organizational structure for differentiation focus strategy
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Organizational Structure for Differentiation Focus Strategy KACSÓ Szilárd Csaba
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TABLE OF CONTENTS
Abbreviations ................................................................................................................. 3
Introduction .................................................................................................................... 4
Chapter 1 Differentiation Focus Strategy ...................................................................... 6
1.1 About Strategy ...................................................................................................... 6
1.1.1 Definition ...................................................................................................... 6
1.1.2 Importance .................................................................................................... 7
1.2 Generic Competitive Strategies ............................................................................ 9
1.2.1 Focus Strategies ............................................................................................ 9
Chapter 2 Oragnizational Structures ............................................................................ 12
2.1 About Organizational Structures ........................................................................ 12
2.1.1 Definition .................................................................................................... 12
2.1.2 Importance .................................................................................................. 12
2.2 Organizational Structure Types .......................................................................... 13
2.2.1 Entrepreneurial Structure ............................................................................ 13
2.2.2 Functional Structure .................................................................................... 14
2.2.3 Divisional Structure (Product Structure) .................................................... 15
2.2.4 Matrix Structure .......................................................................................... 16
2.2.5 Project-based Structure (Team Structure) ................................................... 18
2.3 Choosing Organizational Structure for Differentiation Focus Strategy ............. 19
Chapter 3 Case Study: Organizational Structure in AIESEC Cluj-Napoca ................. 21
3.1 About AIESEC ................................................................................................... 21
3.1.1 What is AIESEC? ....................................................................................... 21
3.1.2 AIESEC in numbers (in 2011) .................................................................... 23
3.1.3 Vision .......................................................................................................... 23
3.1.4 Values ......................................................................................................... 24
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3.1.5 Product ........................................................................................................ 25
3.2 About AIESEC Cluj Napoca .............................................................................. 29
3.2.1 Objectives ................................................................................................... 29
3.2.2 Business Model ........................................................................................... 30
3.3 Strategies ............................................................................................................ 33
3.3.1 Global Strategy ........................................................................................... 33
3.3.2 Local Strategy ............................................................................................. 35
3.4 Organizational Structure .................................................................................... 39
Conclusion ................................................................................................................... 45
Bibliography ................................................................................................................ 47
ANNEXES ................................................................................................................... 49
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ABBREVIATIONS
DBA = Doctor of Business Administration
R&D = Research and Development
TN = trainee nominee
LCP = local committee president
VP = vice-president
ICX = incoming exchange
OGX = outgoing exchange
ER = external relations
TM = talent management
HR = human resource
GIP = Global Internship Program
GCDP = Global Community Development Program
TL = Team Leader
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INTRODUCTION
Strategic management theories are available to everyone. Since the creation of generic
strategies of Michael Porter, there were several companies that put his theories in
practice. Some of them had success and some of them failed.
There are companies that operate without following a certain or clear strategy and
they are (or were) doing well, because there was a high demand for what they were
offering and there was a low supply and weak competition.
With the technological advances and globalization, information businesses and their
offerings (commodities, products, services or experiences) became available to
everyone. We are experiencing the globalization of markets, transforming the world
into one single market with the help of the internet and social media. This increases
competition and makes it harder for companies to gain a competitive advantage and
maintain it sustainably.
Another important change happening is regarding the complexity of organizations.
Operations, competencies and activities tend to be more complex and people need to
specialize even more in their jobs, and they need interaction in order to meet
customers‘ needs. This is more accentuated because of the increasing competition on
global markets and the need to attract and maintain customers even in economic
crisis.
This raises a series of questions. What to do now? What strategies to adopt? How to
construct and maintain a sustainable competitive advantage in our fast changing
environment? And more importantly, how to organize our operations, processes and
activities in order to deliver our activities of creating value in the most efficient way?
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In the following pages I will examine and present Michael Porter‘s focus
differentiations strategy.
In chapter 2 I will present different models of organizational structures. Their
functioning rules and the way they suit for different types of organizations.
In chapter 3 I will present a case study about AIESEC. I will demonstrate how a
project based organizational structure can work and drive growth in an NGO using
focus differentiation strategy. The methods, models used and implemented by
AIESEC are coming from the corporate sector, through the knowledge of partner
companies and the experience of 63 years of its existence. This demonstrates a project
based structure can work for the corporate sector as well when using focus
differentiation strategy.
My purpose with this work is to raise awareness on the changing rules in our economy
and on the need of outside the box thinking in implementing organizational structures
that give power to our members in the organization and drive our focus differentiation
strategies. My motive is to present new concepts in organizational structure re-
engineering and to provide a proof that a project based organizational structure can
well suit for focus differentiation strategy implementation.
To present you this, I used a qualitative analysis. I started researching on different
organizational structure models, and then I started analyzing each option available.
After that I researched the concepts about project based organizational structure and
its relation to focus differentiation strategy. In the end I presented a good case practice
from the non-governmental sector, regarding its change from a matrix structure to a
project based structure and how this helped it in driving performance through a focus
differentiation strategy.
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CHAPTER 1 DIFFERENTIATION FOCUS STRATEGY
1.1 ABOUT STRATEGY
In order to discuss differentiation focus strategy and organizational structures for this
strategy, we have to have a common understanding on the meaning of ―strategy‖,
―strategic management‖ and ―business level strategy‖.
1.1.1 Definition
Oxford English Dictionary defines strategy as ―a plan of action designed to achieve a
particular goal. The word is of military origin, deriving from the Greek word
στρατηγός (stratēgos), which roughly translates as general‖1. Michael Porter defines
strategy as ―the creation of a unique and valuable position, involving a different set of
activities‖2.
Strategic management is the conduct of drafting, implementing and evaluating cross-
functional decisions that will enable an organization to achieve its long-term
objectives3. Another approach is the process of managing in a way that is consistent
with the corporate strategy or in such a way as to capitalize on the opportunities that
present themselves4.
Strategies can be formulated at three different levels:
Corporate level: these strategies describe and formulate actions taken by the
firm (or corporation) in order to gain a competitive advantage by selecting and
managing different businesses that operate and compete in different markets
with different products and/or services (or staging experiences);
1 Oxford English Dictionary (2 ed.), Oxford, England: Oxford University Press, 1989
2 Michael Porter, What is Strategy, Harvard Business Review November-December, 1996
3 David F., Strategic Management, Columbus: Merrill Publishing Company, 1989
4 http://www.hainescentre.com/strategic-management, accessed at 06.04.2010
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Business level: these are actions taken by the firm in order to gain competitive
advantage in a specific market, with delivering products and/or services (or
staging experiences) based on its core competencies
Functional level: these are specific actions taken by each functional
area/department in the firm
Business-level strategy is an integrated and coordinated set of commitments and
actions the firm uses to gain a competitive advantage by exploiting core competencies
in specific product markets5.
1.1.2 Importance
Now that we understand the terms, we may discuss the importance of strategies at
different levels in the organization.
Corporate level strategies are essential for a firm (usually large corporation that
operates on different markets with different businesses) to decide where to invest, on
which markets to operate, in which type of businesses, what to produce or deliver, etc.
Practically at this level has to decide where to invest its resources in order to gain
competitive advantage and maximize the return on investment. These decisions (as all
types of decisions) require trade-offs, since we have limited resources. This is why a
corporate level strategy is so important in making critical, long term decisions that
will affect the performance of the firm on the long term. ―Alfred Sloan, former
President of General Motors, defined the fundamental strategic problem as positioning
the firm in those markets in which maximum profits could be earned. In his great
biography, Sloan laid down the classical profit-oriented goal of strategy‖6:
5 Robert E. Hoskisson, Michael A. Hitt, R. Duane Ireland, Competing for advantage (2 ed.), Newgen-
Austin, 2008 6 Richard Wittington, What is strategy, and does it matter? (2 ed.), London, Cengage Learning, 2001
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―The strategic aim of business is to earn a return on capital, and if in any particular
case the return in the long run is not satisfactory, the deficiency should be corrected or
the activity abandoned‖7.
After a firm decides its corporate level strategies, it has to define the strategies for
each business it own. This is called the business level strategy. It is essential for every
management to know where the business is heading, how it will gain competitive
advantage on the market and how it will assure a constant grow for the business.
Business level strategies are intended to create differences between the firm‘s position
relative to those of its rivals. ―Firms have long attempted to build competitive
advantage through an infinite number of strategies. Competitive strategies are
designed to help firms deploy their value chains and other strengths to build
competitive advantage. Thus, in practice, each company formulates its specific
competitive strategy according to its own analysis of internal strengths and
weaknesses, the value it can provide, the competitive environment, and the needs of
its customers‖8.
After a firm has its business level strategy, it is very important to transform that
strategy in every action. This makes critical to define functional level strategies that
make sure that the business level strategy is followed by every functional area in the
business. These functional level strategies have to support business level strategies, so
it is essential that each functional level goes to the ―same direction‖. More than that,
―strategic fit among many activities is fundamental not only to competitive advantage
but also to the sustainability of that advantage. It is harder for a rival to match an array
of interlocked activities than it is merely to imitate a particular sales-force approach,
match a process technology, or replicate a set of product features. Positions built on
systems of activities are far more sustainable than those built on individual
activities‖9.
7 Alfred Sloan, My years with General Motors, New York, Doubleday, 1963
8 Jeff Bordes, Strategic Management assignment - building and sustaining competitive advantage,
Atlantic International University, Honolulu, 2009 9 Michael Porter, What is Strategy, Harvard Business Review November-December, 1996
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1.2 GENERIC COMPETITIVE STRATEGIES
Firms choose business level strategies to establish and defend their desired strategic
position against rivals10
. According to Michael Porter, there are four potentially
successful generic strategic approaches to outperforming other firms in an industry11
:
Overall cost leadership;
Differentiation;
Focus;
Integrated cost leadership/differentiation;
These strategies are called generic, because they can be used in any business and in
any industry. Each business level strategy helps the firm to establish and exploit a
competitive advantage within a particular competitive scope12
.
1.2.1 Focus Strategies
The third generic strategy is focus strategy. Focus strategies are used to help a firm
focus on a specific niche within an industry. Both differentiation and cost leadership
strategies target a wide range market, strive to get a high market share, but focus
strategies aim at specific and typically small niche of the market. These niches could
be selected considering different criteria: a particular buyer group, a narrow segment
of a given product line, a geographic or regional market, or a niche with distinctive,
special tastes and preference. ―The basic idea behind a focus strategy is to specialize
the firm‘s activities in ways that other broader-line (low-cost or differentiation) firms
cannot perform as well. Superior values, and thus higher profitability, are generated
when other broader-line firms cannot specialize or conduct their activities as well as a
focused firm. If a niche or segment has characteristics that are distinctive and lasting,
10
Robert E. Hoskisson, Michael A. Hitt, R. Duane Ireland, Competing for Advantage (2 ed.), Newgen-
Austin, 2008 11
Michael Porter, Competitive strategy, The Free Press, New York, 1980 12
Robert E. Hoskisson, Michael A. Hitt, R. Duane Ireland, Competing for Advantage (2 ed.), Newgen-
Austin, 2008
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then a firm can develop its own set of barriers to entry in much the same way that
large established firms do in broader markets‖13
.
The focus strategy has two variants: cost focus and differentiation focus. In cost focus
strategy, a firm seeks a cost advantage in its niche market segment, while in
differentiation focus a firm seeks differentiation in its niche market segment. In both
cases, the focus strategy is based on differences between a firms niche market
segment and other segments in the whole industry where is activating. The target
segments must either have buyers with specific needs or the production and delivery
system must be different from that of the other industry segments. Cost focus strategy
exploits differences in cost behavior in some segments of the market, while
differentiation focus exploits the special needs of buyers in certain market segments.
Such differences imply that the segments are poorly served and their needs are not
satisfied by broadly targeted competitors who serve them at the same time as they
serve others. The focuser thus can achieve competitive advantage by dedicating itself
to the segments exclusively. The essence of focus is the exploitation of a narrow
target‘s differences from the balance of the industry14
.
As is stated above, this strategy rests on the premise that focusing on a niche market.
A firm is able to serve its narrow strategic market more efficiently or more effectively
than its competitors who are competing for a wider range of the market. In this way, a
firm may differentiate itself by meeting the needs (more specific needs) of a particular
segment of the market, or by having lower costs by serving a niche market, or by
both. Even though the focus strategy does not achieve low cost or differentiation from
the perspective of the market as a whole, it does achieve one or both of these positions
vis-à-vis its narrow market target15
.
13
Jeff Bordes, Strategic Management assignment - building and sustaining competitive advantage,
Atlantic International University, Honolulu, 2009 14
Michael Porter, Competitive advantage, The Free Press, New York, 1985 15
Michael Porter, Competitive Strategy, The Free Press, New York, 1980
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A focuser can take advantage of the incapability of its competitors to serve very
specific needs of niche segments. Competitors may underperform in meeting the
needs of a particular segment in the market, which opens the possibility for a
differentiation focus strategy. On the other hand, if a competitor is overperforming in
meeting the needs of a specific segment (they deliver things that are not essential for a
specific niche segment), a cost focus strategy can assure the satisfaction of that
specific niche with lower costs.
―Focus may also be used to select targets least vulnerable to substitutes or where
competitors are the weakest‖16
.
―If a firm can achieve sustainable cost leadership (cost focus) or differentiation
(differentiation focus) in its segment and the segment is structurally attractive, then
the focuser will be an above-average performer in the industry. Segment structural
attractiveness is a necessary condition because some segments in an industry are
much less profitable than others‖17
.
Generally in an industry there are very different customers and segments that require
different products and services and different delivery and after-sales systems and
services. This makes the focus strategies a very viable and opportune one for most
industries.
16
Michael Porter, Competitive Strategy, The Free Press, New York, 1980 17
Michael Porter, Competitive advantage, The Free Press, New York, 1985
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CHAPTER 2 ORAGNIZATIONAL STRUCTURES
2.1 ABOUT ORGANIZATIONAL STRUCTURES
2.1.1 Definition
Organizational structure is the allocation of responsibilities, tasks and coordination
responsibilities for the aim of organizing work and achieving objectives.
Organizational structure can be defined as ―the framework, typically hierarchical,
within which an organization arranges its lines of authority and communications, and
allocates rights and duties. Organizational structure determines the manner and extent
to which roles, power, and responsibilities are delegated, controlled, and coordinated,
and how information flows between levels of management18
.
2.1.2 Importance
The organizational structure has to serve the objectives and the strategies of the
company. It can help the implementation of a strategy and bring results, or it can be a
barrier for strategy implementation and performance. It is very important to have a
structure that minimizes confusion and defines who is responsible for which task.
―Poor organizational design and structure results in a bewildering morass of
contradictions: confusion within roles, a lack of co-ordination among functions,
failure to share ideas, and slow decision-making bring managers unnecessary
complexity, stress, and conflict. Often those at the top of an organization are oblivious
to these problems or, worse, pass them off as or challenges to overcome or
opportunities to develop‖19
.
The organizational structure also influences how an organization can make decisions,
react to changes in the external environment or drive innovation. Our main goal is to
18
http://www.businessdictionary.com/definition/organizational-structure.html 19
Corkindale, The Importance of Organizational Design and Structure, Harvard Business Review
February, 2011
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implement a structure that can help our organization to maintain its competitive
advantage (and performance) in the most efficient way.
―To survive and thrive, you need to create a work environment that fosters initiative,
collaboration, and learning. How? By maximizing three core horizontal processes:
frontline entrepreneurship, competence building across internal boundaries, and
renewal of ideas and strategies‖20
.
2.2 ORGANIZATIONAL STRUCTURE TYPES
2.2.1 Entrepreneurial Structure
Entrepreneurial structures are
most common for small firms
and organizations, usually at the
beginning of their life cycle.
They are characterized by a small number of employees, where the owner makes all
major decisions and monitors activities for the whole organization. Employees are
usually responsible for specific tasks and they report directly to the
entrepreneur/business owner. This structure is totally centralized. Communication is
done by one to one conversations.
This type of structure is useful for new organizations, because enables the owner to
control growth at an efficient way. It enables the organization to deliver services and
products at lower costs and to be flexible (to make changes and to make quick
decisions).
20
Sumantra Ghoshal, Christopher A. Bartlett, Changing the Role of Top Management: Beyond
Structure to Processes, Harvard Business Review January, 1995
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2.2.2 Functional Structure
Functional structure indicates a more hierarchic organization, where there is a general
manager or CEO on the top, than there are functional managers or directors (ex: Sales,
Marketing, Production, Finance, HR) who report to the general manager. Then in each
functional department there are employees who are responsible for different tasks and
they report to the functional manager. In bigger organizations, in functional
departments there are different teams with managers (middle managers) who are
responsible for different processes in their specific functional department, and they
have staff responsible for specific tasks of the process or area of responsibility and
they report to the middle manager.
In this way, functional departments perform specific tasks related to their area of
expertise. Coordination and decision making is centralized in the functional structure,
which makes it efficient to plan and produce standardized products or services.
Furthermore, employees can become specialists in what they do and become efficient
in their specific area of expertise. Because of this way of organization, there could be
communication problems between functional managers and slow down the
organization and make it inflexible.
This way of organizing is best suited for mid-sized and large organizations who
deliver standardized products or services at a large volume and low cost.
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2.2.3 Divisional Structure (Product Structure)
In this structure, each division has a functional structure. In this way, each division
contains all the necessary functions and resources to perform activities. Divisions can
be organized based on products or services (ex: a manufacturing company can
organize divisions for each of their main category products – scanners, printers,
laptops, TVs, etc), or based on the geographical presence (ex: Europe, North America,
South America, Middle East, etc).
This way of organizing is suitable for large international organizations, who want to
deliver rapid growth in different industries, markets or regions. It allows each division
to have all the necessary resources and staff to drive performance on their own
division.
On the other side, there is the risk of lack of communication between divisions, there
is a huge inefficiency in resources (because each division has its own HR, sales,
marketing, finance, production, etc, functional department), and a great inflexibility
because of the barriers of communication and decision making process.
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2.2.4 Matrix Structure
Matrix structure groups employees both by function and product. In this way, we can
combine the advantages from both structures. On one hand, there are functional
departments with specialists on different areas and processes, but we also have
different teams that have a manager and have employees allocated from different
functional departments to work for that team. Usually managers are product managers
that work on different development projects or are delivering a personalized product
or service to a customer (or groups of customers). In this way, we have functional
departments that maintain ongoing processes (such as accounting or branding, or
sometimes sales), while we also have project teams where the team exists until they
deliver the project.
Project managers report directly to a functional manager or to the general manager.
Specialists from functional areas are allocated (or selected) into the project team, and
they will be accountable to the project manager for their work in the project and to the
functional manager also.
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This form of organizational structure can ensure efficiency in the organization
because key resources and competencies are shared between projects and functional
areas, and also because there is a share of authority and responsibility. In this way, it
is much easier to innovate, to adapt to new trends of the market and meet customers‘
needs for customization.
On the other hand, there can be conflicts generated in the organization and teams
because of double accountability (project manager and functional manager), and also
lack of continuity or knowledge management (because of constant change of teams
and projects).
It is also very important in this type of organization to constantly develop project
managers that are capable of driving performance. ―While top managers universally
recognize their responsibility for developing and allocating a company‘s scarce assets
and resources, their focus on finance and technology often overshadows the task of
developing the scarcest resource of all—capable managers. But if there is one key to
regaining control of companies that operate in fast-changing environments, it is the
ability of top management to turn the perceptions, capabilities, and relationships of
individual managers into the building blocks of the organization.‖21
This type of organizational structure is best suited for companies that offer
personalized services and products, or that drive constant innovation (because of their
differentiation or focus differentiation strategy) and want to do this in an efficient
way. This structure can also be suited for companies who offer a large scale of
different products and services.
21
Christopher A. Bartlett, Sumantra Ghoshal, Matrix Management: Not a Structure, a Frame of Mind,
Harvard Business Review, July, 1990
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2.2.5 Project-based Structure (Team Structure)
Project-based structure can be seen as a strong or project matrix organization. In this
type of organizational structure there is a general manager or CEO, and also vice
presidents or functional managers, but activities and results are driven by project
teams. Almost every activity and operation of the organization is driven and brought
by project teams who have specific goals. Functional managers (or VPs) make sure
that there are employees with functional knowledge, who can perform in project
teams.
In this structure type, project managers have a great autonomy in terms of making
decisions and delivering results. Usually they control everything from the selection of
the team, task allocation and delegation, to the performance management. Functional
managers usually approve some decisions (mostly decisions regarding budgets and
other resource allocations and decisions that affect other projects or the entire
organization). Employees can take part in more than one team (if their geographic
presence and responsibilities allow it). Project managers are assigned (or selected) by
functional managers, who are responsible in front of the CEO for the main
deliverables (and objectives) of a specific project. The focus of the team members is
to complete the project and deliver the objectives of the projects, rather than tasks.
In some cases, we can have only the CEO and some senior project managers that
coordinate other project managers. In this case, we have to make sure that our HR (or
Talent Management) processes are well in place (or outsourced) in order to make sure
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that we always have the necessary talents with the necessary competencies in the
organization.
Team structures can take a form of a functional organization (with functional
managers reporting to the project manager and staff reporting to the functional
managers in the project), but only if the project is big and complex. Usually this
organizational form is used by companies and organizations that use focus
differentiation strategy and are required to innovate constantly and deliver customized
products and services to a niche market.
Because teams are constantly changing, there are very diversified networks of
relationships that employees form across functions. ―These informal networks can cut
through formal reporting procedures to jump start stalled initiatives and meet
extraordinary deadlines‖22
.
2.3 CHOOSING ORGANIZATIONAL STRUCTURE FOR
DIFFERENTIATION FOCUS STRATEGY
Choosing the model of organizational structure is a really important strategic decision.
We have to take into consideration the size of the company, number of products and
services provided, the business and marketing strategy that we have and also future
plans. Organizational structure decisions should be made for medium or long term
because it takes time to adapt processes, procedures and also our employee‘s
behaviors and the organizational culture for certain structures.
The mantra in deciding for an organizational structure should be ―structure services
strategy‖. So first of all, we have to make clear what our current and future strategy is,
and then decide on the structure. ―It seems obvious that organizations should be
designed to advance business strategies. But many times strategies evolve and change
22
David Krackhardt, Jeffrey R. Hanson, Informal Networks: The Company Behind the Chart, Harvard
Business Review, July, 1993
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while seasoned managers clutch tightly to their old ways of structuring their units and
organizing their teams‖23
. We can have two approaches to this decision making:
1. Make different models (brainstorm) and then start analyzing them, establish
criteria and weight for each criteria and rate each of them (or just simply use
pros and cons)
2. Map all the processes of the organization and decide how can they be grouped
in the most efficient way (considering also accountability and communication
between people and teams)
After we make a decision, we should start testing it. If we have a large organization,
we can test the new structure only with a smaller group of people and see how it
works and what the feedback of your employees is.
23
Ron Ashkenas, Solving the Rubik's Cube of Organizational Structure, Harvard Business Review,
March, 2011
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CHAPTER 3 CASE STUDY: ORGANIZATIONAL STRUCTURE
IN AIESEC CLUJ-NAPOCA
3.1 ABOUT AIESEC
3.1.1 What is AIESEC?
AIESEC (originally ―association internationale des étudiants en sciences économiques
et commerciales‖, but now it is a proper name) is the world‘s largest student-run
organization. It is a global, non-political, independent, not-for-profit organization run
by students and recent graduates of institutions of higher education. Its members are
interested in world issues, leadership and management. AIESEC does not discriminate
on the basis of race, color, gender, sexual orientation, creed, religion, national, ethnic
or social origin.
AIESEC‘s innovative development process consists of unmatched leadership
experiences, international opportunities and a global learning environment.
Global – AIESEC has a global scope and is represented in all continents of the world.
One of the most valuable and unique aspects that our organization has is its global
network. AIESEC should make the best use of this global network to enhance the
understanding between cultures by running activities that foster participation and co-
operation among different countries in the network. Without any doubt our exchange
programs create the best conditions for this.
Non-political - AIESEC does not have a pre-defined or officially accepted political
tendency or subscription.
Independent - AIESEC is not a subsidiary or dependent entity of any other bodies in
its work, sustainability or decisions.
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Not-for-profit - AIESEC is not an organization that exists to generate profit for
shareholders. The bottom-line for AIESEC is not money but people that are
developing themselves as leaders. It is important of course to have enough resources
and be sustainable to ensure we are having the desired impact in society and invest in
further improvements for the organization. However, we are guided by the ways to
generate more impact and have maximum financial sustainability rather than to
simply generate more money.
Run by students and recent graduates of institutions of higher education – Students of
higher education students and recent graduates manage and run all the activities of the
organization. The members of AIESEC are current (includes the ones who have given
a break to their studies to dedicate themselves to AIESEC work) or recently graduated
students of institutions of higher education.
Its members are interested in world issues, leadership and management – Today
AIESEC has expanded its reach to a wide range of student backgrounds. Our
membership base has expanded to university students that are interested in more than
just economics.
AIESEC does not discriminate on the basis of race, color, gender, sexual orientation,
creed, religion, national, ethnic or social origin - AIESEC is an organization that
enjoys and lives diversity, and will not reject participation or contact with people for
any of the reasons mentioned above.
Its international platform enables young people to discover and develop their potential
to provide leadership for a positive impact in society.
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AIESEC provides its members with an integrated development experience comprised
of leadership opportunities, international internships and participation in a global
learning environment.
3.1.2 AIESEC in numbers (in 2011)
Global network run by more than 60 000 students and recent graduates
Active in 1 700 universities across 110 countries and territories
24 700 leadership opportunities annually
18 000 global internships annually in business, technical, education and
development sectors
Has more than 4000 partners/sponsors globally
Organizes 470 conferences annually
Has more than 1 million alumni
Has 63 years of existence
3.1.3 Vision
―Peace and Fulfillment of Humankind‘s Potential‖. In today‘s context, ‗peace‘ should
not be interpreted necessarily as absence of a major war. ‗Peace‘ symbolizes a world
that does not have conflicts that arise from cultural, religious, or other aspects of
differences in humanity.
AIESEC envisions a world where its inhabitants are working together for common
goals to ensure prosperity for all. AIESEC wishes to see the world as a community
where its people respect, enjoy, and understand each other. Through ―Fulfillment of
Humankind‘s potential‖ AIESEC expresses its aim to develop individuals who have
the knowledge, skills and determination to develop their communities.
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AIESEC‘s aim is to offer as many opportunities as possible for young people to
develop their potential; people who are responsible, entrepreneurial, culturally
sensitive and thirsty for learning more! Furthermore, AIESEC wants young people to
learn and contribute to the learning of others so that it helps the development of their
communities.
3.1.4 Values
―Activating Leadership‖: we lead by example and inspire leadership through our
activities. We take full responsibility for developing the leadership potential of our
members.
―Demonstrating Integrity‖: we are consistent and transparent in our decisions and
actions. We fulfill our commitments and conduct ourselves in a way that is true to our
ideals.
―Living Diversity‖: we seek to learn from the different ways of life and opinions
represented in our multicultural environment. We respect and actively encourage the
contribution of every individual.
―Enjoying Participation‖: we create a dynamic environment created by active and
enthusiastic participation of individuals. We enjoy being involved in AIESEC.
―Striving for Excellence‖: we aim to deliver the highest quality performance in
everything we do. Through creativity and innovation we seek to continuously
improve.
―Acting Sustainably‖: we act in a way that is sustainable for our organization and
society. Our decisions take into account the needs of future generations.
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The shareholders of AIESEC are:
Members
Enablers: mentors, TN takers, learning and content partners
Supporters: sponsors (financial and in-kind), boards (advisory and
governance), support groups, university, government
Impact: the community, alumni
3.1.5 Product
AIESEC Experience is the core product of AIESEC. Different facets of AIESEC
Experience are sold to different stakeholders who customize their own experience.
In order to make this experience
more qualitative, the concept of learning environment was created. This learning
environment has 6 elements through which every member can learn about a specific
issue or functional area. These elements are:
The AIESEC Experience
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There are the five principles which should guide people through the AIESEC
Experience. Everybody who joins should have them in mind before joining AIESEC
and also during the actual AIESEC experience:
1. Take an active role in your learning and the learning of others
What – you are in charge of your own learning and also to help others learn
Why is it important to the outcome of the Learning Process?
o Our education system teaches us to be passive towards learning (take
what is given)
o The world is dynamic and one must always be proactively learning
o It is the only way people will be really committed to the process
Where this principle shows up in the process
o Become more involved with organization prior to going on the
traineeship and you help out with one of the functional areas
o People are informed before entering of what it takes to do an exchange
and then have time to get needed skills and resources
o Encouraging reflection on goals and persional vision
Individual discovery
and reflection
Mentoring
Learning Circles
T
Team Experiences
Conferences and
Seminars
Virtual Spaces; forums,
blogs, resource sharing
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o Joining a learning network
2. Challenge your worldview
What – All new information is interpreted through the worldview of the
person, including emotions, attitudes, values, passed experiences, and as a
result, motivation and action. It affects a lot how and to what we direct our
attention and action in different situations. We want to create situations that
broaden and challenge how a person thinks and helps them to see the
connection between these elements, their actions, and results.
Why is it important to the outcome of Learning Process?
o It is not sufficient to be aware of the problems of the world to achieve
change, you must also understand the causes and possible solutions and
this requires thinking about and understanding many different points of
view. It requires skills, confidence and ―shaking‖ experiences to build
a worldview oriented towards positive changes.
Where does this principle show up in the process?
o Certain experiences, such as doing an exchange, have the intensity to
―shake up‖ the worldview. Other experiences include:
Having a positive impact on a person
Experiences of failure and success
Forming and exchange ideas with people from different
backgrounds
Intense teamwork experience
3. Meta-cognition and personal reflection skills
What is it? – refers to the capacity to recognize and evaluate your own
thoughts, values, emotions, motives, goals and actions.
Why is it important to the process?
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o These skills allow someone to really take advantage of the AIESEC
experience, since it allows them to analize their actions and those of
others.
o Facilitates the creation and completion of goals
o Facilitates the creation of values and the will to follow them
Where does this principle show up in the process?
o Giving space to reflect on what one has learned or wants to learn
o Giving space to share visions and learning experiences with others
o Through the role of a mentor
4. Increasing Practical and Theoretical Knowledge
What is it? – the opportunity to gain professional and personal skills and to
apply them
Why is it important to the outcome of the learning process?
o With more skills, one increases the capacity to have an impact in the
world
o Fills a flaw in our education system in which most students to know
have the opportunity to gain practical experience
o Learning increases when there is an opportunity to apply and put into
practice what you have learned in theory
Where does this principle show up in the learning process?
o Experience working as a member in the area of public-speaking, sales,
planning, marketing, team management, leadership, budgeting, etc.
o During the traineeship
o On a theoretical level during conferences or learning activities
5. Creating a network of contacts
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What is it – a group of like-minded people who are interested in seeing you make
the change you want to see in the world
Why is it important to the outcome of the AIESEC Learning Process?
o Because it helps to have contacts and support from all of the world
when trying to change it
Where does this principle show up in the AIESEC Learning Process?
o Through running the exchange program and attending conferences you
are put into contact with people from all over the world
o The ability to be in contact with people of similar interest through
learning networks
3.2 ABOUT AIESEC CLUJ NAPOCA
AIESEC Cluj Napoca was established as an initiative of 5 students in 1994. It was
recognized as a legal entity in 1997. Since then it developed, reaching more than 150
members in present, offering more than 70 leadership and 90 international
opportunities a year.
AIESEC Cluj Napoca has its own set of values also (SIGPE DACIM):
Sharing Development
Inspiring Action
Getting Connected
Performing Intelligence
Exploring the Mind
3.2.1 Objectives
AIESEC measures its performance by the following organizational objectives:
Number of experiences in Team Member Program (TMP)
Number of experiences in Team Leader Program (TLP)
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Number of experiences in Global Community Development Program (GCDP)
Number of experiences in Global Internship Program (GIP)
The Executive Board (the top management) established objectives for their 1 year
term (from 01.04.2011 to 31.03.2012):
Objective Name Number - Target
International Experiences 197
GIP - outgoing 52
GCDP - outgoing 47
GIP – incoming 20
GCDP – incoming 78
TLP 70
Nr of Members 200
Financial Reserve 4000 euro
3.2.2 Business Model
AIESEC has a business model, for each of its main 4 programs, which describe the
rationale of how the organization creates, delivers, and captures value. These business
canvases describe this value generation process for each program, and for each
stakeholder.
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3.3 STRATEGIES
3.3.1 Global Strategy
In order to achieve its goals, AIESEC
adopted Product Leadership Strategy
(focus differentiation strategy). This
strategy usually implies: strong innovation
and marketing, to operate on dynamic
markets, focus on development,
innovation and design, high margins,
educating the market and risk taking.
For AIESEC, product leadership means the following:
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The visual representation of the strategy (how is going the organization to achieve its
vision), is presented in the strategy map:
The logical flow of all these is that through product leadership, AIESEC will grow
and attract more customers to consume the AIESEC Experience, more companies and
students will join the organization, who will experience different stages of the
AIESEC Experience.
In ―Engagement‖ phase students get knowledge about the organization, about its
vision, values and how it works and also get some preparation on soft skills.
At the ―Team Member Program‖ they participate actively in projects, so they take
some responsibilities. At this stage they can try themselves and develop on personal
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and professional sides, which contribute to the ―fulfillment of humankind‘s potential‖
part of the vision.
Then they have the possibility to take a ―Leadership‖ opportunity and to become
Project Managers or Executive Board members (top management). At this stage they
will learn about leadership, management and will have the possibility to coordinate
different teams which have specific task and objectives. They can try themselves on
how to be a leader and develop their leadership skills, which also contributes to the
―fulfillment of humankind‘s potential‖ part of the vision.
Another option is to participate in the international program (Global Community
Development – volunteering, or Global Internship – professional internship) and go
abroad to do an internship. This will take participants away from their comfort zone,
and offer them multicultural experiences, the possibility to learn about other cultures
and civilizations, to live cultural shocks and also to gain professional experience. This
stage contributes to ―peace‖ because participants become more tolerant towards
different cultures, religions or ways of thinking, and to ―fulfillment on humankind‘s
potential‖ through their professional experience.
After completing all the stages, members will become change agents, who will make a
positive impact in society, contributing to the vision of the organization.
3.3.2 Local Strategy
Because every Local Committee has the freedom to adapt this general global strategy,
in the case of AIESEC Cluj-Napoca we can talk about a focus differentiation strategy.
One aspect of this strategy is that AIESEC Cluj Napoca needs to be always sure about
its product portfolio and the value that products offer. This implies constant evolution
and development of the portfolio and training its members on marketing and sales.
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Because of its focus differentiation strategy, AIESEC is aware that the product
(experience) it offers is not desired by everyone.
Another important aspect is the brand. AIESEC needs to have an extremely strong
and reputed brand which transmits the core of AIESEC and the quality of experiences
that offers. This is very important because a strong brand attract talented people and
other organizations towards consuming the AIESEC experience.
In order to support the implementation of strategy,
AIESEC structured its activities in subsystems.
The AIESEC sub-systems model outlines the core
activity & process structure of the organization.
Each of the sub-system is separate but they are all
interdependent on each other.
The heart of the organization is the vision, nature, role, core-work and values, which
form the organizational identity. The identity gives the organization reason to exist
and defines the unique role that it is playing – ―creating impact on society through
development of Change Agents‖. The strategy puts the vision into practice.
AIESEC Experience is a unique leadership development experience, which enables
the development of individuals into Change Agents. It is the core-work, the core
deliverable of the organization and defines what happens in the sub-systems.
The 5 sub-systems of AIESEC create a logical internal system, which is the
mechanism to deliver core-work – The AIESEC Experience. All the 5 sub-systems are
required for AIESEC to be able to respond to the needs of our environment and create
more & more of AIESEC Experiences.
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Exchange Management System:
Promotion (Messages & Campaign)
Market Research & Segmentation (& external input)
Product Development
Delivery Process
Marketing/Selling
Internship Preparation
Reception
Adaptation & Integration
Customer Relationship Management (AIESEC involvement & on-going
support during the internship)
Quality Measurement
Re-integration
People System:
Recruitment & Marketing Messages/Campaign
HR planning & allocation (AIESEC‘s Talent Management System)
Selection Criteria & System
Defined Induction Process
Competency Model – defined profile for each position
Member Education Cycle (training & education)
Individual Goal Setting
Capturing personal learning/experience
Member Performance Appraisal
Mentoring
Individual Reward & Recognition
Alumni – H4TF Opportunities
Transition Tools & Systems
Structure System:
Compendium
Membership Criteria (Local Committee/Members)
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Organizational Structure (Local Committee/National Committee/Support
Bodies etc.)
Role & responsibilities of different bodies
Governance – accountability to external bodies
Organizational Planning & Review (Goal setting & planning for the entire
organization – all the different sub-systems)
System of review & assessment (all kinds of performance, health & strategic
indicators)
Organizational Reward & Recognition
Conference Cycle (fitting the Member Education Cycle & the Planning
Process)
Legal Administration
Expansion of the AIESEC network
Information System:
IS Infrastructure
Online Collaboration & Networking
Communication
Membership Management
Business Intelligence (for business management & review)
Aiding individual experience
Education & competence development (e-learning aspect)
Exchange Management
Relationship Management
External Interfaces
Knowledge Management
Help Desk – user support & education
Revenue Generation
Financial System:
Budgeting & Review
Cash Flow Management
Book-keeping
Diversification of Revenue
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Financial Reporting Structure – Audits (internal & external)
Fund-raising
ER products
ER Principles – sharing companies, territories
Financial Reserves Management
Restricted Funds Management
Investments Management
Infrastructure
You can also find the destination statement of AIESEC Cluj-Napoca in annex number
2.
Considering all, we can state that AIESEC differentiates itself from other student
organizations through having good systems, tools, processes and structures
implemented in the organization, which makes it more alike to a corporation, rather
than a student organization. More than that, what differentiates AIESEC from its
competitors is the experience that it offers: leadership experience, international
professional and personal experiences and a global learning environment, all in one
place. The AIESEC experience offers a complex frame for development, making
contacts, and gaining professional experience on different functional areas, all in one
with enjoyment of participation.
3.4 ORGANIZATIONAL STRUCTURE
The organizational structure was a matrix structure, where there were different
functional departments, and also a lot of projects, through which most of the results
were delivered. Through 2011 there was an organizational structural change, starting
from autumn, where the matrix structure was changed into a completely project based
one, where there is the executive board (EB), with vice-presidents responsible for
different areas (operations) and project managers and teams who delivered every
single activity through projects.
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Top management: LCP (Local Committee President), Vice-President Talent
Management (HR), Vice-President Finance, Vice-President Corporate Development
(Sales), Vice-President Non-Corporate Development (responsible for bringing
international volunteers to NGOs through the GCDP program), Vice-President
International Internships (responsible for sending students and recent graduates
abroad through the GIP and GCDP program), Vice-President Alumni Development,
Vice-President Communication.
The executive board functions have the following roles:
Local Committee President: managing and developing the executive board
team, organization management, external representation, performance
management, defining direction and core strategies
VP Finance: resource management (financial, consumables), defining rules
and framework for the usage of resources, diversification of income sources,
legal management
VP Talent Management: defining framework for managing HR in the
organization (internal systems and rules), tracking HR and their education and
development, developing performance management system, talent planning,
Project
Manager 1
Project
Manager 2
Project
Manager 3
Project
Manager 4
Organizing
Committee 1
Organizing
Committee 2
Organizing
Committee 3
Organizing
Committee 4
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R&R system, managing internal programs (team member, team leader),
recruitment and selection
VP Corporate Development: managing incoming Global Internship Program,
product development for the corporate sector, revenue generation from the
corporate sector, attracting development partners for know-how, managing
partnerships
VP Non-Corporate Development: managing incoming Global Community
Development Program, product development for the non-corporate sector
(NGOs, schools, etc), revenue generation from the non-corporate sector,
managing partnerships, social projects development
VP International Internships: managing outgoing Global Internship Program
and Global Community Development Program, product development for the
students and recent graduates sector, revenue generation, managing
partnerships
VP Alumni Development: product development for Alumni, revenue
generation from Alumni, account management with Alumni, managing Life-
Long Connection Phase
VP Communication: account management with the media, managing media
partnerships, aligning communication messages, managing communication
channels, brand management
The Accountability system works as follows:
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The vice-presidents are accountable in front of the president for the specific goals on
their areas. The project managers and team leaders (for initiatives in a specific area)
are accountable in front of the vice-president who selected them. They are held
accountable for the specific objectives of their project/initiative. Then team members
are accountable in front of the project manager/team leader for their specific
objectives and tasks.
In order to have more members engaged in the development of new product and
project development, and to have specialists in each functional area that can become
project managers (or team leaders) or deliver the projects, there was mapped a
category for specialists. Specialists are not part of the structure (as a position in the
organization), they are more like an accreditation for people who have more
experience in a specific area or process:
In order to ensure that operations are happening and the organization is constantly
driving innovation, a new product development cycle and process was put in place.
This was critical, since all operations and activities are happening in projects, so it is
important that projects are developed and put in place really quick. The project
development flow happens as follows:
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The Executive Board (EB) takes all major decisions in the organization and at the
strategic level. For different decisions regarding achieving specific objectives, or
solving different problems, they engage members (specialists) who have experience in
a specific area and have project management experience.
A vice-president who has a problem or a specific goal for which he/she wants to find
and initiative or a project, establishes a task force. The vice-president also invites
experienced members into this task force from areas that can have a contribution in
making that specific decision. The task force meets and discusses possible solutions.
Than the VP selects the best suitable solution (initiative or project), usually discussing
also with the executive board, or at least other vice-presidents (if it is an initiative or
project that requires support from other vice-presidents also).
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After selecting the initiative or project, the project manager position is launched and a
project manager is selected. Usually people who participated in the task force are
applying for the project manager positions. After that, the project manager selects
members into the project team, who will implement the project and will be
accountable for the objectives of the project.
In order to be able to manage all the projects in the organization, a project planning,
management and evaluation tool was developed which is used by every team online
(in google docs).
As a result of the new organizational structure and working method, there was a
growth on the realization of organizational objectives. Overall results growth was
%48 compared to the same period on the previous term. Retention rate (calculated 6
month after the recruitment) and engagement of members also increased from %82 to
%97 compared to the last term.
These results war brought by the increased engagement and activity of members, and
also from the simplified accountability brought by the new organizational structure
(compared to the past matrix structure where there was double accountability of
project managers).
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CONCLUSION
Today we are facing a lot of challenges. From environmental, through social, to
economic challenges. These challenges force us to be creative, to generate solutions
and to change things.
Classical organizational structures are outdated for most of the organizations. For
focus differentiation strategy it is critical to be able to be flexible and innovative in
order to maintain our competitive advantages. To drive innovation and to be able to
adapt to changes in the market and to our customers‘ needs, we have to implement
organizational structures that support innovation, collaboration and fast decision
making in our organizations.
The study case demonstrated that a project based structure for a focus differentiation
strategy can work. It can work in an NGO that is constantly changing, evaluating and
growing for 63 years now. You may think that managing an NGO is different from
managing a business, and it is much easier. The fact is, that every single concept and
model that is adopted and used in AIESEC, came from the corporate sector. Partners
of AIESEC helped the development and implementation of those business models,
strategies and organizational structures.
It makes no difference where we implement organizational structures. It can be any
kind of organization. The difference between AIESEC and companies is that
companies are working for different kind of objectives and they use different
motivators.
AIESEC measures its performance in number of members, number of leadership
positions and experiences that are realized, number of international experiences that it
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provides. AIESEC uses mostly non-financial motivators, because it is a voluntary
work.
Companies usually measure their performance in number of clients, number of
products or services sold or experiences staged, return on investment and profits that
were generated. Companies can use all kinds of non-financial motivators and financial
motivators as well.
I am not saying that functional structures, matrix structures or divisional structures
can‘t work. There are examples where companies have success. But I truly believe
that we have to start thinking strategically, on the long term. We have to maintain our
competitive advantages, and for this reason, organizational structure is a key factor
that can drive performance and efficiency in doing so.
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BIBLIOGRAPHY
Books
Alfred Sloan, My years with General Motors, New York, Doubleday, 1963
David F., Strategic Management, Columbus: Merrill Publishing Company,
1989
Michael Porter, Competitive Advantage, The Free Press, New York, 1985
Michael Porter, Competitive Strategy, The Free Press, New York, 1980
Oxford English Dictionary (2 ed.), Oxford, England: Oxford University Press,
1989
Richard Wittington, What is strategy, and does it matter? (2 ed.), London,
Cengage Learning, 2001
Robert E. Hoskisson, Michael A. Hitt, R. Duane Ireland, Competing for
Advantage (2 ed.), Newgen-Austin, 2008
Tom Peters, Re-Imagine! Business Excellence in a Disruptive Age, Dorling
Kindersley Limited, London, 2004
Ron Ashkenas, Solving the Rubik's Cube of Organizational Structure, Harvard
Business Review, March, 2011
Articles and other studies
Jeff Bordes, Strategic Management assignment - building and sustaining
competitive advantage, Atlantic International University, Honolulu, 2009
Michael Porter, What is Strategy, Harvard Business Review November-
December, 1996
Sumantra Ghoshal, Christopher A. Bartlett, Changing the Role of Top
Management: Beyond Structure to Processes, Harvard Business Review
January, 1995
David Krackhardt, Jeffrey R. Hanson, Informal Networks: The Company
Behind the Chart, Harvard Business Review, July, 1993
Christopher A. Bartlett, Sumantra Ghoshal, Matrix Management: Not a
Structure, a Frame of Mind, Harvard Business Review, July, 1990
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48 | P a g e
Corkindale, The Importance of Organizational Design and Structure, Harvard
Business Review February, 2011
Videos
Jacek Utko designs to save newspapers
(http://www.ted.com/talks/jacek_utko_asks_can_design_save_the_newspaper.
html)
Jay Walker's library of human imagination
(http://www.ted.com/talks/jay_walker_s_library_of_human_imagination.html)
Malcolm Gladwell on spaghetti sauce
(http://www.ted.com/talks/malcolm_gladwell_on_spaghetti_sauce.html)
Seth Godin on standing out
(http://www.ted.com/talks/seth_godin_on_sliced_bread.html)
Seth Godin on the tribes we lead
(http://www.ted.com/talks/seth_godin_on_the_tribes_we_lead.html)
Simon Sinek: How great leaders inspire action
(http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action.ht
ml)
Sir Ken Robinson: Bring on the learning revolution!
(http://www.ted.com/talks/sir_ken_robinson_bring_on_the_revolution.html)
Viktor Frankl: Why to believe in others
(http://www.ted.com/talks/lang/eng/viktor_frankl_youth_in_search_of_meani
ng.html)
Internet
http://www.hainescentre.com/strategic-management, accessed at 16.05.2012
http://www.quantifiedmarketing.com/ , accessed at 18.05.2012
Online dictionaries and encyclopedias:
http://www.wikiquote.org/
http://www.wikipedia.org/
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ANNEXES
Annex number 1
The exchange flow and duration in AIESEC
Action
Optimistic
case
Pesimistic case
1 AIESEC contacts the company
The company agrees to participate in the
program and fills in a form and makes the job
description for the trainee.
START
2
AIESEC selects possible candidates from its
international database, based on the criteria
established by the company.
3 weeks 8 weeks
3
AIESEC presents 2-3 candidates for the
company (CV, other information), based on the
profile provided by them.
The company selects an intern after finishing
the selection process (usually interview).
1 week 4 weeks
4
AIESEC deals with legal issues (preparing and
sending documentation for visa). After arrival,
the trainee signs a collaboration contract with
the company.
- The company assures all living costs for the
trainee
- The company pays all administrative costs for
AIESEC
6 weeks 12 weeks
STARTING the internship
Total 10 weeks 24 weeks
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Annex number 2
Destinations statement of AIESEC Cluj-Napoca
top related