Strategic Management: Chapter 11
How does organizational culture change?
Corporate BODs bring in new leadership at top, which is charged to make changes in strategy/ structure
Organizational Culture can be a basis of competitive advantage if the firms unique culture helps in increasing its ...
economic value creation
Exploitation-
enhance firm performance in the short term
Ambidexterity encourages managers to balance... (2 E's)
exploitation with exploration
Extrinsic motivation is driven by...
external factors such as awards and higher compensation, or punishments (the carrot- and-stick approach)
Flat Structure-
few or no levels of middle management between staff and executives (wide span of control) (top down and bottom up communication)
Best to develop strong/ strategically relevant culture in the first...
few years
Ambidexterity-
firm's ability to address trade-offs (over time)
Simple structure-
founders tend to make all the important strategic decisions as well as run the day-to-day operations
The network structure allows firms to connect centers of excellence to their...
global location
Functional structure -
groups employees into distinct functional areas based on domain expertise
Need for structural reorganization is especially intense in industries where rate of change is ______ and potential disruption is _________
high; frequent
Artifacts-
includes elements such as the design and layout of physical space (cubicles/ private offices etc.); symbols (uniform); vocabulary; what stores are told; events celebrated; how they're celebrated.
the use of budget is key to...
input controls
Strategic control and reward systems-
internal governance mechanisms put in place to align the incentives of principals (shareholders) and agents (employees)
A high degree of specialization can increase productivity but decrease...
job satisfaction (due to repetition of tasks)
Mechanic organizations are often used with... (McDonald's and Walmart)
low cost strategy
Tall structure-
many managers, and each manager has a narrow span of control (many levels of hierarchy)
Groupthink is a __________ side effect of recruiting, retaining, and promoting employees with the same values.
negative
Due to computer-mediated collaboration tools firms have moved from rigid matrix structure to...
network structure
Span of control-
number of employees who directly report to manager
Groupthink-
opinions coalesce around a leader w/o individuals critically evaluating and challenging that leader's opinions and assumptions
Organizational structure is key to determining how the work efforts of individuals and teams are ____________ and how resources are ___________.
orchestrated; distributed
What type of organization has fluid and flexible information flow among employees (both vertical and horizontal); faster decision making; and higher employee motivation, retention, satisfaction, and creativity?
organic organization
Key decisions managers make when designing effective organizations pertain to...
organizational structure
Results-only-work-environments (ROWEs)-
output controls that attempt to tap intrinsic employee motivation, which is driven by the employee's interest in and the meaning of the work itself. (work requiring creativity and innovation)
Founder imprinting-
process by which the founder defines and shapes an organization's culture, which can persist for decades after his or her departure
Socialization -
process of employees internalizing an organization's values and norms through day-to-day operations (how employees learn the org culture)
The goal of organizational design is to design an organization that allows managers to translate their chosen strategy into a....
realized one
Centralization-
refers to the degree to which decision making is concentrated at the top of the organization
Output controls ties employee compensations to...
rewards to predetermined goals
Exploration-
searching for new knowledge that may enhance a firm's future performance
Input controls-
seek to define and direct employee behavior through a set of explicit, codified rules and standard operating procedures that are considered prior to the value-creating activities
Output controls-
seek to guide employee behavior by defining expected results, but leave the means to those results open to individual employees, groups, or SBUs
Input controls define ways and means to reach...
strategic goals and ensure predictable outcomes
Organizational structure must follow...
strategy
structure must accommodate...
strategy
Specialization-
the degree to which a task is divided into separate jobs (division of labor)
Organizational inertia-
the failure of established firms
Organizational design-
the process of creating, implementing, monitoring, and modifying the structure, processes, and procedures of an organization
Firms tend to use a global matrix structure to pursue a...
transnational strategy
Related Diversification:
-Centralized decision making -High level of integration at corporate headquarters -Co-opetition among SBUs
Matrix Structure and Global Strategy: (4)
1. international 2. multidomestic 3. global standardization 4. transnational
Key Building Blocks of Organization Structure:
1. specialization 2. formalization 3. centralization 4. hierarchy
Blue ocean strategy: (combo of differentiation and cost leadership)
-Ambidextrous organization -Balancing centralization with decentralization -Multiple core competencies along the value chain required: R&D, manufacturing, logistics, marketing, etc. -Process and product innovations -Focus on economies of scale and scope
Intrinsic motivation in a task is highest when an employee has: (AMP)
-Autonomy (about what to do) -Mastery (how to do it) -Purpose (why to do it)
Disadvantages of matrix structure:
-Difficult to implement -Reporting structures often not clear (employees can have trouble when having two or more supervisors) -Adding layer can slow decision making/ increase bureaucratic costs
International:
-Functional structure -Leverages home based core competency by moving it to foreign markets
Transnational:
-Global matrix structure -Balance of centralized and decentralized decision making -Additional layer of hierarchy to coordinate both: Geographic areas and Product divisions
Pattern for successful firms:
-Master of the current environment -Success is usually measured by financial measurements -Structures, measures, and systems to accommodate and manage size -A resulting organizational inertia that tends to minimize opportunities and challenges created by shifts in the internal and external environment
Cost-leadership strategy:
-Mechanistic organization -Centralized -manufacturing and logistics (core comps) -Process innovation (drive down cost) -economies of scale
Matrix structure combines the benefits of the ____ ______ and the _________ ____________
-Multi-Divisional Form (M-Form) -Functional structure
Global Standardizaton
-Multidivisional structure -Product divisions -Centralized decision making -Cost leadership strategy used where capabilities reside at lowest cost -Reap economies of scale
Multi Domestic:
-Mutlidivisional structure -Geographic areas to maximize local responsiveness -Decentralized decision making
Differentiation strategy:
-Organic organization -Decentralized -R&D, innovation, and marketing (core comps) -economies of scope (leveraging brand name across diff products)
Simple structure characteristics:
-Small firms -Flat structure -decentralized -Low formalization/specialization -no professional managers
Internal shifts:
-accelerated growth -change in business model -entry in new markets -change in top management team -mergers and acquisitions
Disadvantages of multidivisional structure:
-adding another layer of corporate hierarchy (problems of increasing bureaucracy, red tape, and sometimes duplication of efforts) -slows decision making -SBUs compete with each because they are standalone profit-and-loss -Co-opetition (competition and cooperation at the same time) is necessary
Functional structure characteristics:
-adopted when sales increase -Department heads report to CEO -Higher specialization/deeper domain expertise -Greater division of labor (higher productivity) -Top down and bottom up communication chain b/w CEO and functional departments (flat structure)
In multidivisional structure, the president reports to the ______ __ _________, who represents the interests of the _________________.
-board of directors -shareholders
Unrelated Diversification:
-competitive multidivisional structure -decentralized decision making -low level of integration at corporate headquarters -competition among SBUs for resources
High degree of formalization can slow ______ _________, reduce ________/__________, and hinder ________ _________.
-decision making -creativity/innovation -customer service
Benefits of the Multi-Divisional Form:
-domain expertise -economies of scale -efficient processing of info
Where do organizational cultures come from?
-founder imprinting -groupthink
Global Matrix structure wants... (2)
-high local responsiveness -low cost
Control Systems:
-input controls -output controls
Organic organizations: (Zappos)
-low specialization and formalization -a flat structure -decentralized
Functional structure and business strategy is recommended when a firm has a... (2)
-narrow focus of product/service -small geographic footprint
Benefits of Functional Structure:
-responsiveness -decentralized focus
Different Stages in Firm's Growth: (4)
-simple structure -functional structure -multi divisional structure -matrix structure
What 2 multidivisional structures are functional with 70% revenue from primary activity?
-single business -dominant business
Multidivisional Structure (M-Form):
-single business -dominant business -related diversification -unrelated diversification
Output controls are best applied to... (2)
-single line of business -unrelated diversification
Mechanic organizations deal with... (2)
-standardization -economies of scale
Organizational design key components: (SCC)
-structure -culture -control
Types of hierarchy's:
-tall structure -flat structure
Matrix Structure:
-the company structure where reporting relationships are set up as a grid, or matrix -employees have multiple managers to report to (functional manager and a product manager)
Formalization-
Detailed written rules/ policies for what to do in specific situations
External shifts-
PESTEL factors
Inertia-
a firm's resistance to change the status quo, which can set the stage for the firm's subsequent failure (not willing to change)
Mechanic organizations- (McDonald's and Walmart)
characterized by a high degree of specialization and formalization and by a tall hierarchy that relies on centralized decision making
Norms-
appropriate employee attitudes and behaviors
communities of practice are formed by people who engage in a process of...
collective learning in a shared domain (a tribe learning to survive, a band of artists seeking new forms of expression, a group of engineers working on similar problems)
Functional Structure lacks effective _________ ________ across departments,
communication channels
It can be difficult to imitate cultures of successful firms for two reasons:
causal ambiguity and social complexity
Top-down strategic management takes place in highly...
centralized organizations
Multidivisional structure- (Siloed Departments)
consists of several distinct strategic business units (departments are siloed off), are operated independently from one another and each led by a CEO who is responsible for business strategy/ day-to-day operations.
Cross-Functional Teams overcome the lack of....
cross-departmental collaboration in a functional structure
Internal & external shifts can break apart the ______ ________ which can lead to ____ _____
current system; firm failure
planned emergencies are found in more...
decentralized organizations
Hierarchy-
determines the formal, position-based reporting lines and thus stipulates who reports to whom
Organic organizations use what type of strategy?
differentiation strategy
Organizational culture must be:
valuable, rare, difficult to imitate, and organized
Culture flows from...
values
Organizational culture-
values and norms of an organization's members; a key building block of organizational design
Most important & least visible to least important and most observable:
values, norms, artifacts
Values-
what is important
Strong cultures emerge when company's core values are...
widely shared among firm's employees and norms have been internalized