Strategy and Structure Chapter 11

Learning Objectives How strategy is implemented through the company's structure. Types and characteristics of the most common organization structures. Mechanisms to coordinate activities in structured organizations. Whether strategy and structure are aligned.

The Challenge of Strategy Coordination of….. Large employee workforce Dispersed geographically Working on multiple products / services Separated into functional departments (Marketing, Finance, Operations, etc.) Separated by layers of management

Structural Facets of Organizations Specialization Tendency to specialize as firms grow Creates efficiency Centralization Arises when Specialization occurs Someone must have the "big picture" Formalization Rules and procedures emerge to guide disparate departments

Structure Creates Challenges Communication Top down, bottom up, lateral Coordination "Left hand, right hand" Effects on other parts of the organization Control Location of decision making Type of decisions allowed

Five Coordinating Mechanisms

Mutual Adjustment Small group of people Tasks are well-known Employees are cross-trained Innovation may be required Means to success not clear

Standardization Where mutual adjustment among small group is no longer possible Work processes Flow of activity is important Employees are "interchangeable" Work skills Employee qualifications & certifications Work output Variation in effective approaches is possible

Direct Supervision Three conditions simultaneously Work process, and Work skills, and Work output is predictable & consistent

Coordination and Business Strategy Structure should support strategy! Determine business strategy approach Identify type of coordination needed Structure design allows for that coordination

Organizational Structures Simple structure Functional structure M-Form (Multidivisional structure) Business unit organization Geographic region organization Matrix structure Adhocracy

Simple Structure Single product / service New company / entrepreneurial orientation

Functional Structure Specialization is needed Allows for differing coordination methods within each department Sales & Marketing Department Research & Development Department Engineering Department Production & Operations Department Finance & Accounting Services Quality Assurance Department Corporate Planning Department President

M-Form (Multidivisional) Structure By strategic business units (SBUs) Similar functions within each SBU

M-Form (Multidivisional) Structure By customer type or geographic region Depends on how value is created within each unit

Matrix Structure Combines both functional & divisional forms Efficiency and effectiveness across units Complicated – decisions, resource sharing

Adhocracy (Holacracy) Structure Goals well-understood, but means unknown Creativity highly valued Duration of task is well-defined No real supervisors