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HCAD 5390
Organizational Structure
Organizational design
Selecting the structure and control
systems that are most strategically
effective for pursuing sustainable
competitive advantage.
The role of structure and control
To coordinate strategy implementation.
To motivate and provide incentives for superior
performance.
The Role of Organizational
Structure
Building blocks of organizational structure
Differentiation in the allocation of people and resources
to create value.
Vertical differentiation in the
distribution of decision-making
authority.
Horizontal differentiation in
dividing up people and tasks
into functions and divisions.
Integration
The means used in coordinating people and functions to
accomplish organizational tasks.
Differentiation, Integration,
Bureaucratic Costs
11
Structure Follows Strategy:
New strategy is created
New administrative problems emerge
Economic performance declines
New appropriate structure is invented
Profit returns to its previous levels
12
Stages of corporate development
Simple Structure
Functional Structure
Divisional Structure
Beyond SBUs
13
Simple Structure:
Stage I:
Entrepreneur
Decision making tightly controlled
Little formal structure
Planning short range/reactive
Flexible and dynamic
14
Functional Structure:
Stage II:
Management team
Functional specialization
Delegation decision making
Concentration/specialization in industry
15
Divisional Structure:
Stage III:
Diverse product lines
Decentralized decision making
SBUs
Almost unlimited resources
16
Beyond SBUs:
Stage IV:
Increasing environmental uncertainty
Technological advances
Size & scope of worldwide businesses
Multi-industry competitive strategy
Better educated personnel
17
Functional Structure
Advantages Disadvantages
24
Network Structure
Packagers
Designers Suppliers
Corporate
Headquarters
(Broker)
Manufacturers Distributors
Promotion/
Advertising
Agencies
25
Effective implementation requires:
Leadership
Leading people to use their abilities and skills
most effectively and efficiently to achieve
organizational objectives
26
Staffing follows strategy:
Matching the manager to the strategy
Executive type
Executives with a particular mix of skills and
experiences
27
Executive Types:
Dynamic industry expert
Analytical portfolio manager
Cautious profit planner
Turnaround specialist
Professional liquidator
28
Matching Chief Executive Types with
Strategy
Business Strength/Competitive Position
GrowthConcentration Retrenchment
Save Company
Dynamic Industry Expert
Turnaround
High
Specialist
Industry Attractiveness
Stability
Medium
GrowthDiversification Retrenchment
Close Company
Analytical Portfolio
Manager Professional
Liquidator
29
Managing corporate culture:
Corporate culture
Affects firms ability to shift its strategic direction
Strong tendency to resist change
Corporate culture should support the strategy
30
Strategy-Culture Compatibility:
Consider the following:
Is the planned strategy compatible with the firms
current culture?
Can the culture be easily modified to make it more
compatible with new strategy?
Is management willing to make major organizational
changes?
Is management committed to implementing the
strategy?
31
Managing corporate culture:
Communication
Key to effective management of change
Rationale for strategic change should be
communicated to all
32
What Is Organizational Culture?
Culture
The collection of values and norms shared by people and
groups in an organization.
Shared values and a common culture increase integration
and improve coordination.
Values
Beliefs and ideas about common goals and proper
behaviors.
Norms
Act as guidelines or expectations that prescribe acceptable
behavior by organizational members.
Organizational Culture