1. Strategy Implementation
HCAD 5390

2. Organizational Structure
Organizational design
Selecting the structure and control systems that are most strategically effective for pursuing sustainable competitive advantage.
The role of structure and control
To coordinate strategy implementation.
To motivate and provide incentives for superior performance.

3. The Role of Organizational Structure
Building blocks of organizational structure
Differentiation in the allocation of people and resources to create value.
Vertical differentiation in the distribution of decision-making authority.
Horizontal differentiation in dividing up people and tasks into functions and divisions.
Integration
The means used in coordinating people and functions to accomplish organizational tasks.

4. Differentiation, Integration, Bureaucratic Costs
Bureaucratic costs and strategy implementation:
Bureaucratic costs increase with organizational complexity.
More differentiation = more managers.
More integration = more coordination.
Better strategy implementation = better bottom-line performance and profitability.

5. Vertical Differentiation
Span of control (division of authority)
The number of subordinates that a single manager directly manages.
Organizational hierarchy choices
Flat structures
Few organizational levels
Wide spans of control
Tall structures
Many organizational levels
Narrow spans of control

6. Tall and Flat Structures

7. Problems with Tall Structures
Principle of minimum chain of command
Maintaining a hierarchy with the least number of levels of authority needed to achieve a strategy.
Sources of bureaucratic costs:

8. Centralization or Decentralization
Authority patterns in organizations:
Centralized
Decision making retained in the hands of upper-level managers.
Decentralized
Decisions delegated to lower levels in the organization.

9. Centralization (Structural) Choice?
Advantages of decentralization
Reduced information overload on upper managers.
Increased motivation and accountability throughout organization.
Fewer managers; lower bureaucratic costs.
Advantages of centralization
Easier coordination of organizational activities.
Decisions fitted to broad organizational objectives.
Exercise of strong leadership in crisis.
Faster decision making and response.

10. Horizontal Differentiation
Focus is on division and grouping of tasks to meet business objectives.
Simple structure:
Characteristic of small entrepreneurial companies.
Entrepreneur takes on most managerial roles.
No formal organization arrangements.
Horizontal differentiation is low.

11. Structure Follows Strategy:
Changes in corporate strategy lead to changes in organizational structure

12. Structure Follows Strategy:
New strategy is created
New administrative problems emerge
Economic performance declines
New appropriate structure is invented
Profit returns to its previous levels

13. Stages of corporate development
Simple Structure
Functional Structure
Divisional Structure
Beyond SBU’s

14. Simple Structure: Stage I: Entrepreneur
Decision making tightly controlled
Little formal structure
Planning short range/reactive
Flexible and dynamic

15. Functional Structure:
Stage II:
Management team
Functional specialization
Delegation decision making
Concentration/specialization in industry

16. Divisional Structure:
Stage III:
Diverse product lines
Decentralized decision making
SBU’s
Almost unlimited resources

17. Beyond SBU’s: Stage IV: Increasing environmental uncertainty
Technological advances
Size & scope of worldwide businesses
Multi-industry competitive strategy
Better educated personnel

18. Functional Structure Disadvantages Advantages
Functional orientation creates communication problems.
Performance and profitability measurement problems.
Location versus function problems (coordination).
Strategic problems due to structural (vertical and horizontal) mismatches.
Advantages
Task grouping facilitates specialization and productivity.
Better monitoring of work processes, reduced costs.
Greater control over organizational activities.

19. Functional Structure

20. Mutlitdivisional Structure
Disadvantages
Establishing the divisional-corporate authority relationship
Distortion of information by divisions
Competition for resources by divisions
Transfer pricing problems between divisions
Short-term research and development focus
Bureaucratic costs
Advantages
Enhanced corporate control by division
Enhanced strategic control of each SBU in portfolio
Growth is easier. New units don’t have to be integrated across organization
Stronger pursuit of internal efficiencies. Performance of individual units is readily measurable.

21. Multidivisional Structure

22. Matrix Structure Advantages Disadvantages
Flexibility of the structure and membership
Minimum of direct hierarchical control
Maximizes use of employees’ skills
Motivates employees; frees up top management
Disadvantages
High bureaucratic costs
High costs (time and money) for building relationships
Two-boss employee’s role conflict

23. Matrix Structure
 Two-boss employee

24. Network Structure:
“non structure” – elimination of in-house business functions
Termed “virtual organization”
Useful in unstable environments
Need for innovation and quick response

25. Network Structure Packagers Designers Suppliers Distributors Corporate
Headquarters
(Broker)
Promotion/
Advertising
Agencies
Manufacturers

26. Effective implementation requires:
Leadership
Leading people to use their abilities and skills most effectively and efficiently to achieve organizational objectives

27. Staffing follows strategy:
Matching the manager to the strategy
Executive type
Executives with a particular mix of skills and experiences

28. Executive Types: Dynamic industry expert Analytical portfolio manager
Cautious profit planner
Turnaround specialist
Professional liquidator

29. Matching Chief Executive “Types” with Strategy Industry Attractiveness
Business Strength/Competitive Position
Strong
Average
Weak
Growth—Concentration
Dynamic Industry Expert
Retrenchment— Save Company
Turnaround Specialist
High
Stability
Cautious Profit Planner
Industry Attractiveness
Medium
Low
Growth—Diversification
Analytical Portfolio Manager
Retrenchment— Close Company
Professional Liquidator

30. Managing corporate culture:
Affects firm’s ability to shift its strategic direction
Strong tendency to resist change
Corporate culture should support the strategy

31. Strategy-Culture Compatibility:
Consider the following:
Is the planned strategy compatible with the firm’s current culture?
Can the culture be easily modified to make it more compatible with new strategy?
Is management willing to make major organizational changes?
Is management committed to implementing the strategy?

32. Managing corporate culture:
Communication
Key to effective management of change
Rationale for strategic change should be communicated to all

33. What Is Organizational Culture?
The collection of values and norms shared by people and groups in an organization.
Shared values and a common culture increase integration and improve coordination.
Values
Beliefs and ideas about common goals and proper behaviors.
Norms
Act as guidelines or expectations that prescribe acceptable behavior by organizational members.

34. Organizational Culture
Ways of transmitting organizational culture:

35. Culture and Strategic Leadership
The influence of the founder
Initial cultural values and management style is imprinted on the organization by its founder.
Organizational structure
Structure follows strategy. Strategic leadership affects the cultural norms and values that develop in the organization.

36. Strategic Reward Systems
Individual reward systems
Piecework plans
Commission systems
Bonus plans
Promotion
Group and organizational reward systems
Group-based bonus systems
Profit sharing systems
Employee stock option systems
Organization bonus systems