Strategic Management: Value Creation, Sustainability, and Performance, 3e, 2014 Strategy and Structure Chapter 11

1. How strategy is implemented through the company's structure. 2. Types and characteristics of the most common organization structures. 3. Mechanisms to coordinate activities in structured organizations. 4. Whether strategy and structure are aligned. Learning Objectives

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 The Challenge of Strategy

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 Structural Facets of Organizations

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 Structure Creates Challenges

Five Coordinating Mechanisms

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

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 Standardization

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

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

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

Single product / service New company / entrepreneurial orientation Simple Structure

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

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 M-Form (Multidivisional) Structure

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

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