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 Galbraiths 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 companys 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 sizegt24
• Consider
• Functional
• Product
• Market
• Geographical
• Process
• Hybrid
• What are the (dis)advantages of each?

19
Functional Structure

• Small size, single-product line
• Undifferentiated market
• Scale or expertise within the function
• Long product development and life cycles
• Common standards

20
Product Structure

• Product focus
• Multiple products for separate customers
• Short product development and life cycle
• Minimum efficient scale for functions OR
  outsourcing

21
Market Structure

• Important market segments
• Product or service unique to segment
• Buyer strength
• Customer knowledge advantage
• Rapid customer service and product cycles
• Minimum efficient scale for functions OR
  outsourcing

22
Geographical Structure

• Low value to transport cost ratio
• Service delivery on site
• Closeness to customer for delivery or support
• Perception of the organization as local
• Geographical market segments needed

23
Process Structure

• Best seen as alternative to functional structure
• Potential for new processes and radical change to
  processes
• Reduced working capital
• Need for reducing process cycle times

24
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

25
Observations about Process

• Lateral processes
• general management equivalents
• Variety Change
• -gt more decentralization
• No functional management can handle multiple
  products in multiple markets
• Interdependence Speed
• -gt more cross-department coordination
• Internet and need for CRM increases this force

26
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

27
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

28
Fostering Voluntary Processes

• Interdepartmental rotation
• Interdepartmental events
• Co-location
• Mirror image departments
• Consistent reward and measurement systems

29
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

30
Formal Groups

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

31
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

32
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

33
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)

34
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.

35
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

36
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

37
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