organization theory: strategy implementation process designing organizations steven e. phelan
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Organization Theory: Organization Theory: Strategy Implementation Strategy Implementation
ProcessProcessDesigning OrganizationsDesigning Organizations
Steven E. PhelanSteven E. Phelan
PreviewPreview
• 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 ShapersSix 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 ShapersSix 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 ShapersSix 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 AdvantageCompetitive Advantage• An organization design that facilitates
Variety, Change, Speed, and Integration
is a source of competitive advantage
It is difficult to execute but also difficult to copy
TradeoffsTradeoffs• 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 ModelThe Star Model
People
Rewards Processes
Structure
Strategy
Focus of text
The Star ModelThe 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
StructureStructure• 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
ProcessesProcesses• Vertical processes
Business planning, budgeting, resource allocation decisions
• Horizontal (or lateral) processes Designed around the work flow Cross functional Value chain emphasis
RewardsRewards• 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
PeoplePeople• 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
ImplicationsImplications• 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 structureMatching 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 structureMatching 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 structureMatching 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 structureMatching 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?
ProcessesProcesses• 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 ProcessObservations 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 LateralityCosts 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 ProcessesFive 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 ProcessesFostering Voluntary Processes
• Interdepartmental rotation
• Interdepartmental events
• Co-location
• Mirror image departments
• Consistent reward and measurement systems
E-CoordinationE-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 GroupsFormal Groups
• Basis Same as structure: function, product, market,
geography, work flow Strategy sets priorities.
• Charter Scope, mission, authority Issues, resources, timeframe
Formal GroupsFormal 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 GroupsFormal 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 GroupsFormal 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 GroupsFormal 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 GroupsFormal 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 RolesIntegrator 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 TodayCase 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