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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

  • 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

  • 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




Focus of text



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
  • 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
  • Vertical processes
    • Business planning, budgeting, resource allocation decisions
  • Horizontal (or lateral) processes
    • Designed around the work flow
    • Cross functional
    • Value chain emphasis
  • 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
  • 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
  • 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?
  • 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
  • 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