Organisational cultures exist within national cultures.
National culture definition:-
...the values, beliefs and assumptions learned in early childhood that distunguish one group of people from another. The notion of national culture relates directly to the software of the mind - ie the common theories of behaviour or mental programs that are shared [within a social group] (Newman and Nollen, 1996, p754). In this respect, as with any social group, corporate cultures, and incorporate [cultural and behavioural] elements of other outside societies: for example, cultural difference associated with managerial social classes, hourly wages, ethnic cultures. (Grant 2002, p167)
There were several studies examining the relative success of Japanese firms in the 1980s. The conclusion was that national values, through expression in organisational practice, were the key to Japan's economic philosophy and competitiveness. National cultures do differ and so do management practices within them. These include
human resource management practices
leadership style
decision making
Troompenaars, Hoftstede and Schneider & DeMeyer all argue that these differences affect the strategic performance of organisations. 3M example, p69.
Managers in France,Belgium, Italy, Spain and Portugal are more likely to interpret a difficult strategic issue as a threat than their counterparts in the UK or Germany. Studies have found that performance improves where business practices and national culture are congruent. Some authors argue that the effects of national culture on strategy are inconsistent. They propose that national culture may affect values and views of the world, it may not have the same effect on other aspects of organisational or individual beliefs. They argue that national culture is less important than the political workings of the organisation, or managers professional experience and training.
So to summarise the section on the relationship between strategy and culture:-
Structures and systems work only as well as the people who make them up and operate in them. Culture shapes those people, and therefore the behaviour, personality and practices of the whole organisation.
Organisations work as a social system through culture, and culture therefore strongly affects the strategy process.
Culture can be a tacit feature of your organisation, making it difficult for your competitors to imitate
There is no one best culture that fits all organisations or strategies, just as with systems and structure.
Remember your culture is just part of a national "superculture" and so you need to take that into account also during strategy implementation.
To be an organisational strength, culture must support strategy. Often, change in strategic direction requires adjustments to culture.
Wednesday, 16 March 2011
The implications of culture on the strategy implementation process u6 p62
Who implements strategy? Employees (and managers). Strategy implementation requires that your resources and capabilities are directed effectively and efficiently to achieve your goals. Culture influences the behaviour of your employees and managers, as well as their decision making and actions. It therefore strongly affects your ability to see through your strategy.
CULTURE MUST SUPPORT STRATEGY
You will often see firms (attempt to) adjust their culture alongside a change in strategic direction, to try and achieve this.
There is no one best culture that fits all organisations and their strategies.
To be appropriate, your culture must support purpose and strategy.
So a challenge exists, then, to align strategy and culture. How?
Most problems arise when there already exists a strong or deeply embedded established culture which will have a natural ability to resist change. Example, NTFE p63. Change in strategy is not likely to be successful if it simply contradicts the culture of the organisation, leading to employee change resistance. If culture is not compatible it can actually become a serious weakness. Culture's direct impact on the success or otherwise of your strategy may lead you to ask whether culture can be managed as an organisational capability.
Dynamic culture (u6 p66).
Some experts see culture as a controllable organisational variable, others sThe performance of your organisation depends on which its cultural values and norms can be aligned with your strategy, but can culture be manipulated (or manipulated enough) to allow this. Those who see culture as wholly changeable are regarded as "trait theorists" (Deal & Kennedy, Ouchi). Critics of trait theorists accuse them of downplaying the inherent differences that can exist across societies, industries, organisations. They include Barney and Kotter & Heskett. They argue that cultural traits have an adaptability, and that this affects how much culture can be changed to influence performance. Example: Montblanc pen maker, p67. The argument is that because cultural traits have differing adaptability, culture may be manipulated even though it may not be completely controlled.
"Paradigm Shift" :)
To change an organisation's "paradigm" - the deeper level of basic assumptions and beliefs that are commonly shared amongst its members (which operate unconsciously and define in...a fashion an organisation's view of itself and its environment) - to change this effectively, it is crucial for managers and "change consultants" to understand the relationships between those processes that coordinate activities or enable organisational members to interact.
Before attempting to change culture, management must
Evaluate what a particular change in strategy means to the culture
Assess if a change in culture is needed at all
Decide if an attempt to change the culture is worth the likely costs to the whole strategy process
The direction of cultural change and its impact cannot be handled systematically or rationally. It is a dynamic process.
National vs Organisational culture
CULTURE MUST SUPPORT STRATEGY
You will often see firms (attempt to) adjust their culture alongside a change in strategic direction, to try and achieve this.
There is no one best culture that fits all organisations and their strategies.
To be appropriate, your culture must support purpose and strategy.
So a challenge exists, then, to align strategy and culture. How?
Most problems arise when there already exists a strong or deeply embedded established culture which will have a natural ability to resist change. Example, NTFE p63. Change in strategy is not likely to be successful if it simply contradicts the culture of the organisation, leading to employee change resistance. If culture is not compatible it can actually become a serious weakness. Culture's direct impact on the success or otherwise of your strategy may lead you to ask whether culture can be managed as an organisational capability.
Dynamic culture (u6 p66).
Some experts see culture as a controllable organisational variable, others sThe performance of your organisation depends on which its cultural values and norms can be aligned with your strategy, but can culture be manipulated (or manipulated enough) to allow this. Those who see culture as wholly changeable are regarded as "trait theorists" (Deal & Kennedy, Ouchi). Critics of trait theorists accuse them of downplaying the inherent differences that can exist across societies, industries, organisations. They include Barney and Kotter & Heskett. They argue that cultural traits have an adaptability, and that this affects how much culture can be changed to influence performance. Example: Montblanc pen maker, p67. The argument is that because cultural traits have differing adaptability, culture may be manipulated even though it may not be completely controlled.
"Paradigm Shift" :)
To change an organisation's "paradigm" - the deeper level of basic assumptions and beliefs that are commonly shared amongst its members (which operate unconsciously and define in...a fashion an organisation's view of itself and its environment) - to change this effectively, it is crucial for managers and "change consultants" to understand the relationships between those processes that coordinate activities or enable organisational members to interact.
Before attempting to change culture, management must
Evaluate what a particular change in strategy means to the culture
Assess if a change in culture is needed at all
Decide if an attempt to change the culture is worth the likely costs to the whole strategy process
The direction of cultural change and its impact cannot be handled systematically or rationally. It is a dynamic process.
National vs Organisational culture
Strategy and culture u6 p57
Previous study already pointed out that Mintzberg stresses the importance of ideology. Simons control levers talk about beliefs and boundary systems as bases of control mechanisms. The structure and systems of an organisation undoubtedly affect the morale and behaviour of its people. Whittington said that structures are primarily about people, and that structures can "work only so well as their constituents are capable". (2003, p343).
In effect culture is another system. A social system, shaped by the formal and informal interactions of your staff, as they perform productive activities. Those people establish norms, beliefs, behaviours, relationships and social groupings irrespective of those defined by management.
Being successful, then, depends not only on having a strategy consisting of the right systems and organisational structures, but also on the willing participation and commitment of people. This shapes the personality and practices of the whole organisation. Culture affects in particular the implementation part of the strategy circular process.
There are links between organisational culture and the study of anthropology and sociology.
Schein's two challenges:
integrating individuals into an effective whole
adapting effectively to the external environment
The collective learning that goes on while you're meeting those challenges creates a set of shared values and beliefs - culture.
Ogbonna and Harris define culture as "a dynamic set of assumptions, values and artefacts whose meanings are collectively shared in a given social unit at a particular point in time"
There is a distinction between corporate and organisational cultures. To clarify, there are two questions to be asked.
1. Who owns culture?
2. Is culture something that an organisation is, or something it has?
If culture is something that an organisation has, then it can be treated as another contingency which has an impact on structures, people and processes, and can be seen to be owned by the management of the organisation and is capable of being manipulated in some way, eg to improve efficiency. It may even be a resource, a source of competitive advantage.
If culture is something that an organisation is, then it is the product of negotiated and shared meanings that emerge from social and personal interactions. In this case culture is created and re-created by its participants in a process that is continuous and not imposed. It's possible to imagine links between organisational culture and emergent strategy. Corporate culture is more akin to deliberate strategy, but what you end up with is an emergent strategy and an organisational culture that have been moulded from the deliberate strategy and corporate culture by your people. Emergent strategy may also be a byproduct of your organisational culture, even if your deliberate strategy took corporate culture into account.
Corporate culture refers to and reflects managers' values, interpretations and preferred way of doing things. Organisational culture may embrace many sub-cultures and is more intangible. Managers often assume that their understanding of the corporate culture is fully reflected in the organisational culture, whereas in effect it is only part of it. They also confuse compliance to corporate culture with the existence of a homogeneous organisational culture.
Culture normally reflects organisational purpose:-
this is what we are about
this is what we do
and even this is how we do it - which becomes "the way things are done around here".
It shapes the behaviour and attitude of people. Your culture will be distinct in intensity (depth) and integration (breadth) to any other organisation (Wheelen and Hunger, 2002, p89(.
To clarify those terms:-
Cultural Intensity:
The degree to which members of a unit accept the norms, values or other cultural content associated with the unit - depth.
Tends to be stronger in mature orgs, eg service at SIA. In intensive cultures, employees are expected to behave more consistently than employees in less intensive cultures.
Cultural Integration:
The extent to which units throughout an organisation share a common culture - breadth. In a hierarchical structure (eg military), culture is highly integrated.
Culture fulfills the following functions:
Internal and external identity can be reflected and reinforced
Your staff's values and norms can be aligned to those of the organisation
It enables the organisation to work as a social system
It provides a frame of reference for employees to draw upon when undertaking productive activities and serves as a guide for appropriate behaviour.
As previously mentioned, culture can heavily influence the strategy process. A culture that fosters strategic flexibility and renewal can help the organisation adapt better in dynamic environments. Where resources and capabilities are embedded in culture, they will form a tacit feature of your operational effectiveness which is difficult for your competitors to copy.
"...culture is what determines how people behave when they are not being watched" - Tom Tierney, Bain Consultancy.
AOL and Time Warner - attempt to merge a sharp e-culture with a traditional controlled media culture - disastrous.
The ways managers interact can help to set the tone.
GE under Jack Welch had a well-forged culture, tough q&a sessions with managers.
Wal-Mart's money saving culture is reinforced by the company's weekly Saturday Morning meetings for managers and families, and low spending habits by which their chief executive sets an example.
Cultures are influenced by the sort of people who are recruited. Enron's MBA talent recruitment resulted in a poorly controlled, self-absorbed management hierarchy.
The biggest single influence on a culture is the boss. Employees set their behaviour by the leader at the top.
Many recent large corporate failures (tyco, Global Crossing, Worldcom) resulted from hastily bundled together mergers of organisations that lost their distinctive cultural norms and found nothing to replace them.
Consistency can lead to a healthy culture, and one aid to this is for key messages to be repeated over and over. Richard Branson repeatedly tells his Virgin staff that 'common sense counts more than pure intellect'.
Culture can therefore influence the success of failure of your organisation because
Culture has a direct influence over how your employees and managers interact within their given structures. It is embedded over time by big events (mergers) as well as small (cakes on birthdays).
It affects the selection and type of people the organisation recruits, and can provide a way to retain the right people.
Cultural consistency leads to greater coherence in the development of your capabilities. This can help explain how belief systems work in the Simons control levers model. It can lead to ways of doing things and organisational learning that can underpin operational effectiveness and become a source of competitive advantage in its own right.
The right culture can be used to reinforce staff commitment to strategic goals. Leadership personalities can really help here. If leaders are committed to the culture then employees perception of that culture is improved and they are more likely to adopt it too.
Culture can be a "sticky" factor (as previously covered) which can lock the organisation into particular commitments of resource and strategic trajectories (and lock others out).
In effect culture is another system. A social system, shaped by the formal and informal interactions of your staff, as they perform productive activities. Those people establish norms, beliefs, behaviours, relationships and social groupings irrespective of those defined by management.
Being successful, then, depends not only on having a strategy consisting of the right systems and organisational structures, but also on the willing participation and commitment of people. This shapes the personality and practices of the whole organisation. Culture affects in particular the implementation part of the strategy circular process.
There are links between organisational culture and the study of anthropology and sociology.
Schein's two challenges:
integrating individuals into an effective whole
adapting effectively to the external environment
The collective learning that goes on while you're meeting those challenges creates a set of shared values and beliefs - culture.
Ogbonna and Harris define culture as "a dynamic set of assumptions, values and artefacts whose meanings are collectively shared in a given social unit at a particular point in time"
There is a distinction between corporate and organisational cultures. To clarify, there are two questions to be asked.
1. Who owns culture?
2. Is culture something that an organisation is, or something it has?
If culture is something that an organisation has, then it can be treated as another contingency which has an impact on structures, people and processes, and can be seen to be owned by the management of the organisation and is capable of being manipulated in some way, eg to improve efficiency. It may even be a resource, a source of competitive advantage.
If culture is something that an organisation is, then it is the product of negotiated and shared meanings that emerge from social and personal interactions. In this case culture is created and re-created by its participants in a process that is continuous and not imposed. It's possible to imagine links between organisational culture and emergent strategy. Corporate culture is more akin to deliberate strategy, but what you end up with is an emergent strategy and an organisational culture that have been moulded from the deliberate strategy and corporate culture by your people. Emergent strategy may also be a byproduct of your organisational culture, even if your deliberate strategy took corporate culture into account.
Corporate culture refers to and reflects managers' values, interpretations and preferred way of doing things. Organisational culture may embrace many sub-cultures and is more intangible. Managers often assume that their understanding of the corporate culture is fully reflected in the organisational culture, whereas in effect it is only part of it. They also confuse compliance to corporate culture with the existence of a homogeneous organisational culture.
Culture normally reflects organisational purpose:-
this is what we are about
this is what we do
and even this is how we do it - which becomes "the way things are done around here".
It shapes the behaviour and attitude of people. Your culture will be distinct in intensity (depth) and integration (breadth) to any other organisation (Wheelen and Hunger, 2002, p89(.
To clarify those terms:-
Cultural Intensity:
The degree to which members of a unit accept the norms, values or other cultural content associated with the unit - depth.
Tends to be stronger in mature orgs, eg service at SIA. In intensive cultures, employees are expected to behave more consistently than employees in less intensive cultures.
Cultural Integration:
The extent to which units throughout an organisation share a common culture - breadth. In a hierarchical structure (eg military), culture is highly integrated.
Culture fulfills the following functions:
Internal and external identity can be reflected and reinforced
Your staff's values and norms can be aligned to those of the organisation
It enables the organisation to work as a social system
It provides a frame of reference for employees to draw upon when undertaking productive activities and serves as a guide for appropriate behaviour.
As previously mentioned, culture can heavily influence the strategy process. A culture that fosters strategic flexibility and renewal can help the organisation adapt better in dynamic environments. Where resources and capabilities are embedded in culture, they will form a tacit feature of your operational effectiveness which is difficult for your competitors to copy.
"...culture is what determines how people behave when they are not being watched" - Tom Tierney, Bain Consultancy.
AOL and Time Warner - attempt to merge a sharp e-culture with a traditional controlled media culture - disastrous.
The ways managers interact can help to set the tone.
GE under Jack Welch had a well-forged culture, tough q&a sessions with managers.
Wal-Mart's money saving culture is reinforced by the company's weekly Saturday Morning meetings for managers and families, and low spending habits by which their chief executive sets an example.
Cultures are influenced by the sort of people who are recruited. Enron's MBA talent recruitment resulted in a poorly controlled, self-absorbed management hierarchy.
The biggest single influence on a culture is the boss. Employees set their behaviour by the leader at the top.
Many recent large corporate failures (tyco, Global Crossing, Worldcom) resulted from hastily bundled together mergers of organisations that lost their distinctive cultural norms and found nothing to replace them.
Consistency can lead to a healthy culture, and one aid to this is for key messages to be repeated over and over. Richard Branson repeatedly tells his Virgin staff that 'common sense counts more than pure intellect'.
Culture can therefore influence the success of failure of your organisation because
Culture has a direct influence over how your employees and managers interact within their given structures. It is embedded over time by big events (mergers) as well as small (cakes on birthdays).
It affects the selection and type of people the organisation recruits, and can provide a way to retain the right people.
Cultural consistency leads to greater coherence in the development of your capabilities. This can help explain how belief systems work in the Simons control levers model. It can lead to ways of doing things and organisational learning that can underpin operational effectiveness and become a source of competitive advantage in its own right.
The right culture can be used to reinforce staff commitment to strategic goals. Leadership personalities can really help here. If leaders are committed to the culture then employees perception of that culture is improved and they are more likely to adopt it too.
Culture can be a "sticky" factor (as previously covered) which can lock the organisation into particular commitments of resource and strategic trajectories (and lock others out).
Sunday, 13 March 2011
Strategy and systems u6 p37
Organisations have internal mechanisms through which resources and capabilities are transformed into competitive advantages
Mechanisms include
identifying, acquiring, deploying, coordinating, maintaining, controlling, cutting back resources and capabilities.
These mechanisms are systems - they involve formal and informal flows of information used flor planning, decision making, co-ordenation, cooperation and control at operational and strategic levels.
Grant 2002 p213 defines systems as
management systems provide the mechanisms for communication, decision-making, and control that allow the organisation to operate and develop. These systems are the primary means through which organisations solve the basic problems of achieving both coordination and cooperation.
Systems can be operational - those that underlie the efficient use and deployment of resources and capabilities.
Systems can be control systems - those that monitor the achievement of strategic goals.
Operational systems act as building blocks for organisational capabilities to develop.They become significant when they allow resources and capabilities to interact/interrelate, and create value.
Garvin defines operationial systems as "collections of tasks and activities that together - and only together - transform inputs into outputs, where inputs and outputs include materials, information and people"
Examples:
Retail: new product development, order fulfilment, customer service, resource allocation, decision making
Voluntary: ways of keeping records and mailing lists, preparing funding and donations proposals, fund raising processes.
Government: policy-making systems
Systems are tailored to suit the organisation, to help it pursue its goals. They need to fit the strategy and help the organisation deliver on it.They must include features that enable or allow the organisation to change core capabilities over time since ability to change is always critical. Operational systems that can achieve all this may be genuine sources of distinctiveness in their own right.
Organisations create routines around key tasks. Some are tacit, others are made explicit through codification. Grant states that tacit knowledge (less easily written down) underlies some skills, making it difficult to articulate and more easily expressed through actually doing it, eg. riding a bicycle. Operational system can contribute to making integration of knowledge, people & practices more efficient. There is a danger in large organisations that operational systems actually become sources of inefficiencies. The organisation may actually become slow and unresponsive to change if the systems become too routinised or bedded in. This is another reason why operational systems must be flexible.
Operational structures have the challenge of developing and transferring knowledge internally and changing behaviour and attitudes towards learning and integrating new knowledge (Grant 2002).
Successful management of strategy can also require processes of unlearning (Nystrom and Starbuck, 1984) where existing capabilities become obsolete owing to significant environmental shifts and need to be unlearned to adapt in new and better ways. eg ABB, u6 p41
Control systems u6 p43
Strategic control and organisational structure are intrinsically linked. Control systems make sure that all parts of the organisation are following the strategic roadmap - governed by strategic decisions - and are accountable for their performance.
These decisions may be made at corporate, business or internal levels. The control systems fulfil multiple roles throughout the firm. Some are imposed by outside stakeholders (eg regulations). Others are selected as appropriate by decision-makers.
Structure and control systems are similar - there is no one set of control systems appropriate for all organisations, circumstances or strategies.
Systems->Control Systems->Financial control systems
Financial control systems are information based, their key metrics are numbers, which are used to define activities relative to budgets and financial targets. Grant says 'the budgetary process includes setting and monitoring financial esitmates with regard to income and expenditure for a fixed period' (Grant 2002 p165).
Budgetary processes are normally evaluated/reviewed annually. Forecasts may be linked to the implementation of strategic initiatives. Generally speaking the sophistication and formality of financial controls rises as organisations become more complex (as is to be expected).
This applies in non-profits too!
Managers should pay close attention to weaknesses underpinning control systems, eg Compagnie du Froid, p44 u6. Any kind of control mismanagement can be disastrous, and this could happen with financial or administrative systems. Irresponsibility and fraud can and do happen. .
Simons (1994, 1995) explored the concept of
Dynamic Control Systems (p46)
His argument is that if we want strategic flexibility and innovative capabilities in a dynamic context, then the control mechanism needs to promote those things. Simon's approach integrates feedback and feed-forward mechanisms based on broader organisational criteria eg culture.
Simon's four levers of control, which can reconcile the conflict between flexibility and control are
Belief systems
Boundary systems
Interactive Control Systems
Diagnostic Control Systems.
Belief systems are the values derived from and encapsulated in your mission statement. Strategic decisions are overseen by these systems and they are often concise and inspirational eg "Pursuit of Excellence". They promote the commitment of employees to your central core strategic goal values.
Boundary systems indicate the 'acceptable domain of activity" and can be closely associated with the belief systems of an organisation. Examples include codes of conduct and other codified or non-codified ethical principles - these are conduct boundary systems. Others include eg planning documents, mandates, etc which are 'strategic boundary systems'. Simon's view of boundary systems is that they act like your brakes and every organisation needs them to avoid activities that are off-limits or avoid risks. They tell you what you can and can't do.
Interactive Control Systems stimulate search and learning, permitting new strategies to develop throughout while your staff and managers analyse and respond to opportunities and threats (but no SWOT on B820!) An effective interactive control system should
-keep strategic information up to date for management
-organise information and make it accessible to all levels of management
-encourage strategic decision making in a process of dialogue horizontally and vertically
-serve as a catalyst for ongoing debate and encourage critical thinking abou underlying data, assumptions and action plans.
Diagnostic control systems allow measurement of outputs and assessment against your expected standards of performance. A feedback loop operates allowing you to adjust and modify inputs and processes so that future outputs will more closely match goals - similar to financial control systems.
Collectively the control levers reinforce one another. They all perform a specific task in helping managers harness the creativity and commitment of employees, while at the same time setting up mechanisms to measure and report the achievement of your targets (operational and strategic).
P52 U6 for Eisenhardt and Sull's arguments that Simon's control levers are still not flexible enough to apply to highly turbulent/creative environments. Examples given are Yahoo, ebay and AOL.
They argue that control not by complex systems but by simple rules is more appropriate for the "new economy". Their work was published prior to the dot com bubble bursting, however! Eisenhardt and Sull's rules fall into five categories.
How-to rules - rules describing how things are done
Boundary rules - rules proscribing what can/can't be done
Priority rules - rules defining what should be focused on
Timing Rules - rules defining when things should happen
Exit rules - rules defining when something becomes yesterday's priority
The rules must be tailored to a single process and regularly reviewed. Cisco example u6 p55
Summary
Systems are different for every organisation and include both formal and informal mechanisms of co-ordination and control
They provide the mechanisms for commitment, coordination, decision-making and control
Operational systems underlie the use and deployment of resources and capabilities.
Control systems underlie the monitoring of strategic goal achievements
Operational systems allow resources and capabilities to interact and interrelate
Operational systems are your repository of knowledge
There is no one set of control systems appropriate for all organisations, situations or strategies
In dynamic contexts, your effective control systems promote strategic flexibility in your organisation. They also promote innovative capabilities and contribute to the morale and behaviour of people who work in the organisation.
Mechanisms include
identifying, acquiring, deploying, coordinating, maintaining, controlling, cutting back resources and capabilities.
These mechanisms are systems - they involve formal and informal flows of information used flor planning, decision making, co-ordenation, cooperation and control at operational and strategic levels.
Grant 2002 p213 defines systems as
management systems provide the mechanisms for communication, decision-making, and control that allow the organisation to operate and develop. These systems are the primary means through which organisations solve the basic problems of achieving both coordination and cooperation.
Systems can be operational - those that underlie the efficient use and deployment of resources and capabilities.
Systems can be control systems - those that monitor the achievement of strategic goals.
Operational systems act as building blocks for organisational capabilities to develop.They become significant when they allow resources and capabilities to interact/interrelate, and create value.
Garvin defines operationial systems as "collections of tasks and activities that together - and only together - transform inputs into outputs, where inputs and outputs include materials, information and people"
Examples:
Retail: new product development, order fulfilment, customer service, resource allocation, decision making
Voluntary: ways of keeping records and mailing lists, preparing funding and donations proposals, fund raising processes.
Government: policy-making systems
Systems are tailored to suit the organisation, to help it pursue its goals. They need to fit the strategy and help the organisation deliver on it.They must include features that enable or allow the organisation to change core capabilities over time since ability to change is always critical. Operational systems that can achieve all this may be genuine sources of distinctiveness in their own right.
Organisations create routines around key tasks. Some are tacit, others are made explicit through codification. Grant states that tacit knowledge (less easily written down) underlies some skills, making it difficult to articulate and more easily expressed through actually doing it, eg. riding a bicycle. Operational system can contribute to making integration of knowledge, people & practices more efficient. There is a danger in large organisations that operational systems actually become sources of inefficiencies. The organisation may actually become slow and unresponsive to change if the systems become too routinised or bedded in. This is another reason why operational systems must be flexible.
Operational structures have the challenge of developing and transferring knowledge internally and changing behaviour and attitudes towards learning and integrating new knowledge (Grant 2002).
Successful management of strategy can also require processes of unlearning (Nystrom and Starbuck, 1984) where existing capabilities become obsolete owing to significant environmental shifts and need to be unlearned to adapt in new and better ways. eg ABB, u6 p41
Control systems u6 p43
Strategic control and organisational structure are intrinsically linked. Control systems make sure that all parts of the organisation are following the strategic roadmap - governed by strategic decisions - and are accountable for their performance.
These decisions may be made at corporate, business or internal levels. The control systems fulfil multiple roles throughout the firm. Some are imposed by outside stakeholders (eg regulations). Others are selected as appropriate by decision-makers.
Structure and control systems are similar - there is no one set of control systems appropriate for all organisations, circumstances or strategies.
Systems->Control Systems->Financial control systems
Financial control systems are information based, their key metrics are numbers, which are used to define activities relative to budgets and financial targets. Grant says 'the budgetary process includes setting and monitoring financial esitmates with regard to income and expenditure for a fixed period' (Grant 2002 p165).
Budgetary processes are normally evaluated/reviewed annually. Forecasts may be linked to the implementation of strategic initiatives. Generally speaking the sophistication and formality of financial controls rises as organisations become more complex (as is to be expected).
This applies in non-profits too!
Managers should pay close attention to weaknesses underpinning control systems, eg Compagnie du Froid, p44 u6. Any kind of control mismanagement can be disastrous, and this could happen with financial or administrative systems. Irresponsibility and fraud can and do happen. .
Simons (1994, 1995) explored the concept of
Dynamic Control Systems (p46)
His argument is that if we want strategic flexibility and innovative capabilities in a dynamic context, then the control mechanism needs to promote those things. Simon's approach integrates feedback and feed-forward mechanisms based on broader organisational criteria eg culture.
Simon's four levers of control, which can reconcile the conflict between flexibility and control are
Belief systems
Boundary systems
Interactive Control Systems
Diagnostic Control Systems.
Belief systems are the values derived from and encapsulated in your mission statement. Strategic decisions are overseen by these systems and they are often concise and inspirational eg "Pursuit of Excellence". They promote the commitment of employees to your central core strategic goal values.
Boundary systems indicate the 'acceptable domain of activity" and can be closely associated with the belief systems of an organisation. Examples include codes of conduct and other codified or non-codified ethical principles - these are conduct boundary systems. Others include eg planning documents, mandates, etc which are 'strategic boundary systems'. Simon's view of boundary systems is that they act like your brakes and every organisation needs them to avoid activities that are off-limits or avoid risks. They tell you what you can and can't do.
Interactive Control Systems stimulate search and learning, permitting new strategies to develop throughout while your staff and managers analyse and respond to opportunities and threats (but no SWOT on B820!) An effective interactive control system should
-keep strategic information up to date for management
-organise information and make it accessible to all levels of management
-encourage strategic decision making in a process of dialogue horizontally and vertically
-serve as a catalyst for ongoing debate and encourage critical thinking abou underlying data, assumptions and action plans.
Diagnostic control systems allow measurement of outputs and assessment against your expected standards of performance. A feedback loop operates allowing you to adjust and modify inputs and processes so that future outputs will more closely match goals - similar to financial control systems.
Collectively the control levers reinforce one another. They all perform a specific task in helping managers harness the creativity and commitment of employees, while at the same time setting up mechanisms to measure and report the achievement of your targets (operational and strategic).
P52 U6 for Eisenhardt and Sull's arguments that Simon's control levers are still not flexible enough to apply to highly turbulent/creative environments. Examples given are Yahoo, ebay and AOL.
They argue that control not by complex systems but by simple rules is more appropriate for the "new economy". Their work was published prior to the dot com bubble bursting, however! Eisenhardt and Sull's rules fall into five categories.
How-to rules - rules describing how things are done
Boundary rules - rules proscribing what can/can't be done
Priority rules - rules defining what should be focused on
Timing Rules - rules defining when things should happen
Exit rules - rules defining when something becomes yesterday's priority
The rules must be tailored to a single process and regularly reviewed. Cisco example u6 p55
Summary
Systems are different for every organisation and include both formal and informal mechanisms of co-ordination and control
They provide the mechanisms for commitment, coordination, decision-making and control
Operational systems underlie the use and deployment of resources and capabilities.
Control systems underlie the monitoring of strategic goal achievements
Operational systems allow resources and capabilities to interact and interrelate
Operational systems are your repository of knowledge
There is no one set of control systems appropriate for all organisations, situations or strategies
In dynamic contexts, your effective control systems promote strategic flexibility in your organisation. They also promote innovative capabilities and contribute to the morale and behaviour of people who work in the organisation.
Sunday, 6 March 2011
Summary of U6 S2 Strategy and Structure
Strategy and structure are interdependent. Strategy follows structure like left foot follows right. The needs for structure must be considered as strategy is developed and implemented - and vice versa.
No single structure is universally effective for every organisation. Each organisation is unique in size, purpose, outputs, people and culture
Different structural configurations exist that represent different 'ideal' types of organisations (mintzberg's blobby model!) suitable under specific contingencies as the most effective mix of structural features and options
As organisations grow in size and complexity, so does their structural complexity. Some of the main forms of complex structures include: the multidivisional structure, the holding structure, the matrix structure and the network structure.
Dynamic organisational forms are required in more dynamic environments. Two essential features for dynamic structures: they enable the flow of knowledge, and they enhance the strategic flexibility of the organisation to respond to change effectively
Structure may provide a source of advantage when aligned with systems and culture.
No single structure is universally effective for every organisation. Each organisation is unique in size, purpose, outputs, people and culture
Different structural configurations exist that represent different 'ideal' types of organisations (mintzberg's blobby model!) suitable under specific contingencies as the most effective mix of structural features and options
As organisations grow in size and complexity, so does their structural complexity. Some of the main forms of complex structures include: the multidivisional structure, the holding structure, the matrix structure and the network structure.
Dynamic organisational forms are required in more dynamic environments. Two essential features for dynamic structures: they enable the flow of knowledge, and they enhance the strategic flexibility of the organisation to respond to change effectively
Structure may provide a source of advantage when aligned with systems and culture.
Dynamic Structures u6 s2.4 p27
More dynamic and responsive structures are needed in turbulent environments.
We already know that organisations may outperform competitors by responding more effectively to their changing compeitive and technological contexts.
Organisations need to create dynamic capabilities and compete flexibly. This is an important source of advantage.
Sanchez on dynamic structures:-
Creating modular product development capability is key.
Strategic flexibility is also an important capability.
Example SMART car (Swatch Mercedes ART) from MCC was developed from a modular car design, and Smart was a networked organisation.
Must be careful though, managing the relationships between the multiple collaborators and partners can sometimes be difficult or a source of trouble in itself. Therefore the efficiency of structure and partnerships must be continuously re-assessed. Dynamic structures must
enable dynamic capabilities related to leverageing and managing the flow of knowledge internal and external to the organisations, and
enhance the strategic flexibility of the organisation to respond effectively to change.
Mintzberg's Adhocracies tend to be dynamic and flexible structures, suited to contexts characterised by high degrees of continuous change and innovation.They encourage experts (people whose knowledge and skills have been highly developed) to interact and ideas to flow freely (Grant 2002).
Such structures can be utilised to enhance innovative and creative capabilities within organisations where 'knowledge' is the key strategic asset.
Examples include hospitals, universities, research centres, consulting/professional services firms, ad agencies, biomedical companies, but also possibly design houses such as Gucci or Armani. Miles (1997) calls these "cellular" form.
Adhocracies continuously evolve. Eisenhardt and Brown (1999) describe the evolution of adhocracies in practice as 'patching' and 'coevolution'. See unit 5.
Patching changes are often small in scale and undertaken on a frequent basis in the light of changing circumstances - evolution not revolution.
Adhocracies also apply to market-based or client-based projects that require flexibility. In general, adhocracies tend to push responsibility toward the point of customer contact, flatten the hierarchical strucutre and move away from centralised "command and control" as found in complex structures.
Example: WPP U6 P34
WPP is a cross between a divisionlised form and an adhocracy. Managers in adhocracies rarely give orders or outline procedures, but tend to act in a liaison capacity.
We already know that organisations may outperform competitors by responding more effectively to their changing compeitive and technological contexts.
Organisations need to create dynamic capabilities and compete flexibly. This is an important source of advantage.
Sanchez on dynamic structures:-
Creating modular product development capability is key.
Strategic flexibility is also an important capability.
Example SMART car (Swatch Mercedes ART) from MCC was developed from a modular car design, and Smart was a networked organisation.
Must be careful though, managing the relationships between the multiple collaborators and partners can sometimes be difficult or a source of trouble in itself. Therefore the efficiency of structure and partnerships must be continuously re-assessed. Dynamic structures must
enable dynamic capabilities related to leverageing and managing the flow of knowledge internal and external to the organisations, and
enhance the strategic flexibility of the organisation to respond effectively to change.
Mintzberg's Adhocracies tend to be dynamic and flexible structures, suited to contexts characterised by high degrees of continuous change and innovation.They encourage experts (people whose knowledge and skills have been highly developed) to interact and ideas to flow freely (Grant 2002).
Such structures can be utilised to enhance innovative and creative capabilities within organisations where 'knowledge' is the key strategic asset.
Examples include hospitals, universities, research centres, consulting/professional services firms, ad agencies, biomedical companies, but also possibly design houses such as Gucci or Armani. Miles (1997) calls these "cellular" form.
Adhocracies continuously evolve. Eisenhardt and Brown (1999) describe the evolution of adhocracies in practice as 'patching' and 'coevolution'. See unit 5.
Patching changes are often small in scale and undertaken on a frequent basis in the light of changing circumstances - evolution not revolution.
Adhocracies also apply to market-based or client-based projects that require flexibility. In general, adhocracies tend to push responsibility toward the point of customer contact, flatten the hierarchical strucutre and move away from centralised "command and control" as found in complex structures.
Example: WPP U6 P34
WPP is a cross between a divisionlised form and an adhocracy. Managers in adhocracies rarely give orders or outline procedures, but tend to act in a liaison capacity.
Tuesday, 1 March 2011
Complex Structures u6p19
As an organisation grows and expands, its structural complexity increases.
Chandler 1962 was the first to note this. He said that the more an organisation grows in size and complexity, the more it struggles to operate as a connected business. Increasing diversity leads to increasing separation of the individual parts of the business.
Williamson 1975 and Chandler 1962 proposed two structural types for complex structures
1. Multidivisional structures
2. Holding structures
Multidivisional Structures
Also known as M-form. A structure with multiple divisions and a head office organised by function. There is disagreement over whether strategy is decided by head office or the subsidiaries and divisions. In that case, strategy follows structure.
Advantages of an M-form
Disadvantages of an M-form
This groups together a number of diverse businesses that have grouped together by mergers and acquisitions or by joint ventures under a central head office. Example is Daimler Benz
Advantages
Allows for multiple ownership and greater spread of risks
Accesses knowledge through collaboration in different areas of expertise
Flexibility to tap into new market opportunities
Disadvantages
Minimal parental control and intervention over strategic issues
Possibility of isolation, increased for under-performing SBUs
Conflicts and competition within collaborations
Both these types of structures can become bureaucratic as the organisations grow and become more complex. Formal programmes and rigid procedures and systems can take priority over strategic thinking and operational effectiveness.
Therefore matrix structures and network structures are considered more suitable alternatives for large and complex organisations. They give closer horizontal and vertical linkages and collaborations. They integrate the product, functioinal and geographical dimensions of such organisations in one structure.
Matrix Structure
Already covered by Mintzberg as a liaison device. Characterised by a high degree of dependency between two or more (depending on the number of dimensions of the matrix) types of groupings, such as functional with market (or one kind of market with another, eg regional and product). It is a combination of functional and holding structures.
Haberberg and Rieple's definition, p21-22 u6
Advantages
Encourages collaboration in overlapping businesses or opportunities
Enables flexibility to adapt to changing strategic conditions
Provides for dual responsibility or more in strategic decision-making and accountability
Disadvantages
May be confusing and slow in strategic decisions that involve several participants
Mix-up over roles and repsonsibilities
Possibilities for tensions and conflicts, particularly in teams where individuals are not seen to cooperate equally
Integrating strategy under a matrix structure is complex and highly challenging (should probably go under disadvantages). Example given of matrix structures at Christian Aid p22 u6
Network Structures
This is a flexible, non-hierarchical organisational form that groups together a series of independent organisations or SBUs to design, produce and market a given product or service. It can be composed of numerous individuals, project groups or collaborations linked together by continuously changing formal or informal relationships, resembling an octopus or spider's web.
Its centre (the head) forms a small headquarters and acts like a broker or agent. The various parts are usually linked by some information system as divisions or independent partnerships to the head. The distinguishing feature of networks is that the organisational boundaries are less distinct, and are permeable. Grant calls this "boundaryless" (2002).
Normally, the majority of productive activities are outsourced to suppliers and distrubutors. Use of temporary staff is common. Typical in dynamic and complex environments where creativity, innovation, and speed of response are key sources of advantage.
Example: Cisco u6p25
As organisations grown larger & more diverse, so their structures become more complex. This complexity multiplies as organisationis grow internationally diverse. In those situations, country and regional issues have to be considered alongside product and functional areas.
Chandler 1962 was the first to note this. He said that the more an organisation grows in size and complexity, the more it struggles to operate as a connected business. Increasing diversity leads to increasing separation of the individual parts of the business.
Williamson 1975 and Chandler 1962 proposed two structural types for complex structures
1. Multidivisional structures
2. Holding structures
Multidivisional Structures
Also known as M-form. A structure with multiple divisions and a head office organised by function. There is disagreement over whether strategy is decided by head office or the subsidiaries and divisions. In that case, strategy follows structure.
Advantages of an M-form
- Focuses on growth areas
- Eases conflicts between functional areas
- Increases accountability towards strategic performance
- Encourages leadership at lower levels
Disadvantages of an M-form
- Duplication of functional resources
- Internal competition between divisions
- Discourages cross-sharing functional experts
- Conflicts over relationships with head office
This groups together a number of diverse businesses that have grouped together by mergers and acquisitions or by joint ventures under a central head office. Example is Daimler Benz
Advantages
Allows for multiple ownership and greater spread of risks
Accesses knowledge through collaboration in different areas of expertise
Flexibility to tap into new market opportunities
Disadvantages
Minimal parental control and intervention over strategic issues
Possibility of isolation, increased for under-performing SBUs
Conflicts and competition within collaborations
Both these types of structures can become bureaucratic as the organisations grow and become more complex. Formal programmes and rigid procedures and systems can take priority over strategic thinking and operational effectiveness.
Therefore matrix structures and network structures are considered more suitable alternatives for large and complex organisations. They give closer horizontal and vertical linkages and collaborations. They integrate the product, functioinal and geographical dimensions of such organisations in one structure.
Matrix Structure
Already covered by Mintzberg as a liaison device. Characterised by a high degree of dependency between two or more (depending on the number of dimensions of the matrix) types of groupings, such as functional with market (or one kind of market with another, eg regional and product). It is a combination of functional and holding structures.
Haberberg and Rieple's definition, p21-22 u6
Advantages
Encourages collaboration in overlapping businesses or opportunities
Enables flexibility to adapt to changing strategic conditions
Provides for dual responsibility or more in strategic decision-making and accountability
Disadvantages
May be confusing and slow in strategic decisions that involve several participants
Mix-up over roles and repsonsibilities
Possibilities for tensions and conflicts, particularly in teams where individuals are not seen to cooperate equally
Integrating strategy under a matrix structure is complex and highly challenging (should probably go under disadvantages). Example given of matrix structures at Christian Aid p22 u6
Network Structures
This is a flexible, non-hierarchical organisational form that groups together a series of independent organisations or SBUs to design, produce and market a given product or service. It can be composed of numerous individuals, project groups or collaborations linked together by continuously changing formal or informal relationships, resembling an octopus or spider's web.
Its centre (the head) forms a small headquarters and acts like a broker or agent. The various parts are usually linked by some information system as divisions or independent partnerships to the head. The distinguishing feature of networks is that the organisational boundaries are less distinct, and are permeable. Grant calls this "boundaryless" (2002).
Normally, the majority of productive activities are outsourced to suppliers and distrubutors. Use of temporary staff is common. Typical in dynamic and complex environments where creativity, innovation, and speed of response are key sources of advantage.
Example: Cisco u6p25
As organisations grown larger & more diverse, so their structures become more complex. This complexity multiplies as organisationis grow internationally diverse. In those situations, country and regional issues have to be considered alongside product and functional areas.
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