Strategy Implementation: Structure

Prepared by Dr. Abel Arvizú Whittemore

  1. Introduction
  1. Strategy Implementation’s central concern:  How do we execute the strategies and translate them into accomplishments?
  • Focus:  means by which strategy is translated into accomplishment; involves executing the strategic plan.
  • One of the things this includes is designing the organization’s structure to match the strategy.
  1. Structure
  1. Structural Types
  1. Simple (Exhibit).  Comments:  Appropriate if owner-manager can grasps all the intricacies of the business and if demand is stable.
  1. Functional (Exhibit)
  1. Advantages
  1. Takes advantage of specialists
  • Efficient use of managerial and technical talent
  • Facilitates career paths and professional development in specialized areas
  • Disadvantages
  1. Can lead to inter-functional rivalry
  • Functional specialists often attach more importance to what’s best for the functional area than to what’s best for the whole organization. 
  • Hinders development of managers with cross-functional experience. 
  • Requires much coordination and communication
  • Long vertical channels of authority tend to make the firm inflexible to the requirements of a changing environment.
  1. Divisional (SBUs):  Products (DRGs); Clients — Markets / Segments; Territories (Exhibit)
  1. Centralize or Decentralize?  (Exhibit)
  • Advantages
  1. SBUs can be any size; however, must have own:  unique mission, competitors, external market focus, control of its functions and resources.
  • Appropriate for a firm with different products / services and markets.
  • Gives flexibility to deal with complex and changing environment.
  • Minimizes problems associated with sharing resources across functional areas
  • Facilitates development of general managers
  • Disadvantages
  1. Can be inefficient if there is much duplication.
  • Dysfunctional competition among divisions may detract from overall organizational performance
  • Difficult to maintain uniform corporate image
  1. Matrix (Exhibit)
  1. Advantages
  1. Again, good for a complex and changing environment
  • Can accommodate a wide variety of project-oriented activities.
  • Allows for more efficient utilization of resources
  • Disadvantages
  1. However, can also lead to conflicts of duties, authority, power, and resource allocation by allowing for dual accountability
  • Necessitates tremendous horizontal and vertical coordination.
  • Working relationships may be more complicated
  • Excessive reliance on group processes and teamwork may impede timely decision making
  • Conglomerate (Exhibit).  Comments:  An assemblage of separate firms, having different products in different markets.  Subsidiaries are independent with centralized financial resources and corporate planning.
  1. Advantages:  limitation of liability, reduction in taxes, various divisions with autonomy, distributed market risks.
  • Disadvantages:  limitations due to legalistic and financial reasons, lack of comprehensive understanding, growth by acquisition mentality.
  • Product-line (Exhibit)
  • Governing Board:  Video Clip from Downton Abbey (2 min, begin at 9.00)
  1. Legally responsible for all activities that are carried out within and on behalf of the organization.  Charged by law to act with “due care” – that degree of diligence, care, and skill which ordinarily prudent individuals would exercise under similar circumstance in like positions.
  1. Responsibilities
  1. Set corporate strategy, overall direction, mission or vision
  • Recruit, retain, and support the CEO
  • Protect and enhance the financial assets of the organization; includes reviewing and approving the use of resources
  • Ensure quality of care and services
  • Best structure?  In general, simplest structure (decentralized, flat, close to the customer) that will best:
  1. carry out strategy (structure follows strategy)
  1. allow for flexibility (anticipatory, strategic, operational, and structural)
  1. allow for control of ends (versus means)
  • Design Process
  1. First, identify and list your critical dimensions that could be candidates for this focus of attention.  Normally, this includes:
  1. products
  • markets
  • functions
  • technologies
  • geographical locations
  1. Rank critical dimensions in order of importance
  1. Define one or more primary structure in detail
  1. Simulate the operation of the organization with the new contemplated structure(s):  Ask “what if” questions
  • Evaluate and select

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