2. 2016-06-24 2 Introduction  Models of Business Administration 3 S : Strategy, structure, systems McKinsey 7 S : (+) Style, skills, staff, shared values YDA Model : From purpose to staff potential  Strategic Management Strategy formulation : Choice of effective strategies (making right decisions) ← SWOT analysis Strategy implementation : Efficient execution (doing thing economically) ← “Structure follows strategy.” (A. Chandler, Strategy and Structure : Chapters in the History of the American Industrial Enterprise, 1962) ← “Systems support structure.”

3. 2016-06-24 3 Structure Definition  Boxes and Lines  Boxes and Lines Typical organization charts Boxes : Functions, jobs Solid lines : Direct reporting channels Dotted lines : Cooperation and coordination  Skeleton of a Human Body Chain of command Location of authority Role division Decision-making process

4. 2016-06-24 4 Samsung’s Design Center (Organization Chart) Source: Design Management Institute Case Study DMI021, 2008 Distributed by Harvard Business School Publishing

5. 2016-06-24 5 Structure Key Issues  Key Considerations in Structuring Authority and responsibility : Centralization vs. decentralization, commensurateness (A & R), etc. Span of control : How many to report to one person Number of layers ⇒ The flatter the better for decision making A global organization : HQ vs. subsidiaries ⇒ Four different organization types  Structuring Criteria  Structuring Criteria Function : Traditional, centralized ⇒ Units not self-sufficient Product ⇒ Business divisions Region : Country, region, continent Account : B2B businesses (e.g. Global Account Manager) Matrix : Combination of the above

6. 2016-06-24 6 Organizational Structure  (Example) Business Division  (Example) Matrix: each has two bosses Business Division (HE) (HA) (BS) (MC) Asia Regional EU ↑ Division USA ← ROW Corporate Office Home Entertainment Home Appliance Business Solutions Mobile Communication

7. 2016-06-24 7 Structure Matrix, Team, Hierarchy ①  Team : Project team Five to 20 People with complementary skills For a specific task for a limited period of time Joint decision-making and joint responsibility Moderator/ coordinator and coworkers  Management of Matrix C. Bartlett and S. Ghoshal. “Matrix Management, Not a Structure, a Frame of Mind.” HBR, 1990 ⇒ Ineffective without a right leadership (corporate culture) Three dimensional at Dow Chemical ; Global matrix at ABB ⇒ Both involved in scandals (napalm, agent orange, Dow Corning implant; financial crisis, excessive compensation to P. Barnevick)

8. 2016-06-24 8 Structure Matrix, Team, Hierarchy ②  Problems with Matrix Fad in 1990s ; Something risky in 2000s (complicated and confusing) Disenchantment with matrix at P&G (e.g.) Bartlett and Ghoshal: “The global matrix….eventually cost CEO Durk Jager his job.” (In Transnational Management, 2008) Conventional wisdom - “What gets measured is what gets managed.” - “Responsible for many, accountable for none.” - “Everyone’s responsibility, no one’s job.”  Hierarchy Simplicity wins : (Title of a book by McKinsey Inc., HBSP, 1995) Human minds hate complexity. Efficiency of hierarchy : Peter Drucker ; E. Jacques, “In Praise of Hierarchy.” HBR, 1990

9. 2016-06-24 9 Structure Fit with Strategy  Stage in Internationalization Casual import and export : By each product division Extensive international trade : International division, as a function Going global : A matter of balancing globalization and localization  Mindset or Strategy Ethnocentric : International division (US ; Korea, Japan) Polycentric : Regional (EU) Geocentric : Business Transnational : Network of business supported by region and/ or function e.g.) IBM, “globally integrated enterprise” by S. Palmisano P&G under A.G. Lafley : Businesses coordinated by country managers

10. 2016-06-24 10 Systems Definition  Systems aka Management Control Systems All things that directly control staff behavior Rules, guidelines, codes of conduct, schemes, frameworks… Human body : Circulatory, respiratory, digestive, neuro-….  Something to Localize Closest to local staff Their values and motivations formed through local cultures

11. 2016-06-24 11 Systems Staffing and Style  Staffing Efficiency only, never ethnocentric Staff diversity is a merit on its own (for promotion of innovation) Intra-corporate staff exchange  Leadership Style Better adapt to the local way : Etiquette, manner, formality…. e.g.) Power distance, individualism, masculinity, uncertainty avoidance http://www.geert-hofstede.com Not to doubt local staff’s loyalty : Trust is a two-way street. e.g.) Them (local staff) vs. us (home staff)

12. 2016-06-24 12 Systems Evaluation and Rewards  Evaluation Same rules globally Contribution to the unit vs. the whole  Rewards To globalize promotion To localize compensation No ethnocentric discrimination Otherwise, “selective resignation” inevitable

13. 2016-06-24 13 Systems Control and Coordination  Modes of Global Coordination Centralization Standardization : Process vs. content Socialization : To cultivate shared values  Formal Mechanisms Maximum utilization of ICT Unified reporting system : Daily closing possible Periodic gathering Officialization of English e.g.) Hidden Champions from Germany

14. 2016-06-24 14 Soft Way of Management Culture and Shared Values  Determinants of Organizational Culture Societal culture Administrative heritage Leadership style  Leadership = Integrity Leadership in deed in leadership indeed. “Walk the talk.”  Desirable Leadership Efficiency from directive leadership Effectiveness from participative leadership Balance between directive and participative leadership

15. 2016-06-24 15  What to Change Business ← Change in corporate strategy Structure → e.g.) Restructuring, reengineering, downsizing Culture  When to Change Crisis Changeover in leadership Breakthrough discoveries Major change in strategy M&A Organizational Change ①

16. 2016-06-24 16 Organizational Change ②  Resistance to Change Fear and anxiety Discomfort with uncertainty or unfamiliarity  To Overcome Resistance Sense of crisis Resort to outsiders Leadership integrity: Transparency and predictability

17. 2016-06-24 17 2016-06-24 17 Effectiveness vs. Efficiency ①  Definition Effectiveness : To be conducive to achievement of goals ( 合目的性 ) i.e. “Doing the right thing,” or making the right decision Efficiency : To perform the thing economically ( 經濟性 ) i.e. “Doing it right,” or execution at the minimum cost  Which More to Focus on ? Strategy formulation or implementation ? Global Strategy or Transnational Management ?

18. 2016-06-24 18 2016-06-24 Effectiveness vs. Efficiency ②  Conceptually Effectiveness, Practically Efficiency In theory, EAFFECTIVENESS takes the precedence. e.g.) T. Levitt : “Nothing is more wasteful than doing with great efficiency what should not be done.” Yet, most people know what to do in the real world. Then, “it’s the execution, stupid.” e.g.) Making 김치찌개 —Easy to get the recipe, difficult to make it delicious In practice, EFFICIENCY is the key to excellence ?

19. 2016-06-24 19 Digression : Control Paradox If senior management tries to control too many things too specifically, it may result in loss of the real control. Since human beings' ability is limited, senior executives cannot know everything and cannot control everything. If they try to sign every document over one thousand dollars, they might not have much time to review a one-million-dollar project in detail. Moreover, they may lose sight of the forest, if they try to see each tree from the bottom to the top. That is not the real control. That is what happened at some of the Korean companies…. If many people are involved in a decision-making, it may be nobody's decision. People may lose enthusiasm and commitment to the decision. Moreover, people may not be motivated to come up with new ideas, if they have to explain the same thing over and again through the corporate ladder. That is not the real control, either. That is what happened with many of the American staff at Korean companies. After all, the more control you seek, the less control you will have!