How Is Strategy to Be Implemented?

Organizing for Action Before plans can lead to actual performance, a corporation should be adequately staffed, and activities should be directed toward achieving desired objectives. Any change in corporate strategy is very likely to require some sort of change in the way an organization is structured and in the kind of skills needed in particular positions. Managers must, therefore, closely examine the way their company is structured in order to decide what, if any, changes should be made in the way work is accomplished. Should activities be grouped differently? Should the authority to make key decisions be centralized at headquarters or decentralized to managers in distant locations? Should the company be managed like a tight ship with many rules and controls, or loosely with few rules and controls? Should the corporation be organized into a tall structure with many layers of managers, each having a narrow span of control (that is, few employees per supervision) to better control his or her subordinates; or should be organized into a flat structure with fewer layers of managers, each having a wide span of control (that is, more employees per supervisor) to give more freedom to his or her subordinates? STAGES OF CORPORATE DEVELOPMENT Successful corporations tend to follow a pattern of structural development as they grow and expand. Beginning with the simple structure of the entrepreneurial firm (in which everybody does everything), they usually (if they are successful) get larger and organize along functional lines with marketing, production, and finance departments. With continuing success, the company adds new product lines in different industries and organizes itself into interconnected division. Stage I: Simple Structure Stage I is typified by the entrepreneur, who founds the company to promote an idea (product or service). The entrepreneur tends to make all the important decisions personally and is involved in every detail and phase of the organization. The Stage I company has little formal structure, which allows the entrepreneur to directly supervise the activities of every employee. Planning is usually short range or reactive. The typical managerial functions of planning, organizing, directing, staffing, and controlling are usually performed to a very limited degree, if at all. The greatest strengths of a Stage I corporation are its flexibility and dynamism. The drive of the entrepreneur energizes the organization in its struggle for growth. Its greatest weakness is its extreme reliance on the entrepreneur to decide general strategies as well as detailed procedures. If the entrepreneur falters, the company usually flounders. This is labeled by Greiner as a crisis of leadership. Stage II: Functional Structure Stage II is the point when the entrepreneur is replaced by a team of managers who have functional specializations. The transition to this stage requires a substantial managerial style change for the chief officer of the company, especially if he or she was the Stage I entrepreneur.

He or she must learn to delegate; otherwise, having additional staff members yields no benefits to the organization. Once a functionally structured firm diversifies into other products in different industries, however, the advantages of the functional structure breakdown. A crisis of autonomy can now develop in which people managing diversified product lines need more decision-making freedom than top management is willing to delegate to them. The company needs to move to a different structure. Stage III: Divisional Structure Stage III is typified by the corporations managing diverse product lines in numerous industries; it decentralizes the decision-making authority. These organizations grow by diversifying their product lines and expanding top cover wider geographical areas. They move to a divisional structure with a central headquarters and decentralized operating divisions- each division or business unit is a functionally organized Stage II company. They may also use a conglomerate structure if top management chooses to keep its collection of Stage II subsidiaries operating autonomously. A crisis of control can now develop in which the various units act to optimize their own sales and profits without regard to the overall corporation, whose headquarters seems so far away and almost irrelevant. Recently divisions have been evolving into Strategic Business Units (SBUs) to better reflect product-market considerations. Headquarters attempts to coordinate the activities of its operating divisions or SBUs through performance- and results-oriented control and reporting systems, and by stressing corporate planning techniques. The units are not tightly controlled but are held responsible for their own performance results. Therefore, to be effective, the company has to have a decentralized decision process. The greatest strength of a Stage III corporation is its almost unlimited resources. Its almost significant weakness is that it is usually so large and complex that it tends to become relatively inflexible. ADVANCED TYPES OF ORGANIZATIONAL STRUCTURES A new strategy may require more flexible characteristics than the traditional functional or divisional structure can offer. Todays business organizations are becoming less centralized with a greater use of cross-functional work teams. Matrix Structure Most organizations find that organizing around either functions (in functional structure) or around products and geography (in divisional structure) provide an appropriate organizational structure. The matrix structure, in contrast, may be very appropriate when organizations conclude that neither functional nor divisional forms, even when combined with horizontal linking mechanisms like SBUs, are right for their situations. In matrix structures, functional and product forms are combined simultaneously at the same level of the organization. Employees have two superiors, a product or

project manager and a functional manager. The home department-that is, engineering, manufacturing, or sales-is usually functional and is reasonably permanent. People from these functional units are often assigned temporarily to one or more product units or projects. The product units or projects are usually temporary and act like divisions in that they are differentiated on a product-market basis. The matrix structure is often found in an organization or within an SBU when the following three conditions exist: Ideas need to be cross-fertilized across projects or products Resources are scarce Abilities to process information and to make decisions need to be improved Davis and Lawrence, authorities on the matrix form of organization, propose that three distinct phases exist in the development of the matrix structure. 1. Temporary Cross-Functional Task Force: these are initially used when a new product line is being introduces. A project manager is in charge as the key horizontal link. Chrysler has extensively used this approach in product development. 2. Product/Brand Management: if the cross-functional task forces become more permanent, the project manager becomes a product or brand manager and a second phase begins. In this arrangement, function is still the primary organizational structure, but product or brand managers act as the integrators of semi permanent products or brands. Considered by many a key to the success of P&G, brand management has been widely imitated by other consumer products firms around the world. 3. Mature Matrix: The third and final phase of matrix development involves a true dual-authority structure. Both the functional and product structures are permanent. All employees are connected to both a vertical functional superior and a horizontal product manager. Functional and product managers have equal authority and must work well together to resolve disagreements over resources and priorities. Boeing and TRW Systems are example of companies that use a mature matrix. Network Structure- The Virtual Organization A newer and somewhat more radical organizational design, the network structure is an example of what could be termed a nonstructural by its virtual elimination of in-house business functions. Many activities are outsourced. A corporation organized in this manner is often called virtual organization because it is composed of a series of project groups or collaboration linked by constantly changing nonhierarchical, cobweb-like networks. The network structure becomes most useful when the government of the firm is unstable and is expected to remain so. Under such conditions, there is usually a strong need for innovation