Frank T. Rothaermel -- Strategic Management 3e -- Chapter 11

Organizational Design

The process of creating, implementing, monitoring and modifying the structure, processes and procedures of an organization

Key components of organizational design

structure, culture, and control

the goal is to design an org that allows managers to effectively translate their chosen strat into a realized one

Organizational Inertia can lead to a firms failure

when a tightly coupled system of strategy and structure experiences internal or external shifts, happens through a dynamic four step process

Organizational Structure

Determines how firms orchestrate employees work efforts and distribute resources. defines how firms divide and integrated tasks

Four Building blocks of organizational structure

Specialization

Formalization

Centralization

Hierarchy

Specialization

An element of organizational structure that describes the degrees to which a task is divided into separate jobs (i.e.; the division of labor)

Formalization

An element of organizational structure that captures the extent to which employee behavior is steered by explicit and codified rules and procedures.

Centeralization

An element of organizational structure that refers to the degree to which decision making is concentrated at the top of the organization.

Hierarchy

An element of organizational structure that determines the formal, position-based reporting lines and thus stipulate who reports to whom.

mechanistic organization

Organizational form characterized by a high degree of specialization and formalization, and a tall hierarchy that relies on centralized decision making.

Organic organization

Organizational form characterized by a low degree of specialization and formalization, a flat, organizational structure and decentralized decision making.

Strategy-structure

is dynamic, changing in a predictable pattern, from simple to functional structure then to multidivisional and matrix structure, as firms grow in size and complexity

Simple Structure

Organizational structure in which the founders tend to make all the important strategic decisions as well as run the day-to-day operations.

Functional Structure

Organizational structure that groups employees into distinct functional areas based on domain expertise.

Business Strategies: cost leadership, differentiation, blue ocean

Multidivisional structure (M-form)

Organizational structure that consists of several distinct strategic business units (SBUs), each with its own profit-and-loss (P&L) responsibility. Each SBU operates more or less independently

Matrix structure

Organizational structure that combines the functional structure with M-form

Closed Inovation

framework for R&D that proposes impenetrable firm boundaries. Key to success in the closed innovation model is that firm discovers, develops, and commercializes new products internally

Open Inovation

framework that proposes permeable firm boundaries to allow a firm to benefit not only from internal ideas and inventions, but also from external ones.

Exploitation

Applying current knowledge to enhance firm performance in the short term.

Organizational Culture

The collectively shared values and norms of an organization's members; a key building block of organizational design.

Values vs Norms

define what is considered important, and norms define appropriate employee attitudes and behaviors

Corporate culture

finds it expression in artifacts, which are observable expressions of an organization's culture

Strategic control-and-reward systems

A key building block of organizational design; internal-governance mechanisms put in place to align the incentives of principals (shareholders) and agents (employees).

Allow managers to specify goals, measure progress, and provide performance feedback

Founder imprinting

A process by which the founder defines and shapes an organization's culture, which can persist for decades after his or her departure.

Objectives and Key Results (OKRs)

a strategic reward and control system that helps a team and its individual members monitor objectives and outcomes, as well as set ambitious stretch goals

Input Controls

mechanisms in a strategic control-and-reward system that seek to define and direct employee behavior through a set of explicit, codified rules and standard operating procedures that are considered prior to the value-creating activities

Output controls

Mechanisms in a strategic control-and-reward system that seek to guide employee behavior by defining expected results (outputs), but leave the means to those results open to individual employees, groups, or SBUs.

Groupthink

A situation in which opinions coalesce around a leader without individuals critically evaluating and challenging that leader's opinions and assumptions.

Core rigidity

A former core competency that turned into a liability because the firm has failed to hone, refine, and upgrade the competency as the environment changed.