Lecture 10 Organising for success (Strategy in Action) Update

Learning outcomes Analyse main organisational structural types in terms of their strengths and weaknesses. Identify key issues in designing organisaitonal control systems. Recognise how the three strands of strategy, structure and systems should reinforce each other in organisational configurations and the managerial dilemmas involved.

Role of organisational configuration Organisational configuration is concerned with interdependency between organisational structure, strategy and systems. How do you understand this? e.g., organisational elements, structure and systems can shape strategy; structure can be reshaped to align with strategy. Organisational structure? Organisational systems?

Role of organisational configuration

Structural types Four basic structural types: Functional, divisional, matrix, and network (and project structure, the fifth)

Functional Structures Functional Structures group people with similar skills Departmentalization Grouping people and jobs into a work unit Functional Structure Work units have similar skills and tasks such as finance, marketing, production and human resources.

Divisional Structure Divisional structures group together people who work on a similar product, work in the same geographical region, or serve the same customers.

Matrix Structure Uses permanent cross functional teams to try to gain the advantages of both the functional and divisional approaches

Network Structure

Project-based structure

Choosing structures Each structure has its own advantages and disadvantages. Choice of a structure is based on four general criteria: The need for control over strategy implementation The speed of change and the increased levels of uncertainty the growing importance of knowledge creation and knowledge-sharing The rise of internationalisation

Choosing structure Criteria for structural choice Functional Divisional Matrix Network The need for control over strategy implementation X The speed of change and the increased levels of uncertainty The growing importance of knowledge creation and knowledge-sharing The rise of internationalisation

Organisational control systems Types of control systems Input Output Direct Planning systems Performance targeting Indirect Cultural systems Internal markets

Planning systems Planning systems plan and control the allocation of resources and monitor their utilisation. The focus is on the direct control of inputs in terms of… Financial inputs Human inputs Long-term investments

Cultural systems Cultural systems aim to standardise norms of behaviour within an organisation in line with particularly objectives. Cultural systems exercise an indirect form of control. Why? Key cultural systems are recruitment, socialisation, and reward. Cultural systems exercise an indirect form of control, because of not requiring direct supervision but self-control by employees. Key cultural systems are recruitment, socialisation, and reward.

Performance targeting systems Performance targeting systems focus on the outputs of an organisation, e.g. KPIs the Balanced Scorecard approach financial, customer, internal, and innovation and learning perspectives. Performance targeting systems focus on the outputs of an organisation (or part of an organisation), such as product quality, revenues or profits, which are often know as key performance indicators (KPIs). The most fundamental has been the development of the Balanced Scorecard approach, which combines four specific indicators:

Internal market systems Market disciplines (or internal markets) can be brought inside organisations to control activities internally. Market systems involves some formalised system of internal transfer of resources between units. The control focuses on outputs. Why? The control is indirect. Why? The control focuses on outputs: ‘contracting’ for resources or inputs from other parts of an organisation and for supplying outputs to other parts of an organisation. The control is indirect: rather than accepting detailed performance targets determined externally, units have simply to earn their keep in competitive internal markets.

Configurations Configurations are the set of organisational design elements that interlink together in order to support the intended strategy. The McKinsey 7-S framework highlights the importance of fit between strategy, structure, systems, staff, style, skills and superordinate goals.

The McKinsey 7 Ss Three hard Ss: strategy, structure, and systems Four soft Ss: skills, staff, style, and shared value

The McKinsey 7S Framework: Learn How to Align all Parts of Your Organization's Strategy

The McKinsey 7 Ss The McKinsey 7-S framework implies three minimum aspects of organising… Organising involves a lot more than just getting the organisational structure right; there are many other elements to attend to, It emphasises fit between all these elements: everything from structure to skills needs to be connected together; If managers change one element of the 7-S, the concept of fit suggests they are likely to have to change all the other elements as well in order to keep them all appropriately aligned to each other.

Configuration dilemmas? (self-guided study) Is fit between elements easy to achieve in practice? Why if yes or no?