UNIT 5 Straregy Implementation: Matching structure with strategy: Changes in strategy often require changes in the way an organization

is structured because: (1) structure largely dictates how objectives and policies will be established (e.g., objectives and policies established under a geographic organizational structure are couched in geographic terms) and (2) structure dictates how resources will be allocated (e.g., if an organizations structure is based on customer groups, then resources will be allocated in that manner). Structure should be designed to facilitate the strategic pursuit of a firm and, therefore, follow strategy. When a firm changes its strategy, the existing organizational structure may become ineffective. For example, new strategies to reduce payroll costs may require a change in span of control Structure

Functional Structure Divisional Structure Strategic Business Unit Structure (SBU) Matrix Structure

Functional Structure Groups tasks and activities by business function (e.g., production, finance, marketing, R&D, HR, IT, etc.

Divisional Structure Can be organized in one of four ways: By geographic area By product or service By customer By process

Strategic Business Unit Structure (SBU)

 Groups similar divisions into strategic business units and delegates authority and responsibility for each unit to a senior executive who reports directly to the chief executive officer. Matrix Structure The most complex of all structures because it depends upon both vertical and horizontal flows of authority and communication

Restructuring
Restructuring - reducing the size of an organization. Also called: Downsizing Rightsizing Delayering These methods involve, respectively, reducing the number of employees, number of divisions, and number of hierarchical levels in a firms organizational structure. Reducing the size of an organization is intended to improve its efficiency and effectiveness.

Creating a Strategy

1. Formal statements of organizational philosophy

2. Design of physical spaces 3. Deliberate role modeling, teaching, and coaching 4. Explicit reward and status system 5. Stories, legends, myths, and parables 6. What leaders pay attention to 7. Leader reactions to critical incidents and crises 8. Organizational design and structure 9. Organizational systems and procedures 10. Criteria for recruitment, selection, promotion, leveling off, retirement, and excommunication of people Production/Operations Decision Examples Plant size Inventory / Inventory control Quality control Cost control Technological innovation

The 7-S Model

R.H. Waterman, T.J. Peters, and J.R. Phillips, "Structure is not organisation", McKinsey Quarterly in-house journal, McKinsey & Co., New York, 1980. This diagram has been recreated by LMC. LMC explains The 7-S Model for Organisational Change This is a management tool designed to analyse and understand the key organisational structures within a company in order to assess its potential for effective change. The model examines seven key areas of the company and the relationships of each of these elements to each other. The elements are grouped into two sub-categories of 'hard elements' and 'soft elements': The hard elements represent un-shifting company traits, those which are relatively stable and simple to define such as company strategy, structure and systems.The soft elements, on the other hand, represent more complex traits of the company which are influenced by culture, environment and individuals. These could be shared values, skills, style and staff. The seven elements

A simplified description for each of the elements can be given as:

Strategy: The company plan or route-map to maintain competitive advantage Structure: The company hierarchy Systems: The day-to-day processes and procedures throughout the company Shared Values: The core values of the company Style: The company leadership style Staff: The company's employees and their broad abilities Skills: The skills and competencies of employees

By analysing each of the elements, inconsistencies are revealed which can then be aligned with the other elements before change is effectively implemented. The central theme of the model is that the seven elements are interconnected and interdependent upon one another. In order to achieve business success, each of the seven elements must be aligned and mutually reinforcing each other. Effecting change using this model involves the assessment of all areas, simultaneously taking into account their nature and effect on each other. By asking questions to check the congruence of the key elements of a business, the 7-S model can help companies to analyse and improve existing processes, examine potential effects of a future venture, identify gaps and align departments, or determine how best to implement a strategy. The model can be used in any company or team effectiveness issue where highlighting inconsistencies of approach may be beneficial

Strategic Control Process:-

Although control systems must be tailored to specific situations, such systems generally follow the same basic process. Regardless of the type or levels of control systems an organization needs, control may be depicted as a six-step feedback model):

1. Determine what to control. What are the objectives the organization hopes to
accomplish?

2. Set control standards. What are the targets and tolerances? 3. Measure performance. What are the actual standards?

4. Compare the performance the performance to the standards. How well does the actual
match the plan?

5. Determine the reasons for the deviations. Are the deviations due to internal
shortcomings or due to external changes beyond the control of the organization?

6. Take corrective action. Are corrections needed in internal activities to correct

organizational shortcomings, or are changes needed in objectives due to external events? Feedback from evaluating the effectiveness of the strategy may influence many of other phases on the strategic management process. A well-designed control system will usually include feedback of control information to the individual or group performing the controlled activity. Simple feedback systems measure outputs of a process and feed into the system or the inputs of a system corrective actions to obtain desired outputs. The consequence of utilizing the feedback control systems is that the unsatisfactory performance continues until the malfunction is discovered. One technique for reducing the problems associated with feedback control systems is feedforward control. Feedforward systems monitor inputs into a process to ascertain whether the inputs are as planned; if they are not, the inputs, or perhaps the process, are changed in order to obtain desired results.

Du Pont's control model and other Quantitative and Qualitative tools:-

Quantitative: To compare the performance of the organization over different time periods To compare the performance with its competitors in the industry To compare the performance against industry averages Financial Ratios ROI Return on Equity Profit Margin Market Share

 Debt to Equity EPS Sales Growth Asset Growth Methods of Control DuPont Chart Budgets Audits Time Related Control Critical Path Method PERT MBO Problems of Control System Reporting data validity Criteria for measurement in question Performance standards may be set with inherent contradictions Over emphasis on short term measures Evaluation of Strategy Strategy Formulation Strategy Implementation Strategy Evaluation Business Portfolio Analysis BCG Matrix McKinsey Matrix Strategic Planning Institutes Matrix Arthur DLittle Companys Matrix Hofers Product / Evolution Matrix

Qualitative Factors
Balanced Score Card by Norton and Kaplan

The Basic Performance Pyramid

Balanced Score card Approach:-

The Balanced Scorecard translates an organizations mission and strategy into goals and measures, organized into four different perspectives customer financial internal business process innovation and learning

The Balanced Scorecard helps an organization to: determine progress towards its goals/objectives communicate strategic direction determine success or failure of its strategies/initiatives

 define future strategies establish benchmarks demonstrate value-added

The best Balanced Scorecards will tell the story of the organizations strategy and cause the overall performance to be managed such that the stated mission is accomplished.