Strategy Implementation: Organization Structure Organizational Structure – Comprises the formal and informal arrangement of tasks, responsibilities, lines of authority, and reporting relationships for the firm. Structure Is Aligned with Strategy When: – Its design contributes to the creation of value for customers. – Its parts are aligned with one another and also matched to the requirements of the strategy. – It lowers operating costs through lower bureaucratic costs and operational efficiencies.

THE ORGANIZATIONAL CHALLENGE To design structure & systems that:  Permit specialization  Create incentives to align individual & firm goals  Facilitate coordination by grouping individuals & link groups with systems of communication, decision making, & control

Organization Structure: Balancing Tensions DifferentiationIntegration ControlCoordination CentralizedDecentralized RulesSelf-Managed StabilityAdaptability EfficiencyInnovation

Matching Type of Organizational Structure to Strategy Execution Requirements Simple Structure (Line-and-Staff) Functional Structure (Departmental or Unitary) Multidivisional Structure (Divisional or M-form) Matrix Structure (Composite or Combination) Strategy Execution Requirements: Chosen Strategy Capabilities and Competencies Centralized or Decentralized Control

Strategic Control

Control Methods Behavioral Control – Focus is Doing Things Right – Objective is Stability, Efficiency – Uses: Rewards, Culture, Boundaries Informational Control – Focus is Doing the Right Things – Objective is Flexibility, Fit – Uses: Scanning and Monitoring

Control Systems Traditional Approach Linear and Sequential Based on Feedback Loop – Single Loop Learning Appropriate when the environment is stable and predictable, performance measures are quantitative Contemporary Approach Highly Interactive Based on Informational and Behavioral Controls – Double Loop Learning Appropriate when internal and external conditions are changing and unpredictable

Traditional Control Systems StrategicPlan Market/Customers Products/Services Strategy InputsOutputs Goals Fixed Results Measured Incrementally Resources Capabilities Competencies Feedback

Contemporary Control System StrategicPlan Market/Customers Products/Services Strategy InputsOutputs Goals Continuously Reviewed Results Continuously monitored Resources Capabilities Competencies Loop 1 Continuous Scanning and Monitoring Loop 2