Advance topics in Change Management Lecture 31 Basic Concepts

Main Course Objective To enable you to analyse how and why different kinds of organizations are more or less effective in achieving particular objectives. The course focuses on the key components of organisations that together generate distinctive collective competences and capabilities. It focuses on the meso level.

Levels of Organizational Analysis Micro - individuals and groups in organisations (organisational behaviour, HRM) Meso structures, systems and strategies of organisations (organisation design) Macro organisations and markets in social systems and the global economy (MACC, strategy)

Key Managerial Issues in Organisation Design How to allocate, coordinate and control tasks How to attract, select, reward and retain employees How to group activities and employees into departments, divisions and subsidiaries How to integrate and control operational units for strategic goals Which activities and skills to keep in the organisation and which to outsource How to manage relationships with suppliers, customers, competitors, investors and other organisations

ORGANISATIONS AS OPEN SYSTEMS

COMPONENTS OF WORK ORGANISATIONS 1. Operating Core - those who transform the basic inputs into outputs 2. Middle Line those who administer and supervise operators 3. Technostructure those who standardise how work is carried out and controlled 4. Support Staff those who provide support services for the organisation outside the operating workflow 5. Strategic Apex those who allocate resources, manage relations with the environment and determine strategies and goals – the dominant coalition

DIMENSIONS OF ORGANISATIONS STRUCTURAL Formalisation Specialisation Standardisation Authority Hierarchy Complexity Centralisation Skill Level Personnel Ratios SYSTEMIC (CONTEXTUAL) Size Technology Environment Goals and Strategy Culture

Concepts Resources Capabilities Routines Firm specific, valuable, rare, difficult to imitate and non-substitutable They are the foundations of: Capabilities At an abstract level, these can be thought of as the ability to co-ordinate activities, learn within an organization, and re-configure resources Routines Help to build resources and capabilities

PROBLEM OF LOCK-IN

CHARACTERISTICS OF FORDISM PRODUCTION SYSTEMS Dedicated specialised machinery Standardised products in long production runs Standardised work processes Infrequent and expensive product and process changes MARKETS Stable mass consumption of standardised goods Price based competition Adversarial links with suppliers Oligopolistic ORGANISATIONS Mechanistic and bureaucratic Inflexible with high fixed costs Focused on efficiency and cost reduction Narrow tasks and skills Little or no task autonomy by workers

Fordism

The application of Fordist principles becomes counterproductive

An alternative production system to Fordism: Toyotaism

Models of Competition and Coordination I Characteristics Fordism Customised Production Diversified Quality Production Discontinuous Innovation Examples Some cars, consumer electronics, call centres Some advertising agencies, consultancies Some cars, mechanical engineering Biotechnology, some software developers Primary basis of market competition Price Quality Innovation Production volumes Very large Limited Medium/High Standardisation of outputs High Medium Differentiation and change of products Low Ability to respond quickly to competence destructive changes

Models of Competition and Coordination II Characteristics Fordism Customised Production Diversified Quality Production Discontinuous Innovation Flexibility of work processes Low Medium High Inter-firm relations Adversarial Cooperation with competition Adversarial but some narrowly focused partnerships Key organizational and managerial capabilities Coordination and control Integrating skills and adapting to changing demands Coordination and organisational learning Reconfiguring assets rapidly in response to technical and market opportunities

Organizational and Managerial Capabilities Characteristics Coordinating Learning Reconfigurational Competitive Focus Realise economies of scale and scope through systematic integration of work activities Continual improvement of processes and products to meet changing conditions Fast adaptation to rapidly changing market and technical contexts Key Processes Establishing routines for controlling work and integrating activities Continual collective problem solving and knowledge development Rapid adaptation of work processes, skills and other assets to meet changing conditions Involvement of Employees and Business Partners in Developing Capabilities Varies High Considerable Longevity of Employer-employee Commitment Considerable for managers Considerable for skilled workers Limited

TOP MANAGEMENT ROLE IN ORGANIZATION DIRECTION, DESIGN AND EFFECTIVENESS – The Traditional View

EFFECTS OF UNCERTAINTY AND BARGAINING ON STRATEGY FORMATION – An Alternative View

INFLUENCES ON TOP MANAGEMENT’S CHOICES OF STRATEGY I External Influences: Ownership groups Financial Markets Lenders Customers Suppliers Regulators (Competitors) Influences from the nature of the Top Management Team (TMT): Expertise and experience (HP – Fiorina; Halifax – Andy Hornby) Insiders vs outsiders (GM, HP – Fiorina, and Apotheker)

DEFENDERS I STRATEGIC CHOICES: RISK: DOMINATE NARROW DOMAIN BY PRICING AND SERVICE INCREMENTAL GROWTH LITTLE SCANNING IMITATIVE INNOVATIONS RISK: MARKET CHANGES THREATEN NICHE

DEFENDERS II ENGINEERING CHOICES: RISK: SINGLE CORE COST EFFICIENT TECHNOLOGY VERTICAL INTEGRATION COST REDUCTION IMPROVEMENTS RISK: MARKET CHANGES THREATEN TECHNOLOGY

DEFENDERS III ORGANIZATION-DESIGN CHOICES: RISKS: MACHINE BUREAUCRACY PRODUCTION AND FINANCE INTENSIVE, SOLUTION-ORIENTED PLANNING HIGH STANDARDISATION AND CENTRALISATION RISKS: SLOW TO ADAPT

PROSPECTORS I STRATEGIC CHOICES: RISK: CREATE AND EXPLOIT NEW PRODUCTS AND MARKETS BROAD AND DYNAMIC DOMAINS DISCONTINUOUS GROWTH SCANNING PRODUCT AND MARKET ENVIRONMENTS OFFENSIVE INNOVATIONS RISK: EXTENDED RESOURCES AND LOW PROFITABILITY

PROSPECTORS II ENGINEERING CHOICES: RISK: FLEXIBLE, MULTIPLE TECHNOLOGIES LIMITED MECHANISATION RISK: FAILURE TO ACHIEVE TECHNOLOGICAL ECONOMIES OF SCALE

PROSPECTORS III ORGANIZATION-DESIGN CHOICES: RISK: ADHOCRACY LARGE DYNAMIC COALITION - R&D, MARKETING PRODUCT MARKET-BASED GROUPINGS EXTENSIVE PROBLEM FINDING PLANNING LOW STANDARDISATION, LOW CENTRALISATION ELABORATE LIAISON MECHANISMS RISK: INEFFICIENT USE OF RESOURCES

ANALYSERS I STRATEGIC CHOICES: RISK: COMBINE EXPLOITATION OF NEW PRODUCTS AND MARKETS WITH DOMINATION OF STABLE DOMAIN HYBRID DOMAINS EFFICIENCY AND INNOVATION GOALS SCANNING FOR MARKETS MORE THAN FOR PRODUCTS DEFENSIVE INNOVATIONS RISK: IMBALANCE BETWEEN FLEXIBILITY AND STABILITY

ANALYSERS II ENGINEERING CHOICES: RISK: DUAL TECHNOLOGICAL CORE INVESTMENT IN APPLIED RESEARCH RISK: FAILURE TO ACHIEVE EITHER INNOVATION OR EFFICIENCY

ANALYSERS III ORGANIZATION-DESIGN CHOICES: RISKS: DIFFERENTIATION TO FIT DISPARATE STRATEGIES MKTG AND APPLIED RESEARCH, CORE-PERIPHERY COALITION MATRIX STRUCTURE INTENSIVE AND EXTENSIVE PLANNING MIXED STANDARDISATION WITH NUMEROUS CO-ORDINATION MECHANISMS RISKS: FAILURE TO INTEGRATE EFFECTIVELY HIGH CO-ORDINATION COSTS

ENVIRONMENTS, STRATEGIES AND TECHNOLOGIES DEFENDERS PROSPECTORS ANALYSERS ENVIRONMENTS   STABILITY HIGH LOW VARIED COMPLEXITY HOSTILITY MEDIUM DISPARITY ENVIRONMENTAL SCANNING LIMITED BROAD MKTG AND R&D MKTG AND R&D AND APPLIED RESEARCH TECHNOLOGY MIXED DOMINANT COALITION SIZE SMALL LARGE BACKGROUND PROD. FINANCE R&D MKTG. MKTG. APPLIED RES.

Managing inter-organisational relations: modes of co-ordination and influence Ownership links Contractual links: alliances, joint ventures etc. Inter-locking directorates Transfer and exchange of executives/senior managers Profit pooling and federation of firms Co-operative marketing Advertising and public relations Trade associations Obligational contracting Patent exchange and pooling

MECHANISTIC AND ORGANIC ORGANISATIONS Task Specialisation and Separation Task and Skill Integration Precise and Rigid Role Definitions Diffuse and Flexible Roles Vertical Co-ordination of Tasks Multiple Co-ordination and Responsibilities Centralisation of Knowledge and Control Diverse Sources of Knowledge and Expertise Vertical Communication of Instructions and Decisions Multiple Communication Channels for Information and Advice Loyalty to Firm and Obedience to Superiors Commitment to Tasks and to Expertise

CHARACTERISTICS OF DEVELOPMENT STAGES I II III IV ENTREPRENEUR’L COLLECTIVITY FORMALIZATION ELABORATION CHARACTERISTIC NON-BUREAUCRATIC PRE-BUREAUCRATIC BUREAUCRATIC DECENTRALIZED BUREAUCRATIC STRUCTURE INFORMAL, ONE-PERSON SHOW MOSTLY INFORMAL SOME PROCEDURES FORMAL PROCEDURES DIVISION OF LABOUR ADD NEW SPECIALITIES TEAM-WORK WITHIN BUREAUCRACY, SMALL COMPANY THINKING PRODUCT/ SERVICE SINGLE PRODUCT/ SERVICES MAJOR PRODUCT/ SERVICES LINE OF PRODUCT/ SERVICES MULTIPLE LINES REWARD AND CONTROL SYSTEMS PERSONAL, PATERNALISTIC PERSONAL, CONTRIBUTION TO SUCCESS IMPERSONAL, FORMALISED SYSTEMS EXTENSIVE, TAILORED TO PRODUCT AND DEPARTMENT

FIVE PHASES OF ORGANISATIONAL DEVELOPMENT I 1 2 3 BIRTH GROWTH MATURITY FREQUENT INNOVATION BROADEN PRODUCT LINES FEW CHANGES FINDING UNFILLED NICHES INCREMENTAL INNOVATION FOLLOW COMPETITION USE OF MIDDLEMEN MARKET SEGMENTATION BROADER MARKETS VERTICAL INTEGRATION LOBBYING LARGE SMALL RELATED ACQUISITIONS ENLARGED OWNERSHIP ONE, OR FEW, OWNERS INCREASED SIZE DIVERSE BOARD SIMPLE, CENTRALISED BROADER OWNERSHIP FUNCTIONAL RISK TAKING SALARIED MANAGERS INCREASED STAFF LESS DELEGATION LESS RISK TAKING EFFICIENCY FOCUS CONSERVATIVE DECISIONS

FIVE PHASES OF ORGANISATIONAL DEVELOPMENT II 4 5 REVIVAL DECLINE MANY INNOVATIONS PRICE CUTS DIVERSIFICATION OUTDATED PRODUCTS NEW MARKETS SHRINKING MARKETS MANY OWNERS NO CLEAR STRATEGY DIVISIONAL RESTRICTED OWNERSHIP CENTRALISED STRATEGY SIMPLE STRUCTURE DECENTRALISED OPS. CENTRALISED INCREASED SCANNING LITTLE SCANNING RISK TAKING EXTREME CONSERVATISM LITTLE INNOVATION RISK AVERSE

Phases of Organisational Decline: Problems and Remedies Problem phases Remedies Blinded Good information Inaction Diagnose and implement change Faulty Action Correct mistakes and maintain commitment Crisis Effective re-organisation Dissolution None

Corporate Turnaround: Phases in Revitalisation Facing the crisis: retrenchment and cost cutting: reactive phase Reinvestment: focusing on core skills and investing in them for the future Rebuilding: reshaping the organisation around the new goals and skills for the future

Leadership in Corporate Turnaround Situations New Visions Mobilising Commitment Changing routines and structures to support the new strategy