Structure, Strategy and Systems_FINAL CLASS (1)

7/29/2019 Structure, Strategy and Systems_FINAL CLASS (1)

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Strategy, Structure &Systems

Prof. Subir Verma

Organization BehaviorIIM Ranchi


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Strategic Logic of the firm

Management Processes

Resources and Capabilities

Operations

Products

Product Market Competitors

Resource

markets

Competitionfor resources

Flow of decisions, resources,information, knowledge and incentives

Product

competition

Flow of

data and

resources

Firm as an Open SystemBoundary of the firm


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Th e system is co m posed of subsystems as diagra m med be low :

InputTransformati

Process

Output

Boundar

SpanninProduction,Maintenanc

Adaptation

M anageme n

Boundar

Spannin

Environme

Raw materi

PeopleInformation

resourcesFinancial

resources

Subsystems

Product

and

Services


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Organizations, Resources andCapabilities, And Competitive

Advantage Sustainable Competitive Advantage requirescompeting from inside out.

Capability based competition is related to the

amount of resources an organization has and

controls (vis--vis others in an open

environment)

Organizations attempt to manage theirtransactions with the environment to ensure

access to resources.


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A Model of OrganizationalDesign

Structure

Strategy

Work Processes Staff/Skills

Systems

Style/

Shared Values

Histor

y


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Design for sustainableexcellence: Internal and External

Fit

Structure

Strategy

Work Processes Staff/Skills

Systems

Style/

Shared Values

Histor

y

Environment

Internal Fit

External Fit


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The OrganizationalEnvironment


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Sources of Uncertainty inthe OrganizationalEnvironment

1. Environmental complexity: the strength, number,

and interconnectedness of the specific and general

forces that an organization has to manage

2. Environmental dynamism: the degree to which

forces in the specific and general environments

change quickly over time

3. Environmental richness: the amount of resources

available to support an organizations domain


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Three Factors Causing

Uncertainty


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Environmental Uncertaintyand Structure


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Mechanistic and Organic

Structures


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Task and Role

Relationships


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Organizational Structure

Definition

Structure refers to the formal configuration

between individual and groups with respect to

the allocation of tasks, responsibilities, and

authority within an organization.


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Organizational Structure

At times built; Could be/Are imitations; Reflect the

current fad in their design.

They are emergent, a medium of control and a

product of interaction.

They are both constituted and constitutive!


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Structure perform 3 functions

1. They produce organisational outcomes andachieve organisational goals.

2. They are designed to minimise/ regulate individual

variations on the organisation.

3. Structures are settings in which power is

exercised, in which decisions are made and inwhich organisation activities are carried out


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Dimensions of Structure

1. Complexity

2. Formalization

3. Centralization


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Symptoms of Structural Deficiency

1. Decision making is delayed or lacking in quality:

WHY?

Hierarchy

Insufficient Delegation

Information may not reach the right people

Inadequate Horizontal or Vertical Linkages


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Symptoms of Structural Deficiency

2. The organisation does not respond

innovatively to a changing environment:

WHY? Lack of co-ordination between

relevant departments: Marketing,

R&D and Strategic


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Symptoms of StructuralDeficiency

3. Too much conflict is evident:

WHY?

Horizontal linkage mechanisms are

not adequate.


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Choice points for Vertical Linking

Mechanisms

Information capacity of the mechanism

Degree of Vertical

Coordination

Required

Low

High

High

Vertical information

system

Add positions to hierarchy

Rules and Regulations

Hierarchical referral


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Choice points for Horizontal Linking

Mechanisms

Teams

Information capacity of the mechanism

Degree of

Horizontal

Coordination

Required

Low

High

High

Liaison Roles

Direct Contact

Task Forces

Full Time Integrators


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Structure, Contingency andConfiguration No best structure

It depends on the contingency faced by the

organization

Contingencies relate to Environment,

Strategy

Technology Size


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Structure & Orgs need for Efficiencyand Learning

Vertical:

Control, efficiency,

stability, reliability

Horizontal:

Coordination, innovationLearning, flexibility

Functional Functional +

teams/integrators Divisional Matrix Horizontal


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A comparison of organizationalstructuresFunctional Divisional Matrix Network

Division ofLabour

By inputs By outputs By input &outputs

By knowledge

Coordination Hierarchy +plans

Division GM Dual reporting Cross functionalteams

Decision rights Highlycentralized

Separation ofstrategy &execution

shared Highlydecentralized

Boundaries Core/periphery Internal &external mkt

Multipleinterfaces

Porous &changing

Informalstructure low modest considerable high

Politics Inter-functional Corp division Along matrix Shiftingcoalitions

Basis of authorityPositional &functional

General Mgt Negotiatingresources


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Relative advantages & disadvantages ofdiff structuresFunctional Divisional Matrix Network

Resourceefficiency

excellent poor moderate Good

Time efficiency Poor Good moderate Excellent

Responsiveness Poor Moderate Good excellent

Adaptability Poor Good Moderate Excellent

Accountability Good Excellent Poor Moderate

Environment bestsuited for

Stable Heterogeneous Complex Volatile

Strategy bestsuited

Focused/lowcost

diversified responsiveness

innovation


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Front-backhybrid organization:

emergingOrganizational form


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Factors shaping global

organization Level of international development: export, JV, subsidiary Role assigned to subsidiary

% of assets and management located outside the home country Cross border coordination

Fixed costs Homogeneity of products and markets Customers, competitors and suppliers

Transportability Active Host Government Diversity of International Business Portfolio: degree to which the

business logic is same or diverse.


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Hybrid organisation:

A two line organisation front end: focused on the customer back end: focused on products

Front end can be geographical or market

segment based Back end supplies all customers Both are multifunctional units This model separates the value chain in to two

specialised halves Examples-IBM,citibank


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Front-back structure:

CEO


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Need/requirement:

To simultaneously achieve global scale and

local customer responsiveness

Back end provides the global scale. For e.g.

R&D, procurement, manufacturing Front end achieves responsiveness by being

located closer to the customer


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Unique structure:

Difference from matrix structure-

none of the functions have two bosses

From country organisation-

front and back end units located in same

country are separate profit centres

Worldwide business unit structure

back end equally serves all the front

ends


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Examples: citibank

Front end is structured around industry and

subdivided by customers

Back end is organised around products to

take the advantage of the scale and expertise A global relationship manager is assigned to

each customer and local relationship

managers report to them and not countrymanagers


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Citibanks structure


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Factors behind hybridstructure: Customers can buy all products

Customer want single point of contact

Customer want sourcing partnership

Customer wants solutions and system

Opportunity for cross selling and bundling

Customer specific value addition

Advantages to be gained by better customer

and segment knowledge


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Challenges:

Challenges due to complexity and inherentconflicts

How to integrate front and back end to

produce a viable organisation

three approaches to manage conflicts-

use of management processes

use of market mechanism

only using front or back end and

partnering with other company to perform

other function


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New questions:

Which function belong to which end?

Some times depends on the customers

dictates

Trend is towards moving more activities

towards the front end

Some times this is resolved by division of

function in back and front end Eg. Marketing, production


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Balance:

What is the balance between the front and

the back?

One way is by making one end as profit

center and another as cost center If both profit centers then give priority

Balance can be achieved by dialogue

between the two ends


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links

What are the links between the front and the

back ?

Some kind of matrix structure can be used for

this A nodal person can be appointed to facilitate

the link

A different reward system can help infacilitating link


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Integration by market:

Back and front end organisations are linked

by market forces

SBU(strategic business units )for back end

and RBU(regional business unit) for front end Interaction between two is purely commercial

Eg. Acer


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Interorganizational Strategies forManaging Uncertainties because of

Resource Dependencies Interdependencies that needs to bemanaged. Symbiotic interdependencies:

interdependencies that exist between anorganization and its suppliers and distributors

Competitive interdependencies:

interdependencies that exist among organizationsthat compete for scare inputs and outputs


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Strategic Response toCompetition and Uncertainty Grow: by being unique through pioneering

customized, highly differentiated, high quality andtechnologically superior new products

Manage Risk by controlling the environmentthrough forward and backward integration, lobbyingand strategic alliances

Buffet/Insulate: by sticking to the knitting,controlling, centralizing and emphasizing internalefficiency and technical efficiency.


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Top Management Styles

Management Styles are styles of top

management with respect to its integrating

ideology, strategic orientation, goal setting

performance control, coordination and staffmotivation.


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Conservative .. EntrepreneurialStrategic goals

Intuitive Professional

Processes in Decision making Authoritarian Participative

Style & Mechanisms of Decision Making

Bureaucratic OrganicMode of Management Familial Altruistic

Concerns of the organizational Goals


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Organizing in India: Public SectorEnterprises

Strategic development organizations in domainsthat were either critical for economic

development or unattractive for privateinvestments Employed High End and the Best Human

Capital

In a situation of resource scarcity, emphasis oncosts, control, efficiency and accountability.

Management style was bureaucratic,conservative and authoritative


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Some findings from recentsurvey Air India Kingfisher Airlines Indian Airlines Power Grid TCS

CSC HSS GECIS Nokia CNBC

Reliance Info Com Dabur Pharma

ICICI Bank ICICI Lombard PNB RBI Dupont

IFFCO Tata Steel NTPC ONGC Tata Motors

Maruti Ranbaxy Delphi


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Strategic Domain of theorganizations

V. no. Dimension HighPerformers

LowPerformers

01 Turbulence in input and outputmarket

58.544.1

46.343.7

02 Complexity in extent ofregulation, factors, clientpreferences/demand

71.154.8

68.458.4

03 Richness in terms ofcompetition and market

77.255.8

63.554.2

Overall Strategic Domainfavourable for innovation

68.951.6

61.252.0


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Strategic Choices by theorganizationsV. no. Dimension High

Performers

Low

Performers

01 Strategic choice to be uniqueand to grow throughpioneering, customized, highly

differentiated, high quality,technologically superiorproduct and services

76.560.5

55.452.5

02 Management of Risk throughforward and backwardintegration, lobbying andcollaborating.

62.151.1

68.251.5


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V. no. Dimension High

Performers

Low

Performers

01 Entrepreneurial Style 72.857.7

56.7

46.2

02 Professional Style 72.9

58.9

62.6

51.003 Organic Style 70.0

58.2

55.0

46.9

04 Altruistic Style 75.261.4

64.7

64.0

05 Participative Style 68.057.7

54.5

45.4

Management Style favourableto Growth

71.858.8

58.750.5

Management Practices for Growth thru


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Management Practices for Growth thru

InnovationV. no. Dimension HighPerformers

LowPerformers

01 Brainstorming 69.9, 61.6 59.1,56.1

02 Boundary Spanning 71.7,62.2 55.0,49.2

03 Benchmarking 73.8, 66.8 62.0, 50.2

04 Quality Orientation 76.0, 67.6 61.8,49.7

05 Technical Collaboration 69.9, 60.5 56.9, 45.4

06 Operational Flexibility 64.9, 55.1 54.1, 47.4

07 Planning for innovation 70.9, 60.1 63.9, 48.0

08 Reward System for creative ideas 73.8, 59.7 52.8, 46.4

09 Post implementation review of

innovation

72.0, 58.4 58.8, 46.7


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Management Practices for Growth thruInnovationV. no. Dimension HighPerformers

LowPerformers

10 Cross functional teams 65.8, 57.7 51.4, 43.1

11 Top Management Support 74.7, 65.6 62.2, 51.1

12 Intrapraneurship 64.3, 55.6 48.7, 40.1

13 Strategy for forcing pace of innovation 73.3, 59.2 54.7, 43.0

14 Focus on product innovation 64.5, 54.8 55.8, 44.7

15 Implementation of new processes 76.5, 61.2 62.5, 49.5

16 Implementation of administrative andmanagerial innovations

70.8, 59.6 61.5, 49


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Management Practices formanaging risk


LowPerformers

1 Product Differentiation 65, 57 68,55

2 Forward Integration 59, 45 64,46

3 Backward Integration 57, 45 63, 49

4 Lobbying 56, 49 70, 56

5 Collaboration 74, 63 75, 57


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Corporate Excellence


LowPerformers

Overall Management Practices andorganizational processes favourable to

growth

70.8

60.4

57.2

48.6

Corporate Effectiveness 81.0

67.9

61.6

57.1


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Org designs for InnovativeExcellence

Turbulence

ComplexityRichness

GrowthRisk

Entrepreneurial

Professional

Organic

Participative

Bureaucratic

Altruistic

Managementof Innovation

CorporateExcellence

StrategicDomain of

Organizations

Top

ManagementStyles


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Framework for YourOrganizations

Transformation. ??Leadership

StructureWork Processes

CultureTalent

Environment

Histor

y

f i


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Corporate TransformationModel

Quality of Performance of each unit

Quality

ofintegrat

ion

across

units

Regeneration

Balance discipline,support, stretch and

trust

Corporatization

Integrate acrossunits

Rationalization

Instill discipline and

support

Revitalization

Build stretch

and trust

BA

C


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Remember

Most people most of the time do

not imagine a future different from

the present.


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BEST of LUCK and GODBLESS

Structure, Strategy and Systems_FINAL CLASS (1)

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