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Strategic Design Perspective for Analyzing Organizations
Session 5
Agenda
Review Design Options
Dynacorp Case: Your team is the consultant!
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Strategy and Organization Design
Remember Chandler’s Dictum:
STRATEGY STRUCTURE
Sometimes the reverse is true:
Capabilities perspective: structure also shapes strategy: capabilities-based diversification (Honda engines), ―competency traps‖
In reality, Strategy and Organization co-evolve
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Strategic Design - Key Concepts
Grouping: drawing the boundaries of the organization and boundaries of subunits around activities within the organization
Linking: building information flows between interdependent units within the organization, and with key external organizations
Aligning: ensuring that subunits and people have the resources and motivation to carry out the activities assigned them in linking and grouping
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Strategic Design Processes
Establish the strategy
(Strategic intent)
Identify key activities
within the organization
(linking strategy & orgn)
Allocating activities to units
(Grouping)
Ensuring needed cross-unit
coordination (Linking)
Ensuring that Grouping &
Linking work (Aligning)
Ensuring FIT with
environment
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How do you ―map‖ Grouping?
List of officers (provides titles; org charts)
Annual reports of financial performance by business area
Ask: Who reports to whom?
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Common Grouping Options
Basic Options:
Function (Activity)
Business Unit (Product or technology)
Customer (Market, geography, or segment)
Hybrid Structures:
Matrix
Front end/Back end (Customer interface/R&D, Manufacturing…Support Staffs)
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Functional Grouping Structure:Xerox in the 1980s-90s
Management Team
Corp. Level
Support Staff
Product
Development
Govt. & Public
Affairs
Manufacturing
HR/Labor Relations
Marketing
Xerox PARC
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Business Unit Structure: HP
CEO
EVP, Personal EVP, Imaging and EVP, TechnologySystems Group Printing Group Solutions Group
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Customer Organization: Bank of America
Headquarters
Global Consumer &Small Business Banking
Global Wealth & Investment Banking
Global Corporate &Investment Banking
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Business Unit Structure Matrixed: HP
CEO
EVP, Personal EVP, Imaging and EVP, TechnologySystems Group Printing Group Solutions Group
EVP, Global OperationsEVP, Chief Marketing OfficerEVP, Chief Strategy OfficerEVP, Chief Financial OfficerEVP, Chief Information OfficerEVP, HR
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HP after Compaq and other Mergers/Acquisitions (2010): Still Matrixed; Shuffling of Business Units
CEO
EVP, Personal EVP, Imaging and EVP, TechnologySystems Group Printing Group Solutions Group
--HP Services--HP Software
EVP, Global OperationsEVP, Chief Marketing OfficerEVP, Chief Strategy OfficerEVP, Chief Financial ServicesEVP, Chief Information OfficerEVP, HR
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Front-end/Back-end StructureCEO/HQ
Staffs
Components High
End
Systems
Low
end
Systems
Back End
N.A. Europe
Sales
Service
Application
software
Industry
marketing
Customer
education
Asia L.A.
Front End
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Challenges of Design
Grouping is not just a decision about first-order design – what is the second-order grouping variable?
The same as the first-order?
Alternative (e.g. function under business unit)
…And third-order (―architecting down‖ and ―architecting up‖)
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Functional Grouping Structure:Second-Third Level-Xerox
Manufacturing
Support
Staff
New Build (Design
& Testing)
Engineering
Fabrication
Quality
Parts
Design
Fabrication
Design
Fabrication
Distribution
Field Services
HR
Fabrication
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Key Linking Mechanisms
Formal reporting structures (e.g. ―dotted line‖ reporting)
Liaison roles (information conduit -- e.g. ―community of practice leader‖ at Xerox)
Integrator roles (ensuring information sharing - e.g. ―core technology champion‖ at HP, Apple???):
Intel’s ―Copy Exactly!!‖
MIT Faculty Chair—this is a lot of what I do!
Permanent cross-unit groups: (e.g. Technology Councils)
Temporary cross-unit groups (e.g. project teams, regular meetings—you will be in many of these!!!)
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Key Linking Mechanisms (cont’d)
Information technology systems (e.g. shared data bases, shared CAD tools)
Planning processes (e.g. scenario building)
Co-location (e.g. moving marketing into the same building as R&D)
Temporary cross-unit postings of people
Making Personal Linkages: ―Filling Black Holes‖
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Key Alignment Mechanisms
Performance metrics
Rewards and incentives—economist’s solution!!
Resource allocation—never miss a budget meeting!!
Human Resource Development (recruitment, training, tracking, planning)—when in doubt, train!
Informal systems and processes—personal networks
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Dynacorp: Consultant Deliverables
(1) WRITE ON YOUR WHITE BOARD
(2) SUBMIT A MEMO TO CEO GREYSTONE
What are Dynacorp’s key strategic problems?
Vote on Recommended Structure (List top 2 & number of votes for each)
For your top recommendation:
How will you assure Linking?
How will you assure Alignment?
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Design Options for Dynacorp
1. Go back to functional
2. Product Divisions
3. Customer Division
4. Function/Product Matrix
5. Front/Back
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―Lessons‖ from Dynacorp
Grouping alone will not solve strategic and organizational problems
Every structure (grouping) has strengths and weaknesses; linking and aligning can help leverage the strengths and mitigate the weaknesses
Linking and aligning tools are essential to make the grouping work
Too often grouping is done first and then thinking begins about how to assure linking & alignment: So a key takeaway:
CONSIDER ALL THREE ASPECTS OF STRATEGIC DESIGN WHEN ANALYZING STRUCTURES OR WHEN CONTEMPLATING RESTURCUTRING!
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Remember First Course Requirement Milestone
Ses #7: paragraph identifying your chosen organization and why it interests you
One week to do some exploring:
Sloan and MIT sources
Professors in your major – their contacts, their ideas about interesting organizations
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MIT OpenCourseWarehttp://ocw.mit.edu
15.668 People and OrganizationsFall 2010 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms.