Use Amazon. Begin at 3:40 and stop at 4:13. This is section on infrastructure and physical versus virtual space.
Organising for success
By: Prof. Purvish Shah
The most important Resources of an
Organization is its “PEOPLE”.
So the Roles they play, the Processes
through which they interact and the
Relationships that they build are crucial for
the success of Strategy.
Two issues for the organizations:
1. A static Concept of Formal Structure is less
and less appropriate.
2. Harnessing the valuable knowledge that lies
throughout the Organisation requires more
than the Top-Down formal hierarchies.
Thus Formal structures and Processes need to be
aligned with Informal Processes and
Relationships into coherent
An organisation’s configuration consists
of the structures, processes and
relationships through which the
An organisation’s configuration consists
of the structures, processes and
relationships through which the
The most Important idea here is that the
formal structures and processes need to
be aligned with the informal processes
and relationships into coherent
Structural Design describes the roles , responsibilities
and the lines of reporting.
Failure to adjust structures appropriately can fatally undermine
Processes that drive and support people within and
around an Organisation. It has a major influence on how
strategies are made and controlled and the way the
interaction takes place.
Relationships refer to connection between the
employess both within and outside the Organisation.
Relationship between Organizational Units and Centre
Speed of change and level of Uncertainty:
Knowledge Creation and Knowledge Sharing:
Speed of change and level of Uncertainty:
Have flexible designs and be skilled at
Knowledge Creation and Knowledge Sharing:
Organisational Design should encourage
concentration of expertise and encourage people
to share their Knowledge.
Globalisation: Challenges like Communicating
across wider geography, coordinating more
diversity and building relationship across diverse
Structural charts define the ‘Levels’ and
roles in an Organisation
Formal Structures matters because:
Structural reporting lines shape pattern of
communication and knowledge exchange
The kind of Structural positions at the top
suggests the kind of skills required to move up
Tend to mix
Responsibilities are divided according to the Organisations
primary roles such as Production, finance, accounting,
CEO in touch with all operations
Reduces/simplifies control mechanisms
Clear definition of responsibilities
Specialists at senior and middle
Overburdened with routine issues
Neglect strategic issues
Difficulty coping with diversity
Coordination between functions
Failure to adapt
It is built up of separate divisions on the
basis of products, services or geographical
Each division can respond to the specific
requirements of its product/market
strategy, using its own set of functional
Control by performance
Ownership of strategy
Specialisation of competences
Training in strategic view
Duplication of central and divisional functions
Fragmentation and non-cooperation
Danger of loss of central control
Its an kind of Investment company consisting of
shareholdings in a variety of separate business
Herein the Subsidiary may have other
shareholders and retain its original company
They are extremely flexible but hard to control
because the rights of outside shareholders.
In emerging economies like India, Russia, South
America , they play a prominent role.
• Flexible :-Bring in outside share holders
• Hard to control:-
1. Hands off management style.
2. Rights of outside shareholders.
• Difficult knowledge sharing-less synergy.
It’s a combination of structures which
could take the form of product and
geographical divisions or functional and
divisional structures operating in tandem.
Allows for dual
Length of time
required for decision
Unclear job and task
Unclear cost and profit
High degrees of
Transnational structure seeks to obtain the
best from the two extremes international
strategies. i.e. the Multidomestic strategy
and Global strategy.
Its like a matrix with two features:
It responds specifically to the challenge of
It tends to have more fixed responsibilities
within its cross cutting dimensions.
Each national unit operates independently
but is a source of ideas for whole
National units achieve greater scale of
economies through specialisation on
behalf of the whole corporation.
The corporate parent manages this by first
establishing the role of each business unit,
then sustaining the systems, relationships
and culture. Example: Unilever
• It combines both horizontal and vertical
coordination through cross functional
• Contains mixture of specialists.
• For eg: An information system company
has different team like development team,
product team and application team.
• Good for knowledge sharing.
• Highly motivated.
• Difficulties of control
• Problems of scaling up.
• It is a structure where teams are created.
• They undertake the work and are then
• Many organizations use such teams in a
• For eg: taskforces are set up to make
progress in regular structure.
• Good accountability and control (clear
• Effective knowledge exchange.
• Attracts international members due to
short project span.
• Lack of coordination.
• Proliferation of projects.
• Breaking up teams hinders knowledge
Control processes can be subdivided in two ways:
1. Division tend to emphasize either control over
inputs or control over outputs.
Input control processes concern themselves with the
resources consumed in the strategy.
Output control processes focus on ensuring
2. Division is between direct and indirect controls.
Direct controls involve close supervision or
Indirect controls are more hands-off, setting up the
conditions whereby desired behaviors are achieved
Direct control relies heavily on the physical
presence of management.
It is very effective for small organizations on a
Global organizations may make use of indirect
controls for their geographically dispersed
Direct supervision is the direct control of
strategic decisions by one or a few individuals.
It is a dominant process in small organizations.
It is easiest on a single site although long
distance monitoring is now possible through
It can also be effective during crisis, when
autocratic control through direct supervision may
be necessary to achieve quick results.
Planning processes plan and control the allocation of
resource and monitor their utilization.
Planning can be achieved by standardization of work
processes( such as product or service features). For e.g to
meet externally audited quality standards (such as ISO
Enterprise resource planning systems supplied by software
specialists such as SAP or Oracle, use sophisticated IT to
achieve planning type control.
Centralized planning use a formula for controlling resource
allocation within an organization. For e.g in the public
services budgets might be allocated on a per capita basis.
Processes of self control achieve the integration of
knowledge and coordination of activities by the
direct interaction of individuals without supervision.
The contribution of managers to this process is to
ensure that individuals have the channels to
interact and the social processes are popularly
regulated to avoid the rigidities.
Managers are concerned with shaping the context
in which others are working.
Type of leaders leadership style strongly influence
Credibility of leaders is important and can be built in
more than one way.
For e.g credibility may arise from being a member of the
peer group- as a professional model.
It may also be built by demonstrably shaping a favorable
context for individuals to work and interact.
It might arise from the way in which leaders interface
with the business environment.
These 3 leadership roles- of the professional role model,
supporting individuals and securing resources have
been called the grinding, minding and finding roles
• Key policies
• Resourcing guidelines
‘Division’ prepare draft plans
• Fit with guidelines
• Fit between plans
• Resource mismatch
• Finalise plans
• Agree annual budget
• Set performance indicator
• Agree review process
Bottom –up planning from business unit is
an important process.
If this approach is to work there need to
be processes of reconciliation to ensure
that the sum total of business unit plans
can be resourced.
Cultural processes are concerned with organizational
culture and the standardization of norms.
It is particularly important in organization facing complex
and dynamic environments.
It can also be important between organization in their
approach to competition and collabration.
Cultural processes can also creates rigidities if an
organization has to change strategy.
Training and development is another way in which
organization invest in maintaining the cultural processes
within an organization.
Performance target focus on the outputs of an
organization such as product quality, revenues or
These targets are often known as Key performance
Within large businesses corporate centres may
choose performance targets to control their business
In regulated markets, such as privatised utilities
government appointed regulators increasingly
exercise control through agreed performance
In the public services where control of resource inputs
Market processes are the dominant way
in which organizations relate to their
external suppliers, distributors and
competitors in capitalist economics.
Market processes involve some
formalized system of contracting for
Internal market work well where
complexity or rapid change make
impractical detailed direct or input
1. They can increase bargaining between units,
consuming important management time.
2. They may create a new bureaucracy monitoring
all of the internal transfers of resources between
3. An overzealous use of market mechanism can
lead to dysfunctional competition and legalistic
contracting, destroying cultures of collaboration
Balanced Scorecards combine both
qualitative and quantitative measures,
acknowledge the expectations of different
stakeholders and relate an assessment of
performance to choice of strategy.
Relationship are required to be built and
maintained, especially in ways that are
fluid enough to respond to an uncertain
1. Relating to the Centre:
Devolution concerns the extent to which the
centre of an organisation delegates decision
making to units and managers lower down in
2. Relating over Strategy:
An important determinant of Organising for
success is clarity around how responsibilities
for strategic decision making are to be divided
between the centre and the SBU’s.
Strategic planning style
Financial control style
Strategic control style
It is subcontracting a service, such as product
design or manufacturing, to a third-party
The decision whether to outsource or to do in
house is often based upon achieving a lower
production cost, making better use of available
resources, focusing energy on the core
competencies of a particular business, or just
making more efficient use of labor, capital,
information technology or land resources.
A strategic alliance is where two or more organizations
share resources and activities to pursue a strategy.
This kind of joint development of new strategies has
become increasingly popular. This is because
organizations cannot always cope with increasingly
complex environments (such as globalization) from
internal resources and competences alone.
They may see the need to obtain materials, skills,
innovation, finance or access to markets, and recognize
that these may be as readily available through co-
operation as through ownership.
Alliances vary considerably in their complexity, from
simple two-partner alliances co-producing a product to
one with multiple partners providing complex products and
More organizations have become
dependent on internal and external
networks to ensure success so
cooperation has become key aspect of
Other important networks include:
one stop shops
Telework occurs when information and
communications technologies (ICTs) are
applied to enable work to be done at a
distance from the place where the work
results are needed or where the work
would conventionally have been done.
A location, usually a shop, where various
requirements can be met in one place.
One stop shop
Its main function is to put together a
complete package of products or services
from various network members.
Service AService A Service BService B Service CService C
An organization that uses information and
communications technology to allow it to operate without
clearly defined physical boundaries between different
functions. It provides customized services by outsourcing
production and other functions to third parties.
Several unrelated things are named virtual
In business an organization that can take one of the
a business which operates primarily via electronic
means; see virtual business
independent organizations that share resources to
achieve their goals; see virtual enterprise
Reinforcing cycles and the implications for
Managing dilemmas in Configurations
This type of organization has a simple, flat
structure. It consists of one large unit with one or
a few top managers. The organization is
unstructured and informal compared with other
types of organization, and the lack of
standardized systems allows the organization to
A young company that's tightly controlled by the
owner is the most common example.
The entrepreneurial organization is fast, flexible,
and lean, and it's a model that many companies
want to copy. However, as organizations grow,
this structure can be inadequate as decision-
makers can become so overwhelmed that they
start making bad decisions.
This is when they need to start sharing power
and decision-making. Also, when a company's
success depends on one or two individuals,
there's significant risk if they sell up, move on to
new entrepreneurial ventures, or retire.
The machine organization is defined by its standardization.
Work is very formalized, many routines and procedures,
decision-making is centralized, and tasks are grouped by
The machine organization has a tight vertical structure.
Functional lines go all the way to the top, allowing top
managers to maintain centralized control.
These organizations can be very efficient, and they rely
heavily on economies of scale for their success. However,
the formalization leads to specialization and, pretty soon,
functional units can have conflicting goals that can be
inconsistent with overall corporate objectives.
Large manufacturers are often machine organizations, as
are government agencies and service firms that perform
routine tasks. If following procedures and meeting
precise specifications are important, then the machine
structure works well.
This structure develops preferentially in the public sector,
in the measure-producing large-scale industry, as for
example in the automobile industry and, where reliability
and security are the center of attention, that is banks,
hotel and restaurant chains, airlines, fire-brigades. A
classical example is the company McDonald"´s.
Military is a good example of machine bureaucracy
According to Mintzberg, the professional
organization is also very bureaucratic.
The key difference between these and machine
organizations is that professional organizations rely
on highly trained professionals who demand control
of their own work.
Decision making is decentralized. This structure is
typical when the organization contains a large
number of knowledge workers.
The professional organization is complex, and there
are lots of rules and procedures. This allows it to
enjoy the efficiency benefits of a machine structure,
even though the output is generated by highly
trained professionals who have autonomy and
The clear disadvantage with the professional
structure is the lack of control that senior executives
can exercise, because authority and power are
spread down through the hierarchy. This can make
these organizations hard to change.
If an organization has many different product lines
and business units, we typically see a divisional
structure in place. A central headquarters supports
a number of autonomous divisions that make their
own decisions, and have their own unique
The key benefit of a divisional structure is that it
allows line mangers to maintain more control and
accountability than in a machine structure.
Also, with day-to-day decision-making
decentralized, the central team can focus on "big
picture" strategic plans. This allows them to ensure
that the necessary support structures are in place
A significant weakness is the duplication of
resources and activities that go with a divisional
Also, divisions can tend to be in conflict, because
they each need to compete for limited resources
from headquarters. And these organizations can be
inflexible, so they work best in industries that are
stable and not too complex.
If one’s strategy includes product or market
diversification, this structure can work well,
particularly when the company is too large for
effective central decision-making.
The structures discussed so far are best suited to
In new industries, companies need to innovate and
function on an "ad hoc" basis to survive. With these
organizations, bureaucracy, complexity, and
centralization are far too limiting.
Filmmaking, consulting, and pharmaceuticals are
project-based industries that often use this
structure. Here, companies typically bring in experts
from a variety of areas to form a creative, functional
Decisions are decentralized, and power is
delegated to wherever it's needed. This can make
these organizations very difficult to control!
The clear advantage of adhocracies is that they maintain
a central pool of talent from which people can be drawn
at any time to solve problems and work in a highly
flexible way. Because of this, adhocracies can respond
quickly to change, by bringing together skilled experts
able to meet new challenges.
But innovative organizations have challenges. And
dealing with rapid change is stressful for workers, making
it difficult to find and keep talent. It's popular with young
organizations that need the flexibility it allows.
Reinforcing cycles are created by the dynamic
interaction between the various factors of environment,
configuration and elements of strategy.
For example, the ‘machine bureaucracy' is a
configuration often adopted in stable environmental
conditions and can help create a position of cost
An organization's resources can be considered under
the following four broad categories:
Physical resources – such as the number of machines,
buildings or the production capacity of the organization.
The nature of these resources, such as the age,
condition, capacity and location of each resource will
determine the usefulness of such resources.
Financial resources – such as capital, cash, debtors
and creditors, and suppliers of money (shareholders,
Human resources – including the number and mix (e.g.
demographic profile) of people in an organization. The
intangible resource of their skills and knowledge is also
likely to be important.. In knowledge-based economies
people do genuinely become ‘the most valuable asset'.
Intellectual capital is an important aspect of the
intangible resources of an organization. This includes
patents, brands, business systems and customer
databases. In a knowledge-based economy intellectual
capital is likely to be a major asset of many organizations
Organising for success is about an
organisation’s configuration, built on three
related strands: structures, processes, and
Successful organising means responding
to the key challenges facing the
organisation: control, change, knowledge
There are many structural types, each with
its own strengths and weaknesses
There are a range of different
organisational processes, direct or indirect
and focused on input or outputs, to
Relationships are important for success
Separate organisational strands should
come together to form a coherent