Building Resources Strengths and Organizational Capabilities

Strategy Implementing Tasks Build an organization capable of carrying out the strategy successfully Steer resources to critical activities Establish supportive policies and procedures Institute “best practices” and demand continuous improvement

Strategy Implementing Tasks Install necessary information, communication, e-commerce and operating systems Tie rewards to performance Create supportive work environment and culture Exhibit internal leadership to drive the strategy forward

TOWS Analysis OpportunitiesThreats Strengths Max Min Max Weaknesses Max Min

Building a Capable Organization Gather a strong management team Recruiting and development of employees Screen and train well Employ job enlargement, job rotation and job enrichment Foster intrapreneurship Provide appropriate incentives

Building a Capable Organization Develop core competencies Rarely consist of narrow skills or efforts of a single department Typically reside in the combined efforts of different groups and departments Concentrate more effort than rivals on strengthening these skills Develop broad bases of competence

Building a Capable Organization Developing organizational capabilities Develop the ability to do something With experience the ability begins to translate into a competence With success the organization refines the capability beyond its rivals it becomes a distinctive competence

Matching Structure with Strategy Identify strategy-critical activities Outsource non-critical activities Partner to gain added capabilities Make strategy-critical activities the main building blocks Delegate authority to business units

Matching Structure with Strategy Ensure coordination amongst units Maximize support contributions Minimize support costs Build organizational bridges with outsiders Match structure with strategy

Williamson’s Structures Functional or U-form (Unitary) Design Organizational members and units are grouped into functional departments such as marketing and production Coordination is required across all departments Design approach resembles functional departmentalization in its advantages and disadvantages

Williamson’s Structures U-Form

Williamson’s Structures Conglomerate or H-form (Holding) Design Organization consists of a set of unrelated businesses with a general manager for each business Holding-company design is similar to product departmentalization Coordination is based on the allocation of resources across companies in the portfolio Design has produced only average to weak financial performance; has been abandoned for other approaches

Williamson’s Structures H-Form

Williamson’s Structures Divisional or M-form (Multidivisional) Design An organizational arrangement based on multiple businesses in related areas operating within a larger organizational framework The design results from a strategy of related diversification Some activities are extremely decentralized down to the divisional level; others are centralized at the corporate level The largest advantages of the M-form design are the opportunities for coordination and sharing of resources Successful M-form organizations can out perform U-form and H-form organizations

Williamson’s Structures M-Form

Davis and Lawrence Matrix Design An organizational arrangement based on two overlapping bases of departmentalization (e.g., functional departments and product categories) A set of product groups or temporary departments are superimposed across the functional departments Employees in the resulting matrix are members of both their departments and a project team under a project manager The matrix creates a multiple command structure in which an employee reports to both departmental and project managers A matrix design is useful when There is strong environmental pressure There are large amounts of information to be processed There is pressure for shared resources

Davis and Lawrence Matrix Design

Davis and Lawrence Matrix Design Advantages Enhances organizational flexibility Involvement creates high motivation and increased organizational commitment Team members have the opportunity to learn new skills Provides an efficient way for the organization to use its human resources Team members serve as bridges to their departments for the team Useful as a vehicle for decentralization

Davis and Lawrence Matrix Design Disadvantages Employees are uncertain about reporting relationships Managers may view design as an anarchy in which they have unlimited freedom The dynamics of group behavior may lead to slower decision making, one-person domination, compromise decisions, or a loss of focus More time may be required for coordinating task- related activities

Hammer and Stanton Hybrid Designs An organizational arrangement based on two or more common forms of organization design An organization may have a mixture of related divisions and a single unrelated division Most organizations use a modified form of organization design that permits it to have sufficient flexibility to make adjustments for strategic purposes

Mintzberg’s Structures According to Henry Mintzberg the structural configuration of an organization can be differentiated by Prime Coordinating Mechanism Key Part of Organization Type of Decentralization

Mintzberg’s Structures Prime Coordinating Mechanism Direct Supervision One individual is responsible for the work of others Standardization of work processes The content of the work is specified or programmed Standardization of skills Explicitly specifies the kind of training necessary to do the work Standardization of outputs Specifies the results, or output, of the work Mutual adjustment Coordinates activities through informal communications

Mintzberg’s Structures Key Part of Organization Strategic apex- Top management and its support staff Technostructure- Analysts such as industrial engineers, accountants, planners, and human resource managers Operating core- Workers who actually carry out the organization’s tasks Middle line- Middle and lower-level management Support staff- Units that provide support to the organization outside of the operating workflow (for example, legal counsel, executive dining room staff, and consultants)

Mintzberg’s Structures Types of Decentralization Vertical and horizontal centralization Limited horizontal decentralization Vertical and horizontal decentralization Limited vertical decentralization Selective decentralization

Mintzberg’s Structures The Simple Structure The simple structure uses direct supervision as its primary coordinating mechanism, has as its most important part its strategic apex, and employs vertical and horizontal centralization. Relatively small corporations controlled by aggressive entrepreneurs, new government departments, and medium-sized retail stores are all likely to exhibit a simple structure. These organizations tend to be relatively young. The CEO (often the owner) retains much of the decision-making power. The organization is relatively flat and does not emphasize specialization. Many smaller U-form organizations are structured in this fashion. Trilogy Software would be an example of a firm using this approach.

Mintzberg’s Structures The Machine Bureaucracy The machine bureaucracy uses standardization of work processes as its prime coordinating mechanism; the technostructure is its most important part; and limited horizontal decentralization is established. The machine bureaucracy is quite similar to Burns and Stalker’s mechanistic design discussed in Chapter 12 of Griffin’s Management, Eighth Edition (p. 382). Examples include McDonald’s and most large branches of the U.S. government. This kind of organization is generally mature in age, and its environment is usually stable and predictable. A high level of task specialization and a rigid pattern of authority are also typical. Spans of management are likely to be narrow, and the organization is usually tall. Large U- form organizations are also likely to fall into this category.

Mintzberg’s Structures The Professional Bureaucracy The third form of organization design suggested by Mintzberg is the professional bureaucracy. Examples of this form of organization include universities, general hospitals, and public accounting firms. The professional bureaucracy uses standardization of skills as its prime coordinating mechanism, has the operating core as its most important part, and practices both vertical and horizontal decentralization. It has relatively few middle managers. Further, like some staff managers, its members tend to identify more with their professions than with the organization. Coordination problems are common.

Mintzberg’s Structures The Divisionalized Form The divisionalized form, Mintzberg’s fourth design, exhibits standardization of output as its prime coordinating mechanism, the middle line as its most important part, and limited vertical decentralization. This design is the same as both the H-form and the M-form described earlier. Limited and Disney are illustrative of this approach. Power is generally decentralized down to middle management—but no further. Hence each division itself is relatively centralized and tends to structure itself as a machine bureaucracy. As might be expected, the primary reason for an organization to adopt this kind of design is market diversity.

Mintzberg’s Structures The Adhocracy The adhocracy uses mutual adjustment as a means of coordination, has at its most important part the support staff, and maintains selective patterns of decentralization. Most organizations that use a fully-developed matrix design are adhocracies. An adhocracy avoids specialization, formality, and unit of command. Even the term itself, derived from “ad hoc,” suggests a lack of formality. Sun Microsystems is an excellent example of an adhocracy.

Mintzberg’s Structures