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1. Strategy Implementation
HCAD 5390

2. Organizational Structure
Organizational design
– Selecting the structure and control
systems that are most strategically
effective for pursuing sustainable
competitive advantage.
The role of structure and control
– To coordinate strategy implementation.
– To motivate and provide incentives for superior
performance.

3. The Role of Organizational
Structure
Building blocks of organizational structure
– Differentiation in the allocation of people and
resources to create value.
 Vertical differentiation in the
distribution of decision-making
authority.
 Horizontal differentiation in
dividing up people and tasks
into functions and divisions.
– Integration
 The means used in coordinating people and functions
to accomplish organizational tasks.

4. Differentiation, Integration,
Bureaucratic Costs
Bureaucratic costs and strategy implementation:
– Bureaucratic costs increase with
organizational complexity.
– More differentiation = more managers.
– More integration = more coordination.
– Better strategy implementation = better bottom-line
performance and profitability.

5. Vertical Differentiation
Span of control (division of authority)
– The number of subordinates that a single manager
directly manages.
Organizational hierarchy choices
– Flat structures
 Few organizational levels
 Wide spans of control
– Tall structures
 Many organizational levels
 Narrow spans of control

6. Tall and Flat Structures

7. Problems with Tall Structures
Principle of minimum chain of command
– Maintaining a hierarchy with the least number of
levels of authority needed to achieve a strategy.
Sources of bureaucratic costs:

8. Centralization or Decentralization
Authority patterns in organizations:
– Centralized
 Decision making retained in the
hands of upper-level managers.
– Decentralized
 Decisions delegated to lower
levels in the organization.

9. Centralization (Structural) Choice?
Advantages of
decentralization
– Reduced information
overload on upper
managers.
– Increased motivation and
accountability throughout
organization.
– Fewer managers; lower
bureaucratic costs.
Advantages of
centralization
– Easier coordination of
organizational activities.
– Decisions fitted to broad
organizational objectives.
– Exercise of strong
leadership in crisis.
– Faster decision making and
response.

10. Horizontal Differentiation
Focus is on division and grouping of tasks to
meet business objectives.
Simple structure:
– Characteristic of small entrepreneurial companies.
– Entrepreneur takes on most managerial roles.
– No formal organization arrangements.
– Horizontal differentiation is low.

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 Structure Follows Strategy:
– Changes in corporate strategy lead to
changes in organizational structure

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 Structure Follows Strategy:
• New strategy is created
• New administrative problems emerge
• Economic performance declines
• New appropriate structure is invented
• Profit returns to its previous levels

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 Stages of corporate development
 Simple Structure
 Functional Structure
 Divisional Structure
 Beyond SBU’s

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 Simple Structure:
– Stage I:
 Entrepreneur
– Decision making tightly controlled
– Little formal structure
– Planning short range/reactive
– Flexible and dynamic

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 Functional Structure:
– Stage II:
 Management team
 Functional specialization
 Delegation decision making
 Concentration/specialization in industry

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 Divisional Structure:
– Stage III:
 Diverse product lines
 Decentralized decision making
 SBU’s
 Almost unlimited resources

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 Beyond SBU’s:
– Stage IV:
 Increasing environmental uncertainty
 Technological advances
 Size & scope of worldwide businesses
 Multi-industry competitive strategy
 Better educated personnel

18. Functional Structure
Advantages
– Task grouping facilitates
specialization and
productivity.
– Better monitoring of work
processes, reduced costs.
– Greater control over
organizational activities.
Disadvantages
– Functional orientation
creates communication
problems.
– Performance and
profitability measurement
problems.
– Location versus function
problems (coordination).
– Strategic problems due to
structural (vertical and
horizontal) mismatches.

19. Functional Structure

20. Mutlitdivisional Structure
Advantages
– Enhanced corporate
control by division
– Enhanced strategic
control of each SBU in
portfolio
– Growth is easier. New
units don’t have to be
integrated across
organization
– Stronger pursuit of
internal efficiencies.
Performance of individual
units is readily
measurable.
Disadvantages
– Establishing the divisional-
corporate authority
relationship
– Distortion of information by
divisions
– Competition for resources
by divisions
– Transfer pricing problems
between divisions
– Short-term research and
development focus
– Bureaucratic costs

21. Multidivisional Structure

22. Matrix Structure
Advantages
– Flexibility of the structure and membership
– Minimum of direct hierarchical control
– Maximizes use of employees’ skills
– Motivates employees;
frees up top management
Disadvantages
– High bureaucratic costs
– High costs (time and money) for building
relationships
– Two-boss employee’s role conflict

23. Matrix
Structure
 Two-boss employee

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 Network Structure:
– “non structure” – elimination of in-house
business functions
– Termed “virtual organization”
 Useful in unstable environments
 Need for innovation and quick response

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Network StructureNetwork Structure
Packagers
Designers Suppliers
Distributors
Corporate
Headquarters
(Broker)
Promotion/
Advertising
Agencies
Manufacturers

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 Effective implementation requires:
– Leadership
 Leading people to use their abilities and skills
most effectively and efficiently to achieve
organizational objectives

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 Staffing follows strategy:
– Matching the manager to the strategy
 Executive type
– Executives with a particular mix of skills and
experiences

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 Executive Types:
– Dynamic industry expert
– Analytical portfolio manager
– Cautious profit planner
– Turnaround specialist
– Professional liquidator

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Matching Chief Executive “Types” with
Strategy
Average
HighLow
Business Strength/Competitive Position
Strong
Growth—Concentration
Dynamic Industry Expert
Stability
Cautious Profit Planner
Retrenchment—
Close Company
Professional
Liquidator
Retrenchment—
Save Company
Turnaround
Specialist
IndustryAttractiveness
Medium
Weak
Growth—Diversification
Analytical Portfolio
Manager

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 Managing corporate culture:
– Corporate culture
 Affects firm’s ability to shift its strategic direction
 Strong tendency to resist change
 Corporate culture should support the strategy

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 Strategy-Culture Compatibility:
– Consider the following:
 Is the planned strategy compatible with the firm’s
current culture?
 Can the culture be easily modified to make it more
compatible with new strategy?
 Is management willing to make major
organizational changes?
 Is management committed to implementing the
strategy?

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 Managing corporate culture:
– Communication
 Key to effective management of change
 Rationale for strategic change should be
communicated to all

33. What Is Organizational Culture?
Culture
– The collection of values and norms shared by people and
groups in an organization.
– Shared values and a common culture increase integration
and improve coordination.
Values
– Beliefs and ideas about common goals and proper
behaviors.
Norms
– Act as guidelines or expectations that prescribe acceptable
behavior by organizational members.

34. Organizational Culture
Ways of transmitting organizational culture:

35. Culture and Strategic Leadership
The influence of the founder
– Initial cultural values and management
style is imprinted on the organization
by its founder.
Organizational structure
– Structure follows strategy.
Strategic leadership affects
the cultural norms and values
that develop in the organization.

36. Strategic Reward Systems
Individual reward systems
– Piecework plans
– Commission systems
– Bonus plans
– Promotion
Group and organizational
reward systems
– Group-based bonus systems
– Profit sharing systems
– Employee stock option systems
– Organization bonus systems