ARE 112 - Wk 6 - 5/4- Structures and Strategic Thinking

Unity of command - came from military setting

Often referenced to a military setting but a normal business setting - everyone should have just one boss; contrast to the matrix management system that works ineffectively but efficiently in terms of putting you at two places at once; normally most companies operate from a unity of command perspective unless they are a problem-solving organization - Weber - everyone should just have one boss Contrasted to matrix management system Goes back the classical school of management - Weber - Includes topics previously discussed: Authority - having the power to tell someone to do something - that person needs to be responsible to get the work done Responsibility - 2ndpart to authority - place here Span of control - number of people you have authority over Teams - get work done Horizontal and vertical structures Generally has focus on the processes - the business processes - of the organization and not the products or services of the organization. - a. Except problem solving organizations - consulting firms; architectural firms; CPA firms; law firms - they are out to solve problems as opposed to doing repeated events over and over - a. Our focus today is mostly about process or companies or organizations rather than project companies a. Managers have models to do their job

The Idea of Strategic Thinking

(how we get direction for our organ. Structure and for a manager on what to do) - diff. than strategy - this is how we implement strategy - Lou talks about strategy the way he approaches problems with strategic thinking Note: One of the purposes of organizational structures is to allow for strategic thinking - A framework for strategic thinking 1. Strategic intent - A disciplined approach to only do what matters - this is the most impt. Aspect of strategic thinking - does playing golf solve the problem? No, - get rid of golf ; does taking people out to lunch solve the problem: no , don't take them out to lunch - the only thing that is going to solve a prob. Is hard work - when you're a more senior person inside the organization you have to make sure every minute counts and we are only going to do what matters - you need a systems perspective 2. A systems perspective - What are my resources? - I got a human capital systems; I got a tech. system; you have to think about what resources you have to solve the problem b/c the manager has to allocate those resources to solve a problem 3. Thinking in time - This is vision - to be discussed later in these notes - I am solving this problem so I can do something in the future; am I going to do this in 2 or 3 months or by the end of the week or position my company or unit at the end of this period - Lou couldn't solve things right away - had micro problems - he knew he had to get on the right side of the customer rather than the wrong side - so he said its going to take us a little while to do these things but I got to get ourselves in the right direction so we can get ourselves to where we want to be 4. Intelligent opportunism - How do you connect your resources to your vision? - I have to be smart and see what opp's I have out there - Lour knew what the big opp. Was - = consulting - the opp. Was not the stack or application software - that wasn't going to solve the problem for him - the doc. At the hospital said we have to rebalance the organization so what we do matters - so balance scorecard 5. Hypothesis-driven - Contingency thinking: What happens when we get there - I am going to hypothesize that we are going to enter this marketplace and get 30% of the market so what am I going to do next - this is a little bit of the same concept of thinking in time but it says what happens when I get there or do I exit the market - did not work, then I got to leave the market - did my q mark turn into a dog immediately? - how are we going to get out of the market

Organigraph -

- the "verb" version - not really used by employees - its really used by managers and consultants and maybe academics to talk about how things get done i. This has a focus on processes here a. Definition: An organigraph is a graphical representation of a company's structure and processes. It is used as an alternative to a traditional organizational chart as it does not imply the same degree of linear hierarchy that an organizational chart does. Organigraphs are used to expose critical associations and competitive opportunities as opposed to viewing all parties, departments, and business units as separate entities. They also can reveal relationships between departments, products, supply chains, and more within an organization that might not otherwise be apparent. a. Business strategists, consultants, and academics use organigraphs to analyze the dynamics of organizations. a. Organizational charts are used by managers to run the business a. Examples to the right (figure) i. This is a bank - as a customer, I can deal with my banking people; sell insurance; trust departments; brokerage firms; a customer has released the 4 diff aspects of the bank (doesn't have to) that may be efficient or inefficient - 1storganigraph i. 2ndgraph down - one strategic option were we get a personal financial advisor in place - the customer just deals with this one person over here that's your personal banker - so if you need insurance, brokerage, trust, you go through that person in the middle (in diagram) i. 3rdgraph down - where the customers - similar to the first graph - but bankers, insurance, trust, brokerage can each all talk to each other about your particular needs i. These graphs tell me how I run the business - not any one is better than the other - depends on what you situation is i. Normally at some point in the organigraph introduces the customer into the diagram

2 versions: on organizational structure

- traditional static organizational chart, the other is an organigraph that talks about how the processes actually work in these lines of authority we have in this first illustration on this page

Management - four tasks: (what the manager does)

1. Great manager - but you have to get the right direction = you have to be creative and innovative; and I have to have the right organizational structure (line and staff organization) - in order to implement by 4 tasks - I have to drive my organizational goals through the structure - we do that with strategic thinking - that drives my organization = strategic intent - we can measure that in the balance scorecard, maybe the 4 P's; SWOT - analytical framework - walk driven by customers in the marketplace - IBM and The Goal - the best way to do things - · Planning - something a manager has to do everyday; - did I plan today, did I organize today; did I lead today; did I control today; · Planning goes back to the goal - identify and select an appropriate goal; and courses of action; what are you going to do and how are you going to get there - 2 tasks in planning · Organizing - structuring working relationships; · Leading · Controlling

I. Organizational structure - two types - has a purpose - tells people who their boss is and who they have responsibility for in getting the work done - lines of authority; the legal advisor reports to the president as does sales, production, and finance - staff authority = I don't have authority over you but I have a working relationship with you

1. Organizational chart - the "noun" version and the traditional version a. Example a. Lines of authority or shared authority- solid lines a. Dashed lines - advisory or collaborative relationships 1. Ex. based on the graph - the president has an attorney working for them to get certain advice; at the same time, the finance person may say we're going to enter into a lease on a new facility can you look at the legal aspects to it? - production says we have to contract for new materials over here - can you get that contract - the sales person may say we have to sue someone b/c of nonpayment of a sales invoice -can you take care of it - legal advice 1. The chart - tells everyone who their boss is, who reports to them and who do they report to 1. The organizational structure can be very complicated - IBM book - got rid of that culture of no - sometimes 18 levels of people who could say no - Lou - I don't care what position you are in in the organization, if you can help me solve a problem, you got a seat at the table 1. Sometimes it can be fluid and sometimes a little too structured 1. This has a focus on relationships over here 1. How I report to the organizational structure here 1. We don't see the customer in the organizational chart here a. Horizontal lines - Working relationship - the 3 people in the middle work w/ each other; but not for each other a. Vertical lines - Reporting relationship a. Can reflect the organizational culture - as seen in the IBM book a. Definition: An organization chart shows the structure and the relationships in an organization. The organizational chart formal system of tasks and reporting relationships that coordinated and motivates employees to work together. a. Has focus on authority and responsibility not on how the work actually gets done.

Functions

1. Staff - supports the line 2. Line - provide the service or put the hands on the product - ex. the nurses and the surgeons in the Duke H. case were line people; accountants and administrators were staff people; Deloitte case - all the managers wanted to be promoted to partner were line people; the people in the NY office where they were visiting when they've gone to those committee meetings were the staff people at Deloitte; Lou was a staff person - people selling that product were the line people Seen in the value chain - organizations exist to achieve a goal - that goal should be to make money or provide a service, add value to the process otherwise it won't succeed

How do we "put wheels" on strategic thinking?

1. Strategic management tools - different than the lens we used to view strategy a. Mission: What we do - this is a focus on the strategic business units -SBU's and is an internal view. This is the mission statement for IBM Global Financing: - a mission is generally at the organizational level not company level i. IBM - 50 divisions, each one is going to have a separate mission; each class has a separate mission for you (A in this class, B in other class; or I just want to make sure I get this pass here) "Themissionof Global Financing is to facilitate clients' acquisition of IBM hardware, software and services." = lend money to customers so they can buy their software and hardware Ex. you got a million dollar company and youre going to buy a 2 mill. System from IBM - you go to the bank and say I want to borrow 2 mill. For this - banks say - is it going to work and how are you going to pay be back? Yes it will work and I will pay you back out of earnings - suddenly you have a system that doesn't work very well and its hard for you to pay back the 2 mill = risky - we'll lend you 70% and guarantees on everything - this makes the sale process a little diff. - IBM said how about we lend you the money and you don't have to pay us back until the system works --- they are pretty sure the system is going to work - this makes the sale a lot easier if I can lend you the money = IBM goal of financing does = mission - all we do is lend you the $ so you can acquire the the hardware, software and services - every units at IBM has a mission statement = is pervasive - that's organiztaion wide b. Vision: How we see ourselves and how we want our stakeholders to see us - this has a focus on the marketplace and is generally organizational-wide in its scope "IBM's vision is to be the world's most successful and important information technology company. - they articulate this to tell this to the customers and the marketplace and stakeholders i. Successful - in helping our customers apply technology to solve their problems. And successful in introducing this extraordinary technology to new customers. - · They'll benchmark their client's performance against their peer performance (ours receive a 3% increase in sales vs. their 1% increase - peers) i. Important - because we will continue to be the basic resource of much what is invented in this industry." - · Every year say this year we applied and received 5K patents - something that are new - · They want to make this vision measurable or it won't carry any substance to their potential clients and stakeholders a. We saw these two topics in our strategic lenses from prior classes

Mission and vision face the marketplace - that was where Lou was looking. - this is the balanced scorecard -> how they looked at financial business problems; got rid of the culture of "no"; operation bear hug - customer; financial - they had to make money - culture is the most important aspect of the organization

1. The marketplace includes customers, other stakeholders, new customers, new products, social issues and more on a long list. 1. And it faces forward - into the future 1. Examples a. Balanced Scorecard a. IBM - pages 68-72 a. Duke Hospital Case

A. Why we use the terms: R & D - research and development -

1. We want to "link the idea to the deed" this is an old saying - deed means an accomplishment, a result; a lot of pressure inside an organization to get a payoff from their creative and innovative activities b/c it is a huge investment - that is why people lean towards being innovative and try to find creativity as it occurs - more impt. To look at being innovative about how we do things 1. Deed means accomplishment or result

Organizational Structures

: Recall that "structures" was one of the components of the diagram from Notes #1. - Lower part of the diagram - how we structure those 5 components - tasks, people, structure, systems, culture - into one mega structure

Organizing:

: Structuring working relationships to achieve organizational goals - see below - how I am going to structure the team and the organization to achieve this goal- who am I going to put in charge of sales; who is going to do market dev.; how are we going to handle the financial side of this company over here - the most difficult part is organizing things b/c most of the organizations are very fluid, so the organization that you have today might not be appropriate 6 months from now - Starbucks book - supply chain - the IT was always running behind the marketplace - you got to keep organizing all of the time - once you organized to some point, you got to lead

Organizational design - a verb:

: Where we get the organizational structure. The process by which managers make specific organizing choices that result in a particular organizational structure. - you don't redesign the firm every year - this really gets in to change management - you don't have a free hand in your organizational design - industry structure determines what your organizational management style is going to be 1. Driven by the organizational environment - examples: (what environment do I reside in) a. Technology (any company that relies heavily on technology; John D. making tractors, Campbell soup making tomato soup; big plants making things - organized a certain way - generally very decentralized in terms of tech. - ex. Alex was in charge of everything, strict lines of authority = Ralph did a certain thing, Mario did a certain thing) a. Human resources - also decentralized but in a very complicative environment; b/c we deal with people rather than machines - ex. doctor at Duke H. - was organized in a certain way around the patient = all patients are diff. opposed to having a can of Campbells' soup that's close in terms of color and taste, and pH throughout the line - every patient can be diff.; we wouldn't say we're decentralized as much we are fragmented) a. Strategy - strategically oriented - ex. bank, high tech. company like Facebook; their strategy tells them what their organizational structure Is going to be driven primarily by the marketplace a. The point here is that you don't have a choice but you always have choices - but your choice of your organizational structure is driven in part by what type of organization you have - whether you are a bank or hospital, manufacturing or retail - they are all generally organized in the same way depending of what organizing structure they are 2. Types of organizational design (does come from the organizational environment) a. Divisional - most companies that are large have a divisional design; you design yourself by product line; if I am John D, I am going to have heavy equipment dept., personal use group, and my military use over here = my product lines) i. Product i. Geographic - in North America, South America, Asia, European marketplace i. Market - governmental market; not for profit market; education market; consumer market; business market i. Can be a combination of the above as well i. Each division is like a mini company reporting to a piece of overhead on top - ex. Alex was in the product market - they were making the gear - Geographic market = Deloitte - each office had their own geography - Seattle, Portland, NY Functional - a. - Examples - generally happens with small organizations; where we want to centralize control - this is what your traditional, functional organizational structure would look like - Fig 1 - line and staff organization - inside a divisional structure, you can have a functional structure underneath that for the product line or geographic line; but a pure functional market generally is for someone small so I don't have to break things up by product, geography, market, etc.; we have each of these units reporting to a president; divisional is prob. 60-70%, 30-35% are functional; i. Finance i. Marketing i. Production i. Administration i. Human Resources - Divisional and Functional are process driven a. Problem solving i. Like the matrix management system discussed earlier i. Project driven not process driven as found in the functional or divisional forms - 5% that are problem- solving - limited to law firms, emergency rooms in a hospital - matrix management approach - project driven - I am here to solve this problem - whatever I need to do ill solve this problem Control systems in the organizational structure (inside these structures, I have to control what is going on) a. Behavioral control - we have rules by behavior - ex. casual business client casual only on Friday's; work at home two days a week; teams always evaluate themselves at the end of every 3 month period to see how we are doing - this is how we behave in the organization - these are maybe written in a policy manual - its in the culture inside of the organization a. Financial control - primarily budgets and quotas on monthly sales - quota for this month is 500K we can spend - position management and finance control - our division has 25 positions for sales, we can't hire anymore, if we get below 22 we have to borrow someone from another division a. Bureaucratic control - how we hire and evaluate people on the job - bigger organizations have position management rules in terms of the size of their offices - your cubicle can be 100 sq ft., your bosses cubicle can be 300 sq ft, - everybody just needs to know where they stand inside the organization - A,B, and C, are the normal kinds of control you want to see under "controlling" - that piece of the organizational management structure a. Clan or social controls - may have a purpose inside the organization; very cultural in its orientation - we generally don't like to see them in the organization, we rather like to see these clan and social controls found into more structural behavioral control - i. Ex - subcontracting work w/ a big consulting firm in L.A. - Irvine, O.C. - special project for the client along with a big consulting firm - every Friday go down and meet at Manhattan Beach to have dinner - good time - we went there over a 3 year period off and on on this project - this meeting became business oriented with some of the managers and supervisors start talking about the newer employees - allocating them onto jobs and so if you weren't in that clan, you didn't hear what was going on; you might not become friendly with people in terms of signing a job - at one point - 24 to 25 year olds that just came to work and said I don't want to go to the beach with theses guys and I got things I want to do; they banded together - 3 of them - they talked to the principle - we know what is going on and its not our business to run the firm but we want to tell you we don't think my future should be decided over a margarita at the beach - she was not happy to hear this about what was going on - she stopped it right away - wasn't planned - just sort of happened; very social controls can be good but sometimes can get out of hands and can counter these controls above it b/c there is no framework for clan or social controls - there are frameworks for the other 3 controls - i. Manager has to be sure a place is being controlled the right way

Controlling:

: a manager spends most of their time controlling i. Evaluating how well the organization is achieving its goals - question the planning - did I plan the right way - i. and taking actions to maintain and/or improve performance - did I organize things the right way i. Problem solving - clear vision of organizational goals - we didn't do what we're supposed to do; didn't get done what we're supposed to do; we have to solve some probs here i. Scorekeeping - are we 80 or 90% of the way through; how far are we to achieving the goal for this month or next month i. Attention directing - from prob. Solving and scorekeeping, I got to put some more resources back into those 2 areas i. I am controlling, the planning, organizing, and leading - if the manager can remember these 4 things, these skilled 4 things; they are going to achieve the organizational goals

Creativity and Innovation

I. - this is not the role of the manager, its really the role of the organization; for organizations to succeed, we have to keep our competitive advantage and marketplace; to keep with our comp. adv., we have to always come up with new products; connects to the Boston Consulting Group Growth Share matrix; we take a dog and turn it into a star; star turns into cash cow; and turns into a q mark which turns into a star to cash cow to dog - reinvent that dog into a q' mark or get rid of the dog - same thing with the 4 p's, do we have the right product that is out there - A. Creativity: (creativity and innovation are two separate things, but interrelated) 1. generate new and original ideas - the "R" in research and development 1. that are actionable - the "D" in research and development 1. key word - "new" - if something new in the R exists that we are finding a new use for it, that would be innovation on how to do this 1. the main area in business organizations is called productivity creativity - process R and D 1. if you talked about creativity, prob. 95% of the creative things we do in a business is in process R and D - I need a better new way to do something - new products might be 4%, new structures might be 1% - finding ways to do things better - ex. - garlic dehydrator - they dehydrated onions in the facility - maybe 1 in 50 onions was not positioned correctly on the conveyor belt - people had to go in there and reposition it - an individual there found a way to use an airgun to center the onion on the conveyor belt; so it can work 3x as fast that before that people had to do this but now no = much more productivity in the plant - just gave the idea to the company - they gave him some money back - very simple things about how we do things to get creative A. Areas or the focus of creativity: - 1. Productivity - generally called "process R&D" - 1. New products - 1. New structures A. Creativity needs: Expertise, motivation, and creative thinking skills and abilities. a. Not expertise as being creative, expertise in the area you are working on; like expertise in terms of that conveyor belt; you got to have some creative thinking skills and abilities - you can learn these things a. Ex. prof working on a big project in Sac - ran into an auditor; kids just got out of college; he was a marine - active reserves in the marine - he was going to go active for 2 yrs - marine... worldwide payroll system - went back to Kansas city - wife - school teacher - looked for work in Kansas city - saw an ad - English teacher - took the job at hallmarks - went into a room that was all white - what they had to do everyday - come up with 50 greeting cards - every morning - boss - today is grandmother day - next day - fathers card - first week was terrible - after 2 weeks she was a pro - passed card with everyone to see - very creative b/c she was in the right environment - creativity needs to be fostered in an organization rather than found; a. Ex. 2 - guy in the pic - invented the post it - innovation; was a chemist at 3M in Minneapolis - they have always been big on new products - he was creating an adhesive for a film that was going to cover a satellite component - created this film with adhesive on it that left a little residue - they couldn't use it and so had to come up with something else; he was unhappy with all the work he put into the adhesive wasn't used; he put the adhesive on a little piece of paper - it worked! - Choir leader did not like the sound of ruffling paper; he snuck up to the 3rdfloor at 3am - gave some to administrators - the next day they asked for more - big boss checked on it - that's where the post-it came from - you can be creative coming up with new material - never used a post-it before and now they are pervasive in the world today - it is impt. For a manager to foster this creativity and innovation A. Innovation: applying new ideas to the organization - 1. Invent - the application of the new idea from the "creative process" for the organization - it not the product but the new idea; how can I use this is a better way or another way 1. Develop - makes the new idea practical - I got these post its I can use with my choir - not a big good market - attorneys and leases - worked out 1. Diffuse - puts the idea into the hands of the end user - he went upstairs and gave the post its to the end users - they liked it and integrated it permanent into the organization or people don't walk it back and say I don't want to do this anymore - you got to get into a little change management but not really change management 1. Integrate - makes the new idea permanent in the organization 1. Monitor - tracking of the innovation to validate its continued use - innovative; Alex - innovative in the plant in doing small batches - creative and inventive with the red and green cards - he didn't invent the green cards - that is an old system 1. You got to be creative and innovative as a manager or foster those - but they are 2 diff. things - most companies just want to be innovative b/c being creative is very expensive - can have a big payoff

Leading:

a. Articulating a clear vision of the organizational goals so organizational members can understand the part they play - this is NOT leadership, just leading; the manager has to lead but it's not a true leadership position that's more strategic than operational; we're really talking about managers - that operational section in Anthony's triangle - articulate a clear organizational goal so organizational members can understand the part they play - use the organizational structure to achieve a goal - communicate to them to how these people and resources on the planning side uses organizational structure to achieve a goal

Planning and Controlling - A Manager's Environment from Mintzberg http://www.mintzberg.org/

a. Guy (pic) from Canada; doesn't get too involved on the politics; tru manager guru; he used to canoe a lot and noticed all this debris in the creeks - remnants of beaver building up their dams - collected the beaver sculptures - the beaver is a lot like a manager - always busy doing something - very productive - very focused on what they need to do - you got to build the dam - accomplish something - thought the beaver was a nice analogy of what a manager should be; his model for managers - 2-fold (1 - has to be simple so you can understand and remember it; he put into commanding, organizing, leading, and controlling) when you walk around the plant, you have to be thinking about these 4 things all at the same time; in serial fashion; though you do it in a linear fashion; you have to make sure these things are all occurring at the same time a. Webpage: good pg to reference to in an interview; circus link - all the people listed are very well known academics or business people; he's comfortable in his own skin - that is what a manager should be

1. The company's business model is built to support two principal goals - from IBM:

i. Business model - how do I organize myself - structures, people, technology, product mix, - how do we structure ourselves to achieve being successful and important a. "Helping clients succeed in delivering business value by becoming more innovative, efficient and competitive through the use of business insight and information technology (IT) solutions; - their business model said we are going to provide you with insights on how your business operates - SPSS - acquired that - creative and innovative with their tech. - in order to achieve this - you have to be c. = and, providing long-term value to shareholders. = you got to make money - ex. no margins no mission, no profit - Duke H. - you have to create value - for customers - value to my shareholders The business model has been developed over time through strategic investments in capabilities and technologies that have the best long-term growth and profitability prospects based on the value they deliver to clients. The company's strategy is to focus on the high-growth, high-value segments of the IT industry - i. They get into business analytics - artificial intelligence - there is no additional value to the PC market - it's a commodity- we are going to get out of the business - they sold it to Lenovo - they are still in the networking business with very big systems but they found value in system installation - quantitative measures for these things - now we want to tell you how these things work inside the organization

a. Planning:

i. Identifying and selecting appropriate goals i. and courses of action i. you got the people in place here