Strategic Implementation Administration and Organization In Search of

Strategic Implementation, Administration and Organization In Search of Efficiency and Superior Execution

Implementation Is Strategy n Distinctive performance is almost entirely a function of deeply engrained repertoires – not one thing a 1000% better but a 1000 things 1% better – organizations consist of many things -- the most critical are its inherent skills or distinctive competencies – distinctive skills -- “thousand little things” are the real source of “unassailable” barriers to imitation

THE CRITICAL COMPONENTS OF STRATEGY IMPLEMENTATION n n Innovative, dedicated, motivated people Creative empowering leadership Organizational structures the match competitive strategies, efficiently Organizational controls and incentives that efficiently focus people on strategic goals and objectives n n appropriate administrative procedures and policies Organizational arrangements that efficiently “govern” the critical activities. n n efficient organizational boundaries internalized vs out-sourced (in some non-hierarchial organizational arrangement)

ORGANIZATIONAL STRUCTURE n n Structure follows strategy; but then strategy must follow structure Objective of organizational structure is to balance: n n n the economic advantages of specialization, with the problems and costs of coordination and motivation, i. e. bureaucratic costs Bureaucratic costs arise from: n n supervisory monitoring motivation problems coordination activities opportunism and information distortions

GENERIC ORGANIZATIONAL STRUCTURAL FORMS n n Three Generic Organizational Structures – U-Forms (Unitary or Functional Structures) – M-Forms (Multidivisional Structures) – H-Forms (Holding or Conglomerate Structures) Hybrid Organizational Structures – Matrix Structures – Team-based Structures

U-FORMS n n Functional (or U-Form) Structures group or “chunk” on the basis of their common expertise/experience or because they use the same resources or focus on the same activities Advantages: n n increased specialization economies of scale in monitoring critical decision-making is centralized in one “peak” person Disadvantages: n n cannot handle the complexity of multiple activities well subgoal pursuit problems can become acute absence of objective measures of performance operational concerns can divert attention from strategic/competitive/entrepreneurial issues

M-FORMS n n n A Multi-divisional structure is designed to manage diversification while controlling bureaucratic costs and control-loss problems M-Forms decentralizes operating decision-making to the business unit/division level where all necessary competitive and operational decisions are made. Strategic decision-making responsibility is retained at the headquarters level. The HQ also monitors division’s performance by using both objective market/output measures and subjective performance measures.

M-FORMS n Advantages: n n n uses objective market/output performance measures, bureaucratic controls, and clan/cultural controls encourages the exploiting of economies of scope across divisions frees corporate to focus on strategic concerns Facilitates diversification and growth Disadvantages: n n n Introduces additional levels of hierarchy Opportunism and information distortion problems Myopic focus Divisions may compete at the expense of cooperating Transfer pricing battles

Three Types of M-form and Their Optimal Use Cooperative Form -- Related. Constrained n SBU Form -- Related-Linked n Competitive Form -- Unrelated n

H-FORMS n Holding or Conglomerate structures seek to exploit the advantages of internal capital markets

ORGANIZATIONAL GOVERNANCE n n How do you get people to achieve organizational goals in the most efficient way possible? Problems in managing/motivating people: n n n Opportunism Unrestrained self-interest Error and mistakes Ambiguity in measuring performance Complexity/Inability in giving unambiguous direction

Generic Forms of Organizational Governance n Three Generic Forms of Organizational Governance – Market/Output-based Incentive Schemes n n profit goals output quotas – Bureaucratic Monitoring and Control Schemes n n Rules and procedures Standardization and monitoring – Clan or Culture-based Control Schemes n n Norms, values, socialization Internalization of organizational goals

Corporate Governance A relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations. n Internal Governance Mechanisms n External Governance Mechanisms n

Why Is Corporate Governance Needed Separation of Ownership and Managerial Control n Agency Relationship n Agency Costs (incentive, monitoring, enforcement costs, and financial losses due to insufficient governance) n Product diversification as an example n

Internal Governance Mechanisms Ownership Concentration (blockholders, institutional investors) n Board of Directors (insiders vs. outsiders, diversity; strategic control vs. financial control) n Executive Compensation (salary, bonuses, long-term incentive compensation) n M-form n

External Governance Mechanisms Market for Corporate Control n Managerial Defense Tactics (golden parachute, poison pill, etc. ) n