Building Resources Strengths and Organizational Capabilities

Building Resources Strengths and

Organizational Capabilities

Strategy Implementing Tasks

Build an organization capable of carrying out the strategy successfullySteer resources to critical activitiesEstablish supportive policies and proceduresInstitute “best practices” and demand continuous improvement

Strategy Implementing Tasks

Install necessary information, communication, e-commerce and operating systemsTie rewards to performanceCreate supportive work environment and cultureExhibit internal leadership to drive the strategy forward

TOWS AnalysisOpportunities Threats

Strengths

Max

Max

Min

Max

Weaknesses

Max

Min

Min

Min

Building a Capable Organization

Gather a strong management teamRecruiting and development of employees

Screen and train wellEmploy job enlargement, job rotation and job enrichmentFoster intrapreneurshipProvide appropriate incentives


Develop core competenciesRarely consist of narrow skills or efforts of a single departmentTypically reside in the combined efforts of different groups and departmentsConcentrate more effort than rivals on strengthening these skillsDevelop broad bases of competence


Developing organizational capabilities

Develop the ability to do somethingWith experience the ability begins to translate into a competenceWith success the organization refines the capability beyond its rivals it becomes a distinctive competence

Matching Structure with Strategy

Identify strategy-critical activitiesOutsource non-critical activitiesPartner to gain added capabilitiesMake strategy-critical activities the main building blocksDelegate authority to business units

Matching Structure with Strategy

Ensure coordination amongst unitsMaximize support contributionsMinimize support costs

Build organizational bridges with outsidersMatch structure with strategy

Williamson’s Structures

Functional or U-form (Unitary) DesignOrganizational members and units are grouped into functional departments such as marketing and productionCoordination is required across all departmentsDesign approach resembles functional departmentalization in its advantages and disadvantages

Williamson’s Structures U-Form

Williamson’s StructuresConglomerate or H-form (Holding) Design

Organization consists of a set of unrelated businesses with a general manager for each businessHolding-company design is similar to product departmentalizationCoordination is based on the allocation of resources across companies in the portfolioDesign has produced only average to weak financial performance; has been abandoned for other approaches

Williamson’s Structures H-Form

Williamson’s Structures

Divisional or M-form (Multidivisional) DesignAn organizational arrangement based on multiple businesses in related areas operating within a larger organizational frameworkThe design results from a strategy of related diversificationSome activities are extremely decentralized down to the divisional level; others are centralized at the corporate levelThe largest advantages of the M-form design are the opportunities for coordination and sharing of resourcesSuccessful M-form organizations can out perform U-form and H-form organizations

Williamson’s Structures M-Form

Davis and LawrenceMatrix Design

An organizational arrangement based on two overlapping bases of departmentalization (e.g., functional departments and product categories)A set of product groups or temporary departments are superimposed across the functional departmentsEmployees in the resulting matrix are members of both their departments and a project team under a project managerThe matrix creates a multiple command structure in which an employee reports to both departmental and project managersA matrix design is useful when

• There is strong environmental pressure• There are large amounts of information to be processed• There is pressure for shared resources

Davis and Lawrence Matrix Design

Davis and Lawrence

Matrix Design AdvantagesEnhances organizational flexibilityInvolvement creates high motivation and increased organizational commitmentTeam members have the opportunity to learn new skillsProvides an efficient way for the organization to use its human resourcesTeam members serve as bridges to their departments for the teamUseful as a vehicle for decentralization

Davis and Lawrence

Matrix Design DisadvantagesEmployees are uncertain about reporting relationshipsManagers may view design as an anarchy in which they have unlimited freedomThe dynamics of group behavior may lead to slower decision making, one-person domination, compromise decisions, or a loss of focusMore time may be required for coordinating task-related activities

Hammer and Stanton

Hybrid DesignsAn organizational arrangement based on two or more common forms of organization designAn organization may have a mixture of related divisions and a single unrelated divisionMost organizations use a modified form of organization design that permits it to have sufficient flexibility to make adjustments for strategic purposes

Mintzberg’s Structures

According to Henry Mintzberg the structural configuration of an organization can be differentiated by

Prime Coordinating MechanismKey Part of OrganizationType of Decentralization


Prime Coordinating MechanismDirect Supervision

One individual is responsible for the work of others

Standardization of work processesThe content of the work is specified or programmed

Standardization of skillsExplicitly specifies the kind of training necessary to do the

work

Standardization of outputsSpecifies the results, or output, of the work

Mutual adjustment Coordinates activities through informal communications


Key Part of OrganizationStrategic apex- Top management and its support staff Technostructure- Analysts such as industrial engineers, accountants, planners, and human resource managers Operating core- Workers who actually carry out the organization’s tasks Middle line- Middle and lower-level management Support staff- Units that provide support to the organization outside of the operating workflow (for example, legal counsel, executive dining room staff, and consultants)


Types of Decentralization Vertical and horizontal centralizationLimited horizontal decentralizationVertical and horizontal decentralizationLimited vertical decentralizationSelective decentralization

Mintzberg’s StructuresThe Simple StructureThe simple structure uses direct supervision as its

primary coordinating mechanism, has as its most important part its strategic apex, and employs vertical and horizontal centralization. Relatively small corporations controlled by aggressive entrepreneurs, new government departments, and medium-sized retail stores are all likely to exhibit a simple structure. These organizations tend to be relatively young. The CEO (often the owner) retains much of the decision-making power. The organization is relatively flat and does not emphasize specialization. Many smaller U-form organizations are structured in this fashion. Trilogy Software would be an example of a firm using this approach.

Mintzberg’s StructuresThe Machine BureaucracyThe machine bureaucracy uses standardization of work

processes as its prime coordinating mechanism; the technostructure is its most important part; and limited horizontal decentralization is established. The machine bureaucracy is quite similar to Burns and Stalker’s mechanistic design discussed in Chapter 12 of Griffin’s Management, Eighth Edition (p. 382). Examples include McDonald’s and most large branches of the U.S. government. This kind of organization is generally mature in age, and its environment is usually stable and predictable. A high level of task specialization and a rigid pattern of authority are also typical. Spans of management are likely to be narrow, and the organization is usually tall. Large U-form organizations are also likely to fall into this category.


The Professional BureaucracyThe third form of organization design suggested by

Mintzberg is the professional bureaucracy. Examples of this form of organization include universities, general hospitals, and public accounting firms. The professional bureaucracy uses standardization of skills as its prime coordinating mechanism, has the operating core as its most important part, and practices both vertical and horizontal decentralization. It has relatively few middle managers. Further, like some staff managers, its members tend to identify more with their professions than with the organization. Coordination problems are common.


The Divisionalized FormThe divisionalized form, Mintzberg’s fourth design,

exhibits standardization of output as its prime coordinating mechanism, the middle line as its most important part, and limited vertical decentralization. This design is the same as both the H-form and the M-form described earlier. Limited and Disney are illustrative of this approach. Power is generally decentralized down to middle management—but no further. Hence each division itself is relatively centralized and tends to structure itself as a machine bureaucracy. As might be expected, the primary reason for an organization to adopt this kind of design is market diversity.


The AdhocracyThe adhocracy uses mutual adjustment as a means of

coordination, has at its most important part the support staff, and maintains selective patterns of decentralization. Most organizations that use a fully-developed matrix design are adhocracies. An adhocracy avoids specialization, formality, and unit of command. Even the term itself, derived from “ad hoc,” suggests a lack of formality. Sun Microsystems is an excellent example of an adhocracy.


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Building Resources Strengths and Organizational Capabilities