakeholder evaluations
Matrix of Change
Strategy Implementation
- Budgets:
- Planning a budget is the last real check a firm has on the feasibility of the selected strategy.
- A financial projection of the financial needs of a department or division.
Strategy Implementation
- Procedures:
- Standard Operating Procedures (SOP’s):
- Detail the various activities that must be carried out to complete a corporation’s programs.
- Procedures are a type of coordinating mechanism that are essential to organizing the firm.
- Procedures prescribe how work is to be done and what behaviours are expected without the need for direct supervision
Strategy Implementation
- Achieving Synergy:
- Synergy:
- If the return on investment (ROI) is greater than what the return would be if the division was an independent business.
Strategy Implementation
- Six Forms of Synergy:
Shared know-how
Coordinated strategies
Shared tangible resources
Economies of scale or scope
Pooled negotiating power
New business creation
Strategy Implementation
- Structure Follows Strategy:
- Changes in organizational strategy lead to changes in organizational structure
New strategy is created
New administrative problems emerge
Economic performance declines
New appropriate structure is invented
Profit returns to its previous levels
Strategy Implementation
- Stages of organizational development
Simple Structure
Functional Structure
Divisional Structure
Beyond SBU’s
Strategy Implementation
- Simple Structure:
- Stage I:
- Entrepreneur
- Decision making tightly controlled
- Little formal structure
- Planning short range/reactive
- Flexible and dynamic
- Crisis of Leadership
Strategy Implementation
- Functional Structure:
- Stage II:
- Management team
- Functional specialization
- Delegation decision making
- Concentration/specialization in industry
- Crisis of Autonomy
Strategy Implementation
- Divisional Structure:
- Stage III:
- Diverse product lines
- Decentralized decision making
- SBU’s
- Almost unlimited resources
- Crisis of Control
Strategy Implementation
- Beyond SBU’s:
- Stage IV:
- Increasing environmental uncertainty
- Technological advances
- Size & scope of worldwide businesses
- Multi-industry competitive strategy
- Better educated personnel
- Pressure-cooker crisis
Factors Differentiating Stage I, II, and III Companies
Function Stage 1 Stage II Stage III
1. Sizing up:
Major problems
2. Objectives
3. Strategy
4. Organisation:
Major characteristic
of structure
Survival and growth dealing with short-term operating problems.
Personal and subjective.
Implicit and personal; exploitation of immediate opportunities seen by owner-manager.
One unit, “one-man show.”
Growth, rationalization, and expansion of resources, providing for adequate attention to product problems.
Profits and meeting functionally oriented budgets and performance targets.
Functionally oriented moves restricted to “one product” scope; exploitation of one basic product or service field.
One unit, functionally specialized group.
Trusteeship in management and investment and control of large, increasing, and diversified resources. Also, important to diagnose and take action on problems at division level.
ROI, profits, earnings per share.
Growth and product diversification; exploitation of general business opportunities.
Multiunit general staff office and decentralized operating divisions.
(Continued)
Factors Differentiating Stage I, II, and III Companies
Personal, subjective control based on simple accounting system and daily communication and observation.
Personal criteria, relationships with owner, operating efficiency, ability to solve operating problems.
Informal, personal, subjective; used to maintain control and divide small pool of resources to provide personal incentives for key performers.
Control grows beyond one person; assessment of functional operations necessary; structured control systems evolve.
Functional and internal criteria such as sales, performance compared to budget, size of empire, status in group, personal relationships, etc.
More structured; usually based to a greater extent on agreed policies as opposed to personal opinion and relationships.
Complex formal system geared to comparative assessment of performance measures, indicating problems and opportunities and assessing management ability of division managers.
More impersonal application of comparisons such as profits, ROI, P/E ratio, sales, market share, productivity, product leadership, personnel development, employee attitudes, public responsibility.
Allotment by “due process” of a wide variety of different rewards and punishments on a formal and systematic basis. Companywide policies usually apply to many different classes of managers and workers with few major exceptions for individual cases.
Function Stage 1 Stage II Stage III
5. (a) Measurement
and control
5. (b) Key performance
indicators
6. Reward-punishment
system
Strategy Implementation
- Organizational Life Cycle:
- Describes how organizations grow, develop and eventually decline.
- Stages:
- Birth Stage
- Growth
- Maturity
- Decline
- Death
Identifying Obstacles to Organizational Change
Anticipatory | Reactive | Crisis | |
Firm Performance | High | Declining | Low |
Need for Change | Not demonstrated | Somewhat evident | Obvious |
Management’s Role | Show need for change | Determine where to start | Acquire resources to make changes quickly |
Major obstacles | Lack of commitment to change | Disagreement over what changes to make | Recruiting people to assist turnaround |
Organizational Life Cycle
Stage I Stage II Stage III1 Stage IV Stage V
Dominant Issue Birth Growth Maturity Decline Death
Popular Concentration Horizontal Concentric and Profit strategy Liquidation or
Strategies in a niche and vertical conglomerate followed by bankruptcy growth diversification retrenchment
Likely Entrepreneur- Functional Decentralization Structural Dismemberment
Structure dominated management into profit or surgery of structure
emphasized investment centers
Note: 1. An organisation may enter a Revival Phase either during the Maturity or Decline Stages and thus extend the organisation’s life.
Changing Structural Characteristics of Modern Organization
Old Organizational Design New Organizational Design
One large organization Mini-business units & cooperative relationships
Vertical communication Horizontal communication
Centralized top-down decision making Decentralized participative decision making
Vertical integration Outsourcing & virtual organizations
Work/quality teams Autonomous work teams
Functional work teams Cross-functional work teams
Minimal training Extensive training
Specialized job design focused on individual Value-chain team-focused job design
Advanced Types of Organizational Structures
- Matrix Structure:
- 3 Distinct Phases
Temporary cross-functional task forces
Product/brand management
Mature matrix
Matrix Structure
Manufacturing
Finance
Sales
Personnel
Manager:
Project
A
Manufacturing
Unit
Finance
Unit
Personnel
Unit
Manager:
Project
B
Manufacturing
Unit
Finance
Unit
Sales
Unit
Personnel
Unit
Manager:
Project
C
Manufacturing
Unit
Finance
Unit
Sales
Unit
Personnel
Unit
Manager:
Project
D
Manufacturing
Unit
Finance
Unit
Sales
Unit
Personnel
Unit
Top Management
Sales
Unit
Strategy Implementation
- Network Structure:
- “Non structure” – elimination of in-house business functions
- Termed “virtual organisation”
- Useful in unstable environments
- Need for innovation and quick response
Network Structure
Packagers
Designers
Suppliers
Distributors
Corporate
Headquarters
(Broker)
Promotion/
Advertising
Agencies
Manufacturers
Strategy Implementation
- Cellular organization:
- Composed of “cells”
- Self-managing teams
- Autonomous business units
Strategy Implementation
- Reengineering:
- Radical design of business processes to achieve major gains in cost, service, or time.
- Effective way to implement a turnaround strategy.
Strategy Implementation
- Reengineering Principles:
- Organize around outcomes, not tasks
- Have those who use the output perform the process
- Subsume information-processing work into the real work that produces the information
- Treat geographically dispersed resources as though they were centralized
Strategy Implementation
- Reengineering Principles cont.
- Link parallel activities instead of integrating their results
- Put decision point where work is performed and build control into the process
- Capture information once at the source
Strategy Implementation
- Job design
- Study of individual tasks to increase relevance
- Source of competitive advantage
- Job enlargement
- Combining tasks
- Job rotation
- Increase variety of tasks
- Job enrichment
- More autonomy and control to workers
Stages of International Development
- Domestic company
Some exporting
Export division
International division
- Multinational corporation
Multidomestic emphasis
Global emphasis
Geographic Area Structure for a Multinational Corporation
*Note: Because of space limitations, product groups for only Europe and Asia are shown here.
Board of Directors
President
Corporate
Staff
R & D
Operating
Companies
U.S.
Operating
Companies
Europe*
Operating
Companies
Africa
Operating
Companies
Asia*
Product
Group
B
Operating
Companies
Latin
America
Product
Group
A
Product
Group
C
Product
Group
B
Product
Group
D
Managing Organizational Change
- Organizations can rarely withstand competition or grow without undergoing some type of organizational change
- A large part of the problem with many change efforts is human resistance
- Four most common reasons people resist change are:
- Self-interest
- Misunderstanding and lack of trust
- Different assessments
- Low tolerances for change
Strategy Implementation
- Internet & Hyper-linked organizations
- Hyper-linked & decentralized
- Hypertime
- Directly accessible
- Rich data
- Broken
- Borderless
Discussion Questions
How should a corporation attempt to achieve synergy among functions and business units?
How should an owner-manager prepare a company for its movement from Stage I to Stage II?
How can a corporation keep from sliding into the Decline stage of the organizational life cycle?
Is reengineering just another management fad or does it offer something of lasting value?
How is the cellular organization different from the network structure?
Strategic Practice Exercise
- The Synergy Game
- Setup:
- Put three to five chairs on either side of a room facing each other in the front of the class. Put a table in the middle with a bell in the middle of the table.
The Synergy Game - Procedure
- The instructor/moderator divides the class into teams of three to five people. Each team selects a name for itself. The instructor/moderator lists the team names on the board. The first two teams come to the front and sit in the chairs facing each other. The instructor/moderator reads a list of products or services being provided by an actual company. The winning team must identify (1) possible sources of synergy and (2) the actual company being described.
The Synergy Game - Procedure
- For example, if the products/services listed are family restaurants, airline catering, hotels, and retirement centers, the synergy is standardized food service and hospitality settings and the company is The Marriott Corporation. The first team to successfully name the company and the synergy wins the round.
The Synergy Game - Procedure
- After one practice session, the game begins. Each of the teams is free to discuss the question with other team members. Once one of the two teams thinks that it has the answer to both parts of the question, it must be the first to ring the bell in order to announce their answer. If it gives the correct answer, it is deemed the winner of round one. Both parts of the answer must be given for a team to have the correct answer.
The Synergy Game - Procedure
- If a team correctly provides only one part, that answer is still wrong—no partial credit. The instructor/moderator does not say which part of the answer, if either, was correct. The second team then has the opportunity to state the answer. If the second team is wrong, both teams may try once more. If neither chooses to try again, the instructor/moderator may (1) declare no round winner and both teams sit down, (2) allow the next two teams to provide the answer to round one, or (3) go on to the next round with the same two teams.
The Synergy Game - Procedure
- Two new teams then come to the front for the next round. Once all groups have played once, the winning teams play each other. Rounds continue until there is a grand champion. The instructor should provide a suitable prize, such as candy bars, for the winning team.
This exercise was developed by Professors Yolanda Sarason of Colorado State University and Catherine Banbury of St. Mary’s College and Purdue University and presented at the Organizational Behavior Teaching Conference, June 1999. Copyright © 1999 by Yolanda Sarason and Catherine Banbury. Adapted with permission.