Chapter 13 Organizational Design and Control Learning Objectives
Chapter 13 Organizational Design and Control
Learning Objectives n n n Explain why the design of organizational structure is important to international companies Discuss the concerns and organizational dimensions that must be considered when selecting organizational structures Discuss the various organizational forms available for structuring international companies Familiarize with current organizational trends Explain why decisions are made where they are among parent and subsidiary units of an international company
1. Introduction n When business firm enters a foreign market or makes FDI or opens a subsidiary, it has to two make fundamental decisions: product decision or competitive strategy (Ch 12) and about organization decision or Organization Design and Control (Ch 13). Chapter 13 deals with two aspects of organization decision – Organization Design and Organization Control. We deal with Organization Design first, then comes Organization Control. Organization Design is closely related to Organizational Structure. Organization design is the input, Organization Structure is the Output.
2. Definition and Importance n n n Organizational structure is the way that an organization formally arranges its domestic and international units and activities, and the relationships among these various organizational components. A company’s structure helps determine where formal power and authority will be located within the organization. Organizational Structure is the same as Organogram. Creating and evolving the structure of an international organization over time are fundamental tasks of senior management.
2. Definition and Importance n n n Organizational design is a process that deals with how an international business should be organized in order to ensure that its worldwide business activities are able to be integrated in an efficient and effective manner. It is essential that the structures and systems are consistent with each other, as well as consistent with the environmental context. There is a triangular relations among: Organizational Design, Competitive Strategy and International Environment (Fig 1)
2. Definition and Importance Fig: The relationship among international environment, competitive strategy, and organizational structure – Ref: Page# 403
2. Definition and Importance n n n The size and complexity of its business operations are also important in designing a company. The structure of an international company (IC) must be able to evolve over time, so that the organization can respond to change. This is a major challenge for the management of international companies, as these companies’ activities are increasingly dispersed and subject to rapid & ongoing changes.
2. Definition and Importance n n n Failure to successfully deal with this challenge threatens the organization’s performance and its long-term survival. An IC’s strategic planning process often discloses a need to alter the organization. Strategic planning and organizing are so closely related that usually the structure of the organization is treated by management as an integral part of the strategic planning process.
3. Organizational Design: Concerns and Dimenions While designing the organization structure of an IC, the management faces the following two concerns: n 1. 2. finding the most effective way to departmentalize to take advantage of the efficiencies gained from the specialization of labor and coordinating the activities of those departments to enable the firm to meet its overall objectives.
3. Organizational Design Concerns and Dimensions n n These two concerns run counter to each other, i. e. the gain from increased specialization of labor may at times be nullified by the increased cost of coordination. Thus the management looks for an optimum balance between the two concerns.
3. Organizational Design: Concerns and Dimensions When designing the structure of an IC, the following four primary dimensions need to be considered: n 1. 2. 3. 4. n Product and technical expertise Geographic expertise Customer expertise Functional expertise The way these dimensions are structured and integrated varies among different international companies.
3. Organizational Design : Concerns and Dimensions n n n Managers have to consider both the current and future nature of their company’s international operating environment and strategy, when deciding the company’s organizational structure. The most common types of organizational designs for international companies will be discussed in the following slides. Although in reality the structure of many ICs often deviates from these basic organizational designs, it is important to understand the attributes associated with these basic designs.
3. Organizational Design: Concerns and Dimensions n n Organizational design proceeds along four dimensions: Product or technical expertise concerning the main product or business of the IC; n n n Geographic or regional expertise regarding geographic regions where the IC operates its business or subsidiaries are located; Clientele or market expertise concerning clientele or market segmentation; and Functional expertise concerning functional areas like finance, HR, marketing, corporate administration
4. Evolution of the International Company n n n Evolution of a domestic company into an International Company and the Global Company mirror images IPLC theory, excepting that the latter takes product route while the former takes organization route. When a domestic company starts exports, initially this is handled by the marketing division, then possibly an Export Cell within marketing division. When foreign production starts, an International Division is created to deal with foreign production while the rest of the divisions take care of domestic production and marketing.
4. Evolution of the International Company n n n An international division is a division in the organization that is at the same level as the domestic division and is responsible for all non-home-country activities (Fig 2). There are some companies that are organized into a primary domestic division, supplemented by an international division to serve the rest of the world. Examples:
4. Evolution of the International Company n n n As their overseas operations increased, most managements felt the need to establish worldwide organizations based on product, region, function or customer classes. That is when, the IC with International Division go Global abolishing the domestic and International Divisions. One of the product or regional divisions take charge of domestic operations. Most American MNCs make Americas or North American Division responsible for US operations
4. Evolution of the International Company Fig 2: International Division – Ref: Page# 405
Evolution of the International Company These four dimensions, along with n process ii. national subsidiary iii. international or domestic divisions provide the basis for subdivisions at secondary, tertiary, and still lower levels. i. n As they grow over time, most ICs move away from the use of international divisions and implement one of the global structures (that will be presented later in the slides).
4. Evolution : The international Structural Changes Model Fig 3: Ref: Page# 406
4. The international Structural Changes Model n Managements that changed to the alternative paths shown in the previous diagram felt they would: n be more capable of developing competitive strategies to confront the increasing global competition, n obtain lower production costs by promoting worldwide product standardization & manufacturing rationalization, and n enhance technology transfer and the allocation of company resources n In what follows, we review four Global forms of IC: Global Product, Global Regional, Global Clientele and Global Functional.
5. 1 Global Corporate Form – Product n n n Commonly this structure represents a return to pre-export department times in that the domestic product division has been given responsibility for global line and staff operations. In the present-day global form, product divisions are responsible for the worldwide operations such as marketing and production of products under their control. When a company produces limited number of distinct products, this form is followed.
5. 1 Global Corporate Form – Product n n n Each division generally has regional experts and thus this organizational form creates a duplication of area experts. However, the duplication is avoided by creating a pool of regional experts in the Corporate Division. This structure is graphically shown in the following slide.
5. 1 Global Corporate Form – Product Fig 4: Global corporate form – product Ref: Page# 406
5. 2 Global Corporate Form – Geographic Regions n n Firms in which geographic regions are the primary basis for division put the responsibility for all activities under area managers who report directly to the chief executive officer. This kind of organization simplifies the task of directing worldwide operations, because every country in the world is clearly under the control of someone who is in contact with headquarters.
5. 2 Global Corporate Form – Geographic Regions Fig 5: Global corporate form – Geographic Regions Ref: Page# 407
5. 2 Global Corporate Form – Geographic Regions n n Some U. S. global companies have created a North American division that includes Canada, Mexico, and Central American countries in addition to the United States, to emphasize that the home country is given no preference. This structure is popular with companies that manufacture diverse products with low, stable technological content requiring strong marketing ability.
5. 2 Global Corporate Form – Geographic Regions n n This structure requires having own product & functional specialists, creating duplication of product & functional specialists. This is the disadvantage of an organization divided into geographic regions. Like global product planning, there are problems of production coordination across regions. To tackle these problems managements often place specialized product managers on the headquarters staff.
5. 3 Global Corporate Form: Clientele/Market n Client segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs, and then be designed and implemented to target these specific customer segments, addressing needs or desires that are believed to be common in this segment, using media that is used by the market segment.
5. 3 Global Corporate Form: Clientele/Market n Every organization engaged in a market will develop different ways of imagining market segments, and create product differentiation strategies to exploit these segments. Successful market segmentation and corresponding product differentiation strategy can give a firm a commercial advantage, due to the more effective match between target customer and product.
5. 3 Global Corporate Form: Clientele/Market n n Kimberly Clark Ltd is an example that is organized along client segmentation. With brands like Kleenex, Scott, Huggies, Pull. Ups, Kotes, Poise and Depend, KC holds No. 1 and No. 2 brand share in more than 80 countries. But all products are not sold in all countries. Major organizational divisions that KC follows is : Developed and Developing Countries
5. 4 Global Corporate Form – Function n n Few firms are organized by function at the top level. These firms believe that worldwide functional expertise is more significant to the firm than product or area knowledge. In this type of organization, those reporting to the CEO might be the senior executives responsible for each functional area. This functional form is common among firms like aircraft manufacturers and oil refining companies, who have a narrow & highly integrated product mix.
5. 4 Global Corporate Form – Product Fig 6: Global corporate form – Function Ref: Page# 407
5. 5 Other Corporate Forms n n Two other Corporate Forms based on the above broad categories are: Hybrid Organization and Matrix Organization. They are discussed below.
5. 5. 1 Hybrid Forms n n n In a hybrid organization, a mixture of the organizational forms is used at the top level and may or may not be present at the lower levels. Combinations, as shown in the figure on the next slide, are often the result of a regionally organized company having introduced a new & different product line. A mixed structure may also result from the firm’s selling to a sizable, homogeneous class of customers.
Hybrid Forms Fig: Hybrid Organizational Form Ref: Page# 408
Matrix Organizations n n Matrix organization is an organizational structure composed of one or more superimposed organizational structures in an attempt to mesh product, regional, functional, and other expertise. It is called a matrix because an organization based on one or two dimensions is superimposed on an organization based on another dimension.
Matrix Organizations n n n In an organization of two dimensions, such as area & product, both the geographic area managers & the product managers will be at the same level, and their responsibilities will overlap. Figure on the next slide illustrates an extremely simply matrix organization based on two organizational dimensions. Here, the country managers are responsible to both the area managers and the productline managers.
Matrix Organizations Figure: Regional-Product Matrix – Ref: Page# 409
Problems with the Matrix n n n One problem with the matrix is that the two or three managers must agree on a decision. This can lead to less-than-optimum compromises, delayed responses, and power politics in which more attention is paid to the process than to the problem. When the managers cannot agree, the problem goes higher in the organization and takes top management away from its duties.
Problems with the Matrix n n n The disadvantages of the matrix form have kept most worldwide companies from adopting it. Many firms have maintained their original organizations based on product, function, region, or international divisions and have built into the structure accountability for the other organizational dimensions. This is often known as a “matrix overlay”.
Matrix Overlay n The matrix overlay attempts to address the problems of the matrix structure by requiring accountability of all functions, while avoiding the troublesome management stresses of a pure matrix structure.
Matrix Overlay n n n A firm organized by product may have regional specialists in a staff function, requiring that they have input to product decisions. They may even be organized in an international division. Conversely, a regional organization would have product managers on its staff who provide input to regional decisions.
Strategic Business Units (SBUs) n n n It is a concept in which product divisions have defined as though they were distinct, independent businesses. An SBU is defined as a self-contained business entity with a clearly defined market, specific competitors, the ability to carry out its business mission, and a size appropriate for control by a single manager. Most SBUs are based on product lines.
Changes in Organizational Forms The rapidly changing business environment is pressuring companies to look for new, more efficient organizational forms. Many firms are increasingly accepting the need for frequent reorganizations, which is often accompanied by: n n n a significant reduction in the levels of middle management
Changes in Organizational Forms n n restructuring of work processes to reduce the fragmenting of the process across functional departments improvement in the speed & quality of strategy execution empowerment of employees, and the use of computers for instant communication and swift transmittal of information
Changes in Organizational Forms n n CEOs are striving to make their organizations to lean, flat, fast to respond, and innovative. This redesigning organizational structure, hierarchy, business systems, and processes in order to improve organizational efficiency is called “reengineering”.
Current Organizational Trends The following slides describe the two organizational forms, which are now receiving the attention of many CEOs: n n n the virtual corporation the horizontal corporation
Virtual Corporation n A virtual corporation, often known as a network corporation, is an organization that coordinates economic activity to deliver value to customers using resources outside the traditional boundaries of the organization. It relies to a great extent on third parties to conduct its business. Companies are now using outsourcing to obtain specialized expertise in order to serve new markets or new technology.
Virtual Corporation n The evolution of the technology infrastructure has made possible changes in the work force and working methods that have contributed to the increase in virtual corporations. Global networking on the Internet has made worldwide outsourcing possible for firms of all sizes. Dell, Accenture Ltd. , Reebok, Nike, DKNY are some examples of network organizations.
Virtual Corporation n The virtual corporation concept has several potential benefits. It permits greater flexibility than typical corporate structures. Virtual corporations form a network of dynamic relationships that allow them to take advantage of the competencies of other organizations and respond rapidly to changing circumstances.
Virtual Corporation n n Disadvantages of virtual corporation includes the potential to reduce management’s control over the corporation’s activities. This form of organization may also replace the security of long-term employment for employees.
Horizontal Corporation n n The horizontal corporation is a form of organization characterized by lateral decision processes, horizontal networks, and a strong corporate-wide business philosophy. It is common among large technology– oriented global firms in highly competitive industries such as electronics and computers.
Horizontal Corporation n This organization form provides the flexibility to respond quickly to advances in technology and be product innovators. Firms such as 3 M, General Electric, and Du. Pont have chosen this organizational form. In many companies, teams are drawn from different departments to solve a problem or deliver a product.
Horizontal Corporation n Designers of this organizational form seek to remove the constraints of the conventional organizational structures. Hence this organization has been characterized as “anti-organization”. In a horizontal corporation, employees worldwide create, build, and market the company’s products through a carefully cultivated system of interrelationships.
Horizontal Corporation n Proponents of the horizontal organization claim that lateral relationships incite innovation and new-product development. They argue that this approach places more decision-making responsibility in the hands of middle managers and other skilled professionals. If pursued effectively, this approach can help to develop international communities of skilled workers, which create and exploit valuable intangible assets.
Corporate Survival in the 21 st Century n n n Managers in many international companies can expect to make greater use of the dynamic network structure. Dynamic network structure breaks down the major functions of the firm into smaller companies coordinated by a small-size headquarters organization. Business functions such as marketing and accounting may be provided by separate organizations that are connected by computers to a central office.
Corporate Survival in the 21 st Century n n n To attain the optimum level of vertical integration, a firm must focus on its core business. Anything not essential to the business can often be done cheaper, faster, and better by outside suppliers. In the global battles of the 21 st century organizations, like people, have life cycles too.
Corporate Survival in the 21 st Century n n n In their youth, companies are small and fast-growing. However, as they age, they often become big, complex, and out of touch with their markets. The firms of tomorrow must learn how to be both large and entrepreneurial.
Control Achieving effective control is more challenging for an international company than for a one-country operation. The complicating causes include: n n n different languages, cultures, and attitudes different taxes and accounting methods different currencies, labor costs, & market sizes different degrees of political stability and security for personnel & property
Subsidiaries n n n These are companies that are controlled by other companies through ownership of enough voting stock to elect board-of-directors majorities. The word subsidiaries and affiliates are often used interchangeably. There are three possibilities of where decisions can be made for 100% owned subsidiaries.
Subsidiaries - 100% owned Instead of making decisions at the international company’s headquarters or at the subsidiary level, n n n some decisions are made at headquarters, some are made at subsidiaries, and some are made cooperatively Many variables determine which decision is made where.
Subsidiaries - 100% owned Some important variables include: n n n Product & equipment The competence of subsidiary management and reliance on that management by the IC headquarters The size of the IC and how long it has been one The detriment of a subsidiary for the benefit of the enterprise Subsidiary frustration
Product & Equipment n n When it comes to decision location, questions of standardization of product & equipment are important for an IC. In developing standardized products from the outset for global or regional markets, the affiliates have to follow company policy. At first, new products are often introduced in the home market. After stabilization of production process, the specifications are sent to the affiliates for local production.
Product & Equipment n n n In a firm without a global product policy, the preference of the operations management people is to standardize the product. If the profit potential is greater for a product tailored for own market, than from global standardization, then the subsidiary is usually allowed to proceed. The decision in such a case is cooperative in the sense that the parent company has the power to veto or override its subsidiary’s decision.
Competence of Subsidiary Management and Headquarters’ Reliance on It Reliance on subsidiary management can depend on: n n n How well the executives know one another and how well they know company policies Whether headquarters management feels that it understands host country conditions The distances between the home country and the host countries How big and old the parent company is
Moving executives around n n Many ICs have a policy of transferring promising management personnel between parent headquarters and subsidiaries and among subsidiaries. This allows the managers to learn the policies of headquarters and the problems of putting those policies into effect at subsidiary levels, at first hand.
Moving executives around n n n Such transfers results in a network of intra. IC personal relationships. This increases the confidence of executives in one another and to make communication among executives easier and error-free. Some ICs have moved their regional executives into headquarters to improve communications and reduce cost.
Understanding Host Country Conditions n n Headquarters’ reliance on subsidiary management also depends on the headquarters’ familiarity with conditions in the subsidiary’s host country. The less familiar or the more different conditions in the host country are perceived to be, the more likely headquarters is to rely on subsidiary management.
How far away is the host country? n n Distance of the host county from home headquarters is another element in the degree of headquarters’ reliance on subsidiary management. For example, an American parent company is likely to place more reliance on the management of an Indonesian subsidiary than on the management of a Canadian subsidiary.
How far away is the host country? This is because: n n n American management typically perceives management conditions in Canada to be more easily understood than conditions in Indonesia is much farther from USA than Canada is – in terms of geography, culture, politics, and other variables.
Size and Age of the IC n n n A large company can afford to hire more specialists, experts, and experience executives than can a smaller one. The longer a company has been an IC, the more likely it is to have a number of experienced executives. Over time, the headquarters of a successful company is run by experienced executives who are confident of their knowledge of the business.
Size and Age of the IC n n n In larger, older organizations, more decisions are made at headquarters and fewer are delegated to subsidiaries. Smaller & newer companies tend to be able to afford fewer internationally experienced executives and will not have had time to develop them internally. These companies often have no choice but to delegate decisions to subsidiary management.
Size and Age of the IC However due to increased competition and differences across markets, even large & experienced companies now need to delegate some decision-making authority to subsidiary managements. This allows the company: n n n To effectively sense pressures for adaptation To serve as tools for developing and communicating innovation To promote effective execution of strategy
Benefiting the Enterprise to the Detriment of a Subsidiary detriment is a situation in which a small loss for a subsidiary results in greater gain for the total IC. This may result from an IC: n n n sourcing raw materials & components, locating factories, allocating orders, and governing intra-firm pricing that are not available to a non-IC
Moving production factors An IC may decide to move factors of production from one country to another or to expand in one country in preference to another. Possible reasons include: n n n n Cost, availability & skill of labor Taxation Market Currency Political stability issues
Moving production factors n n n The subsidiary from which factors are being taken would be unenthusiastic about giving up control over existing activities. Its management would be slow to cut the company’s capacity or to downsize or eliminate local operations. Headquarters would typically have to make such decisions.
Which subsidiary gets the order? If an order can be filled from a subsidiary, parent headquarters might decide which subsidiary gets the business. Factors to consider in taking such a decision include: n n n Transportation costs Production costs Comparative tariff rates Customers’ currency restrictions
Which subsidiary gets the order? n n Comparative order backlogs Governmental pressures Taxes Having such a decision made by IC headquarters avoids price competition among members of the same IC.
Multi-country production n Frequently, the market size in a single country is too small to permit economies of scale. An example is Ford’s production of a light vehicle for the Asian market. Ford negotiated with several countries to the end that one country would make one component of the vehicle for all the countries involved.
Multi-country production n n In this way each operation achieves the efficiency and cost savings of economies of scale. This kind of multinational production demands a high degree of IC headquarters’ control and coordination.
Which subsidiary books the profit? n n In certain cases, an IC may have a choice of two or more countries in which to declare profits. Under these conditions, there may be opportunities to allocate higher prices to one unit or subsidiary and lower prices to another within the global price to the customer.
Which subsidiary books the profit? Differences between host countries of the subsidiaries that dictate the allocation of profit are: n n n Tax rates Currency controls Labor relations Political climate Social unrest
Which subsidiary books the profit? n n n The intra-firm transaction may also give a company choices regarding profit location. Transfer pricing, i. e. pricing between members of the same enterprise, and undirected negotiations might not yield the most advantageous results for the enterprise as a whole. Price and profit allocation decisions are best made at parent-company headquarters.
Which subsidiary books the profit? n n n Of course, subsidiary management does not gladly make decisions to accept lower profits. It is possible for an IC enterprise to make profit in total even though one subsidiary makes less. This can happen for different combinations of price & profit allocations.
Which subsidiary books the profit? n n n The following tables illustrate how the total IC enterprise may profit even though one subsidiary makes less. Assume a cooperative contract by which two subsidiaries are selling products and services to an outside consumer for a price of $100 million. The host country of IC Alpha levies company income taxes at the rate of 50%, whereas IC Beta’s host country taxes its income at 20%.
Which subsidiary books the profit? Receives Tax After Tax ($ millions) Alpha $60 $30 Beta 40 8 32 $62 Table# 1 – Ref: page 416
Which subsidiary books the profit? n n n The customer is in a third country, has agreed to pay $100 million, and is indifferent to how Alpha & Beta share the money. The first table shows the enterprise’s aftertax income if Alpha is paid $60 million and Beta is paid $40 million. Therefore, after tax, the enterprise realizes $62 million.
Which subsidiary books the profit? n n The second table shows the after-tax income if Alpha is paid $40 million and Beta is paid $60 million. Thus, after taxes, the enterprise realizes $68 million. Receives Tax After Tax ($ millions) Alpha $40 $20 Beta 60 12 48 $68 Table# 2 – Ref: page 417
Which subsidiary books the profit? n n These simple examples illustrate that the IC would be $6 million better off if it could shift $20 million of the payment from Alpha to Beta. The customer is no worse off, as it pays $100 million in either case. Alpha having received $20 million less in payment, is $10 million worse off after taxes. But Beta is $16 million better off – and the enterprise is $6 million ahead on the same contract.
Which subsidiary books the profit? n n n There are countless combinations for how such savings can be accomplished, since there are so many countries and tax laws in the world. Financial management awareness and control are the keys. The companies must expect questioning by host and home governments and must be prepared to demonstrate that prices or allocations are reasonable.
Subsidiary frustration n n If all the big decisions are made at the IC headquarters, the managers of subsidiaries can lose incentive and prestige, or face with their employees and the community. They may grow hostile and disloyal. Thus, headquarters of an IC should delegate as much decision-making power to its subsidiaries as possible. Management of each subsidiary should be kept thoroughly informed and be consulted seriously about decisions, negotiations, and developments in its geographic area.
Joint Ventures & Subsidiaries – less than 100% owned A joint venture may be: n n A corporate entity between an IC and local owners, or A corporate entity between two or more companies that are foreign to the area where the joint venture is located, or It may involve one company working on a project of limited duration in cooperation with one or more other companies.
Joint Ventures & Subsidiaries – less than 100% owned n n n The other companies may be subsidiaries or affiliates, or they may also be entirely independent entities. All the reasons for making decisions at IC headquarters, subsidiary headquarters, or cooperatively apply equally in joint venture situations. Headquarters will almost never have as much freedom of action and flexibility in a joint venture as it has with subsidiaries that are 100% owned.
Loss of Freedom and Flexibility n n n If shareholders outside the IC own control of the affiliate, they can block efforts of IC headquarters to move production factors away, fill an export order from another affiliate or subsidiary, and so forth. Outside shareholders can bring legal or political pressures on the IC to prevent it from diminishing the affiliate’s profitability for the enterprise’s benefit. Similarly, the local partner in a joint venture is highly unlikely to agree with measures that penalize the joint venture for the IC’s benefit.
Control can be had With less than 50% of the voting stock and even with no voting stock, an IC can have control. Some methods of maintaining control are: n n n A management contract Control of the finances Control of the technology Putting people from the IC in important executive positions
Control can be had n n n ICs have faced resistance to putting IC personnel in the important executive positions from their joint venture partners or from host governments. These partners & governments want their own nationals to have equality in the important positions. They also want their own nationals to get training and experience in the technology and management.
Reporting For effective controls, all operating units of an IC must provide headquarters with timely, accurate, and complete reports. The required types of reporting include: n n n Financial Technological Market opportunity Political and economic
Financial n n A surplus of funds in one subsidiary should perhaps be retained there for investment or contingencies. On the other hand, such a surplus might be more useful at a parent company, in which case payment of a dividend is indicated. Or, the surplus could be lent or invested in another subsidiary or affiliate that is in need of capital. Obviously, parent headquarters must know the existence and size of a surplus to determine its best use.
Technological n n n New technology should be reported. New technology is constantly developed in different countries, and the subsidiary or affiliated company operating there is likely to learn about it before IC headquarters. If headquarters finds the new technology potentially valuable, it can gain competitive advantage by being the first to contact the developer for a license to use it.
Market opportunities n n n The affiliates in various countries may spot new or growing markets for some product of the enterprise. This could allow the IC to sell more of the product and the affiliate to earn higher sales commission. Naturally, the affiliate may begin to assemble or produce the product under license from the parent company or from another affiliate, if the new market is sufficiently large enough.
Market opportunities Other market-related information that should be reported to IC headquarters includes: n n n Competitors’ activities Price developments New products of potential interest to the IC group Information on the subsidiary’s market share and whether it is growing or shrinking, together with explanations, is also important for reporting purposes.
Political & Economic n n n Political and economic conditions have changed drastically in many countries where revolutions have toppled and changed governments. Changes have been occurring on almost every continent. Therefore, reports on such conditions have multiplied greatly over the past 20 years or so.
Managing in a world out of control n n The Internet has proved to be a paragon of hothouse of expansion and constant evolution. It may be the closest thing to a working anarchy the world has ever seen. The management in a world out of control, such as the Internet, can be a challenging thing. As a result, Massachusetts Institute of Technology has devised a system of distributed control.
Managing in a world out of control The system dictates: n n n n Do simple things first Learn to do them flawlessly Add new layers of activity over the results of the simple task Do not change the simple things Make the new layer work as flawlessly as the simple one Repeat ad infinitum
Managing in a world out of control n n n Many organizations would benefit by adopting organizing principles as deceptively simple as these. Increasingly, the most successful companies, and the networks on which they all will rely will advance only by evolving and adapting in this organic, bottom-up way. Successful leaders will have to relinquish control.
Control: Yes and No n n n Control within the IC family of parent, subsidiaries, affiliates, and joint ventures deals with where decisions are made on a variety of subjects under different circumstances. Timely and accurate reporting to the parent is necessary for success of the IC family. The trend in this area of control is toward centralized decision making, with more being done by the parent.
Control: Yes and No n n The other control involves the design, production, and order-filling functions of companies. The explosion of software, computer networks, and information technology has tended to decentralize and de-job organizations. More and more, workers do evolving tasks with changing teams of other workers. Hierarchies dissolve and successful leaders relinquish control as workers are trained and encouraged to cope with evolving tasks and rewarded for coping well.
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