To accompany contemprory strategy analysis concepts techiniques application chapter06slides

Organization Organization Structure Structure and and Management Management Systems Systems OUTLINE • Evolution of the corporation • Principles of organizational design • The role of hierarchy: bureaucratic control vs modular integration • Alternative structural forms • Management systems Evolution Evolution of of the the Modern Modern Corporation Corporation The business environment Strategic changes Organizational consequences Early 19th century Local markets Transport slow Limited mechanization Firms specialized & focused on local markets Small firms Simple management structures Late 19th century Introduction of railroads, telegraph industrialization Geographical and vertical expansion Functional structures Line/staff separation Accounting systems Early 20th century Excess capacity in distribution Growth of financial institutions & world trade Product & multinational diversification Development of multidivisional corporation General GeneralMotors’ Motors’ Organization Organization Structure, Structure,1921 1921 Board of Directors President GM Acceptance Corporation Financial Staff Chevrolet Division Sheridan Division GM Truck Division Canadian Division Samson Tractor Division Executive Committee Legal Department Oldsmobile Division General Advisory Staff Buick Division Oakland Division Cadillac Division Intercompany Parts Division Source: A.P Sloan, My Years with General Motors, Orbit Publishing, 1972, p 57 GM Export Company Scripps Booth Corp The The Basic Basic Tasks Tasks of of Organization Organization Achieving high levels of productivity requires SPECIALIZATION Specialization by individuals necessitates COORDINATION For coordination to be effective requires COOPERATION But goals of employees == goals of owners THE AGENCY PROBLEM THE ORGANIZATIONAL CHALLENGE: to design structure & systems that:  Permit specialization  Facilitate coordination by grouping individuals & link groups with systems of communication, decision making, & control  Create incentives to align individual & firm goals Hierarchy HierarchyEconomizes Economizeson onCoordination Coordination (a) Self Organizing Team: (b) Hierarchy: 10 interactions interactions Hierarchy Hierarchyof of Loosely-Coupled Loosely-Coupled Modules Modules Allows AllowsFlexible FlexibleAdaptation Adaptation Tightly-coupled, integrated system: Change in any part of the system requires system-wide adaptation Loose-coupled, modular hierarchy: partiallyautonomous modules linked by standardized interfaces permits decentralized adaptation and innovation Weber’s Weber’s Principles Principles of of Bureaucracy Bureaucracy • • • • Rational-legal authority Specialization of labor Hierarchical structure Coordination and control through rules and standard operating procedures • Standardization employment practices • Separation of jobs and people • Formalization of administrative acts, decisions and rules Mechanistic Mechanistic and and Organic Organic Forms Forms FEATURE MECHANISTIC ORGANIC Task definition Rigid & highly specialized specialized Flexible; less Coordination & control Mutual adjustment.l Cultural control Rules & directives imposed from the top Communication Mainly vertical Commitment & loyalty Horizontal & vertical To immediate superior goals & values To the organization & its Environmental Stable with low techDynamic, ambiguous, context nological uncertainty technologically uncertain Designing Designingthe the Hierarchy: Hierarchy: The The Basis Basis for forDefining Defining Organizational OrganizationalUnits Units and and their their Relationships Relationships Units may be defined on the basis of Common Tasks, Products, Geographical Proximity, or Process/Function Critical issue: Intensity of Coordination—Employees with the greatest interdependence should be grouped into same organizational unit Additional criteria: Economies of Scale, Economies of Utilization, Learning, Standardization of Control Systems General GeneralMotors’ Motors’ Organization Organization Structure, Structure,1997 1997 Board of Directors President’s Council North American Operations Delphi Automotive Systems GM Acceptance Corporation Corporate Functions International Operations Hughes Electronics GM Europe Midsize & Luxury Car Group Small Car Group GM Power Train Group Vehicle Sales, & Marketing Group Development & Technical Cooperation Group Asian & Pacific Operations Latin American, African, & Middle East Operation Corporate Executive Office Chairman & CEO Service Divisions GE Aircraft Engines GE Transportation GE Power Systems Finance GE Industrial Systems GE Medical Systems GE Lighting Corporate Staff Business R&D Development GE Plastics GE Specialty Materials Human Legal Resources GE Appliances GE Supply NBC 26 businesses organized into segments: Consumer Mid-market Specialized Specialty Services Financing Financing Insurance General GeneralElectric’s Electric’sOrganization OrganizationStructure, Structure,2002 2002 GE Capital Equipment Management Mobil MobilCorporation, Corporation,1997 1997 Board of Directors CEO Executive Office Corporate Center North America Asia/ Pacific Support Services New Exploration Europe & CIS Shipping Africa & Middle East Worldwide LNG & IPP Technology South America North America M&R Worldwide Chemicals Royal RoyalDutch/Shell Dutch/ShellGroup, Group,1994: 1994:AAMatrix MatrixStructure Structure The The Generic GenericStrategic StrategicPlanning PlanningCycle Cycle Corporate Guidelines Draft Discuss Revised Business with Business Plans Corporate Plans Forecasts/ Scenarios/ Approval by Board Corporate Planning assumptions Plan Capex Performance Review Annual Performance Targets Budget ... Development of multidivisional corporation General GeneralMotors’ Motors’ Organization Organization Structure, Structure,1921 1921 Board of Directors President GM Acceptance Corporation Financial Staff... control Rules & directives imposed from the top Communication Mainly vertical Commitment & loyalty Horizontal & vertical To immediate superior goals & values To the organization & its Environmental... be grouped into same organizational unit Additional criteria: Economies of Scale, Economies of Utilization, Learning, Standardization of Control Systems General GeneralMotors’ Motors’ Organization