2019 Jan 9 Lecture 9 Strategy Structure and Systems

Slide 13.
Strategy in Action
13: Organising for Success
Johnson, Whittington, Scholes, Angwin and Regnér, Exploring Strategy Powerpoints on the Web, 10th edition ©Pearson Education Limited 2014
Slide 13.2
Learning outcomes
• Analyse the main organisational structural types in

terms of their strengths and weaknesses.
• Identify key issues in designing organisational control
systems (such as planning and performance targeting
systems).
• Recognise how the three strands of strategy, structure
and systems should reinforce each other in
organisational configurations and the managerial
dilemmas involved.
Slide 13.3
Structures, systems and configurations

• Structures give people formally defined roles,
responsibilities and lines of reporting. The structure
is like the skeleton of an organisation and creates
its basic framework.
• Systems support and control people as they carry
out structurally defined roles and responsibilities.
Systems are like the muscles of an organisation
that provide movement and coherence.
• Configurations are the set of organisational design
elements that interlink together in order to support
the intended strategy ( How strategy, structure and systems should
reinforce each other in organisational configurations and the managerial
dilemmas involved).
A System
• A set of detailed methods, procedures, routines , steps and
tools created to carry out a specific activity, perform a duty,
or solve a problem, complete a task effectively and
efficiently e.g. to serve customers efficiently, to deal with
efficiency in registration of students, processing of exams
or orders, etc. ...
• An organized, purposeful structure that consists of
interrelated and interdependent elements (components,
entities, factors, members, parts. procedures etc.).
• You need a system for efficiency and effectiveness in every

part of the value chain (revise Value chain components in
chapter 3)
• These systems require monitoring for quality continuously
for continuous improvement…kaizen) see the Service
Blue Print for Natsave.
Slide 3.5
The value chain (1) chapter 3
• The value chain describes the categories of

activities within an organisation which,
together, create a product or service.
• The value chain consists of five primary
activities (which are directly concerned with the
creation or delivery of a product or service) and
four support activities (which help to improve
the effectiveness or efficiency of primary
activities).
• Competitive advantage can be analysed in any
of these activities.
Slide 3.6
The value chain (2) Chapter 3
Source: Adapted with the permission of The Free Press, a Division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance by
Michael E. Porter. Copyright © 1985, 1998 by Michael E. Porter. All rights reserved.
NATSAVE Background continues…..
 Mission - To provide distinctive, customer-focussed banking services in
order to foster financial inclusion and economic development
 Vision - To be Zambia’s preferred Bank in the provision of sustainable
and quality banking services
 Key words: Blueprint, Services, and Banks.
Definitions
 Blueprint – “Is a picture or map that portrays the service system and it is
useful at the design stage of service development”. (Zeithaml,p365, 2009);
and,
 Services – Are economic activities offered by one party to
another(Lovelock & Wirtz, 2007).
 Banks – Are financial institutions offering various financial services
(Singh.J., 2013)
NATSAVE BLUEPRINT
Bank Frontline Support Money
Physical Banking Hall desk Cashier facility at
exterior ATM Outlook & counter cashier
counting/
Evidence Parking & machine
staff uniform counter display
outlook of
Building Inquiring
from Filling
Contactin Getting Waiting cashier amount in
withdraw to
Customer g front for withdrawal Exiting
Arrive al/deposit Collectin
desk staff withdraw available g money
from
Actions at Bank slip from form & hand bank
for enquiry cashier / cash to cashier
counter deposit amount
Line of interactions
Employee Actions
Retrieves
Gives info. Collects
(Onstage info
contact on deposit/ Collecting
about
person) withdraw/ withdrawal money &
available
deposit slips from counting it
balance
amount customer
in A/C
Line of Visibility
Employee Actions Money

(Backstage Phone calls, locked
Authorises
contact person) Schedules & up in
transaction
meetings cash
s
canister
Line of internal interactions
Support CCTV Applicatio

Processes n software Schedules Main
Operator Server
Systems & meetings Volt
“
IDEAL BLUEPRINT
 The need to embrace new technology
CONCLUSION AND
”
• The need to embrace new technology
 New New
technology
• has transformed
technology has transformed the banking sector the banking
sector
RECOMMENDATIONS
• Examining the Natsave blueprint suggested opportunities for products and
service improvements
 Examining the Natsave blueprint suggested

opportunities for products and service
improvements
IDEAL BLUEPRINT FOR NATSAVE
Bank exterior/car Security Queuematic ATM Meter greeter Waiting Area
Cashier Counter
park personnel machine
Physical
Evidence
Get
Arrive Security Bal Inquiry /fill
Get
Waiting cash/
at check at ticket
out
Exiting
form/brochure to be make
Bank entrance number from
Customer Transfer, s
served deposi
Actions withdrawal/d t bank
eposit,
cardless
Line of interactions
Employee Actions Give
Directs the
(Onstage customer availabl Give
contact person) e
Visible
where to go money/
balance deposit slip
Technology Actions Generation of ticket no. To deliver self –

for deposit/withdrawal, service
Line of Visibility or other services technology
Employee Actions
Phone calls, Put money/ chq in
(Backstage contact Generating Loading Cash canister/cash
person) Invisible schedules and
ticket number money trolley
meetings
Line of internal interactions
Support
Processes Phone
CCTV Application ATM services calls,
Operato software systems Schedules
r Systems & meetings
Slide 13.4
Organisational configurations
Slide 13.5
Structural types
• Structures give people formally defined roles,
responsibilities and lines of reporting. The structure is like
the skeleton of an organisation and creates its basic
framework
• There are many structural types (e.g.
• functional, divisional, matrix, transnational and
project).
• Each structural type has its own strengths and
weaknesses and responds differently to the
challenges of control, change, knowledge and
internationalisation.
Slide 13.6
Structural types
Functional Divisional
Multinational/
Matrix
transnational
Project
Slide 13.7
The functional structure
The functional structure divides

responsibilities according to the
organisation’s primary specialist roles
such as production, research and
sales.
Slide 13.8
A functional structure (1)
Slide 13.9
A functional structure (2)
Advantages Disadvantages
• Chief executive in • Senior managers
touch with all overburdened with
operations routine matters
• Reduces/simplifies • Senior managers
control mechanisms neglect strategic issues
• Clear definition of • Difficult to cope with
responsibilities diversity
• Specialists at senior • Coordination between
and middle functions is difficult
management levels. • Failure to adapt
Slide 13.10
The divisional structure
The divisional structure is built up of

separate divisions on the basis of products,
services or geographical areas.
Slide 13.11
A multidivisional structure (1)
Slide 13.12
A multidivisional structure (2)
• Flexible (add or • Duplication of central
divest divisions) and divisional
• Control by functions
performance • Fragmentation and
• Ownership of non-cooperation
strategy • Danger of loss of
• Specialisation of central control
competences
• Training in strategic
view
Slide 13.13
The matrix structure
The matrix structure combines different

structural dimensions simultaneously, for
example product divisions and
geographical territories or product divisions
and functional specialisms.
Slide 13.14
Matrix structures (1)
Slide 13.15
Slide 13.16
• Integrated • Length of time to
knowledge take decisions
• Flexible • Unclear job and task
• Allows for dual responsibilities
dimensions • Unclear cost and
profit responsibilities
• High degrees of
conflict
Slide 13.17
Multinational structures
Source: Reprinted by permission of Harvard Business School Press. From Managing Across Borders: The Transnational Corporation, 2nd edition by C.A. Bartlett and
S. Ghoshal, Boston, MA, 1998. Copyright © 1998 by the Harvard Business School Publishing Corporation. All rights reserved.
Slide 13.18
Transnational structures
The transnational structure combines local

responsiveness with high global
coordination.
Key advantages include:

• Knowledge-sharing
• Specialisation
• Network management.
Slide 13.19
Project-based structures
A project-based structure is one where teams

are created, undertake the work (e.g. internal or
external contracts) and are then dissolved.
Slide 13.20
Comparison of structures
Slide 13.21
Design tests for

checking structural solutions
• Market Advantage • Specialised
• Parenting Cultures
Advantage • Difficult Links
• People • Redundant
• Feasibility Hierarchy
• Accountability
• Flexibility
Slide 13.22
Types of control systems (1)

Systems support and control people as they carry out structurally defined
roles and responsibilities. Systems are like the muscles of an
organisation that provide movement and coherence.
There is a range of different organisational systems to facilitate and

control strategy. These focus on either inputs or outputs and can be
direct or indirect.
Slide 13.23
Types of control systems (2)
• Direct supervision – direct control of strategic

decisions by one or a few individuals, typically
focused on the effort of employees.
• Cultural systems aim to standardise norms of
behaviour within an organisation in line with
particular objectives.
• Performance targets focus on the outputs of an
organisation (or its parts) such as product quality,
revenues or profits.
• Internal market systems – a formal system of
(a)‘contracting’ for resources or inputs and (b) for
supplying outputs to other parts of an organisation.
Slide 13.24
Planning systems
Planning systems plan and control the

allocation of resources and monitor their
utilisation. The focus is on the direct
control of inputs.
Slide 13.25
Strategy styles
Source: Exhibit 1, R. Lawson, W. Stratton and T. Hatch (2005), ‘Achieving strategy with Scorecarding’, Journal of Corporate Accounting and Finance, March–April, 62–8: p. 64.
Slide 13.26
Strategic planning style(Highly

involved Corporate Centre)
The strategic planning style – is the
archetypal planning system.
It features:
• Strong planning influence from the centre but
relatively relaxed performance accountability
from the business units.
• The centre allocates all the resources to
business units.
• The centre exercises a high degree of control
on how strategy is implemented. (typical of
synergy Manager)
Slide 13.27
Financial control style( typical of

portfolio manager)
The financial control style involves very little
central planning. It features the following:
• The business units each set their own
strategic plans (probably after some
negotiation with the corporate centre).
• Business units are strictly accountable for
their performance and financial results.
• Managers typically have a lot of autonomy
and receive high levels of bonus for success
but are likely to be dismissed for poor results.
• This style fits with the portfolio manager view
of the corporate centre.
Slide 13.28
Strategic control style( Corporate

parent and synergy developer)
The strategic control style lies in the middle with
a more consensual approach to strategy. It
features:
• Moderate levels of business unit accountability
• The corporate centre acts as a ‘coach’ to
managers in business units and is supportive
• This style relies on cultural systems to foster
trust and mutual understanding
• This style fits with the synergy manager and
parental developer view of the corporate
centre
DQ- dairy queen, Heinz- tomatoes source, BNSF-
railway, Clayton Homes builds homes, Marmon
Group- construction equipment
Slide 13.29
Cultural systems
Cultural systems aim to standardise norms of

behaviour within an organisation in line with
particular objectives.
Cultural systems are an indirect form of control
and rely on the self control of employees.
There are three key cultural systems:
• Recruitment – selecting people who ‘fit’
• Socialisation – behaviour is shaped by social
processes (e.g. training, mentoring or symbols)
• Rewards – appropriate behaviour receives
rewards in the form of pay, promotion or praise.
Slide 13.30
Performance targeting systems (1)
Performance targets focus on the outputs

of an organisation (or part of an
organisation) such as product quality,
revenues or profits.
• These targets are often referred to as key
performance indicators (KPIs).
• The performance of the organisation is
judged on its ability to meet these targets.
• Within boundaries the organisation is free
to decide on how to reach these targets.
Slide 13.31
This approach is appropriate:

• In large businesses – as with the financial
control style, the centre may set targets for
business units but not get involved in how the
targets are achieved.
• In regulated markets – government appointed
regulators may exercise control through agreed
KPIs (e.g. service quality in utilities).
• In the public services – governments are trying
to shift control from input control to performance
outcomes (e.g. in healthcare or education).
Slide 13.32
There are several problems in setting targets:

• Inappropriate measures – choosing things that
are easily measured but don’t reflect real needs.
• Inappropriate target levels – they may set
unrealistically high or at a level that is too easy
to achieve (and leads to complacency).
• Excessive internal competition – if individual
business units are rewarded on their own
performance there will be little incentive to
collaborate, share resources or best practices.
Slide 13.33
Balanced scorecards( check in

evaluating strategy)
Balanced scorecards set performance targets
according to a range of perspectives, not only
financial.
Typically there is a combination of four specific
perspectives:
• financial
• Customer/markey
• Internal-efficiency
• innovation and learning.
• Corporate citizenship
Slide 13.34
Strategy maps
Strategy maps link different performance

targets into a mutually supportive causal
chain supporting strategic objectives.
Figure 13.7 provides an example for a delivery

company and stresses the need for balance and
re-enforcement.
Slide 13.35
A strategy map
Source: Adapted from M. Goold and A. Campbell, Strategies and Styles, Blackwell, 1989, Figure 3.1, p. 39.
Slide 13.36
Configurations
Configurations are the set of organisational
design elements that interlink together in
order to support the intended strategy.
(i.e How strategy, structure and systems should reinforce
each other in organisational configurations and the
managerial dilemmas involved).
• The separate organisational elements, summarised in the McKinsey

7-S framework, should come together to form a coherent
reinforcing configuration. However these reinforcing cycles also
raise dilemmas that can be managed by subdividing, combining
and reorganising.
Slide 13.37
McKinsey 7-S framework
Source: R. Waterman, T. Peters and J. Phillips, ‘Structure is not organisation’, Business Horizons, June 1980, pp. 14–26: p. 18.
Slide 13.38
• Style here refers to the leadership style of

top managers in an organisation. Leadership
styles may be collaborative, participative, directive or coercive, for
instance (see Chapter 14 ).Managers’ behavioural style can
influence the culture of the whole organisation (see Chapter 5 ). The
style should fit other aspects of the 7-S framework: for example, a
highly directive or coercive style is not likely to fi t a matrix
organisation structure.
• Staff is about the kinds of people in the
organisation and how they are developed. This
relates to systems of recruitment, socialisation and reward ( section
13.3.2 ). A key criterion for the feasibility of any strategy is: does the
organisation have the people to match (see section 11.4.2 )? A
common constraint on structural change is the availability of the right
people to head new departments and divisions (the ‘People Test’:
see section 13.2.6 ).
Slide 13.39
• Skills relates to staff, but in the 7-S framework refers

more broadly to capabilities in general (see Chapter 3 ).
The concept of capabilities here raises not only staff
skills but also issues to do with how these skills are
embedded in and captured by the organisation as a
whole. For example, how do the organisation’s training
schemes, information technology and reward systems
transform the talents of individuals into the organisational
capabilities required by the strategy?
• Superordinate goals refers to the overarching goals or

purpose of the organisation as a whole, in other words
the mission, vision and objectives that form the
organisational purpose (see Chapter 4 ). Superordinate
goals are placed at the centre of the 7-S framework: all
other elements should support these.
Slide 13.40
Configuration dilemmas
Slide 13.41
Responding to configuration
dilemmas
• However these reinforcing cycles also
raise dilemmas that can be managed by
• subdividing,
• combining and
• reorganising.
Slide 13.42
• subdividing the organisation- so that the one

part of the organisation is organised optimally
according to one side of these dilemmas, while
the rest responds to the other.
– for example, IBM created its revolutionary personal computer
in a specialised new-venture division, kept separate from the
traditional mainframe activities which were dominated by
principles of hierarchy and vertical accountability highly
antagonistic to radical innovation.
• combining different organising principles at the same
time. Thus organisation design expert Jay Galbraith
argues for the potential of ‘hybrid structures’:
– for instance, a ‘front–back’ structure combines centralised
functional specialisms in manufacturing and research at the
‘back’, while customer- facing units at the front are organised in a
more decentralised way around particular market segments,
such as industry or geography.
Slide 13.43
• By reorganising frequently so that no one side

of the dilemma can become too entrenched.
• Given this pace of reorganising, many
organisations are like pendulums, constantly
swinging between centralisation and devolution,
for example, without resting long on one side or
the other.
• A final dilemma arising from the
interconnectedness of configurations is which
element drives the others.
Slide 13.44
Summary
• Successful organising means responding to the key challenges

facing the organisation. This chapter has stressed control, change,
knowledge and internationalisation.
• There are many structural types (e.g. functional, divisional, matrix,
transnational and project). Each structural type has its own strengths
and weaknesses and responds differently to the challenges of
control, change, knowledge and internationalisation.
• There is a range of different organisational systems to facilitate
and control strategy. These focus on either inputs or outputs and can
be direct or indirect.
• The separate organisational elements, summarised in the McKinsey
7-S framework, should come together to form a coherent
reinforcing configuration. However these reinforcing cycles also
raise dilemmas that can be managed by subdividing, combining
and reorganising.

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Slide 13.

• Analyse the main organisational structural types in

Structures, systems and configurations

• You need a system for efficiency and effectiveness in every

The value chain (1) chapter 3

• The value chain describes the categories of

The value chain (2) Chapter 3

Employee Actions Money

Support CCTV Applicatio

 Examining the Natsave blueprint suggested

Technology Actions Generation of ticket no. To deliver self –

The functional structure

The functional structure divides

A functional structure (1)

A functional structure (2)

The divisional structure

The divisional structure is built up of

A multidivisional structure (1)

A multidivisional structure (2)

The matrix structure

The matrix structure combines different

Matrix structures (1)

Matrix structures (2)

Matrix structures (3)

The transnational structure combines local

Key advantages include:

A project-based structure is one where teams

Design tests for

Types of control systems (1)

There is a range of different organisational systems to facilitate and

Types of control systems (2)

• Direct supervision – direct control of strategic

Planning systems plan and control the

Strategic planning style(Highly

Financial control style( typical of

Strategic control style( Corporate

Cultural systems aim to standardise norms of

Performance targeting systems (1)

Performance targets focus on the outputs

Performance targeting systems (2)

This approach is appropriate:

Performance targeting systems (3)

There are several problems in setting targets:

Balanced scorecards( check in

Strategy maps link different performance

Figure 13.7 provides an example for a delivery

• The separate organisational elements, summarised in the McKinsey

McKinsey 7-S framework

• Style here refers to the leadership style of

• Skills relates to staff, but in the 7-S framework refers

• Superordinate goals refers to the overarching goals or

• subdividing the organisation- so that the one

• By reorganising frequently so that no one side

• Successful organising means responding to the key challenges

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