Table of Contents
1.
Management and management models .................................................................... 4
1.1
Environmental Spheres .......................................................................................... 4
1.2
Stakeholders ......................................................................................................... 5
1.3
Processes .............................................................................................................. 5
1.4
Development Modes ............................................................................................. 5
1.5
Structuring Forces ................................................................................................. 6
1.6
Evolution of the St. Gallen Management Models ................................................... 7
1.7
Integrative Management ....................................................................................... 9
1.8
System ................................................................................................................ 10
1.9
What is a process ................................................................................................ 13
1.10
Types of organizations ......................................................................................... 16
2.
Decisions and communications................................................................................ 20
2.1
Fundamentals of decision theory ......................................................................... 22
2.2
Methods for decision theory................................................................................ 23
2.3
Prerequisites for Effective Organizational Decisions ............................................. 31
3.
Strategy and development modes ........................................................................... 33
3.1
Properties of strategic decisions: according to Nickerson and Argyres................... 34
3.2
Competitive advantage ........................................................................................ 36
3.3
Competitive strategies ......................................................................................... 37
3.4
Strategy process .................................................................................................. 40
3.5
Ansoff’s product market matrix for the identification of growth options .............. 45
3.6
Hamel and Prahalad’s Core competence market matrix ....................................... 45
3.7
Boston Consulting Group (BCG) Matrix for Portfolio Management........................ 46
3.8
Crises as triggers of organizational change ........................................................... 47
3.9
Implementation .................................................................................................. 49
3.10
Evaluation ........................................................................................................... 49
1
4.
Structure and Culture .............................................................................................. 51
4.1
4 basic organizational types ................................................................................. 53
4.2
Line organization ................................................................................................. 54
4.3
Augmented organization: .................................................................................... 56
4.4
Matrix organisation ............................................................................................. 57
4.5
Network organisation .......................................................................................... 58
4.6
Process organization ............................................................................................ 59
4.7
Culture ................................................................................................................ 61
4.8
Schein’s mode of cultural levels ........................................................................... 62
4.9
Typologies ........................................................................................................... 64
5.
Leadership and Governance .................................................................................... 66
5.1
Theories of motivation ........................................................................................ 67
5.2
Content theories: ................................................................................................ 67
5.3
Maslow’s pyramid of needs ................................................................................ 67
5.4
Two-factor model ................................................................................................ 68
5.5
Extrinsic and Intrinsic motivation ......................................................................... 69
5.6
Process theories: ................................................................................................. 70
5.7
Valence-instrumentality- expectancy theory ........................................................ 70
5.8
Image of Man ...................................................................................................... 71
5.9
Leadership in the SGMM ..................................................................................... 73
5.10
Behavioural Managerial Grid ............................................................................... 74
5.11
Theory of situational leadership .......................................................................... 75
5.12
Contingency theory ............................................................................................. 75
5.13
Leadership principles ........................................................................................... 76
5.14
Human Resource Management ............................................................................ 77
5.15
Personnel requirements ...................................................................................... 78
5.16
Recruitments ....................................................................................................... 79
5.17
Staff motivation and Remuneration ..................................................................... 80
5.18
Human Resources Development .......................................................................... 81
5.19
Releasing Staff ..................................................................................................... 82
5.20
Governance ......................................................................................................... 83
5.21
Board of directions .............................................................................................. 84
5.22
Triangle of corporate governance......................................................................... 87
2
5.23
Risk Management................................................................................................ 88
5.24
Tools ................................................................................................................... 89
5.25
Lines of defense .................................................................................................. 89
6.
Environment and Interaction Issues ......................................................................... 91
6.1
Theories of the firm ............................................................................................. 91
6.2
Environmental Spheres: ....................................................................................... 92
6.3
Stakeholders ....................................................................................................... 95
6.4
Back to integrative management ......................................................................... 96
6.5
Rationality .......................................................................................................... 97
3
1. Management and management models
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Management
Deals with the organization and design of purpose-oriented socio-technical systems
It is about goal-oriented leadership
Also means a community of managers in an organization
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Organization
Face the demands of different stakeholders
Involve division of labour and functionally differentiated value creation
Managers must:
o Optimally configure short- and long-term organizational value creation in the face
of a constantly changing environment
o Critically question their own managerial activities in the process -> for this they
need an integrative approach
St. Gallen Management Model has served as an intellectual map for the academic and
practical discussion of management in and of organizations for several generations (SGMM)
-> despite continuous evolution, 3 elements have remained constant: environment,
organization, management
Task perspective:
o Environment: environmental spheres, stakeholders, interaction issues
o Organization: processes, structuring forces, development modes
Practice perspective:
o Management: value creation, orientation framework, management practice
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Tasks of management:
o Continuous questioning, reflection, and further development of an organization
o Organization of the value-creation system
o Ensuring stakeholder cohesion
1.1
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Environmental Spheres:
The current version of the SGMM highlights that organizations are embedded in and define
their own environment
This environment contains different so-called environmental spheres: societal, natural,
technological and economic
The company is influenced by these spheres and in turn influences them
Example: an innovation in technology compels the company to change its own production in
order to remain competitive -> job reduction -> this impacts the societal environment
Environmental spheres are spaces of opportunity for the company from which opportunities
and threats arise
Organizations needs the environment and its different spheres to tap the resources they
need for their products and services, and that enable an organization to develop strategic
competitive advantages
4
1.2
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Are the key to the organization’s relationship with its environmental spheres
Stakeholder participation (e.g employees, customers, investors, suppliers, or even the state)
is necessary for the company’s survival
The most important task of management is to ensure cohesion among stakeholder groups
Corresponding relationships with its environment enable the organization to tap the
necessary resources via stakeholder groups
o Media relations allow the organization to strengthen its reputation, while investor
relations contribute to raising capital
o Good customer relations are essential for selling products and services, stable
supplier relations for reliably providing the necessary components
1.3
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Processes
Can be defined as sequences of activities
Central processes of companies are business processes -> include service creation processes
(what the company actually produces), service innovation processes and customer processes
Include those processes that serve to steer the company as a system, as well as its
relationships with the environment
Require communication and decision-making skills and techniques
Support processes are functions that indirectly support business processes
o Target group oriented core activities intended to contribute directly to creating
benefits for primary value creation -> business processes
The degree of specialization of the processes is defined by the division of labor
1.4
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Stakeholders
Development Modes
Environment is dynamic and organizations need to keep evolving
2 types of organizational change: in management these 2 modes often occur parallel
o Continuous optimizing of current operations: presupposes an existing structure
o Renewing the organization or parts of it by challenging the status quo: involves
structural change
If a value system has been reconfigured (renewal), it subsequently requires a phase of
optimization and structural stability
5
1.5
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Structuring Forces
Ensure the necessary basic order or structure to an organization, in form of governance
They are essential for the smooth functioning and growth of an organization -> ensure that
the organization has a clear direction, a structure to implement its strategy and a culture to
support its objectives
These forces include:
o Governance: refers to the system, by which an organization is controlled and
operates. Includes the rules, practices and processes used to direct and manage the
organization -> ensures the prerequisites for management and strategic capability by
defining a suitable company purpose, management resources, division of powers
and processes -> defines the roles, rights and duties of management, as well as an
organization’s normative orientation, for example its vision and mission
o Strategy: can only be designed, if an organizations long-term purpose is clear ->
plan of action designed to achieve a long-term or overall aim -> provides a direction
for the organizations development -> ensures competitiveness -> strategic factors
are developed either within (inside out) or outside the company (outside in)
o Organizational Form/structure: refers to the structures of the organization that is
designed to implement the strategy -> includes hierarchy, roles and responsibilities
within the organization
o Culture/Norms and Values: structure and culture correlate -> defined by the culture
of the organization -> they guide the behaviour of individuals within the organization
and influence how the organization operates -> the culture must be consistent or at
least compatible with the company’s purpose
6
1.6
Evolution of the St. Gallen Management Models
1. Generation (Ulrich/Krieg 1972):
 Management is always integrative management: grasping and effectively dealing with
management challenges in the overall context and dynamic networking
 Systematic perspective -> new elements can enter the system old elements can leave ->
movement is described as complex
 Management as shaping, directing, and developing purpose-oriented social institutions
 3 central elements:
o enterprise/organization
o leadership/management
o environment/setting
2. Generation (Bleicher 1991)
 Subdivision into:
o Normative: central values, what do we stand for, what do we want to offer as a
unique thing?
o Strategic: how do we achieve a superior performance?
o Operational: day to day activities and day to day business
3. Generation (Rüegg-Stürm 2003)
 Based on new findings in business studies and added a process oriented view of the
organization
 Process orientation
o Management processes
o Business processes
o Support processes
4. Generation (Rüegg-Stürm 2017)
 Management as a reflexive design practice
 4 key dimensions: external + internal integration over time and integration within
management
7
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Management has to cover environment and organization
Core management tasks: reflection and further development of the organization
Models are understood as socio technical and complex systems
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Orientation Framework:
o Normative orientation
o Strategic orientation
o Operational orientation
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Management practice
o Manager Communities
o Design platforms
o Design practices
o Languages of reflection
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Value creation
o Differentiation
o Resource configuration
o Value creation processes
o Decision making practice
o Relationship culture
8
1.7
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Integrative Management
Can be defined as the design and steering of an organization as a purpose-oriented sociotechnical system, that consciously and responsibly handles significant force fields and
conflicting goals
Is necessary for solving management tasks at every level of the organization
Force fields: refers to the different forces or factors, that can influence the direction and
decisions of a corporation -> can include internal factors, such as the perspectives of a
different corporate functions and external factors such as market trends, competition, and
regulatory environment
Conflicting goals: refers to situations where different stakeholders or parts of the
organization have different objectives that may not align perfectly -> for example if the
marketing department wants to spend more on advertising and the finance department
wants to cut costs
Stakeholder expectations: different stakeholders often have different expectations for the
company -> balancing these expectations can be a challenge
Short-term vs long term: companies often must balance short term operational goals (like
meeting a quarterly sales target) with long term strategic goals (like developing a new
product line or expanding into a new market)
Integrative management is needed more than ever in today’s “VUCA age.” VUCA stands for
“Volatility, Uncertainty, Complexity and Ambiguity”
 Ashby’s Law
 Outcome of systemic approaches
 This states that a variegated complex system also needs to be governed by an equally
variegated and complex control system -> for example if a team conflict occurs in an R and D
Department, it is not enough to simply remove the greatest “rebel” -> any team is a complex
system, in which social relationships coincide with knowledge relationships, hierarchical
dependencies and product processes -> the team as a system is characterized by different
interconnected levels
9
1.8
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System
Ordered whole of elements between which any
relation can exist or be established
For example a socio technical organization such as a
hospital:
Logistical level on which patient flows occur and on
which different service elements (e.g., radiology
department, laboratory, operating rooms) are
combined to form a specific service chain for patients
o Issues: securing supply
disruptions/bottlenecks, skills shortages
Information level on which patient data are
collected and made available in close conjunction
with the logistical level
o Issues: maintaining information flow,
recognization of anc access to strategic
signals from the environment, cyberattacks
recognizing soft strategic signals from the
environment
Financial level on which the financial flows between the different elements take place (e.g.,
the billing of services from the X-ray department to the treating ward and the individual
patient)
o Issues: securing financing and liquidity, inflation
Hierarchical level consisting of reporting relationships and cooperation structures (e.g., in
projects)
o Too many levels/strict hierarchies lead to inefficiency/problems with communication
and decision-making abilities
Social level comprising personal and business acquaintances and informal communication
relations.
o Conflicts between employees affect productivity and must be resolved
10
Organizations are complex systems,
this means they are not entirely
understandable and predicable
- New things can come in; for
example new laws and the system
changes continously
- The development of the system is
not entirely predictable
- Elements behave unpredictably
- The relationships between the
elements are non-linear
- The elements are not
unambigously connected to each
other
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System thinking claims to enable interdisciplinary perspectives
Boundary spanning objects such as process maps enable functional silos to be overcome
Star networks: are centred on one element, that controls the network -> for example the
hub-and-spoke networks of airlines handle traffic via a central hub
Mesh networks: relationships exist between different elements -> every element is
connected with all others -> advantage is their redundancy -> if one element fails, its
functions can be performed by other elements -> On the downside, these systems are
difficult to control because the central node through which everything could be controlled is
missing.
o Special case of mesh network: grid network -> consists of a rectangular network
whose elements are connected to their neighbouring elements on all 4 sides, if one
of the nodes in a grid network fails, it is possible to switch to parallel connections ->
used in road and traffic planning
Systems are an ordered whole of elements, between which any relations can exist or be
established
System elements can be different types ( e.g companies, persons, environmental, spheres)
All objects in a system must be connected
11
12
1.9
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What is a process
Can be defined as a sequence of activities that require one or more types of input and
generates an output with a value for a customer
The foundation and primary process of every organization is value creation
An organization defines itself in terms of its services
Value chains tend to be restructured on an ongoing basis
Environmental changes (e.g new technology or changed prices for input factors) mean that
activities need to be carried out differently or that value chains may even need to be
reconfigured
Value chains tend to become increasingly differentiated and specialized as a result of the
underlying “economics”
Additional value ( for example boosting the attractiveness of a region by creating jobs and
paying taxes) is created beyond primary value creation
Process focus in management -> the goal of each process: value creation
Every organization can be understood as a networked interaction of processes
Processes are optimised individually and in interaction for example, minimising interfaces,
blind services etc.
Processes are digitally mapped/supported
13
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Process maps can be used as show as it real processes
These descriptive recording instruments enable empirically recording processes and display
them as a process diagram
These maps provide the basis for continuously improving such sequence of activities,
because they illustrate the interdependencies of these activities
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Management processes: tasks needing repeated handling and related to designing and
developing of the value creation
Business processes: target group-oriented core activities intended to contribute directly to
creating benefits for primary value creation
Support processes:
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Processes require one or more types of input
Processes can be defined as a sequence of activities
The degree of specialization of the processes is defined by the division of labour
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14
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Process oriented design concepts
o Focus is on the customer centric and well-coordinated organizational value creation
to maximize customer benefit
o Concepts such as process management, process organization, business process
design and business reengineering
o Eliminating inefficiencies in organizational value creation processes
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Process Management:
Systematic planning, execution, monitoring, and optimization of business processes within
an organization.
Involves the design, implementation, and improvement of processes to achieve specific
business goals efficiently and effectively.
Often includes activities such as defining workflows, allocating resources, measuring
performance, and identifying opportunities for enhancement
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Process Organization:
Structuring and arrangement of various components within a business process to ensure
smooth and efficient operations.
Involves defining roles, responsibilities, and relationships among individuals or departments
involved in the execution of a process.
Organizing processes helps in clarifying communication channels, improving accountability,
and streamlining the flow of work to achieve desired outcomes.
Business Process Design:
Involves the creation or redesign of business processes to enhance efficiency, productivity,
and overall performance.
Includes the identification of key activities, sequencing of tasks, allocation of resources, and
establishment of control mechanisms to ensure that the process aligns with organizational
objectives.
Aims to optimize workflows, reduce bottlenecks, and improve the overall effectiveness of
the processes within an organization.
Business Reengineering:
Also known as business process reengineering (BPR), is a fundamental rethinking and
redesign of business processes to achieve significant improvements in performance,
efficiency, and competitiveness.
It involves questioning existing practices and making radical changes to processes rather
than incremental adjustments.
Business reengineering often requires a holistic approach, considering technological,
organizational, and cultural aspects to bring about transformative changes in the way an
organization operates.
It is driven by the goal of achieving dramatic and sustainable improvements in business
processes and outcomes.
15
1.10
Types of organizations
16
Several independant
organizations for the
purpose of carrying out a
specific business
17
18
Elements of the management cycle:
 Define target value
 Define measures
 Order measures
 Execute
 Record actual values
 Compare target and actual values
Organizational images according to their historical origin
 Organization as machine: understanding and perfecting people’s motivation
 Organization as relationship structure: understanding and perfecting people’s motivation
 Organization as culture: understanding informal processes
 Organization as multifunctional system: understanding communication in its complexity
Typical specializations within management
 Strategy/Risk
 Accounting, controlling, auditing
 Leadership/organization
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Resources: activities that require the same knowledge are grouped together
Customer groups: activities with the same recipient of benefit are grouped together
Tasks: similar activities are tasked together
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Neoclassical value concept: everything create value that increases market price
Social system: elements are humans, which represent communication between elements
Classical value concept: value is only driven by input factors
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TYPE III: refers to the situation where the actual problem as not been identified at all 
where situations are developed for the wrong problem  careful problem formulation is
required to avoid Type III problems
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Business Ecosystems:
o Focal company acts as an orchestrator in the network
o All partners contribute to value propositions/innovation
o Multilateral relationships between ecosystem partners
19
2. Decisions and communications
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Basic elements of a decision -> can prove wrong
The normative decision theory (assumption of purely rational decision making) presupposes
that the decision makers are aware of the following elements:
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Target system
Alternatives for action
Consequences of the alternatives
Preferences (or decision rules)
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The single most important managerial activity is decision making
Main management tasks: making and implementing decisions, upstream, ensuring decisionmaking capability and identifying decision necessity
Even seemingly small decisions can have a major strategic impact
Basic element: alternatives for action
Prerequisites for effective organisational decisions: mobilisation of the necessary expertise,
clarification of the assessment and evaluation criteria
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 Decision making phases:
 Successful decision-making needs to be tightly interlocked with communication
 Ensuring decision-making capacity: focuses on building trust, in order to secure information
access and be capable of taking adequately legitimate decisions
 Identifying decision necessity: involved asking the right questions, providing relevant data
(for example based on a balanced scorecard) and exchanging soft signals ( for example subtle
hints at a social occasion)
 Decision making: focuses on developing alternatives (for example through exchange with
cooperation partners or stakeholders able to provide the necessary resources such as new
financing options) and evaluate alternatives
 Decision implementation: legitimizing decisions among those affected and communicating
the information that is relevant to implementation (for example instructing staff entrusted
with implementation)
Phases of decisions
Relevent info + trust
In the phase of the actual decision, the focus
is on the development of alternatives
20
 Uncertainty
 Alternatives and consequences of a decision -> can’t be foreseen -> especially when made
under time pressure -> this can be only realised retrospectively -> decisions always concern
future
 Business Judgment Rule
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Courts judge accroding to Business judgement Rule
Decisions should be made within the applicable legal framework (i.e., within one’s own
jurisdiction and within the law)
Decision-makers should act unencumbered by conflicts of interest
All the necessary information should be obtained
Alternatives should be weighed up (including a zero alternative, according to which nothing
is done at all).
21
2.1
Fundamentals of decision theory
 Decision theories (selection of classical approaches)
22
2.2
Methods for decision theory
3 types of problems
 Decision making methods
Simple decisions
- Characterized by clear objectives and known alternative courses of action
- Involve evaluating alternatives with respect to how they contribute to goal attainment ->
solution algorithm exists -> known action alternatives
- Assumption of purely economic benefit maximization
- All variants and consequences known
- Goals and optimization algorithms known
- Uncertainty and risks known
23
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Application examples: travelling salesman -> what is the optimal route, so he spends less
time travelling and more time with customers
Variant with the highest expected
value is chosen
Heuristics: methodical guidance for solving
problems; procedure for solving general
problems for which no clear solution strategies
are known or do not appear reasonable due to
the effort required; primarily involved rrules of
thumb» based on subjective experience and
traditional behaviour. Used in problem areas.
That are poorly structured and difficult to
understand -> first come and first served
Based on work samples and preferences
24
Complicated decisions
- No purely economic maximization of benefits
- Unconscious violation of rationality
- Limited information -> systemic feedback loops
- Avoid worst case -> pessimistic minimax rule
- Keep all options open as long as possible
- Use of simplifying heuristics (methodical guidance for solving problems)
- Typical heuristics include decomposing complex problems into subproblems or so-called “roll
back planning”
- Transparency of the decision-making process and its traceability are very important
- Example: should I invest in a new technology platform?
Complex decisions
- Several rounds
- Uncertain/changing environment -> and unclear effects of alternatives
- Unclear/unknown opponents
- Systemic feedback loops -> ongoing review and adjustment of targets and variants
- Goals, variants and consequences -> unstable -> goals are constantly changing
- Possible thinking in scenarios and possible development paths -> scenario technique
- Examples: prisoners dilemma, minimax principle
- Since consequences are unclear, it is necessary to tap into all available information and
expertise as comprehensively as possible
- Because not all possible alternatives are known in part, new options must be created
through active management of the new environment as a space of possibility
25
-> 5 point command order
 Orientation
 Purpose
 Assignment
 Special instructions
 Locations
26
Communication is crucial in several ways:
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In preparing decisions, information and evaluations are needed to develop alternatives and
to assess their consequences
This usually involved different people and departments, which in turn requires
communicative alignment
In selecting and determining an alternative, groups rather than individuals are often involved
in organizations
Decisions are collective accomplishments of interacting collectives to that decisions are
“enacted” communicatively
Implementing a chosen alternative requires information, clarification and persuasion in order
to ensure decisions can be accepted and implemented
Depending on the issue, this means communicatively involving employees, customers,
suppliers, or other stakeholders in order to make decision success more likely
27
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Decisions must be perceived as fair at different levels so that they can be accepted and
enforced -> they mean procedural fairness
o Procedural fairness: requires that decision-making processes are perceived as
comprehensible and as fair, both by those affected and by third parties. This means,
for example, enabling participation and offering those involved opportunities to
have a say. It is important to meet participation expectations and to ensure the
decision-making process is appropriately documented (also for later public or
judicial review). It is necessary to clarify the scope of decision-making, which
includes setting clear, non-negotiable limits. Binding definitions of who approves
and communicates decisions are required.
o Distributive fairness: means that decision outcomes are perceived as fair in terms of
distributional effects, for example, certain minimum distributional levels should be
neither undercut nor exceeded.
28
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Senders encode their message (they choose the language, wording gestures and
environment)
Receivers decode messages and interprets them based on their world of experience and
referential system
Every message has different components:
o Appeal
o Factual information
o Self-revelation
o Relationship
What is perceived as right or wrong depends very much on the perceived “constructed”
reality of those involved
Constructivism is the dominant paradigm (the fundamental model of thought) in the social
sciences
This epistemological theory maintains that knowledge and perception are always subjectively
constructed and hence never constitute objective reality
Constructivism is distinct from other epistemological paradigms such as positivism, which
holds that objective reality is indeed perceptible and verifiable
Success factors for relationship development?
- Basic attitude of respectful encounter on an equal
footing
- Timely, informed decisions within as apolitical
communication as possible
- Active awareness of mutual dependance
- Early establishment of sustainable relationships in
a relatively unanticipated space
29
Why do misunderstandings often arise according to the epistemology of constructivism?
-> Because it is not knowledge but perception that guides action
-> Knowledge is not objective reality but only a subjective “invention” or perception of reality
-> There are no “absolute” truths
-> Describes how we gain knowledge
30
2.3
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Prerequisites for Effective Organizational Decisions
Organizations are decision-making systems -> establishing a decision making practive is a
core task of management
Conditions for effective organizational decisions
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A multitude of premises leads to a high need for clarifiction:
Participation expectations: Who has the right to participate in the decision-making process
Documentation requirements: In what form should the decision be prepared in advance?
Scope for decision: How many decision alternatives must be prepared?
Time expectations: How much time can and should be spent to reach the decision?
Level of certainty: What degree of certainty is necessary for a responsible decision?
Commitment: How is the communicative authorization of the decision made?
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Bindingness: how is a decision communicatively authorized?
Safety level:
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Communicative challenges:
Conflicting expectations: between objectives among stakeholder affected by decision -> goal
conflict (service quality and return on investment)
Multiple unknown possibilities: neu options must be created by actively managing the
environment as a space of possibility (for example during a pandemic a company might have
a shortage of funds, instead of turning to classic financing instruments -> microloans from
customers)
Unclear consequences: aim must be to obtain as diverse a picture as possible, rather than
merely confirming preconceived opinions -> access info and expertise from external and
internal sources
Lack of clarity concerning decision making methods: gain acceptance through consensus
processes such as “roundtables” and through communication with all stakeholders,
especially when public interests are also affected
Overall decision-making system: continually adjusting decisions and constant dialogue in
other decision-makers
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Decisions impact:
o Individual issues areas (for example: purchasing decision within procurement)
o Other organizational areas (for example: supplier problems affecting production)
o Corporate environment with its stakeholders ( for example: employment situation
at a supplier and in its region)
Decisions also have impacts across different time horizons -> for example: wrong investment
decisions damage a company’s assets and limit its ability to develop, which in turn affects
employees and the region
31

What characterises an organizational decision-making practice?
o Decision-making necessities
o Ideal conceptions and rules of a “legitime” decision-making process
o Evaluation criteria and performance expectations

Decision-making necessities
o Must be identified, formulated and legitimized
o Requires an agenda setting (draw up a list of items that has to be discussed at a
meeting)
o Normative, strategic, operational orientation as well as targeted irritations are
important
32
3. Strategy and development modes
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Strategy has 2 basic dimensions:
o Strategy content: focuses on content-related outcomes -> what is your strategy?
o Strategy process: focuses on how best to develop strategy content -> how do I come
to my final strategy? what is the process behind?
Strategy is one of the 4 structuring forces in the St. Gallen Management Model
Strategy
Is the determination of all basic long-term goals of an enterprise and the adoption of
courses of action and the allocation of resources necessary for carrying out those goals
(Chandler)
Is how an organization moves forward (how do I prepare myself to be successful in the
future) (Rumelt)
Is a pattern in a stream of decisions or actions (you have a lot of decisions to make, some of
them are strategies) (Mintzberg)
o In particular Mintzberg’s understanding of strategy makes clear that although every
organization has a strategy, this has not necessarily been explicitly formulated.
Is a pattern of collective behaviour that is either consciously evoked with a view to the
future or occurs spontaneously
An adaptive narrative, because it lives from stories that ultimately socially construct our
reality (strategy is about story telling -> for example Taylor Swift makes so much money, but
telling her life stories in her songs)
Mission: defines what exactly is to be achieved. Mission is defined as a consistent statement
of purpose, which reveals the company’s products or services, markets or customers, and
philosophy
Vision: illustrates the future-oriented and long-term image of a company -> for example, our
airline’s vision may be to rank among the world’s top five airlines in terms of service.
Purpose and mission define a company’s fundamental value creation for the benefit of
society.
33
3.1
Properties of strategic decisions: according to Nickerson
and Argyres
o
o
o
⁃
⁃
⁃
Long term nature
Impact on the ability of an organization to generate and internalise value
Decisions on the allocation of resources and commitments that are expensive to
change or can only be changed at high cost (where do I engage, how do I engage,
how much time do I invest)
o Inclusions of reactions of rivals (competitors on the sales market, but also on
different markets for the company (for example, resource markets) (rivals copy you,
if you’re successful -> what will they do if I do A?)
o (Positive) effect on return on investment
Normative: refers to an organization’s role in society, its values and norms (i.e., formulated
as the company’s vision and mission) -> provide the framework for strategic development
processes -> goal: legitimize the company in society and among stakeholders. Important in
this regard is the enterprise’s purpose, which defines its reasons for operating and existing
Strategic: looks at the organization’s immediate environment (i.e., markets in the case of
companies). This level focuses on potential longer-term success and on the prerequisites for
the organization’s success
Operational: level focuses on day-to-day business (e.g., the efficient use of resources or
internal alignment to ensure services are provided as smoothly as possible).
34

Every organization has a strategy, an explicit or implicit one
o Explicit: A clearly articulated, communicated and documented strategy. Involves a
deliberate and conscious decision-making process. Are typically developed through
formal planning process and are intended to guide the actions and decisions of an
organization
o Implicit: refers to a strategy, that is not clearly defined or communicated. It may be
based on assumptions, habits, or informal practices within an organization. Are often
unspoken and can emerge organically without deliberate planning.
35
3.2

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Competitive advantage
Aim: create sustainable competitive advantages and thus ensure and increase
competitiveness
Competitiveness is the prerequisite for creating sufficient value
Sustainable competitive advantages require creating and utilizing protectable market
positions
Competitive advantages can also arise from industry-specific “economies” For example, a
company can achieve a competitive advantage because it is the largest producer in a certain
area (economies of scale). Learning curve effects enable it to produce at lower costs at an
earlier point in time than competitors
Outside-in perspective: the brand or positioning anchored with customers -> deliberately
choosing a different set of activities to deliver a unique mix of value (Porter) -> opposite: Me
too strategy -> I’m doing the same thing as the other (copying) -> it is however difficult to
beat the original and be successful
o Uniqueness through differentiation:
o Define the relevant competitive arenas and target groups
o Determine the strategically differentiating services, form of communication,
marketing and core messages (branding)
o Determine the value creation configuration, core processes and partnerships to
deliver the targeted service and appearance in the relevant competitive arenas
Inside-out perspective: a company’s core competence -> For example, if a company is able
to produce more innovative and better quality fastening products (screws, dowels, etc.) for
the construction industry in the long term — because it has better innovation processes
(including patenting) and stable production processes based on personnel trained and
developed over many years — its core competence is valuable, hard to imitate, and
nonsubstitutable
36
3.3

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
Competitive strategies
Main goal: ensure competitiveness
Corporate strategy: should define competitive advantages that are envisages, developed and
used -> should formulate a competitive strategy that builds on these competitive advantages
Porters’ strategy’s 2 dimensions
o Strategic advantage sough
o Strategic target object
His matrix results in 3 different possible competitive strategies for achieving strategic
advantages
o Differentiation from competitors
o Comprehensive cost leadership
o Concentration on focal points (occupation of niches
Comprehensive cost leadership: low-cost airlines -> Costs are reduced not only in terms of
service processes (minimum turnaround times and no in-flight service elements) or
employees (salaries), but also in terms of suppliers (using airports with low airport charges).
This cost orientation is also enacted in the management’s appearance and kept alive by
ideas and “narratives” (e.g., speculations about charging passengers to use the restroom
during flights).
Differentiation: legacy carries (classical national airlines with extensive route networks) ->
Building on a strong hub located at an international economic center, they operate a highquality network of intercontinental connections
Concentration on focal points: pursued by airlines focusing on a specific segment due to
their geographical location. Based on this strategy, they serve regional focal points (e.g., in
air traffic between Europe and South America) and thus occupy a niche.
37

Following five elements are relevant for assessing industry attractiveness:
o Suppliers’ negotiating power
o Customers’ negotiating power
o Threat from new providers
o Threat from substitute products
o Intensity of competition/rivalry in the industry
Framework to analyze how attractive a market/industry is
38

Frameworks for describing business models contain the same basic questions as strategy
development: questions are closely related to strategy elements (e.g., market position, core
competencies, and development mode).
o How is value created?
o For whom is this value created?
o How is this value internalized?
A structure for creating
depth and investment in
a particular value in an
organization. Applying
the framework to a
value is a method of
realizing a value.
a promise by a company to a customer or
market segment. The proposition is an easy-tounderstand reason why a customer should buy a
product or service from that particular business
The process of turning
resources into something
valuable with work.
Value communication is when a
business shows customers the
positive or helpful aspects of its
products. To help persuade potential
leads into becoming customers,
businesses create value propositions
through advertisements and
marketing plans
The process of retaining some percentage of the value provided in every
transaction
39
3.4
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Strategy process
Strategy process: how is a strategy developed?
Strategy development refers to the individual steps through which an organization creates
its strategy -> it refers to how these steps are worked on.
Analysis phase: involves examining one’s environment, market, and competitors, as well as
one’s organization with its strengths and weaknesses -> based on the analysis, options for
the future are developed, derived as different possibilities available to the organization ->
from these options, the company selects a thrust (i.e., main direction) and concretizes its
strategic positioning as outlined under strategy content
For the purpose of strategy implementation, the changes resulting from the positioning are
grouped into larger project packages, so-called strategic initiatives -> their implementation
leads to organizational changes
Implementation is followed by a performance review, which serves to establish whether and
how well the adopted strategy is working.
The results of the analysis enter the next cycle, making strategy development a continuous
process in organizations.
Among these steps, Nickerson and Argyres highlight the analysis phase or problem
formulation as the core activity -> they refer to the process through which organizations
assess their challenges, opportunities, and situation and through which they conceptualize
possible future scenarios as “strategizing.”
According to Felin and Zenger, this process ought to lead to forming hypotheses about how
the organization can create and internalize value.


Four typical patterns of strategy development: according to Nagel and Wimmer
Structure based on:
o Where: (outside or inside the organization?)
o How: (implicit-intuitive or explicit- systematic?)

First variant: strategy work is explicit-systematic and takes place outside the organization.
Organizations hire external consultants to develop a strategy. Larger companies also have
their own strategy development units. Because, so the corresponding conviction, strategy is
a matter for experts.
Second variant: strategy work is seen as a matter for the boss, who has a feeling for which
opportunities and challenges are emerging based on many years of experience and intuition
Third variant: an organization’s strategy results from the respective strategies of the
different parts of the company. In this pattern, the main idea is that every part is responsible
for its future development. This implicit-intuitive pattern with emergent strategies is evident
in expert organizations such as universities and hospitals
Fourth variant: explicit-systematic strategy development takes place within the organization.
Strategy work is jointly developed by managers and involves different company areas



40

Key factors that inhibit meaningful and efficient strategy development (“strategizing”):
o Cognitive: problems arise when group members maintain different mental models
of the world. If they experience their model as underrepresented or underperceived,
there is a risk that they will conceal or distort their information.
o Sociology: there is a risk of “groupthink” If group interests, especially conformity or
harmony, take centre stage, there is too little conflictual discourse. There is even a
risk that, because it functions well on the surface (“after all, we have no conflicts”),
the group also overestimates its ability to solve complex problems.
o Politico-economic: problems arise when no common understanding of the
organization’s problem can be created. In this case, group members have their own
hidden, unexpressed views of the problem, and thus will individually perceive and
evaluate the alternatives. This often leads to unresolvable conflicts because group
members use different evaluation criteria to compare alternatives.
41

Kreutzer and Lechner mention five typical approaches
Core competencies

Core competencies: a valuable, rare, difficult to imitate and not substitutable ability
o Questions about development of the strategic design field: process, capabilities,
resource configuration

Command approach: enables taking rapid decisions through a clear hierarchy. Strategy
formulation takes place in a centralized manner and accordingly is separated from
implementation.
Strategic planning: strategy formulation also takes place in a centralized fashion, but (in
contrast to the command approach) within the framework of an analytical and formalized
process
Directed evolution: ideas and suggestions from the entire organization are incorporated into
the strategy at a very early stage. Strategy formulation and implementation thus merge and
take place quasi simultaneously.
Symbolic approach: focuses on a common vision for the entire company. Managers act
more as coaches and motivate employees to achieve this common goal. Strategy
formulation and implementation no longer take place explicitly
Self organization: management only assumes a very passive role and merely provides the
ideal framework for the company’s strategic self-development. Ideas and initiatives can arise
anywhere in the company and be driven forward independently.
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42
How attractive is a
market?

Identifying growth potential
Competitive strategy of classic low cost airlines  comprehensive cost leadership
43
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Regarding the four fields, an organization need to ask itself several basic questions:
Strengths/threat: How can I use my strengths to avoid possible threats?
Strengths/opportunities: How can I use my strengths to optimally utilize the opportunities
presenting themselves (see the concept of “unique selling propositions” in marketing)?
Weaknesses/threats: Which weaknesses simultaneously pose a danger and therefore,
make the company vulnerable (Achilles, heel)?
Weaknesses/opportunities: Which opportunities do my weaknesses prevent me from
optimally utilizing?
The negotiating power of suppliers and customers determines how well they can assert their
interests toward the company.
The greater their negotiating strengths, the less attractive the industry.
The same applies to the threat of new suppliers and substitute products: The greater this
threat, the more competitive the market and the less attractive the industry is for the
company.
Competition intensity as the fifth factor also impacts industry attractiveness. Strong rivalry
usually leads to strong price or performance competition, which results in poor profitability
prospects.
SWOT analysis is particularly suitable in the phrase analysis
44
3.5
Ansoff’s product market matrix for the identification of
growth options



A classical tool for formulating and systematizing alternative strategies
Tool best suited for managers to formulate and systematize alternative strategies for a
company
This systematizes different thrusts with regard to market and product
3.6
Hamel and Prahalad’s Core competence market matrix
45
3.7
Boston Consulting Group (BCG) Matrix for Portfolio
Management
46
3.8
Crises as triggers of organizational change
47


The two development modes can also be described as evolutionary (optimization) and
revolutionary (renewal) -> search for effectiveness
A disruption of the value chain corresponds to the development of renewal
o Evolutionary: development often takes the form of optimizing customer
performance (e.g., when a sneaker manufacturer successively evolves into an
integrated lifestyle coach by installing sensors in its running shoes and developing
apps). Today, performance systems are increasingly being developed into integrated
solutions to problems. The horizontal performance domain of companies is thus
expanded -> low impact intensity
o Revolutionary: development often starts with the renewal of service creation (e.g.,
when an integrated car manufacturer focuses on providing delivery and
maintenance logistics and thus becomes a pure service provider for other car
manufacturers). Service production areas of companies are currently growing
narrower, thus shortening their share of the value chain -> high impact intensity
48
3.9


Strategy implementation or realization depends on the selected strategy process.
One main distinction is between “top-down” and “bottom-up” implementation
o Top down: the strategy is specified by management, and implementation is
“commanded” top-down. The less a strategy can be implemented top-down, the
more a participation process and thus mobilizing those affected becomes necessary.
For example, a university can build up a new field of teaching and research by
deciding top-down (i.e., centrally) to create new chairs.
o Bottom up: an attempt is made to get all employees to willingly support the strategy
through a shared understanding of the problem. Establishing interdisciplinary
research areas requires professors to cooperate across disciplines and can only be
achieved bottom-up (i.e., decentrally) through a common understanding of the
problem and through shared motivation.
3.10

Implementation
Evaluation
Strategies must be reviewed in terms of their implementation and success. Various tools
exist for this purpose.
o Balanced Scorecard: involves incorporating the various input and output factors of a
strategy or of a corporate development in a report (quasi a “dashboard” that makes
explicit the strategy’s goals and key figures). Typical perspectives include the
financial perspective, the customer perspective, the internal process perspective,
and the potential perspective
o KPI (Key Performance Indicator): Such KPIs can be defined based on results (e.g.,
number of new patents in a research department), but can also focus on processes
(e.g., improving the scope and quality of collaboration in an interdisciplinary
research team). For example, a series of tangible KPIs can be derived from the vision
of an organization via the various stages of concretizing a strategy
49


Strategic success positions (SSP) : prerequisite/precondition for long-term advantage
created by companies by building key and dominant capabilities
To which of the strategic design fields do make or buy decisions belong ?
o Scope of value creations

For which phase of a typical strategy development process is … suitable?

Formulation: market matrix, Ansoff’s product matrix (FMA)

Analysis: network analysis, SWOT analysis, porters 5 forces (ANSP)

Selection: utility analysis, BCG (SUB)

Evaluation: balanced scorecard (EB)

To which of the strategic design fields do questions about cooperation with strategic partners
belong?
o
Cooperation Fields, Partners and Forms
50
4. Structure and Culture
Both are mutually dependant
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Organization definition
o Creative: an organization is organized
o Instrumental: an organization has an organization -> an organization or a company
needs structures as structing forces -> structures refer primarily to formal
specifications so that it is clear which areas, units or offices perform which tasks,
who is authorized to issue instructions to whom and with what responsibility
o Institutional: an organization is an organization -> an organization or a company
needs structures as structuring forces
Formal elements of an organization: Responsibility (whom), task (what), competencies
(how)
Structures: formal specifications so that it is clear which areas, units or offices perform which
tasks, who is authorized to issue instructions to whom and with what responsibility
Structures are rules that an organization establishes for itself or that develop over time to
provide orientation for its members
Giddens theory: every social action automatically generates structures  every time people
meet, they are automatically divided into different roles
Structures shape a culture
An organization’s culture comprises the fundamental understandings, values and norms that
are expressed in the actions, modes of communication, decisions and structures
An organizations culture is not homogeneous -> group or subcultures evolving
Structure follows strategy (Chandler) -> in the process of the trend toward “business
reengineering” (reorganization of business processes): structure follows process -> in the
case of strategic process management: process follows strategy in the case of strategic
process management
o STRUCTURE FOLLOWS PROCESS FOLLOWS STRATEGY
o Strategy is decided first
o Processes are created to implement it
o Structure of the company is arranged to support
Representation of structures:
o Function diagram
o Organizational charts
o Bar chart
o Network planning
technique
51
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At all levels (job, department, division), it is central to define and coordinate the tasks,
competencies, and responsibilities of the individual units ->function diagrams
Within such diagrams, tasks are assigned to units while the powers of individual positions
are determined (e.g., planning, decision, codetermination, execution, withholding approval).
o Example: RACI (Responsible, Accountable, Consulted have established themselves.
Functional diagrams not only provide an overview, but also enable verifying adherence to
organizational principles such as avoiding duplication of responsibilities (e.g., when two units
make decisions on the same issue).
For more complex projects and tasks, process organization tools are introduced.
Organizational structure (i.e., the structural division of the company into organizational
units) and process organization (i.e., the definition of the company’s work processes) are
intimately related
They provide different perspectives on the same issue: a company’s organization.
o While organizational structure defines the organizational framework
o Process organization regulates the work processes to be carried out within this
framework.
Attention turns to process organization when organizational structure complicates the
execution of complex projects and tasks, which makes taking a closer look at processes
helpful.
Together, these functional and hierarchical barriers create a fragmented organization.
o Fragmentation: means the formation of different operational islands
Danger of a specialist department -> often still differentiated by hierarchical level (e.g.,
controlling clerks) -> develops its own goals, which are oriented more toward professional
status and hierarchical standing, and thereby neglects larger, overarching organizational
goals.
Possible measures include boundary-spanning tools (e.g., management models business
planning, or appropriate management and communication measures
52
4.1
4 basic organizational types
There is no generally ideal organization that is appropriated for all tasks and contexts
o Line organization
o Matrix organization
o Network organization
o Process organization
53
4.2


Line organization
Medium to large companies
Organization can be structured along various dimensions (by functions or divisions in a lifestaff)
Similar activities are grouped together as far as possible and are subject to clear
(hierarchical) line management
Structures have specialized functions
Structured by:
o Function/staff (function based)
o Division/staff (division based)
Alternatively, it can be organized as a system of subsidiaries each with mutual contractual
agreements.
Hierarchical barriers also tend to emerge from individual hierarchical levels (e.g., middle
management) developing their own identity based on their own artifacts (e.g., reserved
cafeteria seats) and dealing with issues in their own way according to their own agendas.

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Strengths

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Clear hierarchy
Simple structure
Specialization
Weaknesses


Communication gaps
Possible Silo thinking
54
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In order to benefit from the more extensive division of labor possible in larger organizations,
similar functions are grouped together in specialist departments.
Functional specialist departments may, however, lead to silo thinking
o Two separate departments at Sony once worked on creating the same electrical plug
without either department realizing it. This example illustrates the silo mentality
meaning. When employees don't talk to each other, they end up doing redundant
work, wasting time and lowering efficiency.
Functional specialization and hierarchical differentiation can result in operational islands
Employees orient themselves increasingly toward the standards of their own occupational
group (e.g., the special features of a production department, the identity of a marketing or
controlling department).
Differentiation into specialisms promotes effective and efficient collaboration within
departments while potentially complicating the coordination of differentiated departments.
Higher number of hierarchial levels leads to a slowing down of communication and decision
making processes
55
4.3

Augmented organization:
Applies technology, and in particular artificial intelligence, to functions and processes, in
order to become more nimble, efficient, and innovative
Functionality, productivity
56
4.4



Matrix organisation
Suitable for medium to large, diversified companies
Can be structured by business units or customer groups
Involved defining a primary dimension (customer groups or business units), which then
access the individual functions or regions
Structured by: function/business unit or region

Strengths
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Flexibility
Multidisciplinary
Collaboration
Weaknesses

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Conflicts between 2 authorities
Slow decision making
Complex management
Can also be controlled internally via service contracts
Ultimately, this enables creating an internal market of sorts: Specialist departments must
apply to the individual business units or processes with their services.
In extreme cases, the internal specialist department (e.g., the communications department)
can also be exposed to external competitors (e.g., communications agencies)
If those responsible for a process or business segment are not satisfied with internal
services, they can switch to an external provider.
In this extreme variant, specialist departments could even be designed as their own
subsidiaries.
57
4.5

Network organisation
Any size, independent units following centralized standards
o Examples: holding companies
Consists largely of independent units with great decision-making autonomy and managed
centrally by a focal element in line with specific standards
Structured by: independent business units with a central coordinating body

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Strengths

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
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
Innovativeness
Local adoption
Agility
Weaknesses


Coordination
Risk of incoherence
Can in turn be established within a legal entity, but also through a system of fully, mostly, or
partially controlled subsidiaries each with their own legal personality, or indeed through a
franchise system and thus through contractually bound independent legal entities.
When is the network planning technique usually applied: when individual processes and
process steps have tob e coordinated in terms of time
58
4.6

Process organization
Aims to ensure standardized overall responsibility for a process and thus the greatest
possible quality and handling efficiency from a single source
Challenge: coordinate individual processes and any specialist departments still existing along
processes
Interlinking processes (for example recruitment in HR with the service processes of individual
operating units) requires coordinating communication, work and IT processes
Structured by: core business process

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Strengths
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High quality control
High efficiency
Good responsibility tracking
Weaknesses

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
Silo thinking
Resistance to change
Difficult innovation
Can also be controlled internally via service contracts
Ultimately, this enables creating an internal market of sorts: Specialist departments must
apply to the individual business units or processes with their services.
In extreme cases, the internal specialist department (e.g., the communications department)
can also be exposed to external competitors (e.g., communications agencies)
If those responsible for a process or business segment are not satisfied with internal
services, they can switch to an external provider.
In this extreme variant, specialist departments could even be designed as their own
subsidiaries.
59

Determinants of organizational structure
o Organizational controllability
o Focusing on those concerned (e.g avoiding monotony, ensuring occupational safety,
ensuring freedom and providing scope for intrinsic motivation
o Diversity of goals means there is no single optimal organizational structure
o Organizational structure depends on task focus and primary goals, which may differ
depending on an organizations development phase


Economic effects:
In an economic perspective designing organizational structure is about creating the best
possible conditions for establishing and exploiting strategic competitive advantages
If production conditions enable economies of scale, then the same type of activities should
be grouped together as far as possible -> strongly hierarchical line-staff organisations are
used to best support coordinating highly specialised activities -> similar activities are
coordinated through the clearest possible standards and controlling specifications
Learning effects offer cost advantages and quality advantages over competitors -> total
number of services produced becomes a competitive factor
Strong hierarchical line staff organizations are used to best support coordinating highly
specialized activities -> similar activities are coordinated through the clearest possible
standards and controlling specifications
If a business is characterized by very strong network effects, its goal must be to facilitate the
fastest possible growth of the enterprise while ensuring cohesion -> in this case a network
organization may be suitable -> to some extent these individual elements of the overall
network coordinate themselves independently by helping each other out in case of
bottlenecks via direct contact with other production cells
Economies of scope: if for example comprehensive customer care can increase willingness to
pay, it is worth aligning the organization with precisely these customer processes and for
example offering optimum service quality for customers through a one stop shop -> such
process organizations include financial services, which are structured according to customers
and customer groups
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60
4.7
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Culture
Definition:
The way of life and practice of an organization: the way we do things around here
Based on a frame of reference and meaning: a shared interpretation tool, that allows
employees to adequately interpret events and developments in an organization and its
environment
Even if an organizational culture is effective implicitly, it (often) becomes visible in
material form -> artifacts of culture can be: design of offices, expectations regarding
working hours/catering arrangements
Evolves over time: but is shaped by past events (historical component)
Peter Drucker is credited with saying that “Culture eats Strategy for Breakfast” -> a strategy
and an organization function only in terms of a culture that supports them.
An organization shapes a culture -> for example, by forming its own demarcation
mechanisms toward the outside and integration mechanisms toward the inside.
An organization’s culture is its way of life, the way organizational members typically handle
topics and make decisions (i.e., practices and routines).
It is also oriented toward a common “horizon of sense and meaning” and it serves as a
jointly usable “interpretive aid” that enables employees to appropriately interpret events
and developments in their organization and its environment
Although organizational culture is implicitly effective, it often becomes visible and
“readable” in materialized form.
61
4.8
Schein’s mode of cultural levels

At its lowest level: basic underlying assumptions
o A culture consists of so-called basic premises.
o In the case of an organizational culture, these include the fundamental/basic
assumptions about the company’s environment -> For example, a company can
perceive its environment primarily as competitive or as cooperative -> unwritten
rules of conduct
o Identity and self understanding

The second level: espoused values rproclamations»
o Concerns collective values
o This is also referred to as the proclamation level because it focuses primarily on the
communicated values, which are often articulated in a mission statement.
o For example, a company that views its relationship with its environment chiefly as
cooperative may espouse corresponding values (e.g., tolerance or the search for
balance), whereas a more competitively minded company may emphasize rivalry
and achieving success through performance.

The most visible level: artifacts
o Include observable behaviors or visible physical symbols.
o In a collaborative culture, for example, an intangible artifact may be starting every
meeting by asking participants how they feel or when every motion is first
acknowledged positively.
o Physical artifacts can include particular office formats or artworks whose design and
messages represent company culture.
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63
4.9
Typologies


Schein’s model emphasizes the levels for describing a culture
Hofstede proposes a content-based description of different social cultures. He uses six
dimensions to compare cultures:
o Power distance
o Individualism
o Masculinity
o Uncertainty avoidance
o Long-term orientation
o Indulgence

He also uses this typification to describe national cultures.
o For example, Scandinavian cultures exhibit small power distance and low
masculinity, while Switzerland is dominated by high uncertainty avoidance and
strong long-term orientation
In addition to Hofstede’s dimensions, other approaches to typologizing cultures have been
proposed -> Deal and Kennedyclassify corporate cultures based on a matrix consisting of two
dimensions: “risk propensity” and “feedback speed.”
o This typology can be used to illustrate the importance of the interaction between
culture and structure. For example, a bureaucratic “process culture” can completely
block the dynamics of a network organization.
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65
5. Leadership and Governance
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Leadership:
o Process of influencing the actions of an organized group toward goal setting and
goal attainment.
o Leadership requires understanding the goal-related and motivational structures of
those who are led.
o Every leadership style and leadership behaviour is informed by a concept of the
human being. This reflects basic assumptions about individual behaviour in the
organization.
Motivation: can be described and explained with the help of content or process theories.
Content theories: describe specific motivational structures that determine human actions
Process theories: apply suitable models to describe how motivation comes into existence.
Leadership is the process of influencing the activities of an organized group toward goal
setting and goal achievement
Leadership over human beings is exercised when persons with certain motives and purpose
mobilize, in competition or in conflict with others, institutional, political, psychological, and
other resources so as to arouse, engage and satisfy the motives of followers
Leadership is understood to be the attempt to exert influence in order to motivate group
members to perform and thus to achieve group or organizational goals. Influence can be
defined as a change in the attitudes, values, beliefs and behaviour of target persons as a
result of the influence efforts of the leader.
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5.1
Theories of motivation
5.2
Content theories:
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5.3
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Understand what motivates people
Theories:
o Maslow: importance of motivational factors
o Herzberg 2 factors model: basic criteria vs motivators
o Intrinsic (individual rewards) vs extrinsic (external rewards) motivation
Maslow’s pyramid of
needs
Model hierarchizes human and
assumes that humans first want to
satisfy their physiological needs (e.g,
food, sleep, reproduction)
Next come security needs (e.g.,
health, work, housing) and social
needs (family, friendship,
communication).
Only at a later stage of development do individual needs (e.g., independence, esteem, selfaffirmation) become dominant
According to Maslow when these potential deficits have been eliminated, self-realization
comes to the fore: Humans seek meaning in life and want to develop their own potential.
o These insights can also be applied to today’s working world: Many people are no
longer just looking for job security but wish to work an environment with a good
“team spirit,” mutual appreciation, and the opportunity to realize themselves, to fill
their self-concept with “purpose.”
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5.4 Two-factor model

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Classifies motivational factors in terms of how far they promote satisfaction (motivators) or
merely serve to avoid dissatisfaction (hygiene factors)
If a company improves its hygiene factors, this does not yet increase work motivation, but
only eliminates dissatisfaction.
The perceived quality of company policy and administration (organization, goals, rules,
procedures, etc.) is the most important hygiene factor, followed by competent superiors and
personal relationships with superiors.
Herzberg identified a sense of achievement, recognition, and fulfilment as the most
significant motivators.
However, not all factors can be assigned clearly to one or the other category:
o Income can be both a hygiene factor and a motivator.
o A fair basic salary serves to avoid dissatisfaction, while perks (performance bonuses)
are likely to increase satisfaction.
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5.5 Extrinsic and Intrinsic motivation


Extrinsic motivation: based on external incentives (e.g., salary, title).
Intrinsic motivation: results from the meaningfulness of work and from the satisfaction with
one’s contributions and possibilities to be creative.

If work is well-structured (e.g., assembly line performance), extrinsic incentives are likely to
positively influence motivation or performance (in the short term).
More comprehensive work, on the other hand, requires intrinsic motivation.
In activities such as teaching, research, and building maintenance, it is never possible to
measure and evaluate all performance factors -> this explains why extrinsic motivation (e.g.,
through monetary incentives) is not enough in itself.
In the worst case, extrinsic incentives override intrinsic motivation such that attention
focuses mainly on what is being measured
What is not measured no longer takes place (e.g., talent development as part of managerial
responsibility).
The nonmeasurable parts of a task are neglected.
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5.6


How success impacts motivation
Consider not only different motives and incentive types, but also the perceptual and
evaluative processes involving factors such as how likely an action will succeed in terms of
goal attainment.
5.7


Process theories:
Valence-instrumentality- expectancy theory
Theory maintains that motivation results from the perceived probability of being successful
(expectancy), the desired consequences of an action (instrumentality), and the value of
successful action (valence).
Valence, in turn, is influenced by various motives and incentives
70
5.8

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Image of Man
Theory X: holds that human beings are basically inert and act only on external impetus
Assumption: man is unwilling (lazy)
Source of motivation: supervision, rewards, penalties -> extrinsic
Leadership styles: authoritarian, patriarchal -> transactional leadership
Work environment: clear hierarchy, controlled, strict rules, only what is recorded by control
mechanisms is values
Resulting behaviour: reliance on external rewards to act + reliance on direct oversight to act
Theory Y: maintains that people are intrinsically motivated. In this view, meaningfulness of
work, one’s creative contribution, and appreciation are important. Thus, delegation of
responsibility and participation are important management principles.
Assumption: man is committed (self-motivated)
Source of motivation: fulfilling work, recognition, personal growth -> intrinsic
Leadership styles: participatory, delegating, democratic -> transformational leadership
Work environment: decentralization of decision making, creativity, delegation of
responsibilities, initiatives are welcome
Resulting behaviour: satisfaction found in achievements, employees fake initiatives,
commitment
71
Tension between transactional and transformational leadership requires a situational approach to
leadership
72
5.9 Leadership in the SGMM
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Management: the reflective design of value creation systems, and thus refers to the
“macrocosm” of organizational leadership.
Leadership: the management of people and employees, and thus focuses on the immediate
work context of management and refers to the “microcosm” of organizational leadership.
Profession related leadership: leadership through highly specific, task- centred specialist
expertise, also focuses on the immediate work context and thus on the “microcosm.” In
contrast to leadership per se, however, profession-related leadership is not about
performing leadership through “communicative interventions” but through elaborate
specialist knowledge (e.g., a surgeon in the operating room).
Management processes: These are an organization’s planning and management processes,
which as a rule extend over a year (analysing goal attainment, budget and action planning,
implementation, reviewing goal attainment), and form the basis for setting organizational
and individual goals.
Support processes: especially in the context of HR processes in the sense of structural
management measures (e.g., recruitment, remuneration and compensation, personnel
development).
When a new product is launched -> participative – delegative so the creativity of the group
can be fully utilized
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5.10 Behavioural Managerial Grid
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5.13
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Theory of situational leadership
In order to be effective, leaders need a different leadership style depending on the situation.
This approach belongs to so-called contingency theory
This assumes that the tension between differentiation and integration is constitutive for
organizations
Differentiation enables efficiency gains or learning effects via increasing specialization and
division of activities.
These, however, must be reintegrated, in order to benefit customers either as a product or
as a service.
Yet there is no single best solution for this force field (i.e., one that would be either
comprehensive or permanent).
Instead, contingency theory characterizes decision situations from which it derives
recommendations for action.
5.14 Contingency theory
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Model shows that a manager’s leadership style should be more task- or relationshiporiented depending on employee maturity.
Other situational factors include time availability or task complexity.
The more time and the more complex the task, the more “team wisdom” can and should be
used.
If, however, decisions need to be made at short notice in the face of clearly defined
problems (e.g., savings measures to be implemented immediately in a crisis to preserve
liquidity), then authoritarian decisions are called for
These also have the advantage of relieving the group.
Moreover, they help to avoid tough disputes, which might split the group (due to conflicts of
interest and emotional upheaval) and even leave noticeable scars in the long term.
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5.15 Leadership principles


Leadership rules are principles, quasi “firm precepts” of leadership.
Leadership rules can be found both in history and in different types of organizations.
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5.16 Human Resource Management

Performs two overarching functions:
o To recruit, develop, and release employees
o To support managers’ employee management

Subtasks which we explain in detail in the following sections:
o Determining personnel requirements
o Recruitment
o Staff motivation
o Remuneration
o Human resources development
o Releasing staff.

These tasks involve determining goals, measures, and means, as well as defining the
necessary control variables.
This creates a closed management loop.
As a whole, human resources management as a support process should be aligned with
organizational strategy and contribute to aligning the actions of an organization’s members
with its goals and context.




A company providing largely repetitive services (e.g., a cleaning company) will likely more
strongly emphasize costs and productivity. Central aspects will therefore probably include
accurately assessing personnel requirements and also recruiting in favourable recruitment
markets. Simple and transparent systems of personnel motivation and remuneration will be
important, just as recruitment will be largely standardized or even automated.
A company performing complex, creative tasks (e.g., an advertising agency) will more likely
emphasize creating an intrinsically motivated, creative pool of employees (i.e., knowledge
bearers and co-entrepreneurs). Qualitative criteria in personnel recruitment will matter in
such cases. Young talents might be hired on a temporary basis, quasi as a source of
knowledge and creativity. Such companies might use very individual agreements to motivate
and reward staff.
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5.17 Personnel requirements
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Involves distinguishing qualitative and quantitative requirements.
In the simplest cases, quantitative personnel requirements can be determined by means of
productivity ratios (workload, e.g., the area to be cleaned divided by standard productivity,
measured in terms of the cleaning area per employee and working hours).
Planning quantitative personnel requirements requires taking into account job leavers or
fluctuation rates, as well as sickness levels and other absence rates.
Assessing qualitative personnel requirements involves considering competency and
personality profiles, and increasingly also cultural fit.
Important instruments include job descriptions, requirements profiles, and qualification
profiles:
o Job description: Description of position (tasks, competencies, responsibilities
o Requirements profile: Description of vacancies (required skills, competencies, etc.)
o Qualification profile: Description of applicant requirements (required qualifications,
training, degrees, etc.)
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5.18 Recruitments
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Can be described as a process that ranges from the need for new staff (job announcements,
active search) to their selection and onboarding.
Most positions are filled based on internal or external (i.e., open) advertisements.
This enables the broadest possible search, but also an open recruitment market.
Internal appointments have the advantage that applicants are known, that they are trained
more quickly, and that motivation spreads to other internal employees.
External appointments enable developing new competencies and bringing in new opinions
and perspectives.
With positions that require specific qualifications and confidentiality (e.g., if an incumbent is
unaware that a replacement is being sought), searches are often covert.
Open or covert search processes can be carried out internally or externally (e.g., by the
company’s HR department or by a contracted HR consultancy).
This may occur passively (i.e., running a advertisement) or actively (i.e., sometimes even
going as far as to poach staff from a comparable position).
Today’s predominantly passive, open, and external searches involve various media (e.g., job
platforms or classical personnel advertisements).
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5.19 Staff motivation and Remuneration
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What does a compensation scheme consider?
Performance
Requirements
Employment market
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5.20 Human Resources Development


Personnel development is very important in the context of HR policy. The two key aspects
are:
o Often, the required personnel cannot be sourced externally and must be developed
internally (e.g., due to excess demand in the labour market or when no training is
available for a particular position).
o Personnel development and the associated offerings are often also part of an
incentive system and have an acquisitive effect on recruitment.
Personnel development mainly comprises two main areas: career planning; employee
training and development
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5.21 Releasing Staff
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The final step, releasing staff, involves “eliminating staff surpluses in quantitative,
qualitative, temporal and local terms”
This includes not only staff redundancies (headcount reduction) but also transferring or
reducing working hours (furloughing, part-time work, overtime reduction).
If layoffs are required due to employment relationships being terminated, labour and
insurance law considerations in particular occupy a central role (individual employment
contracts, collective labour agreements, trade unions, pension funds, social security, etc.).
The main reasons for releasing staff: declining sales, structural changes, seasonal
fluctuations, relocations, reorganization, or automation.
In order to avoid redundancies as far as possible, long-term personnel planning is essential
and appropriate measures must be adopted early on.
These include, for example, not replacing natural departures (retirement, employee
resignations, etc.) or promoting voluntary departures (e.g., early retirement, financial
compensation, helping employees find new jobs).
Since termination is probably the hardest measure for employees to cope with, it should be
resorted to solely in exceptional cases and, whenever possible, be accompanied by flanking
measures such as “outplacement” (a “soft” separation supported by an HR consultant)
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5.22 Governance

Characteristics of good corporate governance
o Appropriate risk management
o Formal and transparent election of members
o Functional corporate governance
o No cross involvement between remuneration committees of different companies
o Long term value creation management decisions
o Transparent corporate communication
o Consideration of different groups interests
o Purposeful cooperation of corporate management and supervision
o Whenever possible there should be a prioritization of agents (managers) over
principles(shareholders) -> central challenge corporate governance aims to address
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Swiss code of best practice
Addressed to Swiss public companies
Specific points concern institutional investors and intermediaries
Is intended to provide guidelines and recommendations
Does not aim to put a straitjacket on Swiss companies
Each company should retain the opportunity to realize its own design ideas
The code highlights for companies in a suitable manner how far they deviate from the
recommendations of the Swiss Code
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5.23 Board of directions
!! The tasks and responsibilities of board of directors are increasingly legally defined and increasingly
demanding! In addition to the SGMM’s organizational sociological view, the legal view is therefore of
increasing importance!!

Core functions:
o Define organization’s basic purpose
o Define boundaries and type of organization
o Define scope of executive management
o Responsible for the strategic management level
o Elect the executive board
o Should think outside the box -> take a broader look at environmental developments
o Issues the organizational regulations and/or the competence matrix
o Bring in external experience/diversity
o Control/decrease/review financial planning
o Make strategic decisions based on preparatory work
o Overall management of the company
o Appointment and dismissal of persons entrusted with managing the company
o Determination of the company’s organisation

Composition:
o Diverse group of members
o Members who contribute relevant expertise

CO duties:
o Overall management and issuing directives
o Determine organizational structure
o Organise accounting, financial control and planning systems
o Hire & fire management personnel
o Supervise management, ensure compliance with laws and policies
o Compile annual reports and prepare for general meeting
o Notify the court is the company over-indebted
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85
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Management:
Responsible for operational management level
Prepares the business of the Board of Directors
Performs controlling at company level
Is responsible for the reflective design of an appropriate management architecture

Core functions of executive management:
o To concretize the notions of success and to create the conditions needed for success
within the organization by, among others, optimally configuring the management
architecture and thus how strategic issues are treated
o To operationalize strategies within the system boundaries defined by corporate
governance
o To differentiate management practice (e.g., development of management teams)
and to stabilize development processes (e.g., renewal versus optimization)

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Revision/Auditing
Ensures that the information given to the outside world is correct
Checks compliance with rules and standards
Checks the accounting (books)
Checks the functioning of the internal control system (ICS)
Reports to management, board of directors and general assembly
Checks with random samples (with an “appropriate level of detail")
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5.24 Triangle of corporate governance
Corporate governance
Executive board


control
Inner triangle: involves interactions between the management, the board of directors, and
the auditors
Outer triangle: those between the company, markets, and stakeholders. Corporate
governance needs to establish a balance within both of these triangles
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5.25 Risk Management
Compliance management system


Definition: structural and procedural setup within an organization designed to ensure
adherence to both internal policies and external legal requirements
Responsibilities: management and other responsible persons are responsible for aligning
the organization with current legal requirements
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5.26 Tools:
o
o
o
o
Plan/Do/Check/Act method
Process management model
Delegation
Risk management method
5.27 Lines of defense
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First line: operation management -> managers, operational staff
o Managing day to day operations and risk
o Ensure that protocols and policies are followed
Second line: executive management (ICS -> internal control system) -> CEO, CFO,
Compliance department
o Monitor compliance with laws
o Develop risk management frameworks
Third line: internal audit -> internal auditors
o Internal control processes
Fourth line: external auditing -> checks compliance with requirements and the functioning
of the 3 lines of defense
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90
6. Environment and Interaction Issues

Why do organisations need an environment?
o To supply labour, capital and demanders
o For the creation of a field of existential relevance to them
6.1
Theories of the firm
Why do organizations emerge, persist and grow?
1. Neoclassical theory: does a company given the appropriate technology have a feasible
operating size for its industry?
 Goal: economies of scale -> management ensures the profit maximizing configuration of
labour and capital (or technology)
 Size: cost minimizing configuration of labour and capital for a given technology -> size
depends on the production optimum (MC=MR)
 Rule: MC=MR=production optimum
2. Transaction cost theory: management decides whether the hierarchy (internal) or the
market (external) coordinates or produces more favourably
 Goal: minimum transaction costs (make vs buy)
 Size: depends on the minimum transaction costs
 Rule: plausible reach in the value chain
3. Resource-based theory: existence of a company depends on the resources available
Goal: use of rare and hard to imitate resources -> these resources are not homogeneous and
interchangeable, but rare and hard to imitate.
 Size: depends on the ability to have unique resources to secure competitive advantages
 Rule: having the relevant patients, resources, or technologies
4. Behaviourist theory: question of whether the company can maintain stakeholder cohesion
 Goal: maintain stakeholder cohesion
 Size: depends on coalition and rationalities -> explains company size and existence in terms
of successful stakeholder cohesion.
 Rule: balance profit and stakeholder interests -> theory explains why companies can survive
despite (partial) deviation from “rational” behaviour and without perfect profit maximization
(see neoclassical theory)
4. Customer value-based theory: question of whether the company manages to generate
sufficient customer value in competition with others to open up a sufficiently large market.
 Goal: generate customer value -> company’s existence depends on whether it successfully
fulfils the needs of its customer markets, and thus its basic function
 Size: Depends on firms’ ability to fulfil customer needs
 Rule: adapt to changing customer needs
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6.2
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Environmental Spheres:
Environmental spheres, moreover, are not static but dynamic, which explains why
controversies occur between environments.
Depending on the environmental sphere, the focus can lie on different interaction issues and
controversies with different evaluation scales
Economy
Technology: new technologies are created at research institutions operating in the field of
technology as an environmental sphere.
Nature: most fundamental of all environmental spheres
Society
Financial resources are obtained via the capital market in the economy as a second
environmental sphere.
Employees are recruited in society as a third environmental sphere
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93
Focus on stakeholder concern
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6.3
Stakeholders
Stakeholder approaches
1.
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Strategic stakeholder concept: based on the effectiveness of a stakeholder group
Stakeholders: actors with an impact on the organization
Focus: organization’s dependencies
Strategy: power driven: the more crucial the more priority is given to the stakeholder
Value: strategic rationality -> what is best for the company?
Dependence: resources and support
2.
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Normative-ethical stakeholder concept
Stakeholders: anyone affected by the company
Focus: stakeholders concerns + company’s impact on stakeholders
Strategy: fairness driven -> balance different stakeholders’ interest fairly
Value: ethical rationality -> what is morally correct
Dependence: justice, ethic and common good
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6.4
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
Back to integrative management
External integration: Integration of the often-conflicting interests of various stakeholders.
Cohesion among these stakeholders is a prerequisite for the existence of organizations.
Different ethical approaches are possible when dealing with stakeholders.
Internal integration: Integration across various functions and organizational units within the
company. Governance, structure, and culture offer starting points for integration, which
must be achieved by managers.
Integration over time: Integration of the short- and long-term horizons of corporate
management (i.e., dealing with the conflict between short-term success and safeguarding
the ability to exist and succeed in the long term). The various planning dimensions
(operational, strategic, normative level), strategy as a structuring force, and the different
development modes offer explanations and approaches in this respect.
Integration within management: Integration of the tensions existing within management
tasks and teams (e.g., different decision-making methods, communication platforms,
reflective practices).
Why is management an integrative accomplishment?
o The very diverse stakeholders and interests have to be united
o Short-term optimisation and long-term renewal must be pursued simultaneously
o Formation of functional silos and operational islands must be counteracted
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6.5
Rationality
97
Focus on organization’s dependency
In order to secure our existence in
the long term, the effort to ensure
willingness of all those involved to
cooperate and the acceptance of
influential stakeholders at the time



Private sector: expectations of customers/buyers determine the
structures of the organization
Public administration: politicians expectations are more important than
the efficiency and effectiveness with which tasks are performed
Universities: expectations of measurability of research, quality assurance
etc. change the structures of the organization
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