Structural and Organisational

Implementation

Prof. R.S.Mathur
UNITIII 09-12

 Project and procedural implementation;

 resource allocation,
 structural ,
 behavioural and
 functional implementation,
 Managing Change.

Tuesday, September 22, 2020 Prof R S Mathur 2

 Tools for Putting Strategy into Action
Environment Organization
LEADERSHIP
•Use persuasion
•Motivate employees
•Shape culture/values

STRUCTURAL DESIGN HUMAN RESOURCES

•Design organization chart
•Create teams
•Determine centralization
Strategy
•Arrange facilities, task design
•Recruit/select employees
•Manage
transfers/promotions/training
•Direct layoffs/recalls

INFORMATION AND
CONTROL SYSTEMS
•Revise pay, reward system
•Change budget allocations
•Implement information
systems
•Apply rules and procedures Performance
 Organizational Structure cont..

 An example: A company was experiencing problems

implementing its strategy calling for the development of
two new products.
 Lacking the necessary commitment for new product
development, management didn't establish an R&D group.
 Rather, it assigned its manufacturing engineering group
the job of new product development... and deputed two
junior engineers for the task.
 Since the primary function of the manufacturing
engineering group was to keep the factory humming with
routine, those 2 engineers kept getting pulled off their "new
product" projects and into the role of the manufacturing
support.
 Result – no new products came out.
 The reason the firm had been unable to develop those
products was simple... they had never organized to do so.
Organizational Structure and
Controls
 Organizational structure specifies:
1. The firm’s formal reporting relationships,
procedures, controls, authority and decision-
making processes
2. The work to be done and how to do it, given
the firm’s strategy or strategies
 It is critical to match organizational
structure to the firm’s strategy.
 Organizational Structures
Effective structures provide:
1. Stability
2. Flexibility
3. Organisational effectiveness
Structural stability provides:
 The capacity required to consistently and predictably manage daily work
routines
 Structural flexibility provides for:
 The opportunity to explore competitive possibilities
 The allocation of resources to activities that shape needed competitive
advantages
 Organisational Effectiveness :
o ensures achievements of all/most strategic objectives.
Organizational Controls
 Purposes of Organizational Controls:
Guide the use of strategy.
Indicate how to compare actual results with expected
results.
Suggest corrective actions to take when the difference
between actual and expected results is unacceptable.
 Two Types of Organizational Controls
1.Strategic controls
2.Financial controls
Organizational Controls
Strategic Organizational Financial
Controls Controls Controls

 Strategic Controls: Subjective criteria

Are concerned with examining the fit between:
What the firm might do (opportunities in its external
environment).
What the firm can do (competitive advantages).
Evaluate the degree to which the firm focuses on
the requirements to implement its strategy.
Organizational Controls
Strategic Organizational Financial
Controls Controls Controls

 Financial Controls: Objective criteria

Accounting-based measures include:
Return on investment
Return on assets
Market-based measures include:
Economic Value Added (EVA)
Matching Control to Strategy

 Relative use of controls varies by type of

strategy:
Large diversified firms using a cost leadership
strategy emphasize financial controls.
Companies and business units using a
differentiation strategy emphasize strategic
controls.
Relationships between Strategy and
Structure

 Strategy and structure have a reciprocal

relationship:
Structure flows from or follows the selection of
the firm’s strategy but …
Once in place, structure can influence current
strategic actions as well as choices about future
strategies.
 Evolutionary Patterns of Structure
and Organizational Structure
 Firms grow in predictable patterns:
1. First by volume
2. Then by geography
3. Then integration (vertical, horizontal)
4. And finally through product/business
diversification
 A firm’s growth patterns determine its
structural form.
Evolutionary Patterns of Structure
and Organizational Structure (cont’d)
 All organizations require some form of
organizational structure to implement and manage
their strategies
 Firms frequently alter their structure as they grow
in size and complexity
 Three basic structure types:
1. Simple structure
2. Functional structure
3. Multidivisional structure (M-form)
 Matrix Structure- for Project type organisations
Strategy and Structure Growth
Pattern Simple Structure

 As firms grow larger Efficient implementation of

and become more formulated strategy leads to:
complex, structural Sales Growth
challenges emerge Coordination and Control Problems

 Firms’ larger sizes

dictate the need for
more sophisticated Functional Structure
workflows and
integrating Efficient implementation of
mechanisms formulated strategy leads to:
 Simple Sales Growth
Coordination and Control Problems
 Functional
 Multidivisional

Multidivisional Structure
Strategy and Structure: Simple
Structure
1.Owner-manager
Makes all major decisions directly.
Monitors all activities.
 Staff
Serves as an extension of the manager’s supervisor
authority.
 Matched with focus strategies and business-
level strategies
Commonly complete by offering a single product line
in a single geographic market.
Simple Structure (cont’d)

 Growth creates:
Complexity
Managerial and structural challenges
 Owner-managers
Commonly lack organizational skills and
experience.
Become ineffective in managing the specialized
and complex tasks involved with multiple
organizational functions.
 Strategy and Structure:
 2. Functional Structure
 Chief Executive Officer (CEO)
Limited corporate staff
 Functional line managers in dominant organizational
areas of:
Production Marketing Engineering
Accounting R&D Human resources
 Supports use of business-level strategies and some
corporate-level strategies
Single or dominant business with low levels of diversification
Functional Structure (cont’d)

 Differences in orientation among

organizational functions can:
1. Impede communication and coordination.
2. Increase the need for CEO to integrate
decisions and actions of business functions.
3. Facilitate career paths and professional
development in specialized functional areas.
4. Cause functional-area managers to focus on
local versus overall company strategic issues.
Strategy and Structure:
3.Multidivisional Structure
Appropriate as firm grows through
diversification
 Strategic Control
Operating divisions function as separate
businesses or profit centers
 Top corporate officer delegates
responsibilities to division managers
For day-to-day operations
For business-unit strategy
Multidivisional Structure (cont’d)

 Three Major Benefits

1. Corporate officers are able to more accurately
monitor the performance of each business,
which simplifies the problem of control.
2. Facilitates comparisons between divisions,
which improves the resource allocation
process.
3. Stimulates managers of poorly performing
divisions to look for ways of improving
performance.
Matching Strategy and Functional Structure
 Different forms of the functional organizational
structure are matched to:
1. Cost leadership strategy
2. Differentiation strategy
3. Integrated cost leadership/differentiation strategy
 Differences in these forms are seen in three
important structural characteristics:
1. Specialization (number and types of jobs)
2. Centralization (decision-making authority)
3. Formalization (formal rules and work procedures)
Using the Functional Structure to Implemen
a Cost Leadership Strategy
 Functional Structure for Implementation
of a Differentiation Strategy
Salient features:
•Operations is the main function
1.Process engineering is emphasized rather
than
2. new product R&D
3.Relatively large centralized staff coordinates
4. functions
5.Formalized procedures allow for emergence of
6.a low-cost culture
7.Overall structure is mechanical.
8. job roles are highly structured
Functional Structure forImplementation of a
Differentiaon Strategy
Using the Functional Structure to
Implement a Differentiation Strategy
 Salient features:
 Marketing is the main function for tracking
new product ideas.
1. New product R&D is emphasized.
2. Most functions are decentralized.
3. Formalization is limited to foster change and
promote new ideas.
4. Overall structure is organic.
5. Job roles are less structured.
Using the Functional Structure to
Implement the Integrated Cost
Leadership/ Differentiation Strategy
 Selling products that create customer value
due to:
1. Their relatively low product cost through an
emphasis on production and process engineering,
with infrequent product changes.
2. Reasonable sources of differentiation based on
new-product R&D are emphasized while
production and process engineering are not.
 Used frequently in global economy
Implementing an Integrated Cost
Leadership/Differentiation Strategy
(cont’d)
 The integrated form of the functional
structure must have:
1. Decision-making patterns that are partially
centralized and partially decentralized.
2. Semi-specialized jobs.
3. Rules and procedures that allow both formal
and informal job behaviors.
Corporate-Level Strategies and the
Multidivisional Structure
 A firm’s continuing success that leads to:
1. Product diversification, or
2. Market diversification, or
3. Both product and market diversification.
 Increasing diversification creates control
problems that the functional structure can’t
handle.
1. Information processing, coordination and
2. Control
 Corporate-Level Strategies and the
Multidivisional Structure (cont’d)
 Diversification strategy requires firm to change
from functional structure to a multidivisional
structure.
 Three types of Multi Divisional Structures:
1. Co operative Multi. Div. Form(Related
constrained strategy)
2. SBU Multi.Div,Form (Related link strategy)
3. Competitive Multi,Div Form (Unrelated
Diversification strategy)
Competitive Form of Multidivisional
Structure:Unrelated Strategy
Competitive Form of Multidivisional
Structure:Unrelated Strategy
 Salient Features
• The legal affairs function becomes important when
the firm acquires or divests assets
• Divisions are independent and separate for
financial evaluation purposes
• Divisions retain strategic control, but cash is
managed by the corporate office
• Divisions compete for corporate resources
Co-operative form of Multi division
structure related constrained strategy
 Structural integration devices create tight links
among all divisions
 Corporate office emphasizes centralizead strategic
planning, human resources, and marketing to
foster cooperation between divisions
 R&D is likely to be centralized
 Rewards are subjective and tend to emphasize
overall corporate performance in addition to
divisional performance
 Culture emphasizes cooperative sharing
Multidivisional Structure: Cooperative
Form
 Horizontal integration is used to bring about
interdivisional cooperation
 Sharing divisional competencies facilitates
development of economies of scope
 To foster divisional cooperation, the corporate office
emphasizes centralization:
 Strategic planning
 Human resources
 Marketing
Cooperative Form (cont’d)

1. R&D is likely to be centralized

2. Frequent, direct contact between division managers
encourages and supports cooperation and sharing of
competencies and resources
3. Use of liaison roles
4. Rewards are subjective, emphasizing overall
corporate performance in addition to divisional
performance
Competitive Form of Multidivisional
Structure:Unrelated Strategy
Competitive Form of Multidivisional
Structure:Unrelated Strategy
 Salient features:
Corporate headquarters has a small staff
• Finance and auditing are the most prominent functions
in the headquarters office to manage cash flow and assure
the accuracy of performance data coming from divisions
• The legal affairs function becomes important when the firm
acquires or divests assets
• Divisions are independent and separate for financial
evaluation purposes
• Divisions retain strategic control, but cash is managed by the
corporate office
• Divisions compete for corporate resources
Worldwide Geographic Area
Structure: Multidomestic Strategy
Salient Features:
• The perimeter circles indicate
decentralization of operations
• Emphasis is on differentiation by local demand
to fit an area or country culture
• Corporate headquarters coordinates financial
resources among independent subsidiaries
• The organization is like a decentralized
federation
Linkage - The Foundation for Everything
Else
 Many organizations successfully establish the
following five supporting  factors.
1. They develop action plans,
2. Consider organizational structure,
3. Take a close look at their human resource needs,
4. fund their strategies through their annual business
plan, and
5. Develop a plan to monitor and control their
strategies and tactics.
 And yet they still fail to successfully implement
those strategies and tactics.
 The reason, most often, is they lack linkage.
 cont….
 Linkage - The Foundation for
Everything Else cont…
 Linkage is simply the tying together of all
the activities of the organization...to make
sure that all of the organizational resources
are "rowing in the same direction.
 "It isn't enough to manage one, two or a few
strategy supporting factors.
 To successfully implement your strategies,
you've go to manage them all.
 And make sure you link them together.
 Cont…
 Linkage - The Foundation for
Everything Else cont….
 Strategies require "linkage" both vertically and
horizontally.
 Vertical linkages establish coordination and support
between corporate, divisional and departmental plans.
 For example, a divisional strategy calling for
development of a new product should be driven by a
corporate objective calling for:
1. Growth,
2. On a knowledge of available resources -capital
resources available from the corporate office, human
and technological resources in the R&D department.
 cont…..
Linkage - The Foundation for
Everything Else cont…
 Linkages which are horizontal –- across
departments, across regional offices, across
manufacturing plants or divisions – require
coordination and cooperation to get the
organizational units "all playing in harmony."
 For example, a strategy calling for
introduction of a new product requires the
combined efforts of – and thus coordination
and cooperation among – the R&D, the
marketing, and the manufacturing
departments. 
 Human Resource Factors cont…

1. Consideration of human resources requires that

management think about the organization's communication
needs. That they articulate the strategies so that those
charged with developing the corresponding action steps
(tactics) fully understand the strategy they're to implement.
2. Managers successful at implementation are aware of the
effects each new strategy will have on their human
resource needs. They ask themselves the questions...
"How much change does this strategy call for?" And, "How
quickly must we provide for that change?" And, "What are
the human resource implications of our answers to those
two questions?"
 In answering these questions, they'll decide whether to
allow time for employees to grow through experience, to
introduce training, or to hire new employees.
 Monitoring & Control

 Monitoring and controlling the plan

includes a periodic look to see if you're
on course.
 It also includes consideration of options
to get a strategy once derailed back on
track.
 cont…
Monitoring & Control cont…

 Those options (listed in order of

increasing seriousness) include :
1.changing the schedule,
2.changing the action steps (tactics),
3. changing the strategy or (as a last
resort)
4. changing the objective.