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Organization Theory: Strategy Implementation Process. Designing Organizations Steven E. Phelan. Preview. Galbraith, Designing Organizations Two cases – AHA and USA Today GOAL

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organization theory strategy implementation process

Organization Theory: Strategy Implementation Process

Designing Organizations

Steven E. Phelan

preview
Preview
  • Galbraith, Designing Organizations
  • Two cases – AHA and USA Today
  • GOAL
    • To gain valuable insights into organizational design by contrasting Galbraith’s ideas with our own experiences and applying those ideas to actual cases
six organization shapers
Six Organization Shapers
  • Buyer Power
    • Buyers are gaining power and learning how to use it
  • Variety and solutions
    • Customers do not want bundle of products and services
    • They want them integrated into a solution
  • The Internet
    • The web site becomes a single face to the customer forcing functions to integrate
six organization shapers4
Six Organization Shapers
  • Multiple dimensions (of organizations)
    • Functions, products, geographies (old)
    • Segments, solutions, channels, processes (new)
  • Change
    • Rapid change requires management to re-learn and re-decide
    • To make more decisions more frequently
    • It requires more decentralized management and networks of decision makers
six organization shapers5
Six Organization Shapers
  • More variety, more comprehensive solutions – FASTER!
  • Shorter lead times, shorter cycle times
  • Speed is a force for decentralization
  • Share an example of one of these six forces in your own organization
competitive advantage
Competitive Advantage
  • An organization design that facilitates
    • Variety,
    • Change,
    • Speed, and
    • Integration

is a source of competitive advantageIt is difficult to execute but also difficult to copy

tradeoffs
Tradeoffs
  • Hype
    • There has been an overselling of credible ideas
      • Teamwork, reengineering, virtual organizations etc.
    • Any organizational design requires tradeoffs and will have positives and negatives
the star model
The Star Model

Strategy

People

Structure

Focus of text

Rewards

Processes

the star model9
The Star Model
  • Strategy
    • Is the company’s formula for winning!
    • Goals, mission, objectives, values
    • Delineates products, markets, value proposition, competitive advantage
    • First part of the model to be addressed
    • Establishes criteria for choosing among different organizational forms
    • Drives resource allocation
structure
Structure
  • Specialization
    • Type and number of job specialties
  • Shape
    • Span of control – flat vs. tall structures
  • Distribution of power
    • Centralization vs. decentralization
  • Departmentalization
    • Function, product, process, market or geography
processes
Processes
  • Vertical processes
    • Business planning, budgeting, resource allocation decisions
  • Horizontal (or lateral) processes
    • Designed around the work flow
    • Cross functional
    • Value chain emphasis
rewards
Rewards
  • Purpose
    • To align the goals of the employees with the goals of the organization
  • Some Issues
    • Individual vs. Team
    • Function vs. Cross function (‘citizenship’)
    • Monetary vs. Non-monetary rewards
  • Rewards must be congruent with other parts of organization design
people
People
  • Human resources
    • Recruiting, selection, rotation, training, development
    • Creating the skills and mind-sets needed to implement the strategy
  • Must also develop organizational capabilities
    • Flexibility, ability to work with others
    • Knowledge management
implications
Implications
  • Structure is only one facet of design
    • Structure usually overemphasized
      • status and power issues
    • Processes, rewards, and people are becoming more important
  • Congruence
    • Different strategies lead to different organizations!
    • All policies must be aligned and in harmony
matching strategy and structure
Matching strategy and structure
  • Specialization
    • Trend toward less specialization and more job rotation in low skill tasks
      • better speed, motivation, coordination. Why?
    • More specialization in high skill tasks
      • It is difficult to read academic papers even in the same field or sub-field
matching strategy and structure16
Matching strategy and structure
  • Shape
    • Trend towards wider spans and flatter structures
      • Faster decisions, lower overheads
    • Conference board study
      • Found span of control from 0-127
      • Modes at 7 (traditional), 17 (sales), and 75 (self-managing teams)
      • Function of: experience, work similarity, independence of workers, ease of measurement
matching strategy and structure17
Matching strategy and structure
  • Distribution of Power
    • Centralization vs. decentralization
    • But, also includes horizontal distribution of power among departments
    • Power shifting from accountants and production to sales, marketing, purchasing(!?)
    • When 80% of parts are outsourced, purchasing becomes important
matching strategy and structure18
Matching strategy and structure
  • Departmentalization
    • Suggest departments arise when org size>24
    • Consider:
      • Functional
      • Product
      • Market
      • Geographical
      • Process
      • Hybrid
    • What are the (dis)advantages of each?
processes19
Processes
  • Most of the activity in an organization does not follow the vertical hierarchical structure
    • Structure only address primary focus (e.g. segments)
  • Rationale
    • All the dimensions not handled by the structure require coordination through lateral management processes (i.e. across departments)
  • Need to coordinate responses to:
    • Governments, regulators, customers, functions, vendors, products, strategic partners, unions, regulators, technologies, solutions
observations about process
Observations about Process
  • Lateral processes
    • ‘general management equivalents’
  • Variety & Change
    • -> more decentralization
    • No functional management can handle multiple products in multiple markets
  • Interdependence & Speed
    • -> more cross-department coordination
    • Internet and need for CRM increases this force
costs and benefits of laterality
Costs and Benefits of Laterality
  • Benefits
    • Make more decisions
    • Make different kinds of decisions
    • Make better and faster decisions
  • Costs
    • Loss of top management control
    • Time involved in cross-functional work
    • Increased conflict
five types of lateral processes
Five Types of Lateral Processes
  • Voluntary (or informal)
  • E-coordination
  • Formal group
  • Full-time integrators
    • Project managers, brand managers, process managers etc.
  • Matrix organization
    • Level of coordination grows but so does cost and difficulty of implementation
fostering voluntary processes
Fostering Voluntary Processes
  • Interdepartmental rotation
  • Interdepartmental events
  • Co-location
  • Mirror image departments
  • Consistent reward and measurement systems
e coordination
E-Coordination
  • Intranets
    • ISS uses a web site to coordinate the behavior of various crews at multiple sites throughout the day
      • Customer requests, crew assignments, performance evaluations etc.
  • CRM
    • People at customer interface record all contacts with customer and have access to previous history
    • Customers are managed in a consistent and knowledgeable way
    • Rules can be set to prompt selling opportunities at each point of contact
formal groups
Formal Groups
  • Basis
    • Same as structure: function, product, market, geography, work flow
    • Strategy sets priorities.
  • Charter
    • Scope, mission, authority
    • Issues, resources, timeframe
formal groups26
Formal Groups
  • Staffing
    • Have an informed representative from each affected department with authority to commit
  • Conflict
    • Train in conflict mgt skills
    • Determine procedure for resolving conflicts
    • Be prepared for conflict!
      • Disagreement over means and ends = GOOD
      • Ad hominem attacks = BAD
formal groups27
Formal Groups
  • Rewards
    • Team performance should count as much as line performance in evaluations (!)
  • Leader Role
    • Teams may not need a formal leader (!)
    • Most groups designate a leader
      • Usually from most affected (interested) department
      • But, leader role may change to those most capable of handling a particular issue
      • Leader role may also rotate
formal groups28
Formal Groups
  • Can be simple
    • Film crew put together for one project
    • Team to design a single integrated circuit
  • Characteristics
    • Often rewards tightly linked to results
    • Project manager given lots of control (and accountability)
formal groups29
Formal Groups
  • Can be complex
    • Platform teams in automobile industry
      • Minivans, sedans, trucks
      • Each platform has sub-teams
        • Chassis, power train, engine, interior, exterior etc.
formal groups30
Formal Groups
  • Special challenges
    • Coordination
      • Keep information flows open to reduce duplication of effort
      • E-coordination is handy
    • Conflict management
      • Important to determine overall strategic priorities and who has burden of proof for shifting priorities
      • E.g. PC product managers have to make case for deviating from lowest cost components
integrator roles
Integrator Roles
  • Key Decisions
    • Determine structural basis
      • Product, brand, segment, project, process, geography
    • Determine who
      • good networker, good interpersonal skills
      • “influence without authority”
    • Provide status
      • Appropriate rewards, budget authority, big office, support staff, etc.
      • Last resort – matrix structure, dual authority
    • Provide support
      • Information systems, planning processes
case 1 usa today
Case 1: USA Today
  • Identify the problem(s)
  • Recommend:
    • A strategy
    • A structure
    • A set of key lateral processes
    • A reward system, and
    • An HR strategy
  • That will solve (or at least address) the problem(s) at USA Today
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