Realizing Strategy

Foundations of Strategy CH.9Kevin LangfordDevin NewmanNick CapodagliCaitlin McPherson

Realizing StrategyIntroductionFormulating a strategy without taking into account the conditions in which it will be implemented will result in a poorly designed strategy.ObjectivesOpening Case: BP Oil SpillThe Organizational ChallengeOrganizational DesignManagement SystemsCorporate CultureSummaryOpening Case: BP and the Oil Spill

The Organizational ChallengeEvery organized human activity- from making pots to placing a man on the moon- gives rise to two fundamental and opposing requirements: the division of labor into various tasks and the coordination of these tasks to accomplish the activity. Henry MintzbergThese two requirements are difficult to reconcile simultaneously and is one of the central problems for organizations.

Specialization and Division of LaborThe fundamental source of efficiency in production is specialization through the division of labor into separate tasks. Example: Henry Ford and the Model T. But specialization comes at a cost: the more a production process is divided between different specialists, the more complex is the challenge of integrating the efforts of individual specialists. The Cooperation ProblemThe Coordination ProblemSamuel Adams: The Brew CrewIt takes the right combination of creativity, curiosity and respect for the craft to brew up a great team. Sure, we may have our differences when it comes to favorite beer style or food pairing, but the one thing we all agree on is that we do what we do for one simple reason: FOR THE LOVE OF BEER.Tasting & EvaluationStep 1: AppearanceStep 2: AromaStep 3: TasteStep 4: BodyStep 5: FinishThe Cooperation ProblemArises from differing goals in terms of the concept of agency.Agency Relationship: exists when one party (the principal) contracts with another party (the agent) to act on behalf of the principal.The problem for the principal is ensuring that the agent acts in his or her interest.EX: Shareholders (principal) and managers (agents)Some ways to overcome the agency problem: Bureaucratic ControlsPerformance incentivesShared Values

The Coordination ProblemThe desire to cooperate is not enough to ensure that organizational members integrate their efforts. Unless individuals can find ways of coordinating their efforts, production doesnt happen.Some ways/devices to ensure coordination:Rules and instructionsRoutinesMutual Adjustment(These all depends on the types of activity being performed)Organizational DesignHierarchy and Coordination

Organizational DesignDefining Organizational UnitsWhat basis are individuals assigned to organizational units?TasksProductsGeographyProcessManagement SystemsProvide the mechanisms of communication, decision making, and control that allow companies to coordinate activitiesThere are four different types of management systemsInformationStrategic PlanningFinancialHuman Resources

Organizational DesignAlternative Structure FormsFunctionalMultidivisionalMatrixInformation and Strategic PlanningInformationAdmin. hierarchies are founded on vertical info flows: upward flow of information to the manager and the downward flow of instructionsRegular, real time, performance feed back has allowed employees to take responsibility for quality control and reducing need for constant managementStrategic PlanningConsists of 5 major aspectsA statement of goalsSet of assumptions Qualitative statement Specific action stepsSet of financial projections

Financial and Human ResourcesFinancialThe lifeline and blood of the companyThe top mechanism by which management seeks to control the businessConsists of two major budgetsCapital expenditure budgetOperating budgetHuman ResourcesEstablishes an incentive system that supports the strategic plan and ensuring each employee has the competence to stick to that planThe main problem human resources faces is getting employees to act in line with the goals of the company

Corporate CultureEdgar Schein defines as:A pattern of shared basic assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way you perceive, think and feel in relation to those problems.OR the way things get done around hereCorporate CultureIs typically used to refer the values and ways of thinking that senior managers wish to encourage within their organizationWhereas organizational culture refers to the diverse cultural patterns that exist in the informal organization.

Describing and Classifying CulturesScheins 3 Different Levels of Understanding CultureCan Organizational Cultures Be Changed?Strong corporate cultures play to employees hearts rather than their heads and encourage loyalty and commitment.Strong cultures built by recruiting right people, holding induction events, establishing corporate rights and ceremonies that reinforce the approved ways to behave, holding team briefings, organizing social activities.If changes is values are not seen as authentic they will be met with cynicism and resistance.

Corporate Culture and Organizational PerformanceStudies havent been able to show those with stronger corporate cultures out perform those without.For an organizations culture to confer a competitive advantage it needs to be valuable, rare and inimitable. If it were easy to engineer then it would cease to be rare and inimitable and all companies could create strong corporate cultures.

SummaryPlanned strategy and realized strategyCovered the key issues that underpin the design of an organization's structures and systems and influence the ways in which and organization attempts to develop a strong corporate culture.

Questions?