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CHAPTER 10

Implementing Strategy: Structure, Leadership, and

Culture

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Chapter Topics

• Structuring an Effective Organization• Organizational Leadership• Organizational Culture• Appendix – Primary Organizational Structures and

their Strategy-Related Pros and Cons

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Ex. 10-2: What a Difference a Century Can Make

(Contrasting Views of the Corporation))

Characteristic 20th Century 21st CenturyOrganizationFocusStyleSource of StrengthStructureResourcesOperationsProductsReachFinancials

The PyramidInternalStructuredStabilitySelf-sufficiencyAtoms – physical assetsVertical integrationMass productionDomesticQuarterly

The Web or NetworkExternalFlexibleChangeInterdependenciesBits – informationVirtual integrationMass customizationGlobalReal-time

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Ex. 10-2 (contd.)

Characteristic 20th Century 21st CenturyInventoriesStrategyLeadershipWorkersJob ExpectationsMotivationImprovementsQuality

MonthsTop-downDogmaticEmployeesSecurityTo competeIncrementalAffordable best

HoursBottom-upInspirationalEmployees/ free agentsPersonal growthTo buildRevolutionaryNo compromise

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Key Levers to Implement Strategy

• Structure (organization of firm’s activities)• Leadership (style, staffing, and skills)• Culture (shared values creating behavioral norms)

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Trends Driving Organizational Structure

Speed of Decision Making

InternetGlobalization

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Conclusions of Research on Organizational Structure

A single-product firm or single dominant business firm should employ a functional structureA firm in several lines of business that are somehow related should employ a multidivisional structureA firm in several unrelated lines of business should be organized into strategic business unitsEarly achievement of a strategy-structure fit can be a competitive advantage

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Restructuring to Support Strategically Critical Activities

• Concept – Some activities within a business’s value chain are more critical to the success of the strategy than others

• Considerations in restructuring• Strategically critical activities must be the central building blocks

for designing the organization structure• Organizational structure must be designed to help coordinate and

integrate support activities to• Maximize their support of strategy-critical primary activities• Minimize their costs and time spent on internal coordination

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Reengineering Strategic Business Processes (BPR)

• Concept – Involves reorganizing a company to create value for the customer by eliminating barriers that create distance between employees and customers

• Potential outcomes of BPR• Reduces fragmentation by crossing traditional

department lines• Reduces overhead by compressing formerly separate

tasks that are strategically intertwined in the process of focusing on the customer

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Steps Involved in BPR

• Develop a flow chart of the total business process• Try to simplify the process first, eliminating unnecessary

tasks and streamlining remaining tasks• Determine which parts of the process can be automated• Benchmark strategy-critical activities• Consider outsourcing non-critical activities• Design a structure for performing remaining activities and

reorganize personnel accordingly

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Downsizing, Self-Management, and Outsourcing

• Downsizing – Eliminating employees, particularly middle managers, in a company

• Self-management – Delegating work to lower, operating levels of an organization

• Outsourcing – Obtaining work previously done by employees inside a company from sources outside the company

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Product-Teams

The product-team structure assigns functional managers and specialists (e.g., engineering, marketing, financial, R&D, operations) to a new product, project, or process team that is empowered to make major decisions about

their product

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Ex. 10-5: Product-Team Structure

Chief Executive Officer

Research and Development

Engineering Operations Finance Sales and Marketing

Product orprocess teams

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Virtual Organization

A temporary network of independent companies – suppliers, customers, subcontractors, even competitors –

linked primarily by information technology to share skills, access to

markets, and costs

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Key Considerations of Organizational Leadership

Organizational leadership involves action on two fronts

Providing the management skill to cope with the ramifications of constant change

Guiding the organization to

deal with constant change

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Strategic Leadership: Embracing Change

Clarifying strategic intent

Activities involved in galvanizing commitment to change

Building an organization

Shaping organizational culture

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Strategic Intent

An articulation of a simple criterion or characterization of

what the company must become to establish and sustain global

leadership

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Ex. 10-11: What Competencies Should Managers Possess?

The Leadership Needs of Organization

The ability to:•build confidence•build enthusiasm•cooperate•deliver results•form networks•influence others•use information

The Required Competencies of Business Leaders

•business literacy•creativity•cross-cultural effectiveness•empathy•flexibility•proactivity•problem solving•relation building•teamwork•vision

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Ex. 10-12: Management Processes and Levels of Management

RENEWAL PROCESSAttracting resources and capabilities and developing the business

Developing operating managers and supporting their activities. Maintaining organizational trust

Providing institutional leadership through shaping and embedding corporate purpose and challenging embedded assumptionsINTEGRATION PROCESSManaging operational

interdependencies and personal networks

Linking skills, knowledge, and resources across units. Reconciling short-term performance and long-term ambition

Creating corporate direction. Developing and nurturing organizational valuesCreating and pursuing

opportunities. Managing continuous performance improvement

Renewing, developing, andsupporting initiatives

Establishingperformance standards

ENTREPRENEURIAL PROCESS

Front-Line Management Middle Management Top Management

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What is Organizational Culture?

The set of important assumptions (often unstated)

that members of an organization share in common.

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Ex. 10-13: Managing the Strategy-Culture Relationship

Link changes to basic mission and fundamental organizational norms

Reformulate strategy or prepare carefully for long-term, difficult cultural change

Synergistic –focus on reinforcing culture

Manage around the culture

1 42 3

ManyChanges in key organizational factors that are necessary to implement the new strategy

Few

High LowPotential compatibility of changes with

existing culture

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Ex. 10-A: Functional Organizational Structure

Engineering Production Personnel Financeand

Accounting

Marketing

CEO

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Ex. 10-A: Functional Organizational Structure

Strategic Advantages• Achieves efficiency through

specialization• Develops functional expertise• Differentiates and delegates day-to-

day operating decisions• Retains centralized control of

strategic decisions• Tightly links structure to strategy

by designing key activities as separate units

Strategic Disadvantages• Promotes narrow specialization and

functional rivalry or conflict• Creates difficulties in functional

coordination and interfunctionaldecision making

• Limits development of general managers

• Has a strong potential for interfunctional conflict –priority placed on functional areas, not the entire business

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Ex. 10-A (contd.)Process-Oriented Functional Structure

Purchasing Receivingand

Inventory

Order entry Wholesalesales

Retailsales

Accountingand

billing

Customerservice

CEO

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Ex. 10-B: Geographic Organizational Structure

Corporate StaffFinance & Accounting

PersonnelMarketing, etc.

General Manager,Western District

General Manager,Southern District

District StaffPersonnel

Accounting andControl

Engineering Production Marketing

General Manager,Central District

General Manager,Northern District

General Manager,Eastern District

Chief Executive

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Ex. 10-B: Geographic Organizational Structure

Strategic Advantages• Allows tailoring of strategy to

needs of each geographic market• Delegates profit/loss responsibility

to lowest strategic-level• Improves functional coordination

within the target market• Takes advantage of economies of

local operations• Provides excellent training grounds

for higher level general managers

Strategic Disadvantages• Poses problem of deciding whether

headquarters should impose geographic uniformity or geographic diversity should be allowed

• Makes it more difficult to maintain consistent company image/reputation from area to area

• Adds layer of management to run the geographic units

• Can result in duplication of staff services at headquarters and district levels

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Ex. 10-C: Divisional or Strategic Business Unit Structure

ManagerProd/Operation

ManagerMarketing/Sales

Manager, HRManager, Acctg/FinanceManager, R&D

Personnel

Acctg/ControlDivision Planning

Marketing

Prod/Operation

Marketing

Prod/Operation

Personnel

Acctg/ControlDivision Planning

Chief Executive Officer

GMDivision/SBU A

GMDivision/SBU

B

GMDivision/SBU C

VP-Admn Services VP-Operating Support

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Ex. 10-C: Divisional or Strategic Business Unit Structure

Strategic Advantages• Forces coordination and necessary authority

down to the appropriate level for rapid response

• Places strategy development and implementation in closer proximity to the unique environments of the division/SBUs

• Frees CEO for broader strategic decision making

• Sharply focuses accountability for performance• Retains functional specialization within each

division/SBU• Provides good training ground for strategic

managers• Increases focus on products, markets, and

quick response to change

Strategic Disadvantages• Fosters potentially dysfunctional competition

for corporate-level resources• Presents the problem of determining how

much authority should be given to division/SBU managers

• Creates a potential for policy inconsistencies among divisions/SBUs

• Presents the problem of distributing corporate overhead costs in a way that’s acceptable to division managers with profit responsibility

• Increases costs incurred through duplication of functions

• Creates difficulty maintaining overall corporate image

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Ex. 10-D: Matrix Organizational Structure

EngineeringStaff

EngineeringStaff

Engineering Staff

ProductionStaff

ProductionStaff

ProductionStaff

PurchasingAgent

PurchasingAgent

PurchasingAgent

AdministrationCoordinator

AdministrationCoordinator

Chief Executive Officer

Vice President,Engineering

Vice President,Production

Vice President,Purchasing

Vice President,Administration

Project Manager

A

AdministrationCoordinator

Project Manager

B

Project Manager

C

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Ex. 10-D: Matrix Organizational Structure

Strategic Advantages• Accomodates a wide variety of

project-oriented business activity• Provides good training grounds for

strategic managers• Maximizes efficient use of

functional managers• Fosters creativity and multiple

sources of diversity• Gives middle management broader

exposure to strategic issues

Strategic Disadvantages• May result in confusion and

contradictory policies• Necessitates tremendous

horizontal and vertical coordination

• Can proliferate information logjams and excess reporting

• Can trigger turf battles and loss of accountability