Monday, May 05, 2023

Chapter 6

Strategy Implementation
(Management Related Issues)

References:
• Organization Theory and Design (Richard L. Daft)
• Management (Ricky Griffin)
• Strategic Management Concepts & Cases (Fred R. David)

Resource Person: Furqan-ul-haq Siddiqui

 Strategy Formulation vs. Implementation
Strategy Formulation (SF) Strategy Implementation (SI)
• Positioning forces before the • Managing forces during the
action action
• Focus on effectiveness • Focus on efficiency
• Primarily intellectual • Primarily operational
• Requires good intuitive and • Requires special motivation
analytical skills and leadership skills

• Requires coordination among • Requires coordination among

a few people many people
 Nature of Strategy Implementation
SI problems can arise because of the shift in
responsibility, especially if SF decisions come as a
surprise to middle- and lower-level managers.
Therefore, it is essential to involve divisional and
functional managers in SF.
Divisional or
Strategists Functional
Managers

Shift in Responsibility
Management Issues Central to
Strategy Implementation
Matching Structure with Strategy
 Environment/Goals/Strategy/Structure
Analysis Process
1. Tells you what you should do

External
Environmental Learning or Learning or
Assessment Efficiency Efficiency

2. Goals 3. Strategy 4. Structure 5. Outcome

Internal
Environmental
Assessment

6. Outcome Assessment – have you been successful?

6
 Selecting Strategy and Design to
Achieve Organizational Goals
1. Goals  Where you want to go
2. Strategy  How you are going to get there.
A plan for interacting with the competitive
environment to achieve organizational goals.
3. Structure  How you can do what you need
to do to implement strategy and achieve goals

Environment Goals Strategy Structure

7
Components of Organizational Structure
Designing Organizational Structure
 Organizational design
The process by which managers make
specific choices that result in a particular
kind of organizational structure.
A process in which managers develop or
change their organization’s structure
 Organizational Structure
Formal system of task and reporting
relationships showing how workers use
resources.
 Organization Structure
 There are three key components in the definition of
organization structure:
1. Organization structure designates formal reporting
relationships, including the number of levels in the
hierarchy and the span of control of managers and
supervisors.
2. Organization structure identifies the grouping together
of individuals into departments and of departments
into the total organization.
3. Organization structure includes the design of systems
to ensure effective communication, coordination, and
integration of efforts across departments.
1. Grouping Tasks Into Jobs: Job Design
 Job Design
 The process by which managers decide how to divide
tasks into specific jobs.
 Division of Labor
 Splittingthe work to be performed into particularly
impersonal tasks and assigning tasks to individual
workers.
 The appropriate division of labor results in an effective
and efficient workforce.
2. Grouping Jobs (Departmentalization)

Functional Divisional Geographic

Grouping Grouping Grouping

Horizontal Virtual Network

Others
Grouping Grouping
a. Functional Structure
 Activities grouped by common function
 All specific skills and knowledge are consolidated
 Promotes economies of scale
 Slow response to environmental changes
The Functional
Structure

Figure 7.3
b. Divisional Structure
 An organizational structure composed of separate
business units within which are the functions that
work together to produce a specific product for
specific customers—including personnel in
marketing, manufacturing, and sales—are grouped
together under one executive.
 Allows functional managers to specialize in one product area.
 Division managers become experts in their area.
 Removes need for direct supervision of division by corporate
managers.
 Divisional management improves the use of resources.
 Functional managers report to divisional managers who then report
to corporate upper management.
Viacom's
Divisional
Structure

Figure 7.5
c. Geographic Structure
 Organizing to meet needs of users/customers by
geography.
 Focuses managers and employees on specific geographic
regions
 Global geographic structure
 Different divisions serve each world region when

managers find different problems or demands across

the globe.
 Generally, this structure is adopted when managers are

pursuing a multinational strategy.

 Strengths and weaknesses similar to divisional
organization
Sample Geographic Structure
d. Customer Structure
Each kind of customer is served by a self-
contained division
Global market (customer) structure
 Customers in different regions buy similar products so
firms can locate manufacturing facilities and product
distribution networks where they decide is best.
 Firms pursuing a global strategy will use this type of

structure.
Product, Market,
and Geographic
Structures

Figure 7.4
Global Geographic and Global Product Structures

© Copyright 2004 McGraw-Hill. All

rights reserved.
e. Matrix Design Structure
An organizational structure that simultaneously
groups people and resources by function and
product.
 Conditions for Matrix:
1. Share resources across the organization
2. Two or more critical outputs required: products
and technical knowledge
3. Environment is complex and uncertain
Allows organization to meet dual demands
Largest weakness is that employees have two
bosses and conflicting demands and possibly cannot
satisfy both.
 The matrix can be used when both technical expertise and
product innovation and change are important for meeting
organizational goals.
 The matrix structure often is the answer when organizations
find that the functional, divisional, and geographic
structures combined with horizontal linkage mechanisms
will not work.
 The matrix is a strong form of horizontal linkage. The
unique characteristic of the matrix organization is that both
product divisions and functional structures (horizontal and
vertical) are implemented simultaneously.
 Many companies have found a balanced matrix hard to
implement and maintain because one side of the authority
structure often dominates.
Sample Matrix Organization
 Explanation: Assume the matrix structure is for a
clothing manufacturer. Product A is footwear, product B
is outerwear, product C is sleepwear, and so on. Each
product line serves a different market and customers. As
a medium size organization, the company must
effectively use people from manufacturing, design, and
marketing to work on each product line. There are not
enough designers to warrant a separate design
department for each product line, so the designers are
shared across product lines. Moreover, by keeping the
manufacturing, design, and marketing functions intact,
employees can develop the in-depth expertise to serve
all product lines efficiently.
Matrix Structure
Matrix: Strengths & Weaknesses
f. Horizontal Structure
 Organization around core processes.
 Shift towards horizontal structure during re- organization
or re-engineering
 Eliminates vertical hierarchy and
departmental
boundaries
Reengineering, or
business process
reengineering, basically
means the redesign of a
vertical organization
along its horizontal
workflows and processes.
 Characteristics of Horizontal Structure
 Structure is created around cross-functional processes
 Self-directed teams, not individuals are dominant players
 Process owners are responsible for entire process
 People on the team are given authority for decisions
 Can increase organization’s flexibility
 May harm performance if critical processes are not
correctly defined
g. Virtual Networks and Outsourcing
 Extend horizontal coordination beyond the
boundaries of the organization
 Most common strategy is outsourcing
Contract out certain tasks/functions
 Virtual or modular structures subcontract most of
its major functions to separate companies
 The virtual network organization serves as a central
hub with contracted experts.
 The term virtual organization is used to describe a
network of independent firms that join together,
often temporarily, to produce a service or product.
Virtual Network at TiVo
 Hybrid Structure
 As a practical matter, many structures in the real world do
not exist in the pure forms we have outlined in this chapter.
 Most large organizations, in particular, often use a hybrid
structure that combines characteristics of various
approaches tailored to specific strategic needs.
 Most companies combine characteristics of functional,
divisional, geographic, horizontal, or network structures to
take advantage of the strengths of various structures and
avoid some of the weaknesses.
Ultimately, the most important decision that managers make about structural
design is to find the right balance between vertical control and horizontal
coordination, depending on the needs of the organization. Vertical control is
associated with goals of efficiency and stability, while horizontal
coordination is associated with learning, innovation, and flexibility.
 3. Establishing Reporting Relationship
 Chain of Command- The continuous line of authority
that extends from upper levels of an organization
to the lowest levels of the organization and
clarifies who reports to whom.
 Span of Control- The number of employees who can be
effectively and efficiently supervised by a manager.
Tall A tall organization structure has many levels of management.
Flat organizations have few levels. it usually does not have the middle management levels
and their functions have been eliminated. This allows the top management to be in direct contact
with their frontline salespeople.
Wide span of control means one manager supervises many members
Narrow span of control means one manager supervises a small number of
members
Organogram/chart of management: 
a chart that shows the management structure of an organization
 4. Distributing Authority
Authority
is a manager's formal and legitimate right to make
decisions, issue orders, and allocate resources to achieve
organizationally desired outcomes.

 Authority brings responsibility and accountability

 Responsibility means an employee's duty to perform assigned task
or activities or it is the obligation you have to perform the tasks
assigned to you
 Accountability means that those with authority and responsibility
must report and justify task outcomes to those above them in the
chain of command.
 Centralization & Decentralization
 Centralization- The degree to which decision-making
is concentrated at a single point in the organizations.
 Organizations in which top managers make all the decisions
and lower-level employees simply carry out those orders.
 Decentralization- Organizations in which decision-
making is pushed down to the managers who are closest
to the action.
 Decentralization
 Delegation
 Delegation (or some times called deputation) is the
assignment of authority and responsibility to another person
(normally from a manager to a subordinate) to carry out
specific activities. However the person who delegated the work
remains accountable for the outcome of the delegated work.
 Reasons for Delegation
 To enable the manager to get more work done by
utilizing the skills and talents of subordinates.
 To foster the development of subordinates by having
them participate in decision making and problem solving
that allows them to learn about overall operations and
improve their managerial skills.
Steps in the Delegation Process
Step 1 Step 2 Step 3
Assigning Granting Creating
responsibility authority accountability

Manager Manager
Manager Manager
Manager

Subordinate Subordinate Subordinate

 5. Coordinating Activities
Coordination
 The process of linking the activities of the various
departments of the organization.
The Need for Coordination
 Departments and work groups are interdependent; the
greater the interdependence, the greater the need for
coordination.
 Coordinating Activities:
Three Major Forms of Interdependence
Pooled interdependence
 When units operate with little interaction; their output is
simply pooled at the organizational level.
Sequential interdependence
 When the output of one unit becomes the input of another
unit in sequential fashion.
Reciprocal interdependence
 When activities flow both ways
between units.
Three Major Forms of Interdependence

Sequential Reciprocal

Input Output Input Output Input Output

Pooled
Input

Input Output

Input
Input Output
 6. Differentiating Between Positions
Line Positions- Positions in the direct chain of command
that are responsible for the achievement of an organization’s
goals. Have formal (legitimate) authority to direct the
workforce.
Staff Positions- Positions intended to provide expertise,
advice, and support to line positions. Have advisory
authority; can give compulsory advice. Have functional
authority to enforce compliance with organizational policies
and procedures.
 Both terms originated in the military.
 Organizations begin as line-only, with line manager having
direct control over all activities, including administrative
ones. Only later, as organizations grow in size, do they add
staff positions.
 Line positions are those jobs seen as making a direct
contribution to the company's profits. Jobs directly
involved in the design, manufacture, and sale of
your product are line positions. Briefly put,
production and sales jobs are line positions.

 Staff positions are those that support the line.

Human resources, billing, and public relations are
considered staff positions. Line people are seen as
essential to the organization, while staff people are
viewed as expenses. Line people, by the nature of
their jobs, usually have more power than staff
people. Almost without exception, line people are
paid more.
Application of Structural Design
 Each structure meets different needs and is a tool that
can help managers be more effective
 Structural alignment aligns structure with
organizational goal
 Symptoms of Structural Deficiency:
 Decision making is delayed or lacking quality
 Organization cannot meet changing needs
 Employee performance declines, needs are not meet
 Too much conflict
Design Essentials
• Structure must provide a framework, linking
organization into whole
• Provide vertical and horizontal linkages
• Variety of alternatives for grouping
• Virtual network extends horizontal coordination
• Matrix structure attempts to achieve balance
• Managers must find right balance
• The purpose of the organization chart is to
encourage and direct activities