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Strategic Design - Coggle Diagram
Strategic Design
Grouping
Boundaries of the organisation, subunits.
Basic structures
Function (activities)
Business Unit (product/technology)
Customer (market, geography, segment).
Hybrid structures
Matrix
Front end/back end
Ambidextrous
Every organisation design must address all 3 elements of activity/function, business/product, geography/customer
Functional Structure
- SMEs
- Companies with unique/limited number of closely related products/services.
- High degree of functional expertise necessary
- All activities concerned with a particular function are grouped into separate divisions
- Stable environments
e.g. CEO
Marketing HR ManufacturingAdvantages
- Economies of scale within functional departments. That is easy to transfer resources across activities within functions.
- Enables in depth knowledge and skill development
- Each group to create separate incentive and control systems suited to its needs and to reinforcing its strengths
Disadvantages
- Hierarchical overload/centralisation
- Slow and limited capacity to innovate
- Poor horizontal linking among departments
- Limited adaptability to environmental changes
- As specialisation increases, individuals tend to develop narrower perspectives and have difficulty solving problems that require joint efforts with other groups.
- Does not develop a large supply of managers who can see the organisation as a whole as they have few opportunities to gain experience outside their functional areas.
Divisional Structure
- Typically large organisations producing a large variety of products
- Fast paced environment
- Divisions based on output (e.g. product division)
- Independent profit centres
- Functional stuctures usually develop within divisions
e.g. CEO
Product division 1
marketing manufacturing R&DAdvantages
- Decentralised decision making
- Fast responses and adaptation to changes in environment
- Tailoring to customer needs
- Better monitoring of profit sources (divisions usually have P&L responsibilities, makes the costs and profits of each business much clearer than functional structure).
- Clear strategic focus for managers of product division
Disadvantages
- No functional economies of scale. Difficult to share resources and can lead to duplication of activities
- Loss of in depth knowledge and specialisation skills. This is because functional specialists can be spread across different groups. Then lose their professional focus and become less attuned to breakthrough innovations in their own fields
- Poor linkages among divisions and product lines - often independent profit centres
- Goals and perspectives of divisions might be conflicting
- Difficult for new business creation
Geographical Structure
- Grouping based on needs of users/customers in a given geographical area (e.g. Maccas)
- Often in service industries
Advantages
- High adaptation to regional needs and goals
- Decentralised decision making
- HQ ensures brand recognition
- Local units ensure fit to local needs. Deep customer knowledge and close customer relationships
Disadvantages
- similar to division structure. Duplication of activities and resources
- Erosion of deep technical expertise
- Missed opportunities for synergies and learning.
Matrix Structure
- For complex products and knowledge intensive firms
- Focus and quality and cost
- Groups activities by function and by product
- 2 strategic grouping dimensions
- Managers of each operating unit reports to 2 bosses, one for each dimension
Advantages
- Overcome subunit orientation
- Technological and/or geographical synergies
- Enhances the capacity for innovation
- Flexible sharing of employees across products
- Highly adaptable to environment
Disadvantages
- Dual reporting relationships can be strenuous
- Enhanced likelihood for a conflict laden work environment
- Need for extensive and costly training and conflict management mechanisms in order to maintain a functional balance of power
Front/Back Structure
- Organisation divided into 2 parts.
- Front end faces the customer and is organised by market (geography or customer segment). Includes functions that directly relate with the customer: marketing, sales, distribution, service and support. Responsible for selling to customer.
- Back end is organised by product and takes the form of business units that include tech development, production, logistics. Responsible for developing and producing product.
Advantages
- combines advantages of product division, market structure and functional structure.
- close integration of tech development and production and close customer relations (one of the advantages of product division).
Disadvantages
- fragmentation of technical expertise in the back end, poor integration between market needs and tech development that we sometimes see in functional structures.
- Can be difficult to integrate front and back ends. e.g. different profit centres
Interdependence
Sequential Interdependence
One tasks is completed then handed off to next
Pooled interdependence
Tasks undertaken at the same time and final results are pooled together
Reciprocal Interdependence
Tasks are conducted in repeated interactions with each other
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Aligning
Ensuring subunits (groups) and people have the resources and motivation to carry out the activities assigned in linking and grouping.
Organisational Performance Measurement Systems
- Using performance measures to assess strategic intent and groups and linking patterns.
- Need to align measurement systems with different strategic groupings so they do not pull groups in incompatible directions.
Individual Rewards and Incentives
- Aligning individual rewards and incentives with strategic grouping and linking patterns is important.
e.g. Bonuses, raises, promotionsMisalignment is continuing to base evaluations and rewards solely on individual accomplishments on team tasks.
Human Resource and Development
- Training the right people for the right job, positions, tasks.
- Aligning right personel to match skill and expertise with tasks.