1. CHAPTER 10 Implementing Strategy: Structure, Leadership, and Culture

2. Chapter Topics

Structuring an Effective Organization

Organizational Leadership

Organizational Culture

Appendix Primary Organizational Structures and their Strategy-Related Pros and Cons

3. Ex. 10-2: What a Difference a Century Can Make (Contrasting Views of the Corporation)) The Web or Network External Flexible Change Interdependencies Bits information Virtual integration Mass customization Global Real-time The Pyramid Internal Structured Stability Self-sufficiency Atoms physical assets Vertical integration Mass production Domestic Quarterly Organization Focus Style Source of Strength Structure Resources Operations Products Reach Financials 21 stCentury 20 thCentury Characteristic 4. Ex. 10-2(contd.) Hours Bottom-up Inspirational Employees/ free agents Personal growth To build Revolutionary No compromise Months Top-down Dogmatic Employees Security To compete Incremental Affordable best Inventories Strategy Leadership Workers Job Expectations Motivation Improvements Quality 21 stCentury 20 thCentury Characteristic 5. Trends Driving Organizational Structure Speed of Decision Making Globalization Internet 6. Conclusions of Research on Organizational Structure

A single-product firm or single dominant business firm should employ a functional structure

A firm in several lines of business that are somehow related should employ a multidivisional structure

A firm in several unrelated lines of business should be organized into strategic business units

Early achievement of a strategy-structure fit can be a competitive advantage

7. Restructuring to Support Strategically Critical Activities

Concept Some activities within a businesss value chain are more critical to the success of the strategy than others

Considerationsin restructuring

• Strategically critical activities must be the central building blocks for designing the organization structure

• Organizational structure must be designed to help coordinate and integrate support activities to

• • Maximize their support of strategy-critical primary activities

• • Minimize their costs and time spent on internal coordination

8. Reengineering Strategic Business Processes (BPR)

Concept Involves placing the decision making authority that is most relevant to the customer closer to the customer, in order to make the firm more responsive to the needs of the customer.

Potentialoutcomesof BPR

• Reduces fragmentation by crossing traditional department lines

• Reduces overhead by compressing formerly separate tasks that are strategically intertwined in the process of focusing on the customer

9. Steps Involved in BPR

Develop a flow chart of the total business process

Try to simplify the process first, eliminating unnecessary tasks and streamlining remaining tasks

Determine which parts of the process can be automated

Benchmark strategy-critical activities

Consider outsourcing non-critical activities

Design a structure for performing remaining activities and reorganize personnel accordingly

10. Downsizing, Self-Management, and Outsourcing

Downsizing Eliminating employees, particularly middle managers, in a company

Self-management Delegating work to lower, operating levels of an organization

Outsourcing Obtaining work previously done by employees inside a company from sources outside the company

11. Product-Teams The product-team structure assigns functional managers and specialists (e.g., engineering, marketing, financial, R&D, operations) to a new product, project, or process team that is empowered to make major decisions about their product 12. Ex. 10-5: Product-Team Structure Chief Executive Officer Research and Development Engineering Operations Finance Sales and Marketing Product or process teams 13. Virtual Organization A temporary network of independent companies suppliers, customers, subcontractors, even competitors linked primarily by information technology to share skills, access to markets, and costs 14. Key Considerations of Organizational Leadership Organizational leadership involves action on two fronts Guiding the organization to deal with constant change Providing the management skill to cope with the ramifications of constant change 15. Strategic Leadership: Embracing Change Activities involved in galvanizing commitment to change Clarifying strategic intent Building an organization Shaping organizational culture 16. Strategic Intent An articulation of a simple criterion or characterization of what the company must become to establish and sustain global leadership 17. Ex. 10-12: What Competencies Should Managers Possess? The Leadership Needs of Organization

The ability to:

build confidence

build enthusiasm

cooperate

deliver results

form networks

influence others

use information

The Required Competencies of Business Leaders

business literacy

creativity

cross-cultural effectiveness

empathy

flexibility

proactivity

problem solving

relation building

teamwork

vision

18. Ex. 10-13: Management Processes and Levels of Management RENEWAL PROCESS Attracting resources and capabilities and developing the business Developing operating managers and supporting their activities. Maintaining organizational trust Providing institutional leadership through shaping and embedding corporate purpose and challenging embedded assumptions INTEGRATION PROCESS Managing operational interdependencies and personal networks Linking skills, knowledge, and resources across units.Reconciling short-term performance and long-term ambition Creating corporate direction. Developing and nurturing organizational values Creating and pursuing opportunities.Managing continuous performance improvement Renewing, developing, and supporting initiatives Establishing performance standards ENTREPRENEURIAL PROCESS Front-Line Management Middle Management Top Management 19. What is Organizational Culture? The set of important assumptions (often unstated) that members of an organization share in common. 20. Ex. 10-14: Managing the Strategy-Culture Relationship Link changes to basic mission and fundamental organizational norms Reformulate strategy or prepare carefully for long-term, difficult cultural change Synergistic focus on reinforcing culture Manage around the culture 1 4 2 3 High Low Many Few Potential compatibility of changes with existing culture Changes in key organizational factors that are necessary to implement the new strategy 21. Ex. 10-A: Functional Organizational Structure 22. Ex. 10-A(contd.)

Strategic Advantages

Achieves efficiency through specialization

Develops functional expertise

Differentiates and delegates day-to-day operating decisions

Retains centralized control of strategic decisions

Tightly links structure to strategy by designing key activities as separate units

Strategic Disadvantages

Promotes narrow specialization and functional rivalry or conflict

Creates difficulties in functional coordination and interfunctional decision making

Limits development of general managers

Has a strong potential for interfunctional conflict priority placed on functional areas, not the entire business

23. Ex. 10-A(contd.) Process-Oriented Functional Structure 24. Ex. 10-B: Geographic Organizational Structure 25. Ex. 10-B(contd.)

Strategic Advantages

Allows tailoring of strategy to needs of each geographic market

Delegates profit/loss responsibility to lowest strategic-level

Improves functional coordination within the target market

Takes advantage of economies of local operations

Provides excellent training grounds for higher level general managers

Strategic Disadvantages

Poses problem of deciding whether headquarters should impose geographic uniformity or geographic diversity should be allowed

Makes it more difficult to maintain consistent company image/reputation from area to area

Adds layer of management to run the geographic units

Can result in duplication of staff services at headquarters and district levels

26. Ex. 10-C: Divisional or Strategic Business Unit Structure Manager Prod/Operation Manager Marketing/Sales Manager, HR Manager, Acctg/Finance Manager, R&D Personnel Acctg/Control Division Planning Marketing Prod/Operation Marketing Prod/Operation Personnel Acctg/Control Division Planning Chief Executive Officer GM Division/SBU A GM Division/SBU B GM Division/SBU C VP-Admn Services VP-Operating Support 27. Ex. 10-C(contd.)

Strategic Advantages

Forces coordination and necessary authority down to the appropriate level for rapid response

Places strategy development and implementation in closer proximity to the unique environments of the division/SBUs

Frees CEO for broader strategic decision making

Sharply focuses accountability for performance

Retains functional specialization within each division/SBU

Provides good training ground for strategic managers

Increases focus on products, markets, and quick response to change

Strategic Disadvantages

Fosters potentially dysfunctional competition for corporate-levelresources

Presents the problem of determining how much authority should be given to division/SBU managers

Creates a potential for policy inconsistencies among divisions/SBUs

Presents the problem of distributing corporate overhead costs in a way thats acceptable to division managers with profit responsibility

Increases costs incurred throughduplication of functions

Creates difficulty maintaining overall corporate image

28. Ex. 10-D: Matrix Organizational Structure Engineering Staff Engineering Staff EngineeringStaff Production Staff Production Staff Production Staff Purchasing Agent Purchasing Agent Purchasing Agent Administration Coordinator Administration Coordinator Administration Coordinator Chief Executive Officer Vice President, Engineering Vice President, Production Vice President, Purchasing Vice President, Administration Project ManagerA Project Manager B Project Manager C 29. Ex. 10-D(contd.)

Strategic Advantages

Accomodates a wide variety of project-oriented business activity

Provides good training grounds for strategic managers

Maximizes efficient use of functional managers

Fosters creativity and multiple sources of diversity

Gives middle management broader exposure to strategic issues

Strategic Disadvantages

May result in confusion and contradictory policies

Necessitates tremendous horizontal and vertical coordination

Can proliferate information logjams and excess reporting

Can trigger turf battles and loss of accountability