organization theory: strategy implementation process
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Organization Theory: Strategy Implementation Process. Steven E. Phelan June, 2006 STRATEGY EXECUTION: Structure, Systems, Rewards. Overview. Syriana Discussion Structure and Execution Hrebiniak Chapter 4 USA Today Integration Hrebiniak Chapter 5 Brache – Strategy implementation - PowerPoint PPT PresentationTRANSCRIPT
Organization Theory: Organization Theory: Strategy Implementation Strategy Implementation
ProcessProcessSteven E. PhelanSteven E. Phelan
June, 2006June, 2006
STRATEGY EXECUTION:STRATEGY EXECUTION:
Structure, Systems, RewardsStructure, Systems, Rewards
OverviewOverview• Syriana Discussion• Structure and Execution
Hrebiniak Chapter 4 USA Today
• Integration Hrebiniak Chapter 5 Brache – Strategy implementation Bossidy- Letter to a new leader AHA
• Incentives and controls Hrebiniak Chapter 6 Bebchuk – Pay without performance
SyrianaSyriana
• Analyze the movie from the perspective of: Chaos and complexity theory Critical theory Corporate social responsibility
The Star ModelThe Star Model
People
Rewards Processes(Integration)
Structure
Strategy
from Galbraith, Designing Organizations
StructureStructure
• Key principles Functional organization -> efficiency
• Economies of scale, avoids duplication, critical mass of know-how, clear career path
Divisional structure -> effectiveness• Traditional focus on products, markets or geography• New areas – customers, processes, solutions, segments• Profit contribution can be easily measured in product
divisions– Does this provide more monitoring/motivation as well?
Centralization v DecentralizationCentralization v Decentralization
• General principle Centralized = functional/efficient Decentralized = divisional/effective
• Text recommends a sequential process starting from the corporate level to group, division, and strategic business unit (SBU)
• Choice depends on what is important to management
Tall v FlatTall v Flat Large, more centralized companies often have taller
structures (I.e. more layers) Increasing the span of control to create flatter
structures can create benefits • Faster decision making, less bureaucracy, closeness to
customers, cost savings, and flexibility but can also suffer from problems such as:
• inertia, inadequate expertise, lack of responsibility, and lateral communication problems
• Not a universal cure all Corporate HQs are starting to include:
• Strategic management functions, executive education, and “centers of excellence” in addition to traditional HR, legal, IT etc.
Strategic DriversStrategic Drivers• Type of strategy
Global strategy often calls for matrix structure Low cost leadership = functional structure Focus/differentiation = divisional structure
• Market and technological relatedness Same customers, processes, distribution etc. Leads to increased centralization (or need for
coordination)
• Growth/size Increased decentralization
Emerging TrendEmerging Trend• Customer centric mindset
To find as many new and existing products to sell to a customer as possible
To create and customize solutions for a customer
To appear as one company to each customer To develop an on-going customer relationship Contrasted with a product-centric company
whose mission is to find as many uses and customers for each product as possible
Customer-focused structureCustomer-focused structure
• The front/back structure Front End = customers and market Back End = products and technologies Example of a hybrid structure
TelstraTelstra• Customer Divisions
Sales, direct marketing, sales engineers Corporate, Government, Business, Residential
• Product Management Product marketing and product engineers Basic access, DSL, prepaid cellphones
• Network Engineering Technologies, platforms, infrastructure Switching, transmission, access Broadband, wireless, microwave
ThoughtsThoughts• Art or science?
Is organizational design more art than science?
Diversity (in customers, technology, distribution etc. ) is grounds for differentiation
Need to choose primary form of departmentalization
Integration processes can compensate for inherent weaknesses
Need to be aware of pros and cons
Case 1: American Heart Case 1: American Heart AssociationAssociation
• Case Study Was the first restructure a sound move? What problems did it create? As an org design consultant, what changes
would you recommend to the existing structure…
• At the regional level?• At the national level?
IntegrationIntegration• Interdependence
Pooled • Low coordination requirements• Rules/SOPs/Hierarchy
Sequential• High coordination• Scheduling, JIT, transfer pricing issues
Reciprocal• Very high coordination• Meetings, trust, group incentives
More integration ideasMore integration ideas• Voluntary (or informal)
Rotation, interdepartmental events, co-location, mirror image departments, consistent rewards, common language
• E-coordination Web pages, databases, CRM, email, discussion
groups, instant messaging/chat
• Formal group Regular meetings – need for leadership/conflict
mgt skills
More integration ideas ctd.More integration ideas ctd.
• Full-time integrators Project managers, brand managers, process
managers etc. Put teams together across departments
• Matrix organization Level of coordination grows but so does cost
and difficulty of implementation What about tie-breakers and two-boss
bosses? GE’s Workout program?
Responsibility PlottingResponsibility Plotting• Responsibility Matrix
Major tasks by key people R = responsibility A = accountability (final say) I = must be informed C=must be consulted ? = don’t know
• Useful tool
Brache v BossidyBrache v Bossidy• Systems of strategy implementation
Brache is more structural (hard)• Establish an initiative identification & priority setting system (to
favor fewer initiatives), • Put in place the right structure, people (sponsors, leaders,
teams), and culture to support implementation initiatives• Create a reporting system to monitor progress on initiatives
Bossidy is people oriented (soft)• Know yourself, know your people (potential & performance of top
1/3), know your customers• Be open, honest, realistic – always learn• Attract, reward, retain the doers (the A-players) that get things
done What works?
Rewards & ControlsRewards & Controls• Hrebiniak’s prescriptions
Develop and use good objectives• Clear, relevant, measurable
Reward the doers Reward cooperation Face the brutal facts honestly Clarify responsibility and accountability Obtain timely and valid information Use the information for learning and adaptation
• Take action when actual results deviate from plan• Be sure to change as a result of lessons learned
Case 2: USA TodayCase 2: USA Today
• Identify the problem(s)
• Recommend: A strategy A structure A set of key lateral processes, and A reward system
That will solve (or at least address) the problem(s) at USA Today
Bebchuk and FriedBebchuk and Fried• CEO compensation
Critical analysis (compare to Chomsky)• Aggregate compensation of top-five executives
10%+ of earnings of public firms Limits on board independence to set rewards
• Incentive to be nominated/re-elected• CEO’s power to benefit directors• Friendship, loyalty, collegiality, authority, solidarity• Small personal cost of favoring CEO• Ratcheting
Dubious practicesDubious practices• A list
Camouflage and stealth compensation• To reduce ‘outrage’ costs
Gratuitous goodbye payments Windfall compensation
• Options tend to reward broad market movements and short-term spikes
Pension and deferred compensation
• Is the system broken? Are we rewarding executives too much? Will there be a backlash?