Management Fads – Are Fads Temporary or Permanent
The emergence and disappearance of fads appears to be a predictable aspect of modern society.
A fad arises when some element of popular culture becomes enthusiastically embraced by a group of people.
As with cultural fads, many provocative business ideas go through a life cycle of creating buzz, captivating a group of enthusiastic adherents, and then giving way to the next fad.
Beyond the striking similarities between cultural and business fads, there are also important differences.
Management by objectives (MBO) is a process wherein managers and employees work together to create goals. These goals guide employees’ behaviors and serve as the benchmarks for assessing their performance.
Continuous Improvement is a formal group of employees that meets regularly to brainstorm solutions to organizational problems.
*Improving culture through mission and vision statements is a process by which companies define themselves to their various stakeholders.*Virtual Teams often alters the structure of an organization with employees organized into virtual teams which allow for interaction and communication throughout the global work environment.The above examples of fads are just some changes that companies have experiences. As you think about the current trends in organizational structures or work environments for employees, find an article that describes or predicts what may be a future fad. Analyze it in terms of its features, characteristics, and potential impact. You can use the internet to research this topic. Your response can be in your own words. You can also comment on any fad that you observe in your own work experiences.
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Mastering Strategic Management, v2.0
• Dave Ketchen & Jeremy Short
©FlatWorld 2018
PUBLISHED BY:
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©FlatWorld 2018
CHAPTER 9
Executing Strategy through
Organizational Design
©FlatWorld 2018
Chapter Agenda
After this lecture, you should be able to understand and articulate answers to
the following questions:
1. What are the basic building blocks of organizational structure?
2. What types of structures exist, and what are advantages and disadvantages
of each?
3. What is control and why is it important?
4. What are the different forms of control and when should they be used?
5. What are the key legal forms of business, and what implications does the
choice of a business form have for organizational structure?
©FlatWorld 2018
The Basic Building Blocks of Organizational
Structure
Learning Objectives
1. Understand what division of labor is and why it is beneficial.
2. Distinguish between vertical and horizontal linkages and know what
functions each fulfills in an organizational structure.
©FlatWorld 2018
The Basic Building Blocks of Organizational
Structure
• Division of labor is a process of splitting up a task into a series of smaller
tasks, each of which is performed by a specialist.
• Organizational structure determines how tasks are assigned and grouped
together with formal reporting relationships.
• Most organizations use a diagram called an organizational chart to depict
their structure.
Source: Adapted from company document posted at
http://www.ge.com/pdf/company/ge_organization_chart.pd
f Source: Adapted from company document posted at
http://www.ge.com/pdf/company/ge_organization_chart.pd
f
©FlatWorld 2018
The Basic Building Blocks of Organizational
Structure, continued
• Vertical linkages tie supervisors and subordinates together.
• These linkages show the lines of responsibility through which a supervisor delegates
authority to subordinates, oversees their activities, evaluates their performance, and
guides them toward improvement when necessary.
• Most executives rely on the unity of command principle when mapping out
the vertical linkages in an organizational structure.
• This principle states that each person should only report directly to one supervisor in
order to avoid confusion.
• Horizontal linkages are relationships between equals in an organization.
• Often these linkages are called committees, task forces, or teams.
• Horizontal linkages are of great importance when close coordination is needed across
different segments of an organization.
• Informal linkages refer to unofficial relationships such as personal
friendships, rivalries, and politics.
©FlatWorld 2018
Creating an Organizational Structure
Learning Objectives
1. Know and be able to differentiate among the four types of organizational
structure.
2. Understand why a change in structure may be needed.
©FlatWorld 2018
Creating an Organizational Structure
Four types of structures are available to executives:
• In simple structure, an organizational chart is
usually not needed.
• If the company is a sole proprietorship, one person
performs all of the tasks that the organization needs
to accomplish.
• If the company consists of more than one person,
tasks tend to be distributed among them in an
informal manner rather than each person developing
a narrow area of specialization.
• With a functional structure, employees are
divided into departments that each handle
activities related to a functional area of business,
such as marketing, production, human resources,
©FlatWorld 2018 information technology, and customer service.
Source: Reproduced with permission from Carpenter, M., Bauer, T., & Erdogan, B.
2011. Principles of Management. Irvington, NY: Flat World
Knowledge.
Creating an Organizational Structure, continued
• In multidivisional structure, employees are
divided into departments based on product areas
and/or geographic regions.
• Matrix structures rely heavily on horizontal
relationships.
• These structures create cross-functional teams that
each work on a different project.
• A boundaryless organization is one that
removes the usual barriers between parts of the
organization as well as barriers between the
organization and others.
A matrix structure. Source: Reproduced with permission from Carpenter, M., Bauer, T., &
Erdogan, B. 2011. Principles of Management. Irvington, NY: Flat World Knowledge.
©FlatWorld 2018
• Executives must revisit an organization’s
structure over time and make changes to it if
certain danger signs arise.
Small Business Spotlight: ALARA Garage and
Racing: Structured for Success
• ALARA Racing is essentially a two-man
operation:
• One person handles the technical aspects of
preparing cars for races and manages the part-time
race crew.
• Ara handles finance, marketing, and the logistics
of getting racecars to tracks around the country.
Ara also is a driver on the team.
• Ara’s primary business is ALARA Garage, a
storage facility in Houston, Texas, for exotic
and classic cars.
• The garage shares space with three other
business with related specialties (colocation),
and also exchanges referrals with the real
estate business run by Ara’s wife.
©FlatWorld 2018
Source: Photo courtesy of ALARA.
Research Round-Up:A Classic Finding: The
Relationship between Strategy and Structure
• The idea that “structure follows strategy” has been held for nearly half a
century. Recently, however, skeptics wondered if it was still true.
• A study using data from 1993 to 2003 finds that this classic finding still
holds—the use of a multidivisional structure is much more likely for
companies that are diversified than for those that are not diversified.
• Executives should be wary of suggestions that the competitive nature of
today’s environment invalidates classic strategic truths.
©FlatWorld 2018
Strategy at the Movies: Office Space
• High-tech companies often use matrix to gain the flexibility needed to
manage multiple projects simultaneously.
• Successfully using a matrix structure requires excellent communication
among various managers.
• When Gibbons forgot to put the appropriate cover sheet on his TPS report,
each of his eight bosses admonished him, causing him to become cynical
about his job.
• Simpler organizational structures can be equally frustrating.
©FlatWorld 2018
Creating Organizational Control Systems
Learning Objectives
1. Understand the three types of control systems.
2. Know the strengths and weaknesses of common management fads.
©FlatWorld 2018
Creating Organizational Control Systems
• Organizational control systems allow executives to track how well the
organization is performing, identify areas of concern, and then take action to
address the concerns.
• Three basic types of control systems are available to executives:
• Output control focuses on measurable results within an organization.
• Behavioral control focuses on controlling the actions that ultimately lead to results.
• Clan control is an informal type of control that relies on shared traditions, expectations,
values, and norms to lead people to work toward the good of their organization.
©FlatWorld 2018
Creating Organizational Control Systems
©FlatWorld 2018
© Thinkstock
Management Fads: Out of Control?
• The emergence and disappearance of fads appears to be a predictable aspect
of modern society.
• A fad arises when some element of popular culture becomes enthusiastically embraced
by a group of people.
• As with cultural fads, many provocative business ideas go through a life cycle of
creating buzz, captivating a group of enthusiastic adherents, and then giving way to the
next fad.
• Beyond the striking similarities between cultural and business fads, there are also
important differences.
• Management by objectives (MBO) is a process wherein managers and
employees work together to create goals. These goals guide employees’
behaviors and serve as the benchmarks for assessing their performance.
©FlatWorld 2018
Management Fads: Out of Control?
• A quality circle is a formal group of employees that meets regularly to
brainstorm solutions to organizational problems.
• Improving clan control was the aim of sensitivity-training groups (also
known as T-groups) that were used in many organizations in the 1960s.
• This fad involved gatherings of approximately 8 to 15 people openly discussing their
emotions, feelings, beliefs, and biases about workplace issues.
• Organizational culture is values and norms that are embraced by an
organization that determine how people interact with other organizational
members as well as external stakeholders.
• Later it became clear that organizational culture’s importance was being exaggerated.
• The history of fads allows executives to make certain predictions about today’s
hot ideas, such as empowerment, “good to great,” and viral marketing.
©FlatWorld 2018
Legal Forms of Business
Learning Objectives
1. Know the three basic legal forms of business.
2. Know the two specialized types of corporations.
©FlatWorld 2018
Legal Forms of Business
• A sole proprietorship is a company that is owned by one person. From a
legal perspective, the company and its owner are considered one and the
same.
• In a partnership, two or more partners share ownership of a company. A
partnership is similar to a sole proprietorship in that the partners are the only
beneficiaries of the company’s profits but they are also responsible for any
losses and debts.
• Corporations involve the separation of ownership and management. They
sell shares of ownership that are publicly traded in stock markets and they are
managed by professional executives.
• In an S corporation, the company’s profits and losses are reported on owners’ personal
tax returns in proportion with each owner’s share of the company.
• The owners of limited liability company (LLC) are not personally responsible for debts
that the LLC accumulates and the LLC can be run in a flexible manner.
©FlatWorld 2018
The Lean Startup
• In The Lean Startup, entrepreneur Eric Ries offers a scientifically driven
methodology for developing businesses and launching new products aimed at
reducing market risk and minimizing capital commitment.
• The book is divided into three sections that represent the recommended
process all startups should follow: Vision, Steer, and Accelerate.
• Taken together, the underlying premise of The Lean Startup is that startups
should focus not on making money, but rather on developing a sustainable
business model.
• The basic philosophy of the book is relevant for how all companies should be
run in order to achieve strong organizational performance.
• Organizational structure should be considered within the long-term vision and
strategy of the company and able to adapt and scale as needed to meet the
changing needs of the business.
©FlatWorld 2018
Chapter Summary
• Leaders of companies, ranging from the smallest sole proprietorship to the largest
global corporation, must make decisions about the delegation of authority and
responsibility when organizing activities within their companies.
• Deciding how to best divide labor to increase efficiency and effectiveness is often
the starting point for more complex decisions that lead to the creation of formal
organizational charts.
• To execute strategy effectively, managers also depend on the skillful use of
organizational control systems that involve output, behavioral, and clan controls.
• Executives need to avoid letting their companies become “out of control” by being
skeptical of management fads.
• The legal form a business takes is an important decision with implications for a
company’s organizational structure.
©FlatWorld 2018
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