Advance topics in Change Management

Lecture 31 Basic Concepts

Main Course Objective

• To enable you to analyse how and why different kinds of organizations are more or less effective in achieving particular objectives.

• The course focuses on the key components of organisations that together generate distinctive collective competences and capabilities.

• It focuses on the meso level.

Levels of Organizational Analysis

Micro - individuals and groups in organisations (organisational behaviour, HRM)

Meso - structures, systems and strategies of organisations (organisation design)

Macro - organisations and markets in social systems and the global economy (MACC, strategy)

Key Managerial Issues in OrganisationDesign

1. How to allocate, coordinate and control tasks2. How to attract, select, reward and retain

employees3. How to group activities and employees into

departments, divisions and subsidiaries4. How to integrate and control operational units

for strategic goals5. Which activities and skills to keep in the

organisation and which to outsource6. How to manage relationships with suppliers,

customers, competitors, investors and other organisations

ORGANISATIONS AS OPEN SYSTEMS

COMPONENTS OF WORK ORGANISATIONS

1. Operating Core - those who transform the basic inputs into outputs

2. Middle Line - those who administer and supervise operators

3. Technostructure - those who standardise how work is carried out and controlled

4. Support Staff - those who provide support services for the organisation outside the operating workflow

5. Strategic Apex - those who allocate resources, manage relations with the environment and determine strategies and goals – the dominant coalition

DIMENSIONS OF ORGANISATIONS

• STRUCTURALFormalisationSpecialisationStandardisationAuthority HierarchyComplexityCentralisationSkill LevelPersonnel Ratios

• SYSTEMIC (CONTEXTUAL)SizeTechnologyEnvironmentGoals and Strategy

Culture

Concepts

• Resources– Firm specific, valuable, rare, difficult to imitate and

non-substitutable– They are the foundations of:

• Capabilities– At an abstract level, these can be thought of as the

ability to co-ordinate activities, learn within an organization, and re-configure resources

• Routines– Help to build resources and capabilities

PROBLEM OF LOCK-IN

CHARACTERISTICS OF FORDISM

• PRODUCTION SYSTEMS– Dedicated specialised machinery– Standardised products in long production runs– Standardised work processes– Infrequent and expensive product and process changes

• MARKETS– Stable mass consumption of standardised goods– Price based competition– Adversarial links with suppliers– Oligopolistic

• ORGANISATIONS– Mechanistic and bureaucratic– Inflexible with high fixed costs– Focused on efficiency and cost reduction– Narrow tasks and skills– Little or no task autonomy by workers

Fordism

The application of Fordist principles becomes counterproductive

An alternative production system to Fordism: Toyotaism

Models of Competition and Coordination I

Characteristics Fordism Customised Production

Diversified Quality

Production

Discontinuous Innovation

Examples Some cars, consumer

electronics, call centres

Some advertising agencies,

consultancies

Some cars, mechanical engineering

Biotechnology, some software

developers

Primary basis of market competition

Price Quality Quality Innovation

Production volumes Very large Limited Medium/High Medium/High

Standardisation of outputs

High Limited Medium Medium/High

Differentiation and change of products

Low Medium Medium High

Ability to respond quickly to competence destructive changes

Low Limited Limited High

Models of Competition and Coordination II

Characteristics Fordism Customised Production

Diversified Quality

Production

Discontinuous Innovation

Flexibility of work processes

Low Medium Medium High

Inter-firm relations Adversarial Cooperation with competition

Cooperation with competition

Adversarial but some narrowly

focused partnerships

Key organizational and managerial capabilities

Coordination and control

Integrating skills and adapting to

changing demands

Coordination and

organisational learning

Reconfiguring assets rapidly in

response to technical and

market opportunities

Organizational and Managerial Capabilities

Characteristics Coordinating Learning Reconfigurational

Competitive Focus Realise economies of scale and scope through systematic integration of work activities

Continual improvement of processes and products to meet changing conditions

Fast adaptation to rapidly changing market and technical contexts

Key Processes Establishing routines for controlling work and integrating activities

Continual collective problem solving and knowledge development

Rapid adaptation of work processes, skills and other assets to meet changing conditions

Involvement of Employees and Business Partners in Developing Capabilities

Varies High Considerable

Longevity of Employer-employee Commitment

Considerable for managers

Considerable for skilled workers

Limited

TOP MANAGEMENT ROLE IN ORGANIZATION DIRECTION, DESIGN AND EFFECTIVENESS – The

Traditional View

EFFECTS OF UNCERTAINTY AND BARGAINING ON STRATEGY FORMATION – An Alternative View

INFLUENCES ON TOP MANAGEMENT’S CHOICES OF STRATEGY I

• External Influences:– Ownership groups – Financial Markets– Lenders– Customers– Suppliers– Regulators– (Competitors)

• Influences from the nature of the Top Management Team (TMT):– Expertise and experience (HP – Fiorina; Halifax – Andy

Hornby)– Insiders vs outsiders (GM, HP – Fiorina, and

Apotheker)

DEFENDERS I

• STRATEGIC CHOICES:– DOMINATE NARROW DOMAIN BY PRICING

AND SERVICE– INCREMENTAL GROWTH– LITTLE SCANNING– IMITATIVE INNOVATIONS

• RISK:– MARKET CHANGES THREATEN NICHE

DEFENDERS II

• ENGINEERING CHOICES:– SINGLE CORE COST EFFICIENT

TECHNOLOGY– VERTICAL INTEGRATION– COST REDUCTION IMPROVEMENTS

• RISK:– MARKET CHANGES THREATEN

TECHNOLOGY

DEFENDERS III

• ORGANIZATION-DESIGN CHOICES:– MACHINE BUREAUCRACY– PRODUCTION AND FINANCE– INTENSIVE, SOLUTION-ORIENTED

PLANNING– HIGH STANDARDISATION AND

CENTRALISATION

• RISKS:– SLOW TO ADAPT

PROSPECTORS I• STRATEGIC CHOICES:

– CREATE AND EXPLOIT NEW PRODUCTS AND MARKETS

– BROAD AND DYNAMIC DOMAINS– DISCONTINUOUS GROWTH– SCANNING PRODUCT AND MARKET

ENVIRONMENTS– OFFENSIVE INNOVATIONS

• RISK: – EXTENDED RESOURCES AND LOW

PROFITABILITY

PROSPECTORS II

• ENGINEERING CHOICES:– FLEXIBLE, MULTIPLE TECHNOLOGIES– LIMITED MECHANISATION

• RISK: – FAILURE TO ACHIEVE TECHNOLOGICAL

ECONOMIES OF SCALE

PROSPECTORS III

• ORGANIZATION-DESIGN CHOICES:– ADHOCRACY– LARGE DYNAMIC COALITION - R&D, MARKETING– PRODUCT MARKET-BASED GROUPINGS– EXTENSIVE PROBLEM FINDING PLANNING– LOW STANDARDISATION, LOW

CENTRALISATION– ELABORATE LIAISON MECHANISMS

• RISK: – INEFFICIENT USE OF RESOURCES

ANALYSERS I• STRATEGIC CHOICES:

– COMBINE EXPLOITATION OF NEW PRODUCTS AND MARKETS WITH DOMINATION OF STABLE DOMAIN

– HYBRID DOMAINS– EFFICIENCY AND INNOVATION GOALS– SCANNING FOR MARKETS MORE THAN FOR

PRODUCTS– DEFENSIVE INNOVATIONS

• RISK: – IMBALANCE BETWEEN FLEXIBILITY AND

STABILITY

ANALYSERS II

• ENGINEERING CHOICES:– DUAL TECHNOLOGICAL CORE– INVESTMENT IN APPLIED RESEARCH

• RISK: – FAILURE TO ACHIEVE EITHER

INNOVATION OR EFFICIENCY

ANALYSERS III• ORGANIZATION-DESIGN CHOICES:

– DIFFERENTIATION TO FIT DISPARATE STRATEGIES

– MKTG AND APPLIED RESEARCH, CORE-PERIPHERY COALITION

– MATRIX STRUCTURE– INTENSIVE AND EXTENSIVE PLANNING– MIXED STANDARDISATION WITH NUMEROUS

CO-ORDINATION MECHANISMS

• RISKS: – FAILURE TO INTEGRATE EFFECTIVELY HIGH

CO-ORDINATION COSTS

ENVIRONMENTS, STRATEGIES AND TECHNOLOGIES

DEFENDERS PROSPECTORS ANALYSERS

ENVIRONMENTS      

STABILITY HIGH LOW VARIED

COMPLEXITY LOW HIGH HIGH

HOSTILITY MEDIUM MEDIUM LOW

DISPARITY LOW LOW HIGH

ENVIRONMENTAL SCANNING

LIMITED BROAD BROAD

MKTG AND R&D MKTG AND R&D AND APPLIED RESEARCH

TECHNOLOGY      

STABILITY HIGH LOW MIXED

COMPLEXITY LOW HIGH HIGH

DOMINANT COALITION      

SIZE SMALL LARGE MEDIUM

STABILITY HIGH LOW MEDIUM

BACKGROUND PROD. FINANCE R&D MKTG. MKTG. APPLIED RES.

Managing inter-organisational relations: modes of co-ordination and influence

• Ownership links• Contractual links: alliances, joint ventures etc.• Inter-locking directorates• Transfer and exchange of executives/senior

managers• Profit pooling and federation of firms• Co-operative marketing• Advertising and public relations• Trade associations• Obligational contracting• Patent exchange and pooling

MECHANISTIC AND ORGANIC ORGANISATIONS

MECHANISTIC ORGANIC

Task Specialisation and Separation

Task and Skill Integration

Precise and Rigid Role Definitions

Diffuse and Flexible Roles

Vertical Co-ordination of Tasks Multiple Co-ordination and Responsibilities

Centralisation of Knowledge and Control

Diverse Sources of Knowledge and Expertise

Vertical Communication of Instructions and Decisions

Multiple Communication Channels for Information and Advice

Loyalty to Firm and Obedience to Superiors

Commitment to Tasks and to Expertise

CHARACTERISTICS OF DEVELOPMENT STAGES I

I II III IV

ENTREPRENEUR’L COLLECTIVITY FORMALIZATION ELABORATION

CHARACTERISTIC NON-BUREAUCRATIC

PRE-BUREAUCRATIC

BUREAUCRATIC DECENTRALIZED BUREAUCRATIC

STRUCTURE INFORMAL, ONE-PERSON SHOW

MOSTLY INFORMAL SOME PROCEDURES

FORMAL PROCEDURES DIVISION OF LABOUR ADD NEW SPECIALITIES

TEAM-WORK WITHIN BUREAUCRACY, SMALL COMPANY THINKING

PRODUCT/SERVICE

SINGLE PRODUCT/ SERVICES

MAJOR PRODUCT/ SERVICES

LINE OF PRODUCT/ SERVICES

MULTIPLE LINES

REWARD AND CONTROL SYSTEMS

PERSONAL, PATERNALISTIC

PERSONAL, CONTRIBUTION TO SUCCESS

IMPERSONAL, FORMALISED SYSTEMS

EXTENSIVE, TAILORED TO PRODUCT AND DEPARTMENT

FIVE PHASES OF ORGANISATIONAL DEVELOPMENT I

1 2 3

BIRTH GROWTH MATURITY

FREQUENT INNOVATION BROADEN PRODUCT LINES FEW CHANGES

FINDING UNFILLED NICHES

INCREMENTAL INNOVATION

FOLLOW COMPETITION

USE OF MIDDLEMEN MARKET SEGMENTATION BROADER MARKETS

VERTICAL INTEGRATION LOBBYING LARGE

SMALL RELATED ACQUISITIONS ENLARGED OWNERSHIP

ONE, OR FEW, OWNERS INCREASED SIZE DIVERSE BOARD

SIMPLE, CENTRALISED BROADER OWNERSHIP FUNCTIONAL

RISK TAKING FUNCTIONAL SALARIED MANAGERS

INCREASED STAFF LESS DELEGATION

LESS RISK TAKING EFFICIENCY FOCUS

CONSERVATIVE DECISIONS

FIVE PHASES OF ORGANISATIONAL DEVELOPMENT II

4 5

REVIVAL DECLINE

MANY INNOVATIONS PRICE CUTS

DIVERSIFICATION OUTDATED PRODUCTS

NEW MARKETS SHRINKING MARKETS

MANY OWNERS NO CLEAR STRATEGY

DIVISIONAL RESTRICTED OWNERSHIP

CENTRALISED STRATEGY SIMPLE STRUCTURE

DECENTRALISED OPS. CENTRALISED

INCREASED SCANNING LITTLE SCANNING

RISK TAKING EXTREME CONSERVATISM

LITTLE INNOVATION

RISK AVERSE

Phases of Organisational Decline: Problems and Remedies

Problem phases Remedies

Blinded Good information

Inaction Diagnose and implement change

Faulty Action Correct mistakes and maintain commitment

Crisis Effective re-organisation

Dissolution None

Corporate Turnaround:Phases in Revitalisation

• Facing the crisis: retrenchment and cost cutting: reactive phase

• Reinvestment: focusing on core skills and investing in them for the future

• Rebuilding: reshaping the organisation around the new goals and skills for the future

Leadership in CorporateTurnaround Situations

• New Visions

• Mobilising Commitment

• Changing routines and structures to support the new strategy