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CHAPTER 10
Implementing Strategy:
Structure, Leadership, and
Culture
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Chapter Topics
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McGraw-Hill/Irwin
Structuring an Effective Organization
Organizational Leadership
Organizational Culture
Appendix – Primary Organizational
Structures and their Strategy-Related
Pros and Cons
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Ex. 10-2: What a Difference a Century
Can Make
(Contrasting Views of the Corporation))
Characteristic
Organization
Focus
Style
Source of Strength
Structure
Resources
Operations
Products
Reach
Financials
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20th Century
The Pyramid
Internal
Structured
Stability
Self-sufficiency
Atoms – physical assets
Vertical integration
Mass production
Domestic
Quarterly
21st Century
The Web or Network
External
Flexible
Change
Interdependencies
Bits – information
Virtual integration
Mass customization
Global
Real-time
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Ex. 10-2 (contd.)
Characteristic
Inventories
Strategy
Leadership
Workers
Job Expectations
Motivation
Improvements
Quality
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20th Century
Months
Top-down
Dogmatic
Employees
Security
To compete
Incremental
Affordable best
21st Century
Hours
Bottom-up
Inspirational
Employees/ free agents
Personal growth
To build
Revolutionary
No compromise
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Trends Driving Organizational
Structure
Speed of Decision Making
Globalization
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Internet
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Conclusions of Research on
Organizational Structure
 A single-product firm or single dominant
business firm should employ a functional
structure
 A firm in several lines of business that are
somehow related should employ a
multidivisional structure
 A firm in several unrelated lines of business
should be organized into strategic business
units
 Early achievement of a strategy-structure fit
can be a competitive advantage
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Restructuring to Support Strategically
Critical Activities
• Concept – Some activities within a
business’s value chain are more critical to the
success of the strategy than others
• Considerations in restructuring
• Strategically critical activities must be the central
building blocks for designing the organization
structure
• Organizational structure must be designed to help
coordinate and integrate support activities to
• Maximize their support of strategy-critical
primary activities
• Minimize their costs and time spent on
internal coordination
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Reengineering Strategic Business
Processes (BPR)
• Concept – Involves placing the decision
making authority that is most relevant to the
customer closer to the customer, in order to
make the firm more responsive to the needs
of the customer.
• Potential outcomes of BPR
• Reduces fragmentation by crossing
traditional department lines
• Reduces overhead by compressing
formerly separate tasks that are
strategically intertwined in the process of
focusing on the customer
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Steps Involved in BPR
• Develop a flow chart of the total business process
• Try to simplify the process first, eliminating unnecessary
tasks and streamlining remaining tasks
• Determine which parts of the process can be automated
• Benchmark strategy-critical activities
• Consider outsourcing non-critical activities
• Design a structure for performing remaining activities and
reorganize personnel accordingly
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Downsizing, Self-Management, and
Outsourcing
• Downsizing – Eliminating employees,
particularly middle managers, in a
company
• Self-management – Delegating work
to lower, operating levels of an
organization
• Outsourcing – Obtaining work
previously done by employees inside
a company from sources outside the
company
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Product-Teams
The product-team structure assigns functional
managers and specialists (e.g., engineering,
marketing, financial, R&D, operations) to a
new product, project, or process team that is
empowered to make major decisions about
their product
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Ex. 10-5: Product-Team Structure
Chief Executive Officer
Research and
Development
Engineering
Operations
Finance
Sales and
Marketing
Product or
process teams
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Virtual Organization
A temporary network of independent
companies – suppliers, customers,
subcontractors, even competitors –
linked primarily by information
technology to share skills, access to
markets, and costs
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Key Considerations of Organizational
Leadership
Organizational leadership involves
action on two fronts
Providing the
Guiding the
management skill to
organization to
cope with the
deal with constant
ramifications of
change
constant change
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Strategic Leadership: Embracing
Change
Clarifying strategic intent
Activities
involved in
galvanizing
commitment
to change
Building an organization
Shaping organizational
culture
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Strategic Intent
An articulation of a simple
criterion or characterization of
what the company must become
to establish and sustain global
leadership
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Ex. 10-12: What Competencies Should
Managers Possess?
The Leadership Needs of
Organization
The ability to:
•build confidence
•build enthusiasm
•cooperate
•deliver results
•form networks
•influence others
•use information
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The Required
Competencies of
Business Leaders
•business literacy
•creativity
•cross-cultural effectiveness
•empathy
•flexibility
•proactivity
•problem solving
•relation building
•teamwork
•vision
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Ex. 10-13: Management Processes and
Levels of Management
RENEWAL PROCESS
Attracting resources and
capabilities and
developing the business
Developing operating managers and
supporting their activities. Maintaining
organizational trust
Providing institutional
leadership through shaping
and embedding corporate
purpose and challenging
embedded assumptions
Managing operational
interdependencies and
personal networks
Linking skills, knowledge, and
resources across units. Reconciling
short-term performance and long-term
ambition
Creating corporate direction.
Developing and nurturing
organizational values
Creating and pursuing
opportunities. Managing
continuous performance
improvement
Front-Line Management
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Renewing, developing, and
supporting initiatives
Middle Management
Establishing
performance standards
Top Management
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What is Organizational Culture?
The set of important
assumptions (often unstated)
that members of an
organization share in common.
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Ex. 10-14: Managing the StrategyCulture Relationship
Many
Changes in key
organizational
factors that are
necessary to
implement the
new strategy
Link changes to
basic mission and
fundamental
organizational
norms
Reformulate strategy
or prepare carefully
for long-term,
difficult cultural
change
1 4
2 3
Few Synergistic – focus
on reinforcing
culture
High
Manage around the
culture
Low
Potential compatibility of changes with
existing culture
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Ex. 10-A: Functional Organizational
Structure
CEO
Engineering
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Production
Personnel
Finance
and
Accounting
Marketing
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Ex. 10-A (contd.)
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Strategic Advantages
Achieves efficiency through
specialization
Develops functional expertise
Differentiates and delegates day-today operating decisions
Retains centralized control of
strategic decisions
Tightly links structure to strategy
by designing key activities as
separate units
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Strategic Disadvantages
Promotes narrow specialization and
functional rivalry or conflict
Creates difficulties in functional
coordination and interfunctional
decision making
Limits development of general
managers
Has a strong potential for
interfunctional conflict –priority
placed on functional areas, not the
entire business
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Ex. 10-A (contd.)
Process-Oriented Functional Structure
CEO
Purchasing
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Receiving
and
Inventory
Order entry
Wholesale
sales
Retail
sales
Accounting
and
billing
Customer
service
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Ex. 10-B: Geographic Organizational
Structure
Chief Executive
Corporate Staff
Finance & Accounting
Personnel
Marketing, etc.
General Manager,
Western District
General Manager,
Southern District
General Manager,
Central District
General Manager,
Northern District
General Manager,
Eastern District
District Staff
Personnel
Accounting and
Control
Engineering
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Production
Marketing
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Ex. 10-B (contd.)
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Strategic Advantages
Allows tailoring of strategy to
needs of each geographic market
Delegates profit/loss responsibility
to lowest strategic-level
Improves functional coordination
within the target market
Takes advantage of economies of
local operations
Provides excellent training grounds
for higher level general managers
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Strategic Disadvantages
Poses problem of deciding whether
headquarters should impose
geographic uniformity or
geographic diversity should be
allowed
Makes it more difficult to maintain
consistent company
image/reputation from area to area
Adds layer of management to run
the geographic units
Can result in duplication of staff
services at headquarters and district
levels
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Ex. 10-C: Divisional or Strategic
Business Unit Structure
Chief Executive Officer
VP-Admn Services
VP-Operating Support
GM
Division/SBU A
GM
Division/SBU B
Manager, HR
Personnel
Personnel
Acctg/Control
Acctg/Control
Division Planning
Division Planning
GM
Division/SBU C
Manager, Acctg/Finance
Manager, R&D
Manager
Marketing/Sales
Manager
Prod/Operation
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Marketing
Prod/Operation
Marketing
Prod/Operation
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Ex. 10-C (contd.)
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Strategic Advantages
Forces coordination and necessary authority
down to the appropriate level for rapid
response
Places strategy development and
implementation in closer proximity to the
unique environments of the division/SBUs
Frees CEO for broader strategic decision
making
Sharply focuses accountability for
performance
Retains functional specialization within each
division/SBU
Provides good training ground for strategic
managers
Increases focus on products, markets, and
quick response to change
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Strategic Disadvantages
Fosters potentially dysfunctional competition
for corporate-level resources
Presents the problem of determining how
much authority should be given to
division/SBU managers
Creates a potential for policy inconsistencies
among divisions/SBUs
Presents the problem of distributing corporate
overhead costs in a way that’s acceptable to
division managers with profit responsibility
Increases costs incurred through duplication
of functions
Creates difficulty maintaining overall
corporate image
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Ex. 10-D: Matrix Organizational
Structure
Chief Executive
Officer
Vice President,
Engineering
Vice President,
Production
Vice President,
Purchasing
Vice President,
Administration
Project
Manager
A
Engineering
Staff
Production
Staff
Purchasing
Agent
Administration
Coordinator
Project
Manager
B
Engineering
Staff
Production
Staff
Purchasing
Agent
Administration
Coordinator
Project
Manager
C
Engineering
Staff
Production
Staff
Purchasing
Agent
Administration
Coordinator
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Ex. 10-D (contd.)
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Strategic Advantages
Accomodates a wide variety of
project-oriented business activity
Provides good training grounds for
strategic managers
Maximizes efficient use of
functional managers
Fosters creativity and multiple
sources of diversity
Gives middle management broader
exposure to strategic issues
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Strategic Disadvantages
May result in confusion and
contradictory policies
Necessitates tremendous
horizontal and vertical
coordination
Can proliferate information
logjams and excess reporting
Can trigger turf battles and loss
of accountability
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