Organising for Success 1 Organising for Success Outline

Organising for Success 1 Organising for Success Outline (1) Key challenges in organising for success Control, knowledge management, coping with change, response to globalisation Structural types of organisations Strengths and weaknesses Organisational processes Planning systems, performance targets

2 Organising for Success Outline (2) Management of internal and external relationships Help or hinder success Three reinforcing strands for organising configurations Structure, processes and relationships Implications of configurations for organisational performance and change 3 Organisational Configurations

Exhibit 8.1 4 Organisational Configuration (1) An Anorganisations organisationsconfiguration configurationconsists consistsof ofthe thestructures, structures,processes processes and andrelationships

relationshipsthrough throughwhich whichthe theorganisation organisationoperates operates Structural design Roles, responsibilities and lines of reporting Importance of knowledge management Risk of undermining strategy implementation 5 Organisational Configuration (2) Processes

Supporting people Influence success/failure Define how strategies made and controlled Define interactions and strategy implementation Relationships Between organisational units and the centre (parenting) Outside firm, e.g. outsourcing and strategic alliances 6

Organisational Structure Organisational structure describes: Who is responsible for what Patterns of communication and knowledge exchange Skills required to move up the organisation Types of structure Emphasis on one structural dimension Functional; Multidivisional; Holding Types of structure Mixture of structural dimensions

Matrix; Transnational; Team; Project 7 Organisation Design Challenges shaping structure Organisational size Extent of diversification

Type of technology Control Change Knowledge Globalisation 8 A Functional Structure Exhibit 8.2 9 A Multidivisional Structure

Exhibit 8.3 10 A Holding Company (1) Investment company Shareholdings in variety of separate businesses Subsidiary businesses operate independently, have other shareholders and retain original company name Portfolio parenting role 11 A Holding Company (2) Characteristics Flexible

Bring in outside shareholders as partners Sell subsidiaries as conditions change Hard to control Hands-off management style Rights of outside shareholders Difficult knowledge sharing little synergy 12 A Multinational Matrix Structure Exhibit 8.4a 13

A Matrix Organisation in a School Exhibit 8.4b 14 A Transnational Structure Exploits knowledge across borders Gets the best of multi-domestic and global strategy High local responsiveness High global coordination National units operate independently, but are a source of ideas and capabilities for the whole organisation National/regional units achieve greater scale economies by specialising

Corporate centre manages global network 15 Multinational Structures Source: Reprinted with permission of Harvard Business School Press. Adapted from C. Bartlett and S. Ghoshal, Managing Across Borders: The transnational corporation, 2nd edition, Random House, 1998. Copyright 1998 by the Harvard Business School Publishing Corporation; all rights reserved. Exhibit 8.5 16 Roles within Transnationals (1) Product or business managers

Further global competitiveness across borders Product/market strategists Architects of business resources & competences Drivers of product innovation Coordinators of transnational transactions Country or territory managers Sensors of local needs Build unique competences to become centre of excellence

17 Roles within Transnationals (2) Functional managers Champion worldwide innovation and learning Scan for best practice and cross-pollinate Corporate managers Integrate roles and responsibilities Leaders and talent spotters 18 Team-based Structure Combines both horizontal and vertical co-ordination through cross functional teams

Often built around business processes Contains mixture of specialists Advantages Good for knowledge sharing Flexible Highly motivated Disadvantages Complexity Difficulties of control Problems of scaling up 19 Project-based Structure (1) Teams created, undertake the work, then dissolved For large expensive items or limited time events

Constantly changing organisational structure Collection of project teams Created and steered by small corporate group Set up ad hoc taskforces for new elements of strategy to provide momentum 20 Project-based Structure (2) Advantages

Flexible Good accountability and control (clear tasks/defined time) Effective knowledge exchange Attract international members due to short project times Disadvantages Possible lack of coordination Proliferation of projects Breaking up teams hinders knowledge accumulation 21 Comparison of Structures

Exhibit 8.6 22 Comparison of Structures Challenge Structure Functional Control Change Knowledge

Globalisation *** * ** * Multidivisional ** **

* ** Holding * *** * ** Matrix

* *** *** *** Transnational ** *** ***

*** Team * ** *** * Project **

*** ** ** 9 Design Tests for Organisation Structure (1) Fit with key objectives and constraints 1. Market advantage test Structure follows strategy 2. Parenting advantage test

Fit with parenting role of corporate unit 3. People test Fit people available 4. Feasibility test Fit legal, stakeholder, union constraints Goold and Campbell 2002 24

9 Design Tests for Organisation Structure (2) General design principles 5. Specialised cultures test Value of close collaboration of specialists 6. Difficult links test Links which may strain the organisation 7. Redundant hierarchy test

Too many management layers blockages/ expense 8. Accountability test Clear lines of accountability control 9. Flexibility test To what extent design allows for future change 25 Types of Control Processes

Exhibit 8.7 26 Control Processes (1) Direct supervision Direct control of strategic decisions Often small/family businesses Need thorough understanding of business Can be effective in crisis

27 Control Processes (2) Planning processes Administrative control Planning and control of resource allocation and monitoring resource utilisation Budgeting Support strategy via Standardisation of work processes (e.g. ISO 9000) Enterprise resource planning (ERP) systems Formulae (e.g. public service budgets per capita) 28

Bottom-up Business Planning 29 Control Processes (3) Self-control Integration of knowledge and coordination of activities by direct interaction of individuals without supervision Managers shape the context Provide the channels of interaction (e.g. IT) Support with resources 30 Control Processes (4) Personal Motivation

Influenced by leadership style Importance of credibility Professional role model (Grinding) Supporting individuals (Minding) Securing resources (Finding) 31 Control Processes (5) Cultural processes Organisational culture and standardisation of norms Foster innovation in complex/dynamic environments Collaborative culture communities of practice Danger of core rigidities Training and development

32 Control Processes (6) Performance targeting processes Focus on outputs of an organisation, e.g. quality, revenues or profit Public service move to measuring outcomes Balanced scorecards Combine qualitative and quantitative measures Acknowledge expectations of different stakeholders Relate assessment of performance to choice of strategy 33 The Balanced Scorecard An Example

34 Control Processes (7) Market processes Use of internal markets for control Formalised system of contracting for resources/inputs within the organisation Internal market Competitive bidding Transfer pricing Service-level agreements Market processes Disadvantages

Time spent on bargaining Creation of bureaucracy Dysfunctional competition, destroying collaborative culture 35 Relating Internally and Externally Exhibit 8.10 36 Relating Internally Relating to the Centre Devolution delegation of decision making appropriate for fast moving markets - decisions close to action

Centralisation vs. devolution Relating over strategy Division of responsibilities for strategic decision making Relating over strategy Goold and Campbells 3 strategy styles: Strategic planning style parent as master planner Financial control centre sets financial targets, allocates resources, appraises performance Strategic control centre shapes behaviour and context 37 Strategic Planning

Exhibit 8.11 38 Financial Control Exhibit 8.12 39 Strategic Control Exhibit 8.13 40

Relating Externally (1) Outsourcing Management of external suppliers/distributors Education on strategies, priorities and standards Tie in via ERP systems or manage by cultural processes/norms Strategic alliances Range from contractual to relational Importance of trust 41 Relating Externally (2) Networks Cooperation key for organising for success Teleworking, federations of experts, one-stop shops, service

network Value of nodal position 3 requirements for nodal position: compelling vision unique resources or competences networking skills 42 Joined up services: Smoothing the Network Exhibit 8.14 43

Relating Externally (3) Virtual organisation Held together by partnership, collaboration and networking Not by formal structure and physical proximity Danger of remoteness from learning, loss of core competence 44 Configurations (1) Organisations configuration How structures, processes and relationships work together consistently Stereotypical configurations (Mintzberg)

Simple Machine bureaucracy Professional bureaucracy Divisionalised Adhocracy Missionary 45 Mintzbergs six organisational configurations

Exhibit 8.15 46 Mintzbergs 6 Organisational Configurations (1) Design parameters Situational factors Config. Simple

Machine Bureaucracy Professional Bureaucracy Environment Simple/dynamic Hostile Simple/static Complex/ static

Internal Small Young Simple tasks Old, Large Regulated tasks, Technocrat control Simple systems Professional control Typical

Structure CEO-control Functional Functional Key Processes Direct supervision Planning systems Cultural processes Self-control

Typical Relationships Centralised Centralised Strategic planning Devolved Mintzbergs 6 Organisational Configurations (2) Design parameters

Situational factors Config. Divisionalised Adhocracy Missionary Environment Simple/static Diversity Complex/ dynamic

Simple/static Internal Old Very large Divisible tasks Middle-line control Often young Complex tasks Expert control Middle-aged Often enclaves

Simple systems Ideological control Typical Structure Multidivisional Projects Teams Key Processes Performance targets

Markets Cultural processes Self-control Cultural processes Typical Relationships Devolved Financial or strategic control Networks and

alliances Networks Configurations (2) Reinforcing cycles and implications for change Created by dynamic interaction between environment, configuration and elements of strategy Tend to preserve status quo Managing dilemmas in configurations Trade-offs between elements 49 Reinforcing Cycles: Two Examples (1)

Exhibit 8.16a 50 Reinforcing Cycles: Two Examples (2) Exhibit 8.16b 51 Configurational Dilemmas Exhibit 8.17 52

Strategy and Structure Structure follows strategy (Chandler 1962) Adapt the organisation according to the strategy Strategy follows structure (Hall & Saias 1980) Existing organisational structure determines strategic opportunities Structure follows strategy as the left foot follows the right (Mintzberg 1990) Reciprocal relationship 53 Key Points (1)

Organising for success concerns organisational configuration Structure, Processes, Relationships Successful organisation depends on response to key challenges Control, Change, Knowledge, Globalisation Many structural types (e.g. functional, divisional, matrix) Organisational processes facilitate strategy Focus on inputs or outputs Direct or indirect 54 Key Points (2)

Relationships are important for success Centralisation versus devolution Strategy style Choices about outsourcing, alliances, networks and virtuality Coherent organisational configuration Mintzbergs stereotypical organisations Organisational design dilemmas Reinforcing cycles 55 Class room test 01 Introduce your company or any other company you know.

Show what type of organizational structure it has and due to its structure what advantages and disadvantages spelled out? (20 Marks) 56 Class room test 02 Identify 07 types of controlling processes available in your working place or any other organization. You have to bring down actual examples for each. (20 Marks) 57

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