Strategy and Management of Change Strategic Organization and Corporate Governance Professor Julian Lowe School of Business
Overview <ul><li>Strategy stems from organisation and is implemented through organisation.  How does strategy and organisa...
 
Organisational context and competitive advantage External context Internal context Assets Resources Organisation Competiti...
Two Approaches <ul><li>1. Saloner et al </li></ul>initiative Cooperation Markets Hierachies
Two Approaches 2. De Witt and Meyer <ul><li>Some things need to be changed, others preserved – the role of managers, organ...
What is organisation? <ul><li>7 S (waterman and peters) </li></ul><ul><li>organisation – Psychology, Physiology, anatomy (...
Fit and Alignment <ul><li>Organisation needs to fit strategy But stretch??? </li></ul><ul><li>Haute Couture clothes V Mass...
Fit and Alignment Qantas  and  Virgin People Culture Operating processes Communication Business model Hierarchy
Fit and alignment Inter industry: Auto industry v advertising industry Intra industry:  BMW  v  Ford Intra Organisation: H...
Short-run solution (getting more of both) Initiative coordinate It takes good management to get to the frontier, but until...
Long-run solution (getting more of both) Initiative Cooperation Expand investment in both.  IT to enable better monitoring...
The Incentive problem (how to get the right amount of effort in the face of hidden information) <ul><li>Whose incentive?  ...
The Coordination Problem <ul><li>How to achieve efficient deployment of assets without choking off individual excellence <...
Meeting the challenge (P)ARC) <ul><li>People:  motivation; cognitive scope; place in groups </li></ul><ul><li>Architecture...
(P)ARC analysis Strategy Competitive advantage coordination incentives (P)ARC analysis routines architectures cultures peo...
Defining the problem What norms and decision rules should be supported? What hiring and performance reviews are appropriat...
Assessing the firm’s response Does the culture reduce the need for financial incentives? What are and what defines the int...
Generic Organisational Perspectives Exploiters v Explorers James March  Org Science  1991 A concept appropriate to organis...
Other Issues Tight coupling – interdependence Loose coupling – independence Modularity – task partitions within an agreed ...
Explorer and Exploiter Profiles Reference: Saloner, Shepard & Podolny Well suited to rapidly changing environments Well su...
Towards a dynamic analysis of (P)ARC <ul><li>How does (P)ARC operate through the politics   of the organisation? </li></ul...
Organisational leadership v organisational dynamics Reference: De Wit & Meyer Strategising and organising intertwined Stra...
Nissan Case <ul><li>What happened in the turnaround of Nissan? </li></ul><ul><li>Could (P)ARC solve the problem? </li></ul...
Corporate governance <ul><li>Principal – Agent problems </li></ul><ul><li>Audited requirements </li></ul><ul><li>Scope of ...
Corporate Governance and Strategy <ul><li>Captures the notion of organisational purpose </li></ul><ul><li>Many high profil...
Corporate Governance Mechanisms <ul><li>Governance is about protecting  shareholders from managerial ineptitude and greed....
Upcoming SlideShare
Loading in...5
×

Topic3

254

Published on

Published in: Business, Education
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
254
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
8
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Topic3

  1. 1. Strategy and Management of Change Strategic Organization and Corporate Governance Professor Julian Lowe School of Business
  2. 2. Overview <ul><li>Strategy stems from organisation and is implemented through organisation. How does strategy and organisation affect each other? </li></ul><ul><li>A key issue in strategy, is ‘Why do we have firms’? </li></ul><ul><li>Many of the ‘excesses’ of the capitalist system are sometimes attributed to the equity funded ‘limited liability company’ This is the main organisational form for large scale production. </li></ul><ul><li>So how can ‘organisation’ be designed to facilitate profitable production, without managerial excess? </li></ul>
  3. 4. Organisational context and competitive advantage External context Internal context Assets Resources Organisation Competitive Advantage Organisation enable assets and resources to be put in place or developed as core competences
  4. 5. Two Approaches <ul><li>1. Saloner et al </li></ul>initiative Cooperation Markets Hierachies
  5. 6. Two Approaches 2. De Witt and Meyer <ul><li>Some things need to be changed, others preserved – the role of managers, organisations, leaders </li></ul><ul><li>Strategy is a political process and also works through culture, structure, people, expectations </li></ul><ul><li>Ideally strategy is implemented through the hierarchy. However there are problems of monitoring, co-ordination and leadership </li></ul>
  6. 7. What is organisation? <ul><li>7 S (waterman and peters) </li></ul><ul><li>organisation – Psychology, Physiology, anatomy (Bartlett and Ghoshal) </li></ul><ul><li>(P)ARC – People, Architecture, Routines, Culture (Saloner et al) </li></ul><ul><li>McKinsey core processes – innovation, relationships, operating infrastructure </li></ul><ul><li>The company as a portfolio of processes – entrepreneurial, integrating, renewal (Bartlett and Ghoshal) – the individualised corporation </li></ul><ul><li>Weber >>>> </li></ul>
  7. 8. Fit and Alignment <ul><li>Organisation needs to fit strategy But stretch??? </li></ul><ul><li>Haute Couture clothes V Mass production (note LVMH) </li></ul><ul><li>Undergraduate v Graduate education </li></ul><ul><li>Design>>>>Manufacture>>>>Marketing </li></ul><ul><li>Design<<>>Manufacture<<>>Marketing </li></ul><ul><li>Economics of specialisation v Economics of innovation </li></ul><ul><li>Fit at an enterprise and industry level </li></ul><ul><li>Lawrence and Lorsch (1967) Differentiation and Integration </li></ul>
  8. 9. Fit and Alignment Qantas and Virgin People Culture Operating processes Communication Business model Hierarchy
  9. 10. Fit and alignment Inter industry: Auto industry v advertising industry Intra industry: BMW v Ford Intra Organisation: Hewlett Packard/IBM/Microsoft/LVMH
  10. 11. Short-run solution (getting more of both) Initiative coordinate It takes good management to get to the frontier, but until you do you can have more of both. Some companies do it in steps – two forward one back etc. Roberts (2001)
  11. 12. Long-run solution (getting more of both) Initiative Cooperation Expand investment in both. IT to enable better monitoring. New systems to enable more scope for individual action (Roberts)
  12. 13. The Incentive problem (how to get the right amount of effort in the face of hidden information) <ul><li>Whose incentive? Eg Auto production </li></ul><ul><li>Design; inventory; shared parts; costs; profitability </li></ul><ul><li>Whose incentive? Financial trusts </li></ul><ul><li>Market makers; back of office IT; </li></ul><ul><li>And also problems of monitoring and information. Corrupted systems </li></ul>
  13. 14. The Coordination Problem <ul><li>How to achieve efficient deployment of assets without choking off individual excellence </li></ul><ul><li>Hierarchies and bureaucracies can solve this problem in the face of perfect information. But again the system becomes corrupted. IBM CEO notes a loss of 20% information (bad news) as data moves up the hierarchy </li></ul>
  14. 15. Meeting the challenge (P)ARC) <ul><li>People: motivation; cognitive scope; place in groups </li></ul><ul><li>Architecture: Structure: divisional, centralised, de-centralised, profit centres, cost centres. Informal v formal. Linkages: personal, liaison, teams, knowledge integrators. Compensation and accountabilities. How far is decision making pushed to the front line? </li></ul><ul><li>Routines: Linear/formal and established interfaces and systems that are mandatory. Non- Linear/informal: How decisions are made, what information is required. Both formal and informal suffer problems of drift and ‘corruption’. </li></ul><ul><li>Culture: HP way, IBM way, Public Service way, Health Service way etc. Inducing behaviour seamlessly. Culture influences behaviour in the absence of incentives </li></ul>
  15. 16. (P)ARC analysis Strategy Competitive advantage coordination incentives (P)ARC analysis routines architectures cultures people
  16. 17. Defining the problem What norms and decision rules should be supported? What hiring and performance reviews are appropriate? What activities can be routinized? What cultures will support productive behaviours? What activities can be grouped together? Where will incentive pay be most effective? Who makes which decisions? What performance dimensions can be measured and monitored? How should information flow through the firm? What activities add most value? How does critical information reach the firm? Incentive Coordination
  17. 18. Assessing the firm’s response Does the culture reduce the need for financial incentives? What are and what defines the interfaces? Promotion from within Tall or flat Recruitment policies support culture Interfaces that facilitate the use of routines Impact on compensation of other units Structures for resource allocation Does culture support cooperation? Routines to provide senior management with data on inputs, outputs and processes How is performance measured? interdependence Stories about the culture Routines for coordinating sub-units Incentive compensation Formal linkages Key characteristics Routines for sharing knowledge Non financial elements Sub - units Strength of culture Routines for resource allocation Relative industry compensation Divisional or functional Culture Routines Compensation and rewards Structure
  18. 19. Generic Organisational Perspectives Exploiters v Explorers James March Org Science 1991 A concept appropriate to organisations and sub – units. Most organisations have a mix but may still have a dominant perspective. Eg: Airbus v Boeing; BMW v Toyota; Sony v Panasonic (Matsushita) Japan v the West 1980 – 2000
  19. 20. Other Issues Tight coupling – interdependence Loose coupling – independence Modularity – task partitions within an agreed structure
  20. 21. Explorer and Exploiter Profiles Reference: Saloner, Shepard & Podolny Well suited to rapidly changing environments Well suited to stable environments Environmental fit Outside the defined domain Incremental within the defined domain Learning mode Decentralised Centralised Direction of change-activities Substantial organisational slack No organisational slack Discretionary resources Loosely coupled Tightly coupled Interdependence among units Explorers Exploiters Characteristic
  21. 22. Towards a dynamic analysis of (P)ARC <ul><li>How does (P)ARC operate through the politics of the organisation? </li></ul><ul><li>What is the role of individual managers? </li></ul><ul><li>Need the manager also be a leader? </li></ul>
  22. 23. Organisational leadership v organisational dynamics Reference: De Wit & Meyer Strategising and organising intertwined Strategise, then organise Normative implication Strategy follows organisation Organisation follows strategy Development driver Low, slow High, fast Organisational malleability Political, cultural and learning dynamics Leader’s vision and skill Change determinants New behaviour emerges from interactions Leader shapes new behaviour Change process Democratic (rule of the many) Authoritarian (rule of the few) Decision making Bottom-up, self-organisation Top-down, imposed organisation Development direction The invisible hand The visible hand Development metaphor Uncontrollable evolutionary process Controllable creation process Organisational development Chaos over control Control over chaos Emphasis on Organisational dynamics perspective Organisational leadership perspective
  23. 24. Nissan Case <ul><li>What happened in the turnaround of Nissan? </li></ul><ul><li>Could (P)ARC solve the problem? </li></ul><ul><li>What was the role of leadership in the case? </li></ul><ul><li>What was the role of knowledge management in the case? </li></ul><ul><li>How was change implemented? </li></ul>
  24. 25. Corporate governance <ul><li>Principal – Agent problems </li></ul><ul><li>Audited requirements </li></ul><ul><li>Scope of Firm </li></ul><ul><li>Payments to Directors/Managers/CEO </li></ul><ul><li>Joint CEO/Chairman </li></ul><ul><li>Mergers and Acquisitions/Alliances </li></ul><ul><li>Ethical/Legal Responsibilities </li></ul><ul><li>Higgs Committee (UK) </li></ul><ul><li>Sarbanes – Oxley Act (US) </li></ul><ul><li>Cromme (Germany) </li></ul>
  25. 26. Corporate Governance and Strategy <ul><li>Captures the notion of organisational purpose </li></ul><ul><li>Many high profile cases recently (Enron, HIH) </li></ul><ul><li>Emphasises that strategy is about creating value – but for whom. </li></ul><ul><li>Rules and principles that establish how a firm and its strategy is managed. </li></ul><ul><li>Managing top management from the perspective of shareholders (and society) </li></ul>
  26. 27. Corporate Governance Mechanisms <ul><li>Governance is about protecting shareholders from managerial ineptitude and greed. </li></ul><ul><li>It should reduce information asymmetries </li></ul><ul><li>It should ensure independent representation on boards. </li></ul>
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×