Strategic Organization Structure and Human Resource Management (Aligning Organization Structure and Human Resources Management to Business Stratgy)

Alignment Framework Business Strategy Organization Structure Human Resources Management “HR systems and the organization structure should be managed in a way that is congruent with organizational strategy (hence the name ‘matching model)” (Fombrun et al, 1984).

Business Strategy Basic Concept Strategy is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. (Chandler, 1962) Business strategy is concerned with the match between the internal capabilities of the company and its external environment. (Kay, 1999) A strategy, whether it is an HR strategy or any other kind of management strategy, must have two key elements: there must be strategic objectives (i.e. things the strategy is supposed to achieve), and there must be a plan of action (i.e. the means by which it is proposed that the objectives will be met). (Richardson and Thompson, 1999)

Business Strategy Basic Concept The concept of strategy is based on three subsidiary concepts: competitive advantage, distinctive capabilities and strategic fit. Competitive advantage, Porter asserts (1985), arises out of a firm creating value for its customers. To achieve it, firms select markets in which they can excel and present a moving target to their competitors by continually improving their position. Porter emphasized the importance of: differentiation, which consists of offering a product or service ‘that is perceived industry-wise as being unique’; and focus – seeing a particular buyer group or product market ‘more effectively or efficiently than competitors who compete more broadly’. He then developed his well-known framework of three generic strategies that organizations can use to gain competitive advantage. These are: innovation – being the unique producer; quality – delivering high-quality goods and services to customers; cost leadership – the planned result of policies aimed at ‘managing away expense’.

Business Strategy Basic Concept Distinctive capabilities A distinctive capability or competence can be described as an important feature that in Quinn’s (1980) phrase ‘confers superiority on the organization’. Distinctive capabilities or core competences describe what the organization is specially or uniquely capable of doing. Distinctive capabilities are those characteristics that cannot be replicated by competitors, or can only be imitated with great difficulty. Prahalad and Hamel (1990) argue that competitive advantage stems in the long term when a firm builds ‘core competences’ that are superior to its rivals and when it learns faster and applies its learning more effectively than its competitors. Four criteria have been proposed by Barney (1991) for deciding whether a resource can be regarded as a distinctive capability or competency: value creation for the customer; rarity compared to the competition; non-imitability; non-substitutability.

Business Strategy Basic Concept Strategic fit The concept of strategic fit states that to maximize competitive advantage a firm must match its capabilities and resources to the opportunities available in the external environment. As Hofer and Schendel (1986) conclude: ‘A critical aspect of top management’s work today involves matching organizational competences (internal resources and skills) with the opportunities and risks created by environmental change in ways that will be both effective and efficient over the time such resources will be deployed.’

Business Strategy Basic Concept Craft a Strategy to Achieve Objectives Set Develop a Strategic Vision and Mission Implement Execute Improve/ Change Revise as Needed Recycle as Needed Task 1 Task 2 Task 3 Task 4 Task 5 Monitor, Evaluate, and Take Corrective Action The Five Tasks of Strategic Management

Business Strategy Basic Concept The systematic approach to formulating strategy 1. Define the mission. 2. Set objectives. 3. Conduct internal and external environmental scans to assess internal strengths and weaknesses and external opportunities and threats (a SWOT analysis). 4. Analyse existing strategies to determine their relevance in the light of the internal and external appraisal. This may include gap analysis, which will establish the extent to which environmental factors might lead to gaps between what could be achieved if no changes were made and what needs to be achieved. The analysis would also cover resource capability, answering the question: ‘Have we sufficient human or financial resources available now or that can readily be made available in the future to enable us to achieve our objectives?’ 5. Define in the light of this analysis the distinctive capabilities of the Organization.

Business Strategy Basic Concept The systematic approach to formulating strategy 6. Define the key strategic issues emerging from the previous analysis. These will be concerned with such matters as product-market scope, enhancing shareholder value and resource capability. 7. Determine corporate and functional strategies for achieving goals and competitive advantage, taking into account the key strategic issues. These may include business strategies for growth or diversification, or broad generic strategies for innovation, quality or cost leadership; or they could take the form of specific corporate/functional strategies concerned with product-market scope, technological development or human resource development. 8. Prepare integrated strategic plans for implementing strategies. 9. Implement the strategies. 10. Monitor implementation and revise existing strategies or develop new strategies as necessary.

ORGANIZATION STRUCTURE

ORGANIZATION STRUCTURE TYPES OF ORGANIZATION STRUCTURE

Evolusi Bentuk Struktur Organisasi Hybrid Process-base Matrix Divisional Functional

Functional Organization

The Functional Form Advantages Disadvantages Promotes skill specialization Reduces duplication of scarce resources and uses resources full time Enhances career development for specialists within large departments Facilitates communication and performance because superiors share expertise with their subordinates Exposes specialists to others within same specialty Emphasizes routine tasks; encourages short time horizons Fosters parochial perspectives by managers and limits capacity for top-management positions Multiplies interdepartmental dependencies; increases coordination and scheduling difficulties Obscures accountability for overall results

The Divisional Organization Basis of Division: Product Customer Regional

The Divisional Form Advantages Disadvantages Recognizes interdepartmental interdependencies Fosters an orientation toward overall outcomes and clients Allows diversification and expansion of skills/training Ensures accountability by departmental managers and promotes delegation Heightens departmental cohesion and involvement in work May use skills and resource inefficiently Limits career advancement by specialists Impedes specialists’ exposure to others within same specialties Puts multiple-role demands upon people and creates stress May promote departmental objectives as opposed to overall organizational goals

The Matrix Organization

The Matrix Structure Advantages Disadvantages Makes specialized, functional knowledge available to all projects Use people flexibly Maintains consistency by forcing communication between managers Recognizes and provides mechanisms for dealing with legitimate, multiple sources of power Can adapt to environmental changes Can be difficult to implement Increases role ambiguity, stress, and anxiety Performance is lowered without power balancing between projects and functions Makes inconsistent demands and can promote conflict and short-term crisis orientation May reward political skills over technical skills

The Process-Based Structure

Process-base Structure Top Management Team Process Owner Team 1 Team 2 Team 3 Market Analysis Research Product Planning Testing Customer New Product Development Process Process Owner Team 1 Team 2 Team 3 Customer Analysis Purchasing Material Flow Distrib. Procurement and Logistics Process

Characteristics of Process-Based Structures Processes drive structure Work adds value Teams are fundamental Customers define performance Teams are rewarded for performance Teams are tightly linked to suppliers and customers Team members are well informed and trained

The Process-Based Form Advantages Disadvantages Focuses resources on customer satisfaction Improves speed and efficiency Adapts to environmental change rapidly Reduces boundaries between departments Increases ability to see total work flow Enhances employee involvement Lowers costs dues to overhead Can threaten middle managers and staff specialists Requires changes in command-and-control mindsets Duplicates scarce resources Requires new skills and knowledge to manage lateral relationships and teams May take longer to make decisions in teams Can be ineffective if wrong processes are identified

Hybrid Structure CEO Executive Committee National Companies Germany Power Transformers Power Generation Robots 47 Other Business Areas Germany U.S.A National Companies Norway 137 Other National Companies

Hybrid structure The pure types of structure rarely exist Most are hybrids of different kinds Common hybrid 1: functional and divisional Common hybrid 2: functional and horizontal Five Alive: an example of a hybrid structure

Aligning Organization Structure To Business Strategy

Alfred Chandler’s “structure follows strategy” concept assumes the necessity for organizational structural design changes to meet the demands of strategic goals.

DIMENSIONS OF ORGANIZATION STRUCTURE Strategy menentukan struktur organisasi Strategy, which determines direction Structure, which determines the location of decision-making power Processes, which have to do with flow of information Reward system, which influence the motivation of people to perform and address organizational goals People policies, which influence and define employee’s mindset and skill STRATEGY PEOPLE STRUCTURE PROCESSES REWARDS

The Strategic Choice Approach to Organization Design Strategy menentukan struktur organisasi

Operational excellence DISKUSI KELOMPOK Bentuk dua tim kemudian diskusikan dalam masing-masing tim struktur organisasi dibawah ini cocok untuk strategy generic Tracy & Wiersema yang mana?: Product leadership Operational excellence Customer intimacy

The Divisional Organization Chief Financial Officer VP Research Product A Manager VP Human Resources VP Operations VP Sales and Marketing Product B . Product C Chief Executive Struktur organisasi diatas cocok untuk strategy apa?

The Divisional Organization Chief Financial Officer VP Research Corporate Division Manager VP Human Resources VP Operations VP Sales and Marketing Retail Division . ..Division Chief Executive Struktur organisasi diatas cocok untuk strategy apa?

Aligning Human Resource to Business Strategy

Kerangka alignment Human Resources Management dengan Business Strategy Human Resource Strategy menyelaraskan Human Resource dengan Busniess Strategy Kerangka alignment Human Resources Management dengan Business Strategy Elemen dari HR Strategy yang nantinya akan didetailkan dalam Human Resources Management

Strategic Human Resource Management: Concept and Process

Strategic Human Resource Management: Definitions Strategic HRM defines the organization’s intentions and plans on how its business goals should be achieved through people. It is based on three propositions: first, that human capital is a major source of competitive advantage; second, that it is people who implement the strategic plan; and, third, that a systematic approach should be adopted to defining where the organization wants to go and how it should get there. Strategic HRM is a process that involves the use of overarching approaches to the development of HR strategies, which are integrated vertically with the business strategy and horizontally with one another. These strategies define intentions and plans related to overall organizational considerations, such as organizational effectiveness, and to more specific aspects of people management, such as resourcing, learning and development, reward and employee relations.

THE MEANING OF STRATEGIC HRM Strategic HRM focuses on actions that differentiate the firm from its competitors Purcell, 1999). It is suggested by Hendry and Pettigrew (1986) that it has four meanings: the use of planning; a coherent approach to the design and management of personnelsystems based on an employment policy and workforce strategy and often underpinned by a ‘philosophy’; matching HRM activities and policies to some explicit business strategy; seeing the people of the organization as a ‘strategic resource’ for theachievement of ‘competitive advantage’.

Operational excellence DISKUSI KELOMPOK Bentuk dua tim kemudian diskusikan dalam masing-masing tim performance appraisal dibawah ini cocok untuk strategy generic Tracy & Wiersema yang mana?: Product leadership Operational excellence Customer intimacy

DISKUSI KELOMPOK

DISKUSI KELOMPOK