Realizing Strategy ©2015 Robert M. Grant & Judith Jordan

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Realizing Strategy ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Learning Objectives By the time you have completed this topic you will be able to: understand how strategic planning links to operational planning, performance management and resource allocation in implementing strategy appreciate the basic principles that determine the structural characteristics of complex human organizations select the organizational structure best suited to a particular business context recognise how companies have been changing their organizational structures in recent years and the forces that have been driving these changes understand the role of organizational culture in realizing strategy ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

From Strategy to Execution The Generic Annual Strategic Planning Cycle ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

The need for COOPERATION The need for COORDINATION The Organizational Challenge: Reconciling Specialisation with Coordination and Cooperation High productivity requires SPECIALISATION The efforts of specialised individuals need to be integrated The need for COOPERATION The Agency Problem: Employees’ goals ≠ Owners’ goals The need for COORDINATION Managing interdependency THE ORGANIZATIONAL CHALLENGE To design structure and systems that: Permit specialization Create incentives to align individual and firm goals Facilitate coordination by grouping individuals and link groups with systems of communication, decision making and control ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Overcoming the Organizational Challenges of Managing Cooperation and Coordination Mechanisms for aligning goals Bureaucratic controls: rules and hierarchies of authority Performance incentives: paying for productivity Shared values: commonality of principles and values among organizational members Mechanisms for cooperation Rules and instructions Routines Mutual adjustment ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

How Hierarchy Economizes on Coordination ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Defining Organizational Units Tasks Products Geography Process Organizational units can be created around common tasks—i.e. grouping together employees who do the same job Organizational units can be based on groups of products which form business units Where a company serves a number of local markets, organizational units can be defined around these localities A process is a sequence of interlinked activities. An organization. The individuals who undertake a process need to be within the same organizational unit. Functional organizations tend to combine task-based and process-based grouping ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

A Functionally Structured Organizations ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

A Multi-Divisional Structure: General Electric in 2009 ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

A Matrix Organization: The Royal Dutch Shell Group Before 1996 ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Beyond Hierarchy: Alternative Organizational Forms Adhocracies: Flexible, informal organizations with little formal structure where coordination is through presence of shared values, shared commitment, mutual respect and ease of communication Team-based and project-based organizations: Organizations made up on multiple collaborative teams, often organized around specific projects—separate work assignments of limited duration Networks: Groups of independent but closely-interdependent specialist firms typically located in close proximity to one another ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Beyond Hierarchy: Alternative Organizational Forms Common characteristics Focus on coordination rather than control Reliance on coordination by mutual adjustment Individuals occupy multiple organizational roles ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Corporate vs Organizational Culture Corporate Culture The values and ways of thinking and acting that senior managers encourage within their organizations Organizational Culture The values, ways of thinking and acting that exist informally within work organizations ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com

Some Key Questions Can organizational cultures be managed? People are not easily manipulated Attempts to change attitudes may be met with cynicism or resistance How does culture affect performance? It is difficult to measure broad concepts like culture and performance Limited empirical evidence ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com