Post on 03-Jan-2016
Advance topics in Change Management
Lecture 31 Basic Concepts
Main Course Objective
• To enable you to analyse how and why different kinds of organizations are more or less effective in achieving particular objectives.
• The course focuses on the key components of organisations that together generate distinctive collective competences and capabilities.
• It focuses on the meso level.
Levels of Organizational Analysis
Micro - individuals and groups in organisations (organisational behaviour, HRM)
Meso - structures, systems and strategies of organisations (organisation design)
Macro - organisations and markets in social systems and the global economy (MACC, strategy)
Key Managerial Issues in OrganisationDesign
1. How to allocate, coordinate and control tasks2. How to attract, select, reward and retain
employees3. How to group activities and employees into
departments, divisions and subsidiaries4. How to integrate and control operational units
for strategic goals5. Which activities and skills to keep in the
organisation and which to outsource6. How to manage relationships with suppliers,
customers, competitors, investors and other organisations
ORGANISATIONS AS OPEN SYSTEMS
COMPONENTS OF WORK ORGANISATIONS
1. Operating Core - those who transform the basic inputs into outputs
2. Middle Line - those who administer and supervise operators
3. Technostructure - those who standardise how work is carried out and controlled
4. Support Staff - those who provide support services for the organisation outside the operating workflow
5. Strategic Apex - those who allocate resources, manage relations with the environment and determine strategies and goals – the dominant coalition
DIMENSIONS OF ORGANISATIONS
• STRUCTURALFormalisationSpecialisationStandardisationAuthority HierarchyComplexityCentralisationSkill LevelPersonnel Ratios
• SYSTEMIC (CONTEXTUAL)SizeTechnologyEnvironmentGoals and Strategy
Culture
Concepts
• Resources– Firm specific, valuable, rare, difficult to imitate and
non-substitutable– They are the foundations of:
• Capabilities– At an abstract level, these can be thought of as the
ability to co-ordinate activities, learn within an organization, and re-configure resources
• Routines– Help to build resources and capabilities
PROBLEM OF LOCK-IN
CHARACTERISTICS OF FORDISM
• PRODUCTION SYSTEMS– Dedicated specialised machinery– Standardised products in long production runs– Standardised work processes– Infrequent and expensive product and process changes
• MARKETS– Stable mass consumption of standardised goods– Price based competition– Adversarial links with suppliers– Oligopolistic
• ORGANISATIONS– Mechanistic and bureaucratic– Inflexible with high fixed costs– Focused on efficiency and cost reduction– Narrow tasks and skills– Little or no task autonomy by workers
Fordism
The application of Fordist principles becomes counterproductive
An alternative production system to Fordism: Toyotaism
Models of Competition and Coordination I
Characteristics Fordism Customised Production
Diversified Quality
Production
Discontinuous Innovation
Examples Some cars, consumer
electronics, call centres
Some advertising agencies,
consultancies
Some cars, mechanical engineering
Biotechnology, some software
developers
Primary basis of market competition
Price Quality Quality Innovation
Production volumes Very large Limited Medium/High Medium/High
Standardisation of outputs
High Limited Medium Medium/High
Differentiation and change of products
Low Medium Medium High
Ability to respond quickly to competence destructive changes
Low Limited Limited High
Models of Competition and Coordination II
Characteristics Fordism Customised Production
Diversified Quality
Production
Discontinuous Innovation
Flexibility of work processes
Low Medium Medium High
Inter-firm relations Adversarial Cooperation with competition
Cooperation with competition
Adversarial but some narrowly
focused partnerships
Key organizational and managerial capabilities
Coordination and control
Integrating skills and adapting to
changing demands
Coordination and
organisational learning
Reconfiguring assets rapidly in
response to technical and
market opportunities
Organizational and Managerial Capabilities
Characteristics Coordinating Learning Reconfigurational
Competitive Focus Realise economies of scale and scope through systematic integration of work activities
Continual improvement of processes and products to meet changing conditions
Fast adaptation to rapidly changing market and technical contexts
Key Processes Establishing routines for controlling work and integrating activities
Continual collective problem solving and knowledge development
Rapid adaptation of work processes, skills and other assets to meet changing conditions
Involvement of Employees and Business Partners in Developing Capabilities
Varies High Considerable
Longevity of Employer-employee Commitment
Considerable for managers
Considerable for skilled workers
Limited
TOP MANAGEMENT ROLE IN ORGANIZATION DIRECTION, DESIGN AND EFFECTIVENESS – The
Traditional View
EFFECTS OF UNCERTAINTY AND BARGAINING ON STRATEGY FORMATION – An Alternative View
INFLUENCES ON TOP MANAGEMENT’S CHOICES OF STRATEGY I
• External Influences:– Ownership groups – Financial Markets– Lenders– Customers– Suppliers– Regulators– (Competitors)
• Influences from the nature of the Top Management Team (TMT):– Expertise and experience (HP – Fiorina; Halifax – Andy
Hornby)– Insiders vs outsiders (GM, HP – Fiorina, and
Apotheker)
DEFENDERS I
• STRATEGIC CHOICES:– DOMINATE NARROW DOMAIN BY PRICING
AND SERVICE– INCREMENTAL GROWTH– LITTLE SCANNING– IMITATIVE INNOVATIONS
• RISK:– MARKET CHANGES THREATEN NICHE
DEFENDERS II
• ENGINEERING CHOICES:– SINGLE CORE COST EFFICIENT
TECHNOLOGY– VERTICAL INTEGRATION– COST REDUCTION IMPROVEMENTS
• RISK:– MARKET CHANGES THREATEN
TECHNOLOGY
DEFENDERS III
• ORGANIZATION-DESIGN CHOICES:– MACHINE BUREAUCRACY– PRODUCTION AND FINANCE– INTENSIVE, SOLUTION-ORIENTED
PLANNING– HIGH STANDARDISATION AND
CENTRALISATION
• RISKS:– SLOW TO ADAPT
PROSPECTORS I• STRATEGIC CHOICES:
– CREATE AND EXPLOIT NEW PRODUCTS AND MARKETS
– BROAD AND DYNAMIC DOMAINS– DISCONTINUOUS GROWTH– SCANNING PRODUCT AND MARKET
ENVIRONMENTS– OFFENSIVE INNOVATIONS
• RISK: – EXTENDED RESOURCES AND LOW
PROFITABILITY
PROSPECTORS II
• ENGINEERING CHOICES:– FLEXIBLE, MULTIPLE TECHNOLOGIES– LIMITED MECHANISATION
• RISK: – FAILURE TO ACHIEVE TECHNOLOGICAL
ECONOMIES OF SCALE
PROSPECTORS III
• ORGANIZATION-DESIGN CHOICES:– ADHOCRACY– LARGE DYNAMIC COALITION - R&D, MARKETING– PRODUCT MARKET-BASED GROUPINGS– EXTENSIVE PROBLEM FINDING PLANNING– LOW STANDARDISATION, LOW
CENTRALISATION– ELABORATE LIAISON MECHANISMS
• RISK: – INEFFICIENT USE OF RESOURCES
ANALYSERS I• STRATEGIC CHOICES:
– COMBINE EXPLOITATION OF NEW PRODUCTS AND MARKETS WITH DOMINATION OF STABLE DOMAIN
– HYBRID DOMAINS– EFFICIENCY AND INNOVATION GOALS– SCANNING FOR MARKETS MORE THAN FOR
PRODUCTS– DEFENSIVE INNOVATIONS
• RISK: – IMBALANCE BETWEEN FLEXIBILITY AND
STABILITY
ANALYSERS II
• ENGINEERING CHOICES:– DUAL TECHNOLOGICAL CORE– INVESTMENT IN APPLIED RESEARCH
• RISK: – FAILURE TO ACHIEVE EITHER
INNOVATION OR EFFICIENCY
ANALYSERS III• ORGANIZATION-DESIGN CHOICES:
– DIFFERENTIATION TO FIT DISPARATE STRATEGIES
– MKTG AND APPLIED RESEARCH, CORE-PERIPHERY COALITION
– MATRIX STRUCTURE– INTENSIVE AND EXTENSIVE PLANNING– MIXED STANDARDISATION WITH NUMEROUS
CO-ORDINATION MECHANISMS
• RISKS: – FAILURE TO INTEGRATE EFFECTIVELY HIGH
CO-ORDINATION COSTS
ENVIRONMENTS, STRATEGIES AND TECHNOLOGIES
DEFENDERS PROSPECTORS ANALYSERS
ENVIRONMENTS
STABILITY HIGH LOW VARIED
COMPLEXITY LOW HIGH HIGH
HOSTILITY MEDIUM MEDIUM LOW
DISPARITY LOW LOW HIGH
ENVIRONMENTAL SCANNING
LIMITED BROAD BROAD
MKTG AND R&D MKTG AND R&D AND APPLIED RESEARCH
TECHNOLOGY
STABILITY HIGH LOW MIXED
COMPLEXITY LOW HIGH HIGH
DOMINANT COALITION
SIZE SMALL LARGE MEDIUM
STABILITY HIGH LOW MEDIUM
BACKGROUND PROD. FINANCE R&D MKTG. MKTG. APPLIED RES.
Managing inter-organisational relations: modes of co-ordination and influence
• Ownership links• Contractual links: alliances, joint ventures etc.• Inter-locking directorates• Transfer and exchange of executives/senior
managers• Profit pooling and federation of firms• Co-operative marketing• Advertising and public relations• Trade associations• Obligational contracting• Patent exchange and pooling
MECHANISTIC AND ORGANIC ORGANISATIONS
MECHANISTIC ORGANIC
Task Specialisation and Separation
Task and Skill Integration
Precise and Rigid Role Definitions
Diffuse and Flexible Roles
Vertical Co-ordination of Tasks Multiple Co-ordination and Responsibilities
Centralisation of Knowledge and Control
Diverse Sources of Knowledge and Expertise
Vertical Communication of Instructions and Decisions
Multiple Communication Channels for Information and Advice
Loyalty to Firm and Obedience to Superiors
Commitment to Tasks and to Expertise
CHARACTERISTICS OF DEVELOPMENT STAGES I
I II III IV
ENTREPRENEUR’L COLLECTIVITY FORMALIZATION ELABORATION
CHARACTERISTIC NON-BUREAUCRATIC
PRE-BUREAUCRATIC
BUREAUCRATIC DECENTRALIZED BUREAUCRATIC
STRUCTURE INFORMAL, ONE-PERSON SHOW
MOSTLY INFORMAL SOME PROCEDURES
FORMAL PROCEDURES DIVISION OF LABOUR ADD NEW SPECIALITIES
TEAM-WORK WITHIN BUREAUCRACY, SMALL COMPANY THINKING
PRODUCT/SERVICE
SINGLE PRODUCT/ SERVICES
MAJOR PRODUCT/ SERVICES
LINE OF PRODUCT/ SERVICES
MULTIPLE LINES
REWARD AND CONTROL SYSTEMS
PERSONAL, PATERNALISTIC
PERSONAL, CONTRIBUTION TO SUCCESS
IMPERSONAL, FORMALISED SYSTEMS
EXTENSIVE, TAILORED TO PRODUCT AND DEPARTMENT
FIVE PHASES OF ORGANISATIONAL DEVELOPMENT I
1 2 3
BIRTH GROWTH MATURITY
FREQUENT INNOVATION BROADEN PRODUCT LINES FEW CHANGES
FINDING UNFILLED NICHES
INCREMENTAL INNOVATION
FOLLOW COMPETITION
USE OF MIDDLEMEN MARKET SEGMENTATION BROADER MARKETS
VERTICAL INTEGRATION LOBBYING LARGE
SMALL RELATED ACQUISITIONS ENLARGED OWNERSHIP
ONE, OR FEW, OWNERS INCREASED SIZE DIVERSE BOARD
SIMPLE, CENTRALISED BROADER OWNERSHIP FUNCTIONAL
RISK TAKING FUNCTIONAL SALARIED MANAGERS
INCREASED STAFF LESS DELEGATION
LESS RISK TAKING EFFICIENCY FOCUS
CONSERVATIVE DECISIONS
FIVE PHASES OF ORGANISATIONAL DEVELOPMENT II
4 5
REVIVAL DECLINE
MANY INNOVATIONS PRICE CUTS
DIVERSIFICATION OUTDATED PRODUCTS
NEW MARKETS SHRINKING MARKETS
MANY OWNERS NO CLEAR STRATEGY
DIVISIONAL RESTRICTED OWNERSHIP
CENTRALISED STRATEGY SIMPLE STRUCTURE
DECENTRALISED OPS. CENTRALISED
INCREASED SCANNING LITTLE SCANNING
RISK TAKING EXTREME CONSERVATISM
LITTLE INNOVATION
RISK AVERSE
Phases of Organisational Decline: Problems and Remedies
Problem phases Remedies
Blinded Good information
Inaction Diagnose and implement change
Faulty Action Correct mistakes and maintain commitment
Crisis Effective re-organisation
Dissolution None
Corporate Turnaround:Phases in Revitalisation
• Facing the crisis: retrenchment and cost cutting: reactive phase
• Reinvestment: focusing on core skills and investing in them for the future
• Rebuilding: reshaping the organisation around the new goals and skills for the future
Leadership in CorporateTurnaround Situations
• New Visions
• Mobilising Commitment
• Changing routines and structures to support the new strategy