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Strategic Management S3STR401
- Session 9 -
Alexandre PerrinStrategy Department - Office 272 (ECE)
Tel: 02 40 37 45 56Mail: [email protected]
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The syllabus
Strategic Management
Part 1. Diagnosis
Part 2. Choices
Part 3. Deployment
1. Scanning theenvironment
2. Exploring and exploiting capabilities
1. Diversification or Specialisation (Corporate)
2. Managing the portfolio of activities (SBU)
1. Implementing and controlling decisions
2. Managing change fordeploying strategy
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Implementing and controlling decisions
A) Decisions and structuresB) Informal control of decisionsC) Formal control of decisions
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Decisions and structures
• ‘Structure follows strategy’ (Chandler 1962)
Adapt the organisation according to the strategy
• ‘Strategy follows structure’ (Hall & Saias1980)
Existing organisational structure determines strategic opportunities
• ‘Structure follows strategy as the left foot follows the right’ (Minzberg 1990)
Reciprocal relationship
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Organizational structure
• Organizational structure describes:Who is responsible for what
Patterns of communication and knowledge exchange
Skills required to move up the organisation
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Nature of organizational structures
1. Formal structuresFunctional
Multidivisional
Matrix
Multinational
2. Temporary structuresTeam
Projects
3. Informal structuresSocial networks
Communities of practice
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Functional structure
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Multidivisional structure
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A matrix structure
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A multinational structure
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Comparison of structures
XXXXXXXXGlobalisation
XXXXXXXKnowledge
XXXXXXXXXChange
XXXXXXXXControl
TransnationalMatrixDivisionalFunctionalCriteria
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Nature of organizational structures
1. Formal structuresFunctional
Multidivisional
Matrix
Multinational
2. Temporary structuresTeam
Projects
3. Informal structuresSocial networks
Communities of practice
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Project-based structure
• Teams created, undertake the work, then dissolvedFor large expensive projects or limited time events
Constantly changing organisational structure
Contains mixture of specialists
DisadvantagesPossible lack of
coordination Proliferation of projects
Breaking up teams hinders knowledge accumulation (lost
knowledge)
AdvantagesFlexibleGood accountability and control
(clear tasks/defined time)Real-time knowledge exchangeAttract complementary members
due to short project times
Project
MKTFIN
QUA
SAL
COM
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Example. Direction de la Recherche
Projets de Recherche
Chef Projet 1
Chef Projet 2
Chef Projet 3
Chef Projet N
Chef Projet 4
CKO
Knowlegde coordinator
Directeur
Adjoint au directeur
Directeur d’objectifs Réseaux Directeur d’objectifs Utilisation Directeur d’objectifs des Générales
ProgrammeGaz naturel liquéfié
ProgrammeClients
Programme Etudes éco. et générales
Programme Transport
Programme Distribution
ProgrammeClients industriels
Programme Nouveaux marchés
Pole Techniques de Transport
Pôle Techniques de Distribution
Pôle Métrologie et Matériels Réseaux
Pôle Qualité et Gaz
Pôle Environnement
Pôle Etudes cryogéniques
Pôle Cogénération – Gaz Naturel pour Véhicules
Pôle Gaz pour l’Habitat et le tertiaire
Pôle Bâtiment
Pôle Génie climatique
Pôle industrie
Pôle Moyens d’Essais pour l’Industrie
Service Certification
Pôle combustion, catalyse et mécanique des
fluides
Pôle téléserviceDomotique
Pôle procédés atomiques et systèmes
Pôle SI gaziers, optimisation et
simulation
Pôle économie, statistiques et sociologie
Laboratoire Prototype
Appuis :
- Cabinet de Direction- Relation institutionnelles France- Relations institutionnelles Europe- Relations institutionnelles Partenariat industriels- Mission valorisation- Propriété intellectuelle- Mission connaissance, information, veille- Département achat contrôle de gestion- Service achat- Mission QHSE – Normalisation- Equipe prévention sécurité- Département informatique- Service infrastructure Informatique- Service Informatique métier- Service Intranet Groupware- Ressources humaines- Développement des RH- Contrat de travail- Recrutement mobilité- Solidarité- Service logistique Site- Service comptable et financier
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Nature of organizational structures
1. Formal structuresFunctional
Multidivisional
Matrix
Multinational
2. Temporary structuresTeam
Projects
3. Informal structuresSocial networks
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Organization as knowledge transfer
• We live and work with static, rational ideas about our organizations…
What would an organization be like if it mirrored reality?
The Silicon Systems organization chart Silicon Systems at work
These diagrams are taken from: Krackhardt, David. “The Strength of Strong Ties: The Importance of Philos in Organizations.” In Nohria & Eccles (Eds), Networks and Organizations. Boston: Harvard Business School Press. 1992, pp.. 216-239.
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Social networks
• The informal network is not official, however, it has a very important function in a company to understand:
Who knows who
Givers and takers of information
Strong ties and weak ties
• 4 key roles in this informal network have been identified:
The Central Connector
The Boundary Spanner
The Information Broker
The Peripheral Specialist
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The central connector
The person everyone in the group talks the most.
Difficulty:> finding a way to rewardthese central connectors> some central connectors, if ineffective, can create bottlenecks.
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The boundary spanner
Group’s eyes and ears in the wider world = connection with people outside the informal network.
Useful when people need to share different kinds of expertise but very rare people…
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The information broker
He/She connects the various sub-networks in the company
He/She knows a lot of people but not very well (weak ties)
> A departure of the information broker could be a severe blow
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The peripheral specialist
Serves as an expert
He is not well socialized and nottightly integrated in theinformal network
Often new hires
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What is networking ?
• It means building social structures for people who share common interests:
social networking (making friends)
business networking (selling things andbuilding business relationships)
job networking (finding a job) ex. Corporate alumnis (McKinsey)
• Knowledge networking is building relationships in order to shareknowledge and learn from each otherin order to work more effectively.
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Implementing and controlling decisions
A) Decisions and structuresB) Informal control of decisionsC) Formal control of decisions
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How to coordinate tasks ?
• Formal control (Top-down)Coercitive
Standardisation of practices
Organization chart
• Informal control (Bottom-up)Participative
Multiplicity of practices
Social networks
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How to control deployment?
RatiosRulesFormal control
PoliticalRoutinesInformalcontrol
Output (results)
Input (use of resources)
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Informal - Social control by middle managers
• Social control relies on indirect supervision by:
Middle managers Routines
• Middle managers :interpret and adjust strategy as events unfold in the organizationare responsible for implementing plans determined at the topare bridge between senior executives and lower levels in the organization help change occuradvise top management about change.
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Informal - Social control by routines
• Organizational routines are the “way we do things around here”
Persist over time (accumulation of knowledge)
Guide people’s behaviour
Can become core rigidities
• Organizational culture is the basic assumptions and beliefs that are shared by members of an organization, that operate unconsciously and define an organisation’s view of itself and its environment.
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Informal - Political & Power
• Power is the ability of individuals or groups to persuade, induce or coerce others intofollowing certains courses of action.
• Power is related toFormal aspects
Hierarchy
Competences
Control of strategic resources
Decision ability
Informal aspectsPossession of information & knowledge
Social capital
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Implementing and controlling decisions
A) Decisions and structuresB) Informal control of decisionsC) Formal control of decisions
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Formal – Rules & Processes
• A process is a collection of steps that use people to create a service or a product.
• It is a description of tasks and outcomes associated with a business activity:
Are often expressed with a verb
It explains how people are working in the structure
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Formal – Ratios
• Ratios are selected values on financial statements or objectives completion
Financial ratios allow for comparisons:between companies between industries between different time periods for one company between a single company and its industry average
Profitability ratiosGross margin Companies
= (Revenue - Cost of sales) / Revenue= (Net sales - Cost of goods sold) / Net sales= Operating earnings / Net sales
Economic Value Added Companies= (Return on Capital - Cost of Capital) (Capital Invested in Project)
Return on capital employed (ROCE) Industry= Profit After Tax (Net Profit) / Capital Employed * 100
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Example of formal control : the Balanced Scorecard
• A performance management tool:for measuring whether the smaller-scale operational activities (SBU) are aligned with its larger-scale objectives in terms of vision and strategy.focusing not only on financial outcomes but also on the operational, marketing and intangibles inputs.
• Four general perspectives have been proposed by the Balanced Scorecard:
Financial PerspectiveCustomer Perspective Internal process Perspective Innovation & Learning Perspective
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The Balanced Scorecard by Kaplan & Norton
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Managing change for deploying strategy
A) Why managing change?B) Tools for mapping change
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Why change management?
1. The environment is changing…Tendency towards organisational inertia and resistance to change
2. People have difficulty to adapt…Top and middle managers are responsible for strategic change
3. Companies need to implement changes…Evolution of resources
Change is successful if it is internalised and owned by those who will implement it
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Types of change
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Examples of change management for deploying strategy
• Adaptation is change that can be accommodated with the current culture
Example: Name/logo changing
• Reconstruction is change that may be rapid and involve a deep evolution of the organization
Example: Divestment / cost cutting program
• Evolution is change in the strategy that requires cultural change but in a long term
Example: Ethics / Sustainable Dvlpt / Customer orientation
• Revolution is change that requires rapid and major strategic but also culture change
Example: General Motors in 2008
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Managing change for deploying strategy
A) Why managing change?B) Tools for mapping change
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Tools to manage change
Tool 1. The “cultural web mapping”
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Mapping the cultural web
• The cultural web: a representation of the taken-for-granted assumptions, or paradigm, of an organisation and the physical manifestations of organizational culture.
• Can be used to:map current and required culture
analyse changes needed for strategic success
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Compagnie des Services Pétroliers (CSP)
Mapping the cultural web in a medium size company
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1. The cultural web of CSP
Paradigm
- Engineers clan- Pragmatism
- Prospector spirit
Symbols
- « Impossible Missions »
- French vs US
Routines
- Onsite integration- If successful career
is guaranteed
Structure- Procedures not well
formalized-Decentralized
- Direct relations
Power- Dominated by
Engineers-Acquired on
the field
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Results of the analysis
• CSP is an engineer clan where power is obtained thanks to a rite of passage in the field.
• But the core business evolves from oil exploration & onsite measurement to data analysis.
What was a peripheral activity becomes core activityNecessity to hire top-level computer analysts
Former prospectors not as competitive as external hires
These specialists have a different paradigm:Lower commitment than prospectors
Lower loyalty
Listed on the the stock exchangeNeed for high-level competence in finance, tax and law
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2. The future cultural web of CSP
Paradigm
- Engineers clan- Pragmatism
Symbols
« Impossible Missions »
Change of thename
Routines
Onsite integrationTraining
Structure
Formalized chart
Power
Dominated by Engineers +
managers
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Pros & Cons of consultants & general manager programs
• For the consultantsToo radical the change may be rejected by those who are in charge (executive committee)
Some good ideas for evolution: CFO, Change the name
• For the general managerSeems to be more applicable
This company needs evolution not revolution……even if the real issue is “how the managers of this company can evolve themselves?”
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Conclusion on strategy implementation
• Controlling strategic decisions is based on formal and informal aspects
Formal structure: organization charts + processes + rulesInformal structure: social networks + local practices + culture
• Managing informal structure is much more difficult than managing formal one
Cultural webLeadership from managers
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Next week
• Final session
• Quizz (Sessions 7-9)
• JC Decaux Case Study in team