HOSP 4500 Chapter 8

Matrix structure strengths

-Achieves coordination -Flexible use of human resources -Works well in medium-sized firms with multiple products

Examples of a feedback-control system

-Budgets -Financial ratios analysis (ROI) -Audits (financial, social, safety)

Other types of organizational controls

-Bureaucratic controls -Clan control -Process controls

The multidivisional structure has several advantages

-By existing as a separate unit, each business is better able to focus its efforts on the needs of its particular stakeholders -Corporate-level management is freed from day-to-day issues and is able to take a long-term, integrative view of the collection of businesses -Corporate executives may monitor the performance of each division separately and allocate corporate resources for specific activities that show promise -Can lead to financial synergy

The purpose of these organizational structures is to

-Coordinate, communicate, and control individual actions to support the strategy -Facilitate workflow, permit management control -Create doable jobs -Creating ways to coordinate employee

Disadvantages of company rules and policies

-Could encourage behavior that works against the firm's strategies -Rules and procedures may stifle employees from improving processes because they feel rule-bound -Merchandise-return policies that alienate customers can undermine any attempt at a customer-service advantage -Purchasing policies that require bids to be awarded on the basis of price can erode quality -Reward policies often create tensions among interdependent stakeholder groups

Important functions of feedback-control systems

-Creating specific targets ensures that managers at various levels and areas in the company understand the plans and strategies that guide organizational decisions -Motivate managers to pursue organizational interests as opposed to purely personal interests, because they know they will be held accountable for the results of their actions -Help managers decide when and how to intervene in organizational processes by identifying areas requiring further attention

Goals of a feedback-control system

-Determination of broad goals -Identification of resource areas/activities -Creation of measurable goals -Facilitation of operating goals

Matrix structures weaknesses

-Dual authority can cause frustration and confusion -Excellent interpersonal skills needed -Additional training required can be expensive -Time consuming due to frequent meetings -Great effort needed to maintain power balance

Functional structure strengths

-Economies of scale within departments may lead to efficiency -Allows development of functional expertise and specialization -*Best in organizations with few products or services*

Types of organizational controls

-Feedback-control systems -Feedforward control -Other systems

Accounting-based financial measures sometimes prompt managers to behave in ways that are counterproductive over the long run

-Financial measures such as ROI discourage investments in long-term research projects because expenses must be paid out immediately, while benefits may not accrue until many financial periods later -Managers may cancel services (turn-down service in the guest room) that appear to be too costly, placing an emphasis on essential services or services that are most efficiently produced

Corporate-level matrix strengths

-Improves coordination among internal stakeholders by forcing managers within related businesses to maintain close contact with one another -Can help the organization become more flexible and responsive to changes in the business environment -Can encourage teamwork and participation

Project/knowledge managers

-In large firms, boundary-spanning positions are created so that various components of a business fit together and resources are appropriately allocated -Formal integrator positions may be known as chief knowledge officer (CKO), chief learning officer (CLO), director of intellectual assets, or manager of performance -Have been developed because of an awareness of the importance of using the ideas of people at every level of the firm and ensuring that opportunities are not missed and that people and projects are coordinated -Frequently works to ensure the organization can get maximum value from its intangible assets and best practices -Maximizing the return on knowledge investments helps ensure innovation and avoid knowledge loss that often occurs when an organization restructures

Problems with financial controls

-Lateness -Aggregation -Distortions -Counterproductive

Geographic/customer-based structure weaknesses

-Loss of economies of scale within functional areas -Some redundancy of functions -Loss of in-depth functional specialization -May lead to poor coordination and integration across locations or customer groups

Corporate-level structures

-Multidivisional -Strategic Business Unit (SBU) -Corporate-level matrix

Decentralization

-Overburdened top management -Motivational research favors decentralization -Permits greater flexibility -Can result in better decisions -Can increase control

Many companies do not see everyday rules, procedures, and policies as strategic

-Rules, procedures, and policies guide the decisions and actions of employees, *they are a major determinant of how well strategies are implemented* -All store managers receive a book of detailed instructions specifying exactly where every item of clothing will be displayed -Require that white walls be touched up once a week and wood floors polished every three to four days -Gap management believes this level of procedural detail is necessary to achieve consistency and high levels of performance

Organizational structure, control, and culture

-Shape people's behaviors, values, and attitudes -Determine how they will implement an organization's business model and strategies

Functional structure weaknesses

-Slow response time to environmental changes -Hierarchy overload from decisions collecting at the top -Sometimes poor coordination across departments -Can restrict view of broader organizational goals

Organizational design decisions

-Specialization -Formalization -Centralization -Levels of authority

Geographic/customer-based structure strengths

-Suited to fast change in an unstable environment (more responsive) -High levels of customer satisfaction -High coordination across functions -Best in larger organizations with several locations or customer groups

SBU allows for

-Top management to monitor many businesses at one time -Decentralization around dimensions that are meaningful to the business, such as markets or technologies -SBU presidents can encourage the members of the SBU to coordinate activities and share information

A multidivisional structure is well suited to

An unrelated-diversification strategy -Where there is no attempt to achieve operating synergies through coordinating and combining activities

Several principles or dimensions may be used to

Characterize an organization's structure -Capture the formal arrangements of people, activities, and decision-making authority -Represents an organizational design decision, and these decisions have ramifications with regard to organizational behavior

Bureaucratic controls

Consist of rules, procedures, and policies that guide the behavior of organizational members -Especially appropriate where consistency among employees is important (McDonald's) -Rules and procedures outline specific steps for an employee to follow in a particular situation -When a particular problem is routine or arises often, a rule or procedure may be developed so that every employee handles it in the way that is consistent with the organization strategy -Unusual situations and quickly changing business conditions can make an existing procedure obsolete or ineffective

Geographic structure

Corporations that organize on the basis of expanding into new locations -Common in the hospitality industry, because companies operate in diverse geographic markets -Restructuring of IHG into geographic divisions at both the corporate and regional levels, is an example of a geographic structure and is thought to have streamlined that company

The functional structure is not appropriate in an environment where

Customer needs are diverse or changing, as when a firm is trying to provide many products or services to many customer groups -May result in poor coordination across departments and thus impede the ability of the firm to adapt to changing needs -Different departments may become insular and focus on departmental goals at the expense of overall organizational goals -It is possible for a department to be high-performing, but the overall hotel to not be -Interdepartmental conflicts easily emerge when people focus exclusively on their own area of skill

Centralization

Facilitates coordination -Ensure decisions consistent with organization's objectives -Top-level managers have means to bring about organizational change -Avoids duplication of activities

Any time goals or objectives are established and then measured against actual results, a

Feedback-control system exists -The starting point is the strategic management process, beginning with establishment of strategic direction, followed by identification of basic strategies and implementation plans -Objectives are established as a part of the implementation process -Time passes, and eventually these objectives are measured against actual performance -Performance information is then used as feedback to guide the strategic management process, and the cycle continues

A flat, wide organizational structure means

Fewer levels and a wider span of control for managers -More employees reporting to manager -May be associated with more use of cross-functional, self-managed teams

Organizations that want to create, preserve, or alter their culture and ethics often use

Formal and informal orientation programs, mentoring programs, rigorous selection procedures, skills and communications training, and other methods of socialization to instill commitment to organization values -Define those behaviors that the company finds important, and then stress them in selection, orientation, and training procedures -Some firms select employees on the basis of their existing personal work-related values -Other firms prefer to hire young people and then socialize them toward a required set of values that will support the culture of the organization -*HR management systems play an important role in controlling organizational behavior*

Hierarchy of authority

Formal reporting relationships among levels and across functions and departments

In a matrix structure, the organization is simultaneously

Functional and product, geographic, customer, or service oriented -Can be disconcerting for employees because of the "too many bosses" problem -Power struggles may occur because of balancing the different lines of authority -Require a lot of interpersonal skill because of frequent communication -Meetings can take a lot of time, and it is sometimes difficult to coordinate the many people and schedules -Can create ambiguity and conflict between functional and product managers and between individuals -Sheer number of people that must be involved in decision making can slow the decision processes and add administrative costs

A firm that expands its business from a regional market base to a national market base may form new units around

Geographic segments -A restaurant chain may be divided into units responsible for eastern and western regions

Feedforward control

Helps managers anticipate changes in the external and internal environments -Based on analysis of inputs from stakeholders and the environment

Grouping tasks, functions, and divisions

How best to group tasks into functions - and functions into business units or divisions to create distinctive competencies and pursue a particular strategy

Allocating authority and responsibility

How to allocate authority and responsibility to these functions and divisions

Integration mechanisms

How to increase the level of coordination or integration between functions and divisions as a structure evolves and becomes more complex

If financial-control information is used as a part of an incentive system to reward managers, then

Organizations should consider adding back long-term investments such as research and development before calculating ROIs -Or create separate accounts for longer-term investment programs that are independent of the rest of the financial-reporting system

Functional structures

Organized around the common activities or similar tasks performed by individuals -Hotels are most often functionally structured -The structure is centralized, highly specialized, and most appropriate when a limited service or product line is offered to a particular market segment and when the needs of external stakeholders are relatively stable

The intent of the SBU structure is to

Provide top management with a manageable number of units to keep track of and to force responsibility for decision making lower into the organization, near the important internal and external stakeholders -Financial synergy is possible through allocating resources to the SBUs that have the greatest potential -Operating synergy is available because they are formed based on relatedness among businesses -Financial synergy is available *across* SBUs -Operating synergy is possible only *within* SBUs

Feedback control

Provides managers with information concerning outcomes from organizational activities -Managers establish objectives and then measure performance against those targets at some later time

The corporate-matrix form may also be effective in structuring a hospitality company that

Provides services that are all sold in several nations -May create a matrix structure that groups all products under each national manager and simultaneously groups all nations under each product manager -Allows the firm to achieve a national focus in its marketing and distribution practices -Encourages synergies through economies of scale and shared information within each product category

Lateness

Refers to the long lag times between the organizational transactions and the dates financial reports come out

The corporate-matrix structure is particularly appropriate for

Related-diversification strategies and global strategies -A hospitality firm that has businesses in lodging, gaming, and cruise lines may use a matrix structure to capitalize on economies of scale and capture operating synergies in marketing and distribution

Managers sometimes use a multidivisional structure while pursuing a

Related-diversification strategy -But, to exploit operational synergies, managers must structure relationships among businesses and partners in ways that encourage interdependence, and they must manage them over time with shared goals, shared information, shared resources, and cooperative program development -The multidivisional structure makes resource sharing and cooperation difficult, but those two behaviors are necessary for operating synergy to occur

Organizational-control systems that rely primarily on financial controls are likely to have

Serious problems -High-level managers typically do not have an adequate understanding of what must be done to improve value-adding activities within the organization -Financial-control measures based on accounting data are "too late, too aggregated, and too distorted to be relevant for managers' planning and control decisions"

In hotels, it is common for departments to be in conflict over

Service delivery -The sales team books business, but the rooms division and banquet staff must deliver on the sales promises made to customers -It is not easy to handle interdepartmental communication and coordination -It is unlikely that individual departments are capable of resolving interdepartmental conflicts, and the task of handling these issues falls on the general manager -Hierarchy overload can lead to decisions piling up at the top of the organization, because most interdepartmental issues fall on the general manager

Clan control

Socialization processes through which an individual comes to appreciate the values, abilities, and expected behaviors of an organization -Helps organizational members feel inclined to see things the same way, by espousing common beliefs and assumptions that in turn shape their perceptions -Intensive training; mentoring relationships and role models; and formal organizational communications including the vision, mission, and values statements -Closely linked to the concepts of culture and ethics

Task forces

Teams and task forces bring together individuals from several functions or groups to solve problems or work together to accomplish an overall outcome -Common form of coordination in hospitality firms -Accor North America establishes task forces to help develop practices to improve customer and employee satisfaction -Members of these task forces, from different levels and hotels in the region, perform various designated roles, including the role of conscience, who end the meeting by giving constructive feedback to each member of the team

The learning processes associated with feedforward and feedback control form

The basis for changes to strategic direction, strategies, implementation plans, or even the targets themselves, if they are deemed to be unreasonable given current conditions

A corporate-level structure ties

The business units together -As organizations diversify and form multiple operating companies

Specialization

The degree to which the tasks of the organization are divided into separate jobs -Some organizations have a highly specialized structure, with people focusing on one particular task or function -Advantage is that people can get very good at what they do -Other organizations expect people to be skilled in a number of tasks, which improves scheduling flexibility and teamwork

Formalization

The extent to which formalized rules, policies, and procedures exist within the organization and the extent to which people actually follow them -High level of formalization can lead to efficiency but may reduce the flexibility that is sometimes required to satisfy customers -AKA bureaucracy

Superior enterprise profitability requires that

The organizational architecture must match or fit the strategy of the firm and be consistent -If the strategy does not fit the environment, the firm is likely to experience significant performance problems -If the architecture does not fit the strategy, the firm is also likely to experience performance problems

Organizational design

The process of selecting the right combination of organizational structure, control systems, and culture to pursue a business model successfully

A strength of both the geographic and customer organizational structures

Their focus on unique needs and customer preferences -Goal is to be responsive to local market conditions -A company that uses a geographic structure is better able to serve the unique tastes and needs of customers in various locations -May be little sharing of resources across locations or customer groups and obvious duplication of efforts

A tall, narrow organizational structure means that

There are multiple levels between the CEO and the customer

Customer-based structure

When the organization structures its major units around the characteristics or types of customer -Some firms that pursue growth through market development seek out new customer groups -A hotel chain may organize around economy and luxury lodging -A foodservice firm might organize by institutional versus educational clients

With the multidivisional structure, it is often difficult to decide

Which activities will be performed at the corporate level and which will be held within each division -Competition for corporate resources may create coordination difficulties among divisions -Organizational efforts may be duplicated, particularly when the different businesses within the corporate portfolio are highly related -Shared distribution channels or common-process development could save costs for the two businesses, yet separation in the organization structure discourages cooperation

The formal organizational structure specifies

_The number and types of departments and groups -Provides the formal reporting relationships -Lines of communication among internal stakeholders

Organizational structure refers to three things

1. The formal division of the organization into sub-units (horizontal differentiation) 2. The location of decision-making responsibilities within that structure (vertical differentiation) 3. The establishment of integrating mechanisms to coordinate the activities of sub-units

Corporate-level matrix structure

A way to achieve a high degree of coordination among several related businesses -Used when the individual businesses within a corporation's portfolio need to take advantage of resource, information, or technology sharing in order to succeed in their industries -Tries to reach a balance between the pressures to decentralize units closer to market and technological trends and the pressures to maintain centralized control to bring about economies of scope and shared learning

Corporate-level structures are used when

A company begins to diversify its services, enters unrelated market channels, or begins to serve diverse customer groups -Necessary because of the increased coordination and decision making required for handling large and diversified firms -Decision making is decentralized, and the corporate headquarters focuses on coordinating all of its divisions or groups of business through reporting systems and corporate planning

Geographic and customer-based structures are suited to

A fast-changing environment and high levels of customer satisfaction -Larger businesses with multiple types of services -Helpful if market or service development is the strategic focus -Economies of scale are lost if operations are separated, and some functions will be redundant across locations -Company loses some of its in-depth functional specialization and coordination across product lines, which can be a problem -*Popular in larger hospitality companies*

The most common way in which companies organize is

A functional structure

Community of practice

A group of people who share a concern, a set of problems, or a passion about a topic and who deepen their knowledge and expertise in this area by interacting continually -Frequently hold annual meetings and retreats with their general managers to help build commitment and interpersonal relationships as well as to update and inform participants of corporate strategies and new practices

Strategic control system

A system to support managers in assessing the relevance of the organization's strategy to its progress in the accomplishment of its goals, and when discrepancies exist, to support areas needing attention

In addition to feedforward and feedback controls, organizations use

A variety of internal controls to encourage behavior that is consistent with the overall objectives of the firm

______ contact among managers from different departments or divisions is the simplest form of coordination

Direct contact -Is often based on an informal friendship network -Information often gets shared naturally in these networks, making "who you know" an important component of effective implementation -Meetings and committees are also devices used to help coordinate work -When used strategically, these lateral coordinating processes can be extremely effective

The aggregation problem simply means that financial measures based on accounting data

Do not contain the detail that is necessary to make meaningful improvements to organizational processes -ADR, RevPAR, and occupancy were found to be distorted by certain markets and price segments

Managers need to carefully design the operating systems to

Enable effective action and to modify those systems as an organization grows or shifts its strategic direction

Good feedforward control systems are important because of

Environmental discontinuities -Has an internal dimension

Even in stable environments, where environmental discontinuities play a minor role, feedforward control is

Essential to learning processes that allow organizations to move toward the accomplishment of their goals

Rather than establish a control system based purely on financial controls, top managers should

Establish a more complete strategic-control system -Puts less weight on financial controls as a source of information for evaluating division performance

Matrix structures

Hybrid structure that combines some elements of functional structures with other forms -Each team would have individuals from the functional areas reporting to both a project leader and their functional manager -Viewed by some as a transition stage between a functional form and other forms, and by others as a complex form necessary for complex environments -The many stakeholder influences that simultaneously pull an organization toward functional forms and the more diverse geographic, customer, product, or service forms reach an equilibrium in the matrix structure -Most common in turbulent or uncertain competitive environments where internal stakeholders are highly interdependent and where external stakeholder demands are diverse and changing -Can improve communications between groups, increase the amount of information the organization can handle, and allow people and equipment to be used more flexibly

Integration and integrating mechanisms are used to

Increase communication and coordination among functions and divisions -The greater the complexity of an organization's structure, the greater the need for formal coordination among people, functions, and divisions -*Informal mechanisms tend to be more effective*

Geographic regions may become the basis for grouping organizational activities when companies expand nationally through

Internal expansion, horizontal integration, or mergers

Distortion is especially evident in the way

Inventories, plant, and equipment are valued and in the way overhead costs are allocated to departments and divisions

Environmental discontinuities

Major, unexpected changes in the social, economic, technological and political environments that necessitate change within organizations -Can also arise from inside the organization, such as the unplanned development of a new product or a problem with labor turnover

Turnover among GMs has been found to be primarily due to

Management conflict and problems between the property and owners -One way to reduce the problems inherent in functional structures is to avoid the tendency to blame other departments and to develop general management skills in the functional managers

Differences in the way financial-control variables are created make

Meaningful comparisons difficult across departments, divisions, or companies -Changes in the way a department calculates a variable from one period to the next can cause distortion

Business-level structures

Methods of organizing individual business units (AKA divisions) -Functional -Geographical and customer-based -Matrix

Policy

More general guide to action -Stated in broad terms and communicate the organization's commitment to a guiding principle -Guide behavior in a general sense only (EEOC), with specific procedures needed to translate that commitment into action -May specify which employees are eligible for training programs or what employee behaviors deserve disciplinary actions -May specify which customers are to get priority, and an operations policy may describe under what conditions an order of supplies will be rejected -*The procedures and policies that most companies employ to govern daily activities, such as check approval, price setting, overtime, maintenance, and customer service, are all a form of concurrent control and are intended to ensure consistency of action*

Control systems may also be considered

Tools of strategy implementation

Process controls

Use immediate feedback to control organizational processes -Warning systems built into navigational equipment on an aircraft tell the pilot immediately if the aircraft falls below an acceptable altitude -Real-time financial feedback would make managing a business a frenzy -Real-time controls in service-delivery environments can be very useful

Strategic business units (SBUs) structure

Used when an organization is broadly diversified with several businesses in its portfolio and it becomes difficult for top management to keep track of and understand the many industry environments and business conditions -Each SBU incorporating a few closely related businesses and operating as a profit center -Composed of related divisions, with divisional vice presidents reporting to the president of a SBU or group -If an organization becomes very large, it may combine strategic business units into groups or sectors, thus adding another level of management

Financial synergy

Value added because of the ability to allocate financial resources to the areas that have the highest potential -Can increased returns, reduce risk (variability in earnings), or both

Multidivisional structure

When an organization has relatively few businesses in its portfolio, with each business existing as a separate unit. -A general manager - sometimes referred to as a divisional president or vice president- heads up each of the three divisions -Each division has it own support functions -Services that are common to all three businesses are housed at the corporate level -Divisional activities and overall financial control are monitored by the corporate headquarters