1. Attaining Integration for Advantage
Chapter 11
Attaining Integration for Advantage
by Robert Pitts
& David Lei
Slides prepared by
John P. Orr
Cameron University
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

2. What you will learn… The concept of organization design practices
Slide 1 of 2
The concept of organization design practices
Why organization design practices are crucial in helping the firm achieve integration
Why many companies are moving to a ’networked’ organization
The evolving ‘virtual organization’ design
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

3. What you will learn…
Slide 2 of 2
The broad types of reward systems used by many organizations
How corporate culture can contribute to competitive advantage
The dangers of relying too long on established organizational practices and corporate culture
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

4. Disney World and Advantage
Socialization
Job training
Performance measurement
Rewards
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

5. Cisco Systems and Advantage
Near total reliance on suppliers and manufacturing partners
Fast product design capability
Retention of people from acquisitions
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

6. Flexibility and Stability
Loose Coupling
An organization design and structure that fosters a balance between the need to centralize and decentralize activities
Network Organization
Organizational format in which firms try to balance their reliance on performing internal value-creating activities with the need to stay responsive and open to the environment
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7. Ex. 11-1. Different Configurations of Broad Organization Designs
Traditional Organizations
Network Organizations
Virtual Organizations
Emphasis on vertical integration in product, area, functional structures; fosters high stability
Emphasis on high responsiveness and partnering; balances stability with flexibility
Emphasis on extreme specialization; tight focus on one or two key activities
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

8. Moving to a Network Semipermeable Boundaries
Flexible separations between organizational subunits across which communication, knowledge, and information flow more readily.
Core Processes & Technologies
The key levers or drivers that form the basis of a firm’s distinctive competence and critical value-adding activities.
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

9. Ex. 11-2. Characteristics of the Network Organization
Semipermeable Boundaries
Looser organizational walls
Faster information flow among subunits
Alliances and Partnerships
Divide up the industry value chain
Specialize among partners
Focus on Core Processes/Technologies
Specialization along a core activity
Redefining ways to create value in core activity
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

10. Moving to Virtual Virtual Organization Lateral Communications
An organizational format that coordinates and links up people and activities from different locations to communicate and act together, often on real-time basis.
Lateral Communications
Coordinating work and communications among people who are on the same reporting level within the organization.
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

11. Ex. 11-3. Key Characteristics of Virtual Organizations
High specialization of knowledge
Rapid assembly/disassembly of project teams
Ability to interconnect quickly with other firms
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

12. Organizations and Design
Organization Design Practices
Support mechanisms that facilitate the implementation of a strategy within the framework of a given structure.
Socialization
The process by which shared values and ways of behaving are instilled in new managers and employees.
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

13. Ex. 11-4. Some Key Organizational Design Practices
Reward and Performance Evaluation Systems
Hierarchy-based systems
Performance-based systems
Impact on corporate performance
Shared Values and Corporate Culture
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14. Ex. 11-5. Reward Systems Characteristics of Hierarchy-Based System
Close superior-subordinate relationships
Extensive use of subjective and objective criteria to measure performance
Superiors will guide the career and actions of subordinates
Emphasis on group and team efforts and results
Emphasis on long-term thinking and actions that help the organization
Supports differentiation strategies at the business unit level
Supports related diversification and global strategies at the corporate and business levels
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

15. Ex. 11-6. Reward Systems Characteristics of Performance-Based System
Superior-subordinate relationships not typically close
Emphasis on tangible, concrete measures of output or performance
Focus on individual, not group, measures of performance
Bonuses are a big portion of total compensation
Enhances individual initiative, entrepreneurial thinking, and personal efforts to excel
Supports low-cost leadership strategies at the business level
Supports unrelated diversification and multidomestic strategies at the corporate and business levels
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

16. Values and Culture Shared Values Corporate Culture
The basic norms and ideals that guide people’s behaviors in the firm and form the underpinning of a firm’s corporate culture.
Corporate Culture
The system of unwritten rules that guide how people perform and interrelate with one another.
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17. Ex. 11-7. Ideal Key Characteristics of Shared Values Slide 1 of 2
Simple to understand
Crystallized at top
Consistent over time
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18. Ex. 11-7. Examples of Shared Values Slide 2 of 2
McDonald’s QSVC
Southwest Fun, warm, friendly Airlines
Wal-Mart Friendly service and low prices
Motorola Quality is key
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19. Ex. 11-8. Ways to Transmit Shared Values
Myths and Legends
Develop internal folklore
Heighten awareness of key cherished values
Socialization
Learn “proper” behaviors and ways of doing things
Extensive mentoring and coaching
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20. Keeping the Organization Vital
Creative Tension
A process in which senior management systematically attempts to encourage people to think about new strategies and directions, which prevents the firm from becoming complacent.
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21. Ex. 11-9. Implementation Methods to Encourage Ethical Behavior
Corporate credo that defines ethical values
Thorough instillation and training of values
High-level support for ethical values
Ethically relevant control systems
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