(ASB3009): STRATEGIC MANAGEMENT

Professor Dr Mohammad Moniruzzaman

PhD (University of London, UK), FCIM (UK), MBA (University of Kent, UK)
Sessions 10, 11 & 12: Strategy in action
Organising
 Structures and systems

• Structures give people formally defined roles, responsibilities

and lines of reporting. The structure is like the skeleton of an
organisation and creates its basic framework.
• Systems support and control people as they carry out
structurally defined roles and responsibilities. Systems are like
the muscles of an organisation that provide movement and
coherence.
• Configurations are the mutually supporting elements that
make up an organisation’s design.
Organisational configurations: strategy, structure
and systems
 Structures: types

Functional Divisional

Matrix Transnational

Project Hybrid
 The functional structure

The functional structure divides responsibilities according to the

organisation’s primary specialist roles such as production, research and
sales.
A functional structure
 A functional structure
Advantages
• Chief executive in touch with
all operations
• Reduces/simplifies control
mechanisms
• Clear definition of
responsibilities
• Specialists at senior and
middle management levels.
Disadvantages
• Senior managers
overburdened with routine
matters
• Senior managers neglect
strategic issues
• Difficult to cope with diversity
• Coordination between
functions is difficult
• Failure to adapt.
 The divisional structure

The divisional structure is built up of separate divisions on the basis of

products, services or geographical areas.

Divisionalisation often comes about as an attempt to overcome the

problems that functional structures have in dealing with diversity.
A divisional structure
 A divisional structure

Advantages
• Flexible (add or divest divisions)
• 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.
 The matrix structure

The matrix structure combines different structural dimensions

simultaneously, for example product divisions and geographical
territories or product divisions and functional specialisms.

In matrix structures, staff typically report to two managers rather than

one.
Matrix structures
Matrix structures
 Matrix structures

Advantages
• Integrated knowledge
• Flexible
• Allows for dual dimensions.
Disadvantages
• Length of time to take decisions
• Unclear job and task
responsibilities
• Unclear cost and profit
responsibilities
• High degrees of conflict.
 Transnational structures

The transnational structure combines local responsiveness with

high global coordination. Key advantages include:

• Knowledge-sharing – sources of ideas and capabilities for the

whole corporation.
• Specialisation – units specialise in areas of expertise to achieve
greater scale economies for the whole corporation.
• Network management. The corporate centre has the role of
managing this global network of specialisms and knowledge.
 Project-based structures

A project-based structure is one where teams are created, undertake

a specific project and are then dissolved.

This can be appropriate for organisations that deliver large and

expensive goods or services (e.g. civil engineering,) and those
delivering time-limited events (e.g. sporting events like London
Olympics 2012 or consulting engagements).

The organisation structure is a constantly changing collection of

project teams created, steered and glued together loosely by a small
corporate group.
Table: Strategy and structure fit
Types of control systems
 Types of control systems

• Planning systems – direct supervision control of strategic

decisions by one or a few individuals, typically focused on the
effort of employees.
• Cultural systems aim to standardise norms of behaviour within
an organisation in line with particular objectives.
• Performance target systems focus on the outputs of an
organisation (or its parts) such as product quality, revenues or
profits.
• Internal market systems – a formal system of
(a) ‘contracting’ for resources or inputs and (b) for supplying
outputs to other parts of an organisation.
 Planning systems

Planning systems plan and control the allocation of resources

and monitor their utilisation. The focus is on the direct control of
inputs such as financial inputs (as in budgeting), human inputs
(as in planning for managerial succession) or long-term
investments (as in strategic planning).
 Strategy styles

Source: Adapted from M. Goold and A. Campbell, Strategies and Styles, Blackwell, 1989, Figure 3.1. p. 39.
 Strategic planning style

The strategic planning style – is the archetypal planning system.

It features:

• Strong planning influence from the centre but relatively relaxed

performance accountability from the business units.
• The centre allocates all the resources to business units.
• The centre exercises a high degree of control on how strategy is
implemented.
 Financial control style

The financial control style involves very little central planning. It

features the following:

• The business units each set their own strategic plans (probably after
some negotiation with the corporate centre).
• Business units are strictly accountable for their performance and
financial results.
• Managers typically have a lot of autonomy and receive high levels of
bonus for success but are likely to be dismissed for poor results.
• This style fits with the portfolio manager view of the corporate
centre.
 Strategic control style

The strategic control style lies in the middle with a more consensual
approach to strategy. It features:

• Moderate levels of business unit accountability.

• The corporate centre acts as a ‘coach’ to managers in business units
and is supportive.
• This style relies on cultural systems to foster trust and mutual
understanding.
• This style fits with the synergy manager and parental developer
view of the corporate centre.
 Cultural systems

Cultural systems aim to standardise norms of behaviour within an

organisation in line with particular objectives.
Cultural systems are an indirect form of control and rely on the self
control of employees.

There are three key cultural systems:

• Selection – recruiting people who ‘fit’.

• Socialisation – behaviour is shaped by social processes (e.g.
training, mentoring or symbols).
• Rewards – appropriate behaviour receives rewards in the form of
pay, promotion or praise.
 Performance targeting systems
(1 of 3)

Performance targets focus on the outputs of an organisation

(or part of an organisation) such as product quality, revenues
or profits.
• These targets are often referred to as key performance
indicators (KPIs).
• The performance of the organisation is judged on its ability
to meet these targets.
• Within boundaries the organisation is free to decide on
how to reach these targets.
 Performance targeting systems
(2 of 3)

This approach is appropriate:

• In large businesses – as with the financial control style,
the centre may set targets for business units but not get
involved in how the targets are achieved.
• In regulated markets – government appointed regulators
may exercise control through agreed KPIs (e.g. service
quality in utilities).
• In the public services – governments are trying to shift
control from input control to performance outcomes (e.g.
in healthcare or education).
 Performance targeting systems
(3 of 3)

There are several problems in setting targets:

• Inappropriate measures – choosing things that are easily

measured but don’t reflect real needs.
• Inappropriate target levels – they may set unrealistically
high or at a level that is too easy to achieve (and leads to
complacency).
• Excessive internal competition – if individual business
units are rewarded on their own performance there will
be little incentive to collaborate, share resources or best
practices.
 Balanced scorecards

Balanced scorecards set performance targets according

to a range of perspectives, not only financial.

Typically there is a combination of four specific

perspectives:

• financial;
• customer;
• internal;
• innovation and learning.
 Strategy maps

Strategy maps link different performance targets into a mutually

supportive causal chain supporting strategic objectives.
 A strategy map

Source: Exhibit 1; R. Lawson, W. Stratton, T. Hatch (2005), Achieving Strategy with Scorecarding, Journal of Corporate Accounting and Finance,
March–April, pp.vol 16, no. 3: p. 64.
 Market systems

Market systems typically involve some formalised system of

‘contracting’ for resources or inputs from other parts of an
organisation and for supplying outputs to other parts of an
organisation.

Internal markets can use competitive bidding, the corporate

centre might set rules for transfer prices between internal
business units or insist on service-level agreements.
 Leadership and
strategic change

35
Leadership and strategic change
 Managing change – key issues
Key premises:
• Leaders have to diagnose the organisational context,
the extent to which it is receptive or resistant to change
– particularly the forces blocking or facilitating
change.
• Leaders have to identify the type of strategic change
required: types of change differ according to speed and
scope.
• Understanding the context, and identifying the required
type of change, should help leaders select the
appropriate levers for change.
 Strategic leadership roles (1 of 2)
Leadership is the process of influencing an
organisation (or group within an organisation) in
its efforts towards achieving an aim or goal.
Three key roles of top management in leading
strategic change:
• Envisioning future strategy.
• Aligning the organisation to deliver that
strategy.
• Embodying change.
 Strategic leadership roles (2 of 2)
Middle managers do not just implement strategy
but have key roles in leading change:
• Advisers – on requirements for change and the
likely blockages to change.
• Sense making – interpreting the intended
strategy for their specific part of the organisation.
• Reinterpretation and adjustment – of strategic
responses and relationships as events unfold.
• Local leadership of change – aligning and
embodying change at the local level.
 Leadership styles
Leaders can be categorised in two ways:
• Transformational (or charismatic) leaders
emphasise building a vision for their
organisations; an organisational identity built
on collective values and beliefs and energising
people to achieve the vision.
• Transactional leaders emphasise ‘hard’ levers
of change e.g. designing systems, targets,
financial incentives, project management and
careful monitoring.
 Situational leadership
Transformational and transactional leadership
styles are two ends of a scale, with many feasible
points between. Leaders typically combine
elements of both styles.
Situational leadership encourages strategic
leaders to adjust their leadership style to the
context they face.
No one best way – the most appropriate leadership
style changes according to the specific demands of
the situation.
 Styles of leading change

Learn to lead

Styles of
Select and Empower Vision and Grit
managing
change

Confidence
 Diagnosing the change context
Approaches to leading change depend on the
organisational context.
Leading change in a small, entrepreneurial firm
is likely to differ from leading change in a large
corporation. Change in the public sector will
differ from that in the private sector.
 The change kaleidoscope

Source: Adapted from J. Balogun and V. Hope Hailey, Exploring Strategic Change, 4th edn, Prentice Hall, 2016.
Styles of change leadership according to
organisational capability and readiness
 Forcefield analysis (1 of 2)
Forcefield analysis: provides a view of forces
that act to prevent or facilitate change.
• What aspects of the current situation would block
change, and how can these blocks be overcome?
• What aspects of the current situation might aid
change in the desired direction, and how might these
be reinforced?
• What needs to be introduced or developed to add to
the forces for change?
 Forcefield analysis (2 of 2)
A forcefield analysis can be informed by several
concepts:
• The change kaleidoscope.
• Stakeholder mapping.
• The culture web.
• The 7-S framework.
A forcefield analysis for devolving strategy
 Types of change

Source: Adapted from J. Balogun, V Hope Hailey and S. Gustafsson, Exploring Strategic Change, 4th edn, Pearson, 2016, p.23.
 Types of strategic change
Four types of strategic change:
• Adaptation – can be accommodated with the
existing culture and can occur incrementally.
• Reconstruction (turnaround) – rapid change
but without fundamentally changing the culture.
• Revolution – fundamental changes in both
strategy and culture.
• Evolution – cultural change is required but this
can be accomplished over time.
 Turnaround strategy
A turnaround strategy is where the emphasis is on
speed of change and rapid cost reduction and/or
revenue generation.
Elements of turnaround strategies:
• Crisis stabilisation.
• Management changes.
• Gaining stakeholder support.
• Clarifying the target market(s) and core products.
• Financial restructuring.
Table: Turnaround: revenue generation and cost
reduction steps
 Revolutionary change (1 of 2)

Revolutionary change differs from

turnaround (or reconstruction) in two ways:
• The need is not only for fast strategic
change but also for deep cultural change.
• The need for change is not as evident to
people in the organisation or they have
reasons to deny the need for change.
 Revolutionary change (2 of 2)

Leading revolutionary change is likely to

involve:
• Clear strategic direction.
• Top management changes.
• Culture change.
• Monitoring change.
 Evolution

Evolution is change in strategy that results in

transformation, but gradually. Arguably, this is
the most challenging type of strategic change
since it involves building on and exploiting
existing strategic capabilities while also
developing new strategic capabilities.

One approach is to cultivate organisational

ambidexterity.
 Organisational ambidexterity

Organisational ambidexterity involves both

the exploitation of existing capabilities and the
search for new capabilities.
May be achieved by:
• Structural ambidexterity.
• Diversity rather than conformity.
• A culture of questioning and challenge.
• Type of leadership.
• Tight and loose systems.
 Kotter’s eight steps for change

Source: J. Kotter, ‘Leading change: why transformation efforts fail’, Harvard Business Review, March–April, 1996, p. 61.
Levers for strategic change
A compelling case for change

Challenging the taken for granted

Changing operational processes and routines

Symbolic management

Power and political systems

 Changing operational processes and
routines
The relationship between strategic change and day-to-
day processes and routines is important to consider in
three respects:
• Planning operational change – identify the key
changes in the routines required to deliver the new
strategy.
• Challenging operational assumptions – often taken-
for-granted. It helps to involve people in the activities
of changing.
• Bottom-up changes to routines – changes in routines
may be planned, come about by trial and error or by
on the job learning.
 Symbolic management
Change levers are not always of an overt, formal
nature: they may also be symbolic.
Changing symbols can help reshape beliefs and
expectations. Three key aspects:
• Rituals – see the next Table
• Physical aspects – locations, dress, offices.
• Behaviour of managers – the behaviour of change
agents must be in line with change.
• Language – can be used to galvanise the change or
(unconsciously) deter it.
Table: Organisational rituals and change
Political mechanisms in organisations
Managing change from a political perspective
can be achieved using various mechanisms:
• Control of resources, expertise and
information.
• Support and association with elites or
stakeholders (powerful and/or influential
people).
• Building of alliances and networks.
Table: Political mechanisms in organisations
 Timing
The timing of change can be tactically vital.
• Building on an actual or perceived crisis.
• Exploiting windows of opportunity.
• Symbolic signalling of time frames.
Visible short-term wins – the demonstration of
such wins can galvanise commitment to the wider
change strategy.