Organization Designing and Leadership for Strategy and Success

Organization Structure Organization Design, Leadership and Strategy Organization Design Organization Structure Formal System of task and authority relationship Mechanism for control and Coordination Response mechanism to environment Organization Culture Shared Norms and Values Rituals and Conventions Shared views about nature of business Leadership Strategy: The Pathway to Achieve Business Objectives

HOW IT IS USEFUL FOR AN ENTREPRENEUR TO KNOW ALL THIS?

Organization design Era 1: Self Contained Organization Design (Functional, Divisional and Matrix) Era 2: Horizontal Organization Design with Team – and Process Based Emphasis (Ex. Engineering and design connection, Handling entire claim, ) Organize around complete workflow processes Flatten hierarchy and use of teams Appoint process team leaders Provide expertise from outside the team Enhances interaction with customers and suppliers Works best when internal coordination, flexibility and responsiveness can greatly enhance customer value

Era 3: Organizational Boundaries Open Up Hollow: Outsourcing the processes (PMC, Citec, MphasiS, BenQ) Modular: Outsourcing the product parts (Bombardier, DaimlerChrysler Smart Car) Virtual: Showing if there is more than actually present (M&S and PerUna, Symbian Ltd., Reflect.com)

New Demand on ENTREPRENEURS and VENTURES Get the Right Partner on the Bus (Collaborative role, Partnership) Select People With Lateral Organizing Skills (more of soft skills, appreciation for multidisciplinary approach) Seek Clarity, Not Control (Co creation, Good contract) Design Coordination Mechanism (Governance boards, Clear matrices, Periodic reviews)

Generic Strategies Low-cost leadership Differentiation Focus

LEADERSHIP Force Mass * Acceleration =

Design Challenge

Design Challenge (cont.)

Design Challenge (cont.)

Design Challenge (cont.)

ENTREPRENEURSHIP IS A BALANCING GAME Growth Profit Control

Organization Design, Growth and Leadership Applying frameworks to understand different organization design and practices for both large and small businesses along the venture life cycle Greiner’s Evolution and Revolution as Organizations grow, HBR , 1998 Assessing the different approaches appropriate to each stage of growth – managerial style, leadership, functional delegation, organizational structure and goals and entrepreneur’s involvement

Key Dimensions of Organization Development Age of the organization Size of the organization Stages of the evolution Stages of revolution Growth rate of the industry

ORGANIZATIONS FOLLOW AN EVOLUTIONARY TRAJECTORY Future of an organization may be less determined by outside forces than it is by the organization’s history. It is similar to the tenet of psychologist that individual behavior is determined primarily by previous events and experiences, not by what lies ahead.

Greiner’s Five Phases of Growth Large Collaboration Coordination Size “ ? “ Delegation Direction red tape control Creativity autonomy leadership Small Young Age of the Organization Mature

How Organizations Grow Evolution Revolution Steady or prolonged growth and Stability Substantial organizational change Quiet periods Turbulent Times No major economic setback or internal disruption Serious upheaval of management practices Modest adjustments to maintain growth Eg: Centralized Practices New sets practices for evolutionary stage Eg : Demands for Decentralization Source: Greiner’s Evolution and Revolution as Organizations grow, HBR , 1998

PHASES OF GROWTH Phase 1: Creativity Initiating the entrepreneurial venture Frequent and informal communication Long hour of work Control through immediate marketplace feedback & the leadership crisis

CONT… Phase 2: Direction Functional organization structure is introduced Accounting system for inventory and purchasing More formal communication The new manager and key supervisor take most responsibility, Lower level employees feel restricted & the autonomy crisis (combined with concern on decision making ability)

CONT…. Phase 3: Delegation Greater responsibility to managers Profit centers and bonuses used for motivation Periodic reporting becomes major control tool Efforts in new acquisitions Infrequent communication from the top, brief visits & the control crisis

CONT…. Phase 4: Coordination Rise of formal system to achieve greater coordination Product groups are formed from decentralized units Formal planning and intensive reviews Hiring at headquarters to initiate companywide programs Formation of SBUs & the red tape crisis

CONT…. Phase 5: Collaboration Emphasis on greater spontaneity in management action through teams Social control and self discipline take over from formal control Quick problem solving through teams Headquarter staff experts are reduced in number Matrix-type structure is used frequently Use of conferences, educational programs etc. & Psychological Saturation

Organizational Design Challenges

HOW GREINER’S MODEL IS USEFUL FOR BUSINESS LEADERS Knowing where the firm is in the developmental sequence Recognize the range of solutions Realize that solutions breed new problems

Factors for Survival and Growth (Company) Financial resources Personnel resources Systems resources Business resources

Factors for Survival and Growth (Entrepreneur) Goals Operational abilities Managerial ability Strategic abilities

Organization Design, Growth and Leadership Applying frameworks to understand different organization design and practices for both large and small businesses along the venture life cycle Greiner’s Evolution and Revolution as Organizations grow, HBR , 1998 Assessing the different approaches appropriate to each stage of growth – managerial style, leadership, functional delegation, organizational structure and goals and entrepreneur’s involvement

Greiner’s Five Phases of Growth Large Collaboration Coordination Size “ ? “ Delegation Direction red tape control Creativity autonomy leadership Small Young Age of the Organization Mature

Organizational Practices and Phases of Growth Category Phase I Phase II Phase III Phase IV Phase V Management Focus Make and Sell Efficiency of operations Expansion of market Consolidation of Organisations Problem Solving and Innovation Organisation Structure Informal Centralized and Functional Decentralized and Geographical Line Staff and Product Groups Matrix of Teams Top Management Style Individualistic and Entrepreneurial Directive Delegative Watch Dog Participative Control system Market Results Standards and Cost Centers Reports and Profit Centers Plans and Investment Centers Mutual Goal Setting Management Reward Emphasis Ownership Salary and Merit Increases Individual Bonus Profit Sharing and Stock Options Team Bonus