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Institutionalizing Strategy

Institutionalizing StrategyOrganizational structure refers to the formalized arrangement of interaction between and responsibility for the tasks, people, and resources in an organization.It is a chart often a pyramidal with positions or titles and roles in cascading fashion.Institutionalizing of strategy refers to the getting work of the business done efficiently and effectively so as to the strategy work.It is concerned with the best way to organize people and tasks to execute the strategy effectively.It also denotes the activities that are done inside the organization and activities that are done outside the organization (outsourcing).It is also concerned with the structure of the organization we want to aspire.Moreover it refers to the degree of control, coordination, openness, and innovation in implementing a strategy as per the company situation

Types of Organization StructuresSimple organizational structureFunctional organizational structureDivisional structureStrategic business unitsHolding companyMatrix organizational structureProduct team structureSimple organizational structureStructure in which there is an owner and a few employees and where the arrangement of tasks, responsibilities, and communication is highly informal and accomplished through direct supervision is called simple organizational structure.The very smallest business enterprise follow this organization structure. All strategic and operating decisions are made by the owner, or a small owner partner team.In this structure there will be limited scope, little formalized roles, communication and procedures.One bad strategic decision could provide threatened to the continuance of the business.This structure provides high degree of owners control.It also allows rapid response to product/ market shifts and ability to accommodate unique customer demands without major coordination difficulties.This structure encourage employees to multitasking as well.This structure usually require multitalented, resourceful owner, good at producing and selling a product or service and at controlling scarce funds. Functional organizational structureStructure in which the tasks,people,and technologies necessary to do the work of the business are divided into separate functional group (e.g. marketing,operations,and finance) with increasingly formal procedures for coordinating and integrating their activities to provide the businesss products and services. Functional structures predominate in firms with a single or narrow products focus.Functional Organizational StructureStrategic AdvantagesAchieves efficiency through specializationDevelop functional expertiseDifferentiates and delegates day to day operating decisionsRetains centralized control of strategic decisionsTightly links structure to strategy by designating key activities as separate unitsStrategic DisadvantagesPromotes narrow specialization and functional rivalry or conflictCreates difficulties in functional coordination and interfunctional decision makingLimits development of general managersHas a strong potential for interfunctional conflict priority placed on functional areas, not the entire businessMay cost more to do a function than it does outside the company, unless outsourced.Divisional StructureWhen a firm diversifies its product/service lines, covers broad geographic areas, utilizes unrelated market channels, or begins to serve heterogeneous customer groups, a functional structure rapidly becomes inadequate.A divisional organizational structure is one in which a set of relatively autonomous units, or divisions, are governed by central corporate office but where each operation division has its own functional specialists who provide products or services different from those of other divisions.

A divisional structure allows corporate management to delegate authority for the strategic management of distinct business entities-the division.This enables decision making in response to varied competitive environments and corporate management to concentrate on corporate level strategic level decisions.The division usually is given profit responsibility which facilitates accurate assessment of profit and loss.Chief Executive OfficerVP Administrative ServicesVP Operating SupportGeneral Manager Division A/SBU AGeneral Manager Division B/SBU BGeneral Manager Division C/SBU CManager HRManager Account and Finance Manager R&DManager Marketing and SalesManager POMPersonnelAccounting and ControlDivision Planning MarketingPOMPersonnelAccounting and ControlDivision Planning MarketingPOMDivisional Organizational StructureAdvantages and disadvantagesStrategic advantagesForces coordination and necessary down to the appropriate level for rapid responsePlaces strategy development and implementation in closer proximity to the unique environments of the divisionFrees chief executive officer for broader strategic decision makingSharply focuses accountability for performanceRetains functional specialization within each divisionProvides good training good for strategic managersIncreases focus on products, markets, and quick response to changeStrategic disadvantagesFosters potentially dysfunctional competition for corporate level resourcesPresents the problem of determining how much authority should be given to divisional managersCreates a potential for policy inconsistencies among divisionsPresents the problem of distributing corporate overhead costs in a way that is acceptable to division managers with profit responsibilityIncreases costs incurred through duplication functionsCreates difficulty maintaining overall corporate image.Strategic Business UnitThe SBU is an adaptation of the divisional structure where by various divisions or parts of divisions are grouped together based on some common strategic elements usually linked to distinct product market differences.For example General Foods has its own SBUs such as Breakfast foods, beverages, main meals, and pet foods etc.Some firms encounter difficulty in controlling their divisional operations as the diversity,size,and number of these units continues to increase and add the SBU layers in their hierarchy.Holding CompanyStructure in which the corporate entity is a broad collection of often unrelated businesses and divisions such that it (the corporate entity) acts as financial overseer holding the ownership interest in the various parts of the company, but has a little direct managerial involvement.It reduces the cost and one of the drawback of this structure is lack of control over decisions to make timely corrections and adjustments.Matrix Organization StructureThe matrix organizational structure is one in which functional and staff personnel are assigned to both a basic functional area and to a project or product manager.It provides dual channels of authority, performance responsibility, evaluation, and control.The matrix form is intended to make the best use of talented people within a firm by combining the advantages of functional specialization and product project specialization.The matrix organization structure increases the number of middle managers who exercise general management responsibilities through the project manager role.It broadens the middle managers exposure to organization wide strategic concerns.It overcomes a key deficiency of functional organizations while retains the advantages of functional specialization.It is difficult to implement.Dual chains of command challenge fundamental organizational problems.Negotiating shared responsibilities the use of resources and priorities can create misunderstanding or confusion among subordinates.Chief Executive OfficerVPEngineeringVPProductionVPPurchasingVP AdministrationAdministration CoordinatorPurchasing Agent Production StaffEngineering StaffProject Manager AProject Manager BEngineering StaffProduction StaffPurchasing Agent Administration CoordinatorProduction StaffProject Manager CEngineering StaffPurchasing Agent Administration CoordinatorAdvantages and DisadvantagesStrategic advantagesAccommodates a wide variety of project oriented business activities Provides good training ground for strategic managersMaximizes efficient use of functional managersFosters creativity and multiple sources of diversityGive middle management broader exposure to strategic issues

Strategic disadvantagesMay result is confusion and contradictory policiesNecessitates tremendous horizontal and vertical coordinationCan reproduce information and excess reportingCan cause neighborhood battles and loss of accountability

Product Team StructureThe product team structure seeks to simplify and increase the focus of resources on a narrow but strategically important product, project, market, customer, or innovation.The product team structure assigns functional managers and specialists to a new product, project, or process team that is empowered to make major decision about their product.The team is created at the inception of the new product idea and they stay with it indefinitely if it becomes a viable business.

Instead of being assigned on a temporary basis as in the matrix structure team members are assigned permanently to that team in most cases.This result in much lower coordination costs and because every function is represented usually reduces the number of management levels above the team level needed to approve team decisions.Chief Executive OfficerResearch and DevelopmentEngineeringOperations FinanceSales and MarketingProduct or Process TeamStructuring an Effective OrganizationMajor efforts to improve traditional organizational structures seek to reduce unnecessary control and focus on enhancing core competencies, reducing costs, and opening organizations more fully to outside involvement and influence.Today and tomorrow, organizational structure reflects an external focus, flexible interaction,interdepedency, and a bottom up approach, just to mention a few characteristics associated with strategy execution and success.The fundamental trends are driving decisions about effective organizational structures in the twenty first century are GlobalizationInternetSpeed of decision makingMatch structure with strategy

GlobalizationThe need for global coordination and innovation is forcing constant experimentation and adjustment to get the right mix of local initiative, information flow, leadership, and corporate culture.Global firms have to locate operations in numerous countries.Today it will call on talents and resources wherever they can be found around the globe, just as it now sells worldwide.

For example some MNCs based in the USA,do its software programming in New Delhi, its engineering in Germany, and its manufacturing in Indonesia.Organizations structures are revolutionary day by day.InternetThe internet gives everyone in the organization, or working with it, from lowest clerk to the CEO to any supplier or customer, the ability to access a vast array of information-instantaneously, from anywhere.

We can access ideas,requests,instructions from the global in the blink of an eye.It allows the global enterprise with different functions, offices, and activities spread around the world to be flawlessly connected so that far customers, employees and suppliers can work together in real time. SpeedTechnology or digitization means removing human minds and hands from an organizations most routine tasks and replacing them with computers and networks.Digitizing everything from employee benefits to accounts receivable to product design cuts cost, time, and payroll resulting in cost savings and vast improvements in speed.

Match structure with strategyA single product firm or single dominant business firm should employ a functional structureA firm in several lines of business that are somehow related should employ a functional structureA firm in several unrelated lines of business should be organized into strategic business unitsEarly achievement of a strategy structure fit can be a competitive advantage

Here are some efforts which helps to make structuring an effective organization.

Redefine the role of corporate headquarters from control to support and coordinationEvery multibusiness companies are in trouble regarding resource exploitation, market responsiveness and creativity.Rigorous financial controls and reporting enable cost efficiency, resource deployment and autonomy across different units.Flexible controls are conducive to responsiveness, and innovationThe creation of new resources and capabilities will generate future competitive advantage.Aggressive portfolio management provides maximum shareholder value through independent businesses.It needs cross coordination and recognition between these business interdependencies2.Balance the demands for control/differentiation with the need for coordination/integrationSpecialization of work and effort allows a unit to develop greater expertise, focus and efficiency.

Organizations strategy depends on dividing different activities within the firm into logical, common groupings- sales,operations,administration, or geography-so that each set of activities can be done most effectively.Control of sets of actitivities is at a premium.Dividing each set of activities is an important structural decision.The seperate functional activities has to be coordinated and integrated.Restructuring to emphasize and support strategically critical activitiesRestructuring is redesigning an organizational structure with the intent of emphasizing and enabling activities most critical to the firms strategy to function at maximum effectiveness.At the heart of the restructuring trend is the notion that some activities within a businesss value chain are more critical to the success of the businesss strategy than others.For example Wal-Mart organizational structure is designed to ensure that its impressive logistics and purchasing competitive advantages operate flawlessly.Reengineer strategic business processesA popular method by which organizations worldwide undergo restructuring efforts to remain competitive.It involves fundamental rethinking and radical redesigning of a business process so that a company can best create value for customer by eliminating barriers that create distance between employees and customers.It reduces fragmentation by crossing traditional departmental lines and reducing overhead to compress formerly separate steps and tasks that are strategically intertwined in the process of meeting customer needs.

Critical areas under BPRScratch the flowchart of business with value chain activitiesStreamline the performance (eliminate unnecessary tasks and steps)Business process automation/introduction of new technologiesFocus on strategically critical activities/ benchmak with top leadersConsider outsourcing for non critical activities design a new organization structure and arrange tasks, people and resources

Downsize and self manage :force decision to operating levelEliminate the number of employees, particularly middle management in a company.Allow work groups or work teams to supervise and administer their work as a group or team without a direct supervisor exercising the supervisory role.The team set parameters of their work, make decisions about work related matters, and perform most of the managerial functions previously done by their direct supervisor.Allow multiple structures to operate simultaneously within the organization to accommodate products, geography, innovation and customersFollow matrix and product team structureTake advantage of being a virtual organizationThis organization structure is primarily formed in a temporary manner.It is defined as a network of independent companies-suppliers, customers, subcontractors or even competitors.This network links via information technology to share skills, access to markets, and costsOutsourcing and strategic alliances are two major areas of virtual organization.GMFujiSaabDaewooToyotaIsuzuNew United Motor ManufacturingSuzukiFiatSupplies small carsSupplies small cars,trucks and partsJoint ProductionMakes a carSupplies small carsMakes vanCollaboration on technology and componentsMakes componentsStrategic AlliancesDigitalAbundantResourcesPhysical ScarceSupplier DrivenMass ProductionValue CreationCustomer DrivenService Enhanced CustomizationIndustrial Age CorporationVerticalIntegratedVirtual Corporation extendedInternetworked enterpriseB-Web8. Web based organizationRemove structural barriers and boundryless organizationKnowledge centricBoundlessLearning organization

Organizational CultureOrganizational culture is the set of important assumptions often unstated that members of an organization share in common.It is intangible in nature.It provides the basic theme as well as meaning,direction,and the basis for function.The organizations shared norms and values or beliefs can influence organizations members opinions and actions within that firm.These values aware the organizational members and guide to appropriate behavior in the organization.If the actions of the members are according to the organizational values the employees get satisfied.The organizations assumptions become shared assumptions through internalization among an organization's individual members.

Techniques to manage cultureLeaders typically attempt to manage and create distinct cultures through a variety of waysSome of the common ways are as follows.Emphasize key themes or dominant valuesEncourage dissemination of stories and legends about core valuesInstitutionalize practices that systematically reinforce desired beliefs and valuesAdapt some very common themes in their own unique waysManaging organizational culture in a global organizationManaging the strategy culture relationshipEmphasize key themes or dominant valuesQuality,differentiation,cost advantage, and speed are four key success of competitive advantageKey theme or dominant values may centre around wording in an advertisement.They are often found in internal company communications.This try to address who we are.For example Xerox-respect for employees or customer,P&G-quality etc.Encourage dissemination of stories and legends about core valuesCompanies with strong cultures are enthusiastic collectors and tellers of stories and legends/traditions in support of basic beliefs.Institutionalize practices that systematically reinforce desired beliefs and valuesCompanies with strong cultures are clear on what their beliefs and values need to be and take the process of shaping those beliefs and values very seriously.

Adapt some very common themes in their own unique waysThe most typical beliefs that shape organizational culture includeA belief in being the bestA belief in superior quality and servicesA belief in the importance of people as individuals and a faith in their ability to make a strong contribution.A belief in the importance of the details of execution, the nuts and bolts of doing the job well.A belief that customers should (supremacy) supremeA belief in inspiring people to do their best, whatever their ability.A belief in the importance of informal communicationA belief that growth and profits are essential to a companys well being.

Managing organizational culture in a global organizationThe global organizational culture must recognize cultural diversity in the areas of Social normsValues and attitudeReligionEducation etc.

HighLowManyFew1423Link changes to basic mission and fundamental organizational normsSynergistic focus on reinforcing cultureReformulate strategy or prepare carefully for long term, difficult cultural changeManage around the culturePotential compatibility of changes with existing cultureChanges in key organizational factors that are necessary to implement the new strategyManaging the strategy culture relationship

Link to missionA firm in cell 1 requires several changes in structure,systems,managerial assignments, operating procedures or other fundamental aspects of the firm.The following considerations are appropriateKey changes should be visible linked to the basic company missionEmphasis should be placed on the use of existing personnelCare should be taken if adjustments in the reward system are neededKey attention should be paid to the changes that are least compatible with the current cultureMaximize synergyA firm in cell 2 needs only a few organizational changes to implement its new strategy, and those changes are potentially quite compatible with its current cultureThe firm can apply two broad themesTake advantage of the situation to reinforce and solidify the current cultureUse this time of relative stability to remove organizational road blocks to the desired cultureManage around the cultureA firm in cell 3 must make a few major organizational changes to implement its new strategyBut these changes are potentially inconsistent with the firms current organizational culture.A firm can manage around the culture in various waysFor exampleA separate firm or divisionUse task forcesTeamsProgram coordinatorsSubcontractBring in an outsiderSell out

Reformulate the strategy or culture A firm in cell 4 faces the most difficult challenge in managing the strategy culture relationshipA firm in this situation faces the complex, expensive and often long term challenge of changing its culture.

Organizational LeadershipOrganizational leadership is concerned with providing the direction to the followers.It is cope with changeIt guides the organization to deal with constant changeIt clarifies the strategic intent and shape the culture to fit organizational opportunities and challenges change affords.It identifies and supplies the organization with operating managers prepared to provide operational leadership and vision.Strategic Leadership :Acceptance ChangeChange has become an integral part of what leaders and managers deal with daily.The leadership challenge is to galvanize commitment among people within organization as well as outside stakeholders.Leaders galvanize/stimulate commitment to embrace change through three interrelated activities.Clarifying strategic intentBuilding an organizationShaping organizational culture

Clarifying strategic intentLeaders help stakeholders accept change by setting clear vision where the organization needs to head.Building an organizationLeaders spend considerable time shaping and refining their organizational structure and making it function effectively to accomplish strategic intent.All managers adapt structures, create teams, implement systems, and otherwise generate ways to coordinate,integrate,and share information about what their organization is doing and might do.

Shaping organization cultureLeaders know well that the values and beliefs shared throughout their organization will shape how the work of the organization is done.Leaders use reward systems,symbols,and structure among other means to shape the organization culture.

Recruiting and developing talented operational leadershipAccelerated pace and complexity of business will increase pressure on corporations to push authority down to their organization.Every line manager will have to exercise leaderships prerogatives to an extent unthinkable a generation earlier.Every line managers are global managers, change agents,strategists,motivators,strategic decision makers,innovators,and collaborators if the business is to survive and prosper.The required competencies the managers should have possessThe leadership needs of organizationsThe ability to:Build confidenceBuild enthusiasmCooperativeDeliver resultsForm networksInfluence othersUse informationThe required competencies of business leadersBuild literacyCreativityCross cultural effectivenessEmpathy/understandingFlexibilityProactivelyProblem solvingRelation buildingTeamworkvisionBuilding Resource Strengths and Organizational CapabilitiesImplementing and executing strategy is an operation driven activity revolving around the management of people and business processes.The managerial emphasis is on converting strategic plans into actions and good results.When the company achieves the targeted strategic and financial performance and shows good progress in making its strategic vision a reality.Shortfalls in performance signal weak strategy, weak execution, or both.A good assessment of strategy execution depends upon the task we do differently and better to carryout the strategy successfully.Executing strategy is a job for a companys whole management team.Top level managers have to rely on the active support and cooperation of middle and lower managers to push strategy changes into functional and operating units.The organization actually operates in accordance with the strategy on a daily basis.The following are the managerial tasks used by the organization to good strategy executionBuilding an organization with the competencies,capabilities,and resource strengths to execute strategy successfully.Organizing sufficient money and people behind the driver for strategy execution.Instituting policies and procedures that facilitate rather than hamper strategy executionAdopting best practices and pushing for continuous improvement in how value chain activities are performed.Installing information and operating systems that enable company personnel to carry out their strategic roles proficiently.

Tying rewards directly to the achievement of strategic and financial targets and to good strategy executionShaping the work environment and corporate culture to fit the strategyExercising strong leadership to drive execution forward, keep improving on the details of execution, and achieve operating excellence as rapidly as feasible.Building an organization capable of good strategy execution entails three types of organization building actions:Staffing the organizationAssembling a talented, can do management team, and recruiting and retaining employees with the needed experience, technical skills, and intellectual capital.Building core competencies and competitive capabilities That will enable good strategy execution and update the external environment changeStructuring the organization and work effortOrganization value chain activities and business processes and deciding how much decision making authority to push down to lower level managers and front line employees.Building core competencies and competitive capabilities involves these stagesDeveloping the ability to do something Coordinating group efforts to learn how to perform the activity consistently well at an acceptable cost continue to polish and refine the organizations know how.Structuring the organization and organizing the work effort in a strategy supportive fashionDeciding which value chain activities to perform internally and externallyMaking internally performed strategy critical activitiesHow much authority to centralize and how much to decentralizeProviding for internal cross unit collaborationCoordination and collaborating with strategic allies and stakeholdersManaging the internal organization to promote better strategy executionManagers have to identify the resource requirements and budget to suitable to the strategy implementation and executionManagers have to review the existing policies and operating procedures proactively to the new strategy execution.Newly or freshly revised policies and operating procedures aids the task execution.These procedures provide top down guidance to operating managers.Enforcing consistency in how particular strategy critical activities are performed inside the organization.Promote the creation of new work climate and corporate culture that promotes good strategy executionBenchmarking,TQM and BPR will help to improve efficiency, lower costs, better product quality, and greater customer satisfaction.These initiatives are important tools for learning how to execute a strategy more proficiently.

Installing support system and supportive reward systemThe information system will support to the execution processStrategy supportive motivational practices and reward systems are powerful management tools for gaining employee commitmentThe monetary and non monetary reward system also helps to execute the strategyFor incentive compensation system to work wellThe monetary payoff should be a major percentage of the compensation packageThe use of incentives should expand to all managers and workersThe system should be administered with care and fairnessThe incentive should be linked to performance targets spelled out in the strategic planEach individual performance targets should involve outcomes the person can personally affectRewards should promptly follow the determination of good performanceMonetary rewards should be supplemented with liberal use of nonmonetary rewards

The EndCrimson College of TechnologyLevel: BachelorYear: 2013Programme: BBAFull Marks: 50Course: Strategic Management IIPass Marks: 23Time: 2 hrsCandidates are required to give their answers in their own words as far as practicable.The figures in the margin indicate full marks.Attempt all the questionsa) The success of any firms depends on the use of formal strategic planning process. Justify7b) Suppose you are in charge of Bhatbhateni Supermarket. Since its establishment, you are involved in developing the strategy for the products of the company. Now the BOD has passed the decision to open branch outlets in foreign countries including SAARC region. You are asked to develop strategy relating with home appliances such as washing machines to launch in these areas. Which strategy you would like to suggest multicountry or global?7a) How does environmental analysis at the domestic level differ from global analysis?7b) Briefly describe the behavioral factors that would affect strategic analysis and choice decisions in organization.7a) Why are short term objectives needed when long term objectives are already available?7b) Weak leadership can destroy the soundest strategy; forceful execution of even a poor plan can often bring success. Elucidate 5Write short notes (any two)5*2=10Networking strategiesPoliciesThe patching approach