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Organising for success

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  • Use Amazon. Begin at 3:40 and stop at 4:13. This is section on infrastructure and physical versus virtual space.

Organising for success Organising for success Presentation Transcript

    • ORGANIZING
    • 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:
      • A static Concept of Formal Structure is less and less appropriate.
      • 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 CONFIGURATIONS.
    • An organisation’s configuration consists of the structures, processes and relationships through which the organisation operates.
  •  
    • An organisation’s configuration consists of the structures, processes and relationships through which the organisation operates.
    • The most Important idea here is that the formal structures and processes need to be aligned with the informal processes and relationships into coherent configurations .
    • Structural Design describes the roles , responsibilities and the lines of reporting.
    • Failure to adjust structures appropriately can fatally undermine strategy Implementation.
    • 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:
    • Globalisation:
    • Speed of change and level of Uncertainty: Have flexible designs and be skilled at reorganising.
    • 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 culture.
  • STRUCTURES PROCESSES RELATIONSHIPS
    • 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 the organisation.
  • Functional Multidivisional Holding Matrix Transnational Team Project Tend to emphasise one dimension over the another Tend to mix structural dimensions more evenly
  • Functional Multidivisional Holding Matrix Transnational Team Project
    • Responsibilities are divided according to the Organisations primary roles such as Production, finance, accounting, marketing etc.
    • Advantages
    • CEO in touch with all operations
    • Reduces/simplifies control mechanisms
    • Clear definition of responsibilities
    • Specialists at senior and middle management
    • Disadvantages
    • Overburdened with routine issues
    • Neglect strategic issues
    • Difficulty coping with diversity
    • Coordination between functions
    • Failure to adapt
  • Functional Multidivisional Holding Matrix Transnational Team Project
    • It is built up of separate divisions on the basis of products, services or geographical areas.
    • Each division can respond to the specific requirements of its product/market strategy, using its own set of functional departments.
  •  
    • Advantages
      • Flexible
      • Control by performance
      • Ownership of strategy
      • Specialisation of competences
      • Training in strategic view
    • Disadvantages
      • Duplication of central and divisional functions
      • Fragmentation and non-cooperation
      • Danger of loss of central control
  • Functional Multidivisional Holding Matrix Transnational Team Project
    • Its an kind of Investment company consisting of shareholdings in a variety of separate business operations.
    • Herein the Subsidiary may have other shareholders and retain its original company name.
    • 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 as partners.
    • Hard to control:-
      • Hands off management style.
      • Rights of outside shareholders.
    • Difficult knowledge sharing-less synergy.
  • Functional Multidivisional Holding Matrix Transnational Team Project
    • It’s a combination of structures which could take the form of product and geographical divisions or functional and divisional structures operating in tandem.
  •  
    • Advantages
    • Integrated knowledge
    • Flexible
    • Allows for dual dimensions
    • Disadvantages
    • Length of time required for decision making
    • Unclear job and task responsibilities
    • Unclear cost and profit responsibilities
    • High degrees of conflict
  • Functional Multidivisional Holding Matrix Transnational Team Project
    • 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 globalisation, and
      • 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 corporation.
    • 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
  •  
  • Functional Multidivisional Holding Matrix Transnational Team Project
    • It combines both horizontal and vertical coordination through cross functional teams.
    • 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.
    • Flexible.
    • Highly motivated.
    • Disadvantages
    • Complexity
    • Difficulties of control
    • Problems of scaling up.
  • Functional Multidivisional Holding Matrix Transnational Team Project
    • It is a structure where teams are created.
    • They undertake the work and are then dissolved.
    • Many organizations use such teams in a ad-hoc way.
    • For eg: taskforces are set up to make progress in regular structure.
    • Flexible
    • Good accountability and control (clear task/defined time).
    • Effective knowledge exchange.
    • Attracts international members due to short project span.
    • Lack of coordination.
    • Proliferation of projects.
    • Breaking up teams hinders knowledge accumulation.
  • Challenge Structure Control Change Knowledge Globalization Functional *** * ** * Multidivisional ** ** * ** Holding * *** * ** Matrix * *** *** *** Transnational ** *** *** *** Team * ** *** * Project ** *** ** **
    • Market-Advantage
    • Parenting Advantage
    • People
    • Feasibility
    • Specialised Cultures
    • Difficult Links
    • Redundant Hierarchy
    • Accountability
    • Flexibility
  • STRUCTURES PROCESSES RELATIONSHIPS
  •  
    • 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 satisfactory results.
    • 2 . Division is between direct and indirect controls.
      • Direct controls involve close supervision or monitoring.
      • Indirect controls are more hands-off, setting up the conditions whereby desired behaviors are achieved semi automatically.
    • Direct control relies heavily on the physical presence of management.
    • It is very effective for small organizations on a single site.
    • Global organizations may make use of indirect controls for their geographically dispersed subsidiaries.
    • 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 electronic means.
    • 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 9000)
    • 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 personal motivation.
    • 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 respectively.
  • Setting boundaries Center specifies
    • Vision
    • Key policies
    • Resourcing guidelines
    • Constraints
    Bottom-up plans ‘ Division’ prepare draft plans Reconciliation Discussions on
    • Fit with guidelines
    • Fit between plans
    • Resource mismatch
    Operatinalisation
    • Finalise plans
    • Agree annual budget
    • Set performance indicator
    • Agree review process
    Communication Disseminate plan
    • Internally
    • Externally
    • 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 profits.
    • These targets are often known as Key performance indicators(KPI).
    • Within large businesses corporate centres may choose performance targets to control their business units.
    • In regulated markets, such as privatised utilities government appointed regulators increasingly exercise control through agreed performance indicators.
    • In the public services where control of resource inputs was the dominant approach , government are attempting to move control processes towards outputs.
    • 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 resources.
    • Internal market work well where complexity or rapid change make impractical detailed direct or input controls.
    • Problems:
    • They can increase bargaining between units, consuming important management time.
    • They may create a new bureaucracy monitoring all of the internal transfers of resources between units
    • An overzealous use of market mechanism can lead to dysfunctional competition and legalistic contracting, destroying cultures of collaboration and relationships.
    • Balanced Scorecards combine both qualitative and quantitative measures, acknowledge the expectations of different stakeholders and relate an assessment of performance to choice of strategy.
  •  
  • STRUCTURES PROCESSES RELATIONSHIPS
    • Relationship are required to be built and maintained, especially in ways that are fluid enough to respond to an uncertain environment.
  •  
    • 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 the hierarchy.
    • 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
  •  
  •  
  •  
  • Outsourcing Strategic Alliances Networks Virtual organisations
    • It is subcontracting a service, such as product design or manufacturing, to a third-party company.
    • 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 solutions.
    • More organizations have become dependent on internal and external networks to ensure success so cooperation has become key aspect of organizing success.
    • Other important networks include:
    • Teleworking
    • Federations
    • one stop shops
    • Service network
    • 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.
    Client Service A Service B Service 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 organization :
    • In business an organization that can take one of the following forms:
      • a business which operates primarily via electronic means; see virtual business
      • independent organizations that share resources to achieve their goals; see virtual enterprise
    • Stereotypical Configurations
    • Reinforcing cycles and the implications for change
    • 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 be flexible.
    • 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 functional departments.
    • 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 considerable power.
    • 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 structures.
    • 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 for success.
    • A significant weakness is the duplication of resources and activities that go with a divisional structure.
    • 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 traditional organizations.
    • 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 team.
    • 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 leadership.
    • 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, bankers, etc.).
    • 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
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    • Organising for success is about an organisation’s configuration, built on three related strands: structures, processes, and relationships
    • Successful organising means responding to the key challenges facing the organisation: control, change, knowledge and internationalisation
    • 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 facilitate strategy
    • Relationships are important for success
    • Separate organisational strands should come together to form a coherent reinforcing cycle