Strategic Management Ch. 11 & 12

Founder Imprinting

a process by which the founder defines and shapes an organization's culture, which can persist for decades after his or her departure

Strategic Control-and-Reward Systems

internal-governance mechanisms put in place to align the incentives of principals (shareholders) and agents (employees)

Input Controls

mechanisms in a strategic control-and-reward system that 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

mechanisms in a strategic control-and-reward system that seek to guide employee behavior by defining expected results (outputs), but leave the means to those results open to individual employees, groups, or SBUs

Simple Structure

organizational structure in which the founders tend to make all the important strategic decisions as well as run the day-to-day operations

Matrix Structure

organizational structure that combines the functional structure with the M-form

Multidivisional Structure (M-Form)

organizational structure that consists of several distinct strategic business units (SBUs), each with its own profit-and-loss responsibility

Functional Structure

organizational structure that groups employees into distinct functional areas based on domain expertise

Exploration

searching for new knowledge that may enhance a firm's future performance

Shareholder Capitalism

shareholders - the providers of the necessary risk capital and the legal owners of public companies - have the most legitimate claim on profits

CEO/Chairperson Duality

situation where the CEO of a publicly traded company is also the chairperson of the board of directors

Board of Directors

the centerpiece of corporate governance, composed of inside and outside directors who are elected by the shareholders

Organizational Culture

the collectively shared values and norms of an organization's members; a key building block of organizational design

Span of Control

the number of employees who directly report to a manager

Organizational Design

the process of creating, implementing, monitoring, and modifying the structure, processes, and procedures of an organization

Organizational Structure

a key to determining how the work efforts of individuals and teams are orchestrated and how resources are distributed

Shared Value Creation Framework

a model proposing that managers have a dual focus on shareholder value creation and value creation for society

Ambidexterity

a firm's ability to address trade-offs not only at one point but also over time. It encourages managers to balance exploitation and exploration

Inertia

a firm's resistance to change the status quo, which can set the stage for the firm's subsequent failure

Leveraged Buyout (LBO)

a single investor or group of investors buys, with the help of borrowed money (leveraged against the company's assets), the outstanding shares of a publicly traded company in order to take it private

Moral Hazard

a sitation in which information asymmetry increases the incentive of one party to take undue risks or shirk other responsibilities because the costs incur to the other party

Groupthink

a situation in which opinions coalesce around a leader without individuals critically evaluating and challenging that leader's opinions and assumptions

Adverse Selection

a situation that occurs when information asymmetry increases the likelihood of selecting inferior alternatives

Corporate Governance

a system of mechanisms to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally

Agency Theory

a theory that views the firm as a nexus of legal contracts

Business Ethics

an agreed-upon code of conduct in business, based on societal norms

Stock Options

an incentive mechanism to align the interests of shareholders and managers, by giving the recipient the right (but not the obligation) to buy a company's stock at a predetermined price sometime in the future

Ambidextrous Organization

an organization able to balance and harness different activities in trade-off situations

Formalization

an organizational element that captures the extent to which employee behavior is steered by explicit and codified rules and procedures

Specialization

an organizational element that describes the degree to which a task is divided into separate jobs (I.e., the division of labor)

Hierarchy

an organizational element that determines the formal, position-based reporting lines and thus stipulates who reports to whom

Centralization

an organizational element that refers to the degree to which decision making is concentrated at the top of the organization

Holacracy

an organizational structure in which decision-making authority is distributed through loose collections or circles of self-organizing teams

Exploitation

applying current knowledge to enhance firm performance in the short term

Inside Directors

board members who are generally part of the company's senior management team; appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance

Outside Directors

board members who are not employees of the firm, but who are frequently senior executives from other firms or full-time professionals

Mechanistic Organization

characterized by a high degree of specialization and formalization and by a tall hierarchy that relies on centralized decision making

Organic Organization

characterized by a low degree of specialization and formalization, a flat organizational structure, and decentralized decision making

Poison Pill

defensive provisions to defer hostile takeovers by making the target firm less attractive