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STRATEGY Chapter 10

Core Concepts and Analytical Approaches PowerPoint Slides

Chapter 10 Learning Objectives

1. Become familiar with the managerial tasks that crop up


repeatedly in company efforts to execute strategy.
2. Understand why good strategy execution requires
astute managerial actions to staff the organization and
build strong competencies and competitive capabilities.
3. Learn what issues to consider in organizing the work
effort and why strategy-
strategy-critical activities should be the
main building blocks of the organizational structure.
4. Become aware of the pros and cons of centralized and
decentralized decision making in implementing and
executing the chosen strategy.

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Chapter 10 Roadmap Crafting versus Executing Strategy

Crafting the Strategy Executing the Strategy


A Framework for Executing Strategy Is a market
market--driven activity Is an operations
operations--driven activity
Building an Organization Capable of Good Successful strategy making Successful strategy execution
depends on: depends on:
Strategy Execution: Three Key Actions
Business vision Doing a good job of organization-
organization-
Staffing the Organization Perceptive analysis of market building and people management
conditions and the firms Achieving continuous improvements
Developing and Strengthening Core capabilities in how activities are performed
Shrewd market positioning Motivating/rewarding people in ways
Competencies and Competitive Capabilities
that support good execution
Outcompeting rivals
Execution-Related Aspects of Organizing the
Execution- Creating and deploying Creating and nurturing a strategy-
strategy-
resources and capabilities to supportive culture
Work Effort forge a competitive advantage Instilling a discipline of getting
things done

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Strategy Execution Is Tougher Executing Strategy Is a Team Effort


Than Strategy-
Strategy-Making
Implementing and executing strategy involves a firms whole
It is a whole lot easier to develop a sound strategic plan than management team and all employees
employeesall are in one way or
it is to execute the plan and achieve the desired outcomes. another actively involved in the strategy execution process
A wide array of managerial activities must be attended to Much as every part of a watch has a role in making the watch function
There are many ways to put new strategic initiatives in properly, it takes all pieces of an organization working cohesively
place and keep things moving
moving
which paths to take? Strategy execution
involves
for a strategy to be well-
well-executed
Bedeviling issues crop up and have to be resolved
Top-level managers must lead the
Top-
It tests the ability of company managers to: process and orchestrate big initiatives
Direct organizational change
But they must rely on cooperation of
Build and strengthen competitive capabilities
Achieve continuous improvement in operations and business processes Middle and lower-
lower-level managers to see things
go well in various parts of an organization and
Marshal organization-
organization-wide support and enthusiasm for executing the strategy
as proficiently as possible Employees to perform their roles competently
Consistently meet or beat performance targets
The strategy execution process involves every part of the
Ideally,
Ideally, senior managers need to create a company
company--wide crusade to enterprise
enterprise all value chain activities and all work groups
implement and execute the chosen strategy as fast and effectively as possible
possible..
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STRATEGY Chapter 10
Core Concepts and Analytical Approaches PowerPoint Slides

Core Concept Implementing a New Strategy


Requires Adept Leadership

Good strategy execution requires a team effort.


effort. Just because senior managers announce a new strategy doesnt
mean that organizational members will agree with it or
All managers have strategy
strategy--executing enthusiastically move forward in implementing it
responsibility in their areas of authority It takes adept managerial leadership to:
Convincingly communicate reasons
All employees are active participants in the for the new strategy
strategy execution process.
process. Overcome pockets of doubt
Secure commitment of concerned parties
Build consensus and enthusiasm
All company personnel in one way or Get all implementation pieces in place and coordinated
another are actively involved in the Ideally, senior managers need to create a companywide
strategy execution process
process.. crusade to implement and execute the chosen strategy
as fast and effectively as possible.
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A Framework for Executing Strategy The Principal Managerial Components


of the Strategy Execution Process
The specific hows of executing a strategy
strategythe exact Eight managerial tasks crop up repeatedly in company efforts to execute
items to be placed on managements action agenda
agenda strategy:
always need to be customized to fit the particulars of 1. Developing the competencies, capabilities, and organizational structure to execute
strategy successfully.
a firms situation
2. Marshaling sufficient money and people behind the drive for strategy execution.
Making minor changes in an existing strategy differs 3. Instituting policies and procedures that facilitate strategy execution.
from implementing radical strategy changes 4. Adopting best practices and pushing for continuous improvement in how value
chain activities are performed
performed..
Some managers are more adept at using this or that 5. Installing information and operating systems that enable company personnel to
approach to achieving desired organizational changes.
changes. carry out their strategic roles proficiently
proficiently..
6. Using rewards and incentives to promote good strategy execution and the
Theres no definitive managerial recipe for strategy achievement of strategic and financial targets.
execution that works for all situations or all types 7. Instilling a corporate culture that promotes good strategy execution.
8. Exercising strong leadership to improve execution, make corrective adjustments,
of strategies or all managers. and move toward companywide operating excellence as rapidly as feasible.

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Figure 10.1 Components of the Strategy Execution Process Devising an Action Agenda to
Implement and Execute a Strategy
The place to start is with a probing assessment of what
the organization must do differently and better to
execute the strategy with a high degree of proficiency
and meet or beat performance targets
Every manger must ask the question:
What needs to be done in my area of responsibility to implement
our part of the companys chosen strategy and what should I do
to get these things accomplished in a manner that enables good
strategy execution and produces the desired results?
results?
It is then incumbent on every manager to determine
changes..
precisely how to make the necessary internal changes

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STRATEGY Chapter 10
Core Concepts and Analytical Approaches PowerPoint Slides

What Are the Signs of Building an Organization Capable of Good


Good Strategy Execution? Strategy Execution: Three Key Actions

The two best signs of good strategy Proficient strategy execution depends heavily on three
types of organization
organization--building actions:
execution are whether a company is:
organizationPutting together a strong
Staffing the organization
Meeting or beating its performance targets management team, and recruiting and retaining employees with
the needed experience, technical skills, and intellectual capital
Performing value chain activities in Developing and strengthening core competencies and
a manner conducive to companywide capabilitiesBuilding proficiencies in performing
competitive capabilities
operating excellence strategy--critical value chain activities and updating them to match
strategy
changing market conditions and customer expectations
When strategies fail, it is often
Structuring the organization and work effort effortOrganizing
because of poor execution: certain things value chain activities and business processes and deciding how
important to successful strategy execution much decision-
decision-making authority to push down to lower-
lower-level
slip through the cracks. managers and frontline employees

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Figure 10.2 The Three Components of Building an Organization


Capable of Successful Strategy Execution
Putting Together a Strong
Management Team
One of the key organization-
organization-building
tasks is filling managerial slots
with smart people who are:
Clear thinkers
Good at figuring out what
needs to be done
Skilled in making it happen
and delivering good results
Without a smart, capable, results-
results-oriented management
team, the implementation-
implementation-execution process ends up
being hampered by missed deadlines, misdirected or
wasteful efforts, and/or managerial ineptness.
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Putting Together a Strong Recruiting and Retaining


Management Team (contd) Capable Employees
Sometimes a firms existing management team is suitable
The quality of an organizations people is always an
At other times it may need to be essential ingredient of successful strategy execution
strengthened or expanded by:
Knowledgeable, engaged employees are a firms
Promoting qualified people from within and/or best source of creative ideas for the nuts-
nuts-and
and--bolts
Bringing in outsiders whose experiences, talents,
operating improvements that lead to operating excellence
and leadership styles better suit the situation The firms entire workforce
Overriding aim is to assemble a critical mass of talented (managers and rank-
rank-and-
and-file
managers who can function as agents of change and employees) needs to be a
further the cause of first-
first-rate strategy execution genuine resource strength
A firm needs to get the right executives on the bus
bus
and the wrong executives off the bus
busbefore trying
to drive the bus in the desired direction.

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STRATEGY Chapter 10
Core Concepts and Analytical Approaches PowerPoint Slides

Core Concept Practices the Best Companies Use to Attract


and Retain Talented Employees

It is very difficult for a firm to competently execute Spending considerable effort in screening and evaluating
job applicants, selecting only those with:
its strategy and achieve operating excellence
Suitable skill sets
without recruiting and retaining a large band of very Energy, initiative, and judgment
capable, actively engaged, high- high-achieving Aptitudes for learning and adaptability
employees. to the firms work environment and culture
Putting employees through training programs
The best firms strive hard to make their entire that continue throughout their careers
workforce (both managers and rank
rank--and-
and-file Providing promising employees with challenging,
interesting, and skill-
skill-stretching assignments
employees) a genuine resource strength.
strength.
Rotating people through jobs that not only
have great content but also span functional
and geographic boundaries

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Practices the Best Companies Use to Attract Developing and Strengthening Core
and Retain Talented Employees (contd) Competencies and Competitive Capabilities

Encouraging employees to:


Challenge existing ways of doing
Good strategy execution requires:
things and propose better ways Developing the desired
Be creative and innovative competencies and capabilities
Push their ideas for new products and putting them in place
or businesses
Upgrading and strengthening
Making the work environment
stimulating and engaging them as needed
Striving to retain high-
high-potential Modifying them as market
employees with attractive and competitive conditions evolve
compensation and benefits
Coaching average performers Creating dynamic and competitively valuable
to improve their skills competencies and capabilities is an important
organization--building priority
organization
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Creating Dynamic and Competitively Some Important Traits of the Process of


Valuable Competencies and Capabilities Building Competencies and Capabilities
Building competencies and capabilities is a three-
three-stage process that Organizational capabilities emerge from a process of
occurs over a period of months and years:
years: consciously knitting together the efforts of different work
Stage 11Develop the ability to do something, however imperfectly or groups, departments, and external allies
inefficiently, by molding the efforts and work products of individuals into a
collaborative effort It takes a series of deliberate and well-
well-orchestrated organizational
Stage 22As experience grows and personnel learn how to perform the
steps to achieve mounting proficiency in performing an activity
activity consistently well and at an acceptable cost via repetition,
repetition, the Building competencies and capabilities is not something
ability evolves into a tried- and-true competence or capability. If the
tried-and-
competence is a key part of executing the companys strategy, then it
that can be accomplished overnight
qualifies as a core competence
competence.. Many firms are able to get through stages 1 and 2 in
3Should company personnel continue to polish and refine know-
Stage 3 know- performing a strategy-
strategy-critical activity, but comparatively
how and sharpen performance such that the firm eventually becomes few achieve sufficient proficiency in performing strategy
strategy--
exceptionally good at performing the activity (ideally, better than rivals!), the
competence or capability may provide a path to competitive critical activities to qualify for the third stage
advantage.
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STRATEGY Chapter 10
Core Concepts and Analytical Approaches PowerPoint Slides

Important Traits of the Process of Building Core Concept


Competencies and Capabilities (contd)
A firms competencies and competitive capabilities must be
The key to building a distinctive competence (or continually refreshed and recalibrated to remain aligned with
competitively superior capability) is concentrating changing customer expectations, ever- ever-evolving competitive
more talent/effort than rivals on strengthening conditions, the efforts of rivals to strengthen their
the competence/capability,
competence/capability, so as to achieve the competencies and capabilities, and a firms own strategic
dominance needed for competitive advantage. initiatives to outcompete rivals
This does not require outspending rivals on building a
This refreshment and recalibration is what is meant by
competence or capability
the term dynamic capabilities
But it does mean consciously focusing more talent on them
and striving for best-
best-in-
in-industry, if not best
best--in-
in-world, status. Ongoing managerial efforts to build a dynamic set of
competencies and capabilities is why it is appropriate
to view a firm as a bundle of evolving competencies
and capabilities
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Keeping Competencies and Capabilities Building Dynamic Capabilities:


Updated and Remodeled The Managerial Challenges
Competencies and capabilities grow stale unless they are refreshed, The challenges of building a dynamic set of competencies
modified, or even phased out and replaced and capabilities that delivers good results in the
It takes freshly honed, cutting-
cutting-edge competencies and competitive marketplace entail
capabilities to:
Deciding when and how to remodel and refresh the firms existing
Stay abreast of ongoing changes in customer needs and expectations
competencies and capabilities
Combat competitors newly launched offensives to win bigger sales and
market shares (which can include efforts to strengthen their own Having the foresight or spotting opportunities to develop altogether
competencies and capabilities) new kinds of competitively valuable competencies and
capabilities
Keep the firms resource portfolio in step with changes in its strategy
Build a more durable resource-
resource-based competitive edge over rivals It can also involve
Acquiring another firm with attractive resource capabilities
A firms competencies and competitive capabilities must be
dynamic, always evolving and being recalibrated to remain in Forming collaborative partnerships with suppliers or other
step with evolving conditions and competitive circumstances. companies having cutting-
cutting-edge expertise

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The Benefits of Dynamic Capabilities Strategic Role of Employee Training

Training and retraining are important when:


The organization momentum that comes from
A firm shifts to a strategy requiring different skills,
astute and timely managerial efforts to develop a competitive capabilities, and operating methods
formidable portfolio of dynamic capabilities often A firm is striving to build skills-
skills-based competencies
results in Technical know-
know-how is changing so rapidly that
a firm loses its ability to compete unless its skilled
Greater ability to attract new customers people have cutting-
cutting-edge knowledge and expertise
Increases in sales revenues Better execution of the chosen strategy calls for
new skills, deeper technological capability, or
Higher profitability building and using new capabilities
In all such instances, training should be placed
near the top of managements action agenda.

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STRATEGY Chapter 10
Core Concepts and Analytical Approaches PowerPoint Slides

Translating Competencies and Capabilities into Execution-Related Aspects of


Execution-
a Resource-
Resource-Based Competitive Advantage Organizing the Work Effort

Strong core competencies and competitive capabilities are a major


There are few hard-
hard-and-
and-fast rules
assist in securing a competitive edge over rivals in situations where for organizing a firms work efforts
it is relatively easy for rivals to copy smart strategies Each firms organizational structure and organization chart
is partly a product of its own situation, reflecting:
When rivals can readily duplicate successful strategy features,
the chief way to achieve lasting competitive advantage is to Prior organizational patterns and internal circumstances
out--execute them (beat them by performing certain value
out Executive judgments about reporting relationships
chain activities in superior fashion). The politics of who gets which assignments
Because cutting-
cutting-edge core competencies and competitive Moreover, every strategy is grounded in its
capabilities are often time-
time-consuming and expensive for rivals to own set of key success factors and value
match or trump, any competitive edge they produce tends to be chain activities
sustainable But some organizational considerations
are common to all firms

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Figure 10.3 Structuring the Work Effort to Promote Deciding Which Value Chain Activities to
Successful Strategy Execution
Perform Internally and Which to Outsource

While outsourcing is often driven by the fact that outsiders, because


of their expertise and specialized know-
know-how, may be able to perform
certain value chain activities better or cheaper than a company can
perform them internally, outsourcing can also sometimes make a
execution.
positive contribution to better strategy execution.
Outsourcing the performance of certain administrative support
functions (and perhaps even selected primary value chain activities)
to outside vendors enables a firm to:
Concentrate its full energies and resources on
performing strategy-
strategy-critical value chain activities
even more competently
Heighten its strategic focus

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The Benefits of Astute Outsourcing Core Concept

The heightened strategic focus that results from outsourcing


selected value chain activities can yield three execution-
execution-related Wisely choosing which activities to perform
benefits: internally and which to outsource can lead to
1. Improved chances for outclassing rivals in performing strategy-
strategy- several strategy-
strategy-executing advantages:
critical activities and turning a core competence into a distinctive
competence Lower costs
2. A streamlining of internal operations that A heightened strategic focus
often acts to
Decrease internal bureaucracies Less internal bureaucracy
Flatten the organization structure
Speedier decision making
Speed internal decision making
Shorten the time it takes to respond to changing market conditions A better arsenal of competencies and
3. Added ability to draw on partnerships with outsiders capabilities.
to add to a firms arsenal of capabilities

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STRATEGY Chapter 10
Core Concepts and Analytical Approaches PowerPoint Slides

Guarding Against Outsourcing Making Strategy-


Strategy-Critical Value Chain Activities the
the Wrong Things Main Building Blocks of the Organization Structure
Outsourcing works best for such strategically less
In any business, some activities in the value chain are always
important activities as:
more critical to successful strategy execution than others
Handling customer inquiries and providing technical support
It is generally wise to make those organizational units performing
Doing the payroll and administering employee benefit programs
execution--critical value chain activities the main building blocks in
execution
Providing corporate security
the enterprises organizational scheme
Managing stockholder relations
Making organizational units charged with performing important value
Maintaining fleet vehicles
chain activities centerpieces in the enterprises
Operating the firms web site organizational structure has the advantages of:
Conducting employee training
Giving these organizational units
Handling certain information and data processing functions decision--making influence
decision
A firm cannot be the master of its own destiny unless Increasing the likelihood they will be
it maintains expertise and resource depth in allocated ample resources to execute
their piece of the strategy capably
performing those value chain activities that underpin
its long-
long-term competitive success
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What Types of Organization Structures Determining the Degree of Authority and


Fit Which Strategies? Independence to Give Each Unit and Each Employee

The primary organizational building blocks within a business are usually Firms must decide:
Traditional functional departments
How much authority to delegate
Process departments (where people in a single work unit have responsibility for to the managers of each organization unit
all the aspects of a certain process like supply chain management, new product
development, or customer service) How much decision-
decision-making latitude to give
In enterprises with operations in various countries around the world (or individual employees in performing their jobs
with geographically scattered organizational units within a country), the
basic building blocks may also include geographic organizational units
The two extremes are to:
firms, the major building blocks are divisional
In vertically integrated firms, Centralize decision making at the top
units performing one or more of the major processing steps along the (the CEO and a few close lieutenants)
value chain (raw materials production, components manufacture, Decentralize decision making by giving managers
assembly, wholesale distribution, retail store operations) and employees considerable decision-
decision-making latitude
The typical building blocks of a diversified firm are its individual in their areas of responsibility
businesses

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Table 10.1 Advantages and Disadvantages of Centralized vs.


Decentralized Decision Making
Centralized Decision Making:
Pros and Cons
In a highly centralized organization structure, top executives retain authority for most
strategic and operating decisions by:
Keeping a tight rein on business-
business-unit heads, department heads, and the managers of key
operating units
Granting little discretionary authority to frontline supervisors and rank-
rank-and
and--file employees.
The thesis underlying command
command--andand--control authoritarian structures is that strict
enforcement of detailed procedures backed by rigorous managerial oversight is the
most reliable way to keep the daily execution of strategy on track
Tight control by the manager in charge makes it easy to know who is accountable when things
do not go well.
But there are weaknesses:
Command-and
Command- and--control structures make an organization sluggish in responding to
changing conditions because of the time it takes for the review/approval process to run up
all the layers of the management bureaucracy
It is difficult for high-
high-level executives located far from the scene of the action to have full
understanding of the situation and make wise decisions
Gives top mangers too much room to micromanage activities that are best delegated to
personnel close to the scene of the action
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STRATEGY Chapter 10
Core Concepts and Analytical Approaches PowerPoint Slides

Decentralized Decision Making: Decentralized Decision Making:


Pros and Cons Pros and Cons (contd
(contd))
In a highly decentralized organization, decision
decision--making authority Decentralizing decision-
decision-making has much to recommend:
is pushed down to the lowest organizational level capable of Delegating greater authority to subordinate managers and employees
making timely, informed, competent decisions. creates a horizontal organization structure with few management layers
The objective is to put adequate decision-
decision-making authority in the hands Managers and workers have latitude to develop their own answers and action
plans, rather than having to go up the ladder of authority for an answer
of the people closest to and most familiar with the situation and train
them to weigh all the factors and exercise good judgment. Pushing decision-
decision-making authority down to the heads of business units,
departments, and operating units and then further on to work teams and
Top management maintains control by individual employees
Placing limits on the authority that empowered personnel can exercise Shortens organizational response times
Holding people accountable for their decisions Spurs new ideas, creative thinking, innovation, and greater involvement on the
Instituting compensation incentives that reward people for doing their part of subordinate managers and employees
jobs in a manner that contributes to good company performance Promotes higher employee morale and productivity
Creating a corporate culture where there is strong peer pressure on Fewer managers are needed because deciding how to do things becomes
individuals to act responsibly part of each persons or teams job
Fewer layers of management and less management bureaucracy

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Maintaining Control When Capturing Strategic Fits in


Employees Are Empowered a Decentralized Structure
Efforts to decentralize decision making and give Diversified firms striving to capture cross-
cross-business
company personnel some leeway in conducting strategic fits should refrain from giving business heads
operations must be tempered with the need to total authority to operate independently when cross-
cross-
maintain adequate control and cross
cross--unit business collaboration is essential in order to gain
strategic fit benefits
coordination.. Decentralization doesnt mean
coordination
Cross-
Cross-business strategic fits typically have to be
delegating authority in ways that allow organization
captured by:
units and individuals to do their own thing.
thing.
Enforcing close cross-
cross-business collaboration
Lack of adequate control can put a company at risk or
in the event that empowered employees happen to Centralizing performance of functions having

make some unwise decisions. strategic fits at the corporate level

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Providing for Internal Cross-


Cross-Unit Coordination Providing for Collaboration with Outside
Suppliers and Strategic Allies
Close cross-
cross-unit collaboration is usually needed to build core competencies and
competitive capabilities in activities which involve employees scattered across Building organizational bridges with strategic partners and external
several internal organization units (and perhaps the employees of outside strategic allies is often best accomplished by appointing relationship
partners or specialty vendors)
managers who have responsibility and authority for:
A big weakness of traditional functionally-
functionally-organized structures is that pieces of
strategically relevant activities and capabilities often end up scattered across many Getting the right people together
departments, with the result that no one group or manager is accountable
Promoting good rapport and information-
information-sharing
In such cases, it is often best to achieve coordination by reengineering the work effort
and pulling the people who performed the pieces in functional departments into a Nurturing interpersonal cooperation and communication
group that works together to perform the whole process, thus creating process
departments (like customer service or new product development or supply chain Ensuring effective coordination
management)
Unless management engages in constructive organizational
Other coordinating mechanisms include
bridge
bridge--building with strategic partners occurs and ensures
Strong executive-
executive-level insistence on teamwork and cross-
cross-department cooperation
(including removal of recalcitrant managers who stonewall collaborative efforts)
that productive working relationships emerge, the value of
The use of cross-
cross-functional task forces
alliances is lost and the firms power to execute
its strategy is weakened.
Incentive compensation tied to group performance of cross-
cross-unit tasks

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