10. Managing Strategic Change

Causes of Change

• Internal: Change due to internal factors like people, processes, and motivation.

• External: Changes in legislation, environment, competition, or technology.

• Incremental: Change through small steps (first-order change).

• Disruptive: Change due to innovation, structural change, or business model transformation.

  • Disrupts how business is conducted.

  • Rate of disruptive change has increased exponentially.

Factors of Internal Change

• Technology

• Human Resources

• Organisational Structure

• Profitability

• Objectives and Vision of Owners

Factors of External Change

• Competition

• Economic climate

• Political and legal environment

• Technological advances

• Major global events

Causes of Internal Change

• Change initiated internally.

• Examples:

  • Restructuring

  • Delayering

  • New Management

  • Expansion/Retrenchment

Causes of External Change

• Change from outside the business.

• Examples:

  • Social trends/attitudes

  • Economic conditions

  • Laws/regulations

  • Technological advances

Internal Causes of Change

• Leadership changes: New strategies and visions from new leaders.

• Corporate culture: Rigidity hinders change; flexibility enables adaptation.

• Financial performance: Poor results trigger cost-cutting or strategic shifts.

• Technological advancements: Changes in operations, training, and business models.

External Causes of Change

• Economic: Interest rates, inflation, recession, consumer spending, currency fluctuations.

• Technological: New software, automation, digital disruption.

• Political: Government policies, regulations, tax laws, trade agreements.

• Social: Cultural shifts, demographics, consumer values, lifestyle trends.

• Environmental: Climate change, sustainability, resource scarcity.

• Competitive: New market entrants, competitor strategies, market share changes.

Types of Change

• Incremental Change: Gradual change over time.

• Step Change: Rapid, significant change.

Incremental Change

• Small changes in response to subtle external changes.

• Usually involves little resistance.

• Arises as strategy develops.

Step Change

• Dramatic or radical change.

• Often required after strategic drift.

• Involves significant alteration.

• Gets it over with quickly.

• Likely to encounter resistance.

Disruptive Change

• Step change from external environment.

• Impacts the entire market, challenging the business model.

• Driven by rapid technological improvements, reducing barriers to entry.

Value of change

• Richard Branson: 'Every success story is a tale of constant adaption, revision and change. A company that stands still will soon be forgotten.’

• Jack Welch: 'Change before you have to’

The Value of Change

• Essential part of business life.

• The external environment is constantly changing.

• Successful businesses make internal change part of operations.

Benefits of Change

• Helps sustain competitive advantage.

• Aligns strategy with customer needs.

• Leverages developing technologies.

• Stakeholders benefit from productivity and work environment improvements.

• Change in structure improves communication and decision-making.

• Leading change drives innovation.

Drawbacks of Not Embracing Change

• Lack of adaptability: Outdated practices and products.

• Missed innovation opportunities: Stagnation.

• Competitive disadvantage: Competitors gain an edge.

• Employee dissatisfaction: Stagnant environment.

• Fear of the unknown: Resistance to new strategies.

Lewin’s Force Field Analysis

• Overview of driving vs. resisting forces.

• Kurt Lewin: Successful businesses adapt, rather than being inflexible.

Step by Step

• Describe the current situation.

• Describe the desired situation.

• Identify and evaluate driving forces.

• Identify and evaluate restraining forces.

• Chart the forces.

• Develop a strategy to strengthen driving forces and/or weaken restraining forces.

What is Driving Force?

• Key factor propelling the company forward.

What Restraining Force

• Any factor that opposes or hinders change.

Explaining Force Field Analysis

• Driving forces vs. restraining forces.

• Equilibrium = no change.

• Driving force must exceed restraining force for change to occur.

Examples of Forces Driving Internal Change

• Need for higher profits

• Poor efficiency

• Lack of innovation

• Need to change culture

• Change of leadership

Examples of Forces Driving External Change

• Customer demand

• Competition

• Legislation & taxes

• Political environment

• Ethics & social values

Resistance to Change

• Normal, as change is disruptive and stressful.

• Skepticism can be healthy.

• Resistance slows achievement of objectives.

Why Change is Resisted

• Self-interest: Concerns about personal implications.

• Misunderstanding: Communication problems, inadequate information.

• Low tolerance of change: Insecurity.

• Different assessment of the situation: Disagreement over need or advantages.

Flexible Organisations

• Able to adapt quickly to external changes.

What is a Flexible Organisation?

• The Organisational Structure is Key to Flexibility.

• The structure determines how effectively an organisation identifies and responds to change.

• Flexible organisations often have an ‘organic’ structure.

Two Approaches to Organisational Structures

• Organic Structures:

  • Informal

  • Flexible

  • Verbal communication favoured

  • Decentralised decision-making

  • Easier to handle change

• Mechanistic Structures:

  • Formal

  • Bureaucratic

  • Formal communication

  • Centralised decision-making

  • Standardised policies

  • Little perceived need to change

Characters of a Flexible Organisation

• Use flexible working

• Flat hierarchies

• Culture embraces change

• Quick decision-making

Advantages of Flexible Working

• Attracts higher-skilled workforce.

• Reduces recruitment costs.

• More job satisfaction and morale.

• Reduced sickness absence.

Disadvantages of Flexible Working

• Can lead to less productivity.

• Can lead to more procrastination.

• Workplace Flexibility Often Means Working from Home.

• Flexible Working Arrangements may not Always Equal High Paying Jobs.

• It can be Harder for Managers and Employers to Keep Track of what Their Employees are doing.

Restructuring

• Requires new ways of working.

• Core workers: Essential functions kept in-house.

• Peripheral activities: Subcontracted or outsourced.

Charles Handy’s ‘Shamrock’ organisation (1990)

• Three groups of workers:

  • Core Workers

  • Flexible Workers

  • Contractual ‘Fringe’ Workers

• Companies are moving towards flexible structures.

Advantages

• Increased Efficiency: Streamlines tasks by focusing on resources.

• Improved Debt Management: Renegotiate terms, refinance loans to consolidate debt.

• Reduced Costs: Strategic reassessment of costs to minimize spending.

• Refined Brand Identity: Reposition within the market.

• Streamlined Communication: Improves structure.

Disadvantages

• Loss of key skilled workers.

• Reassigning the workload to another employee could result in a lower quality of work and lower training expenses for that employee.

• Drop in morale.

Organic Structures and Mechanistic Structures

*Organic Structures:
*Informal
*Flexible and fluid (easy to change)
*Favours verbal communication
*Associated with decentralised decision-making and empowerment
*Find change easier to handle

Benefits of Organic Structures

• Promotes cohesion and relationship

• Working together towards a common goal

• High motivation of employees due to their inclusion in the decision-making process (which increases productivity)

• Employees can learn new skills since they're working in teams

• When there's a bad solution to a task, it is easy to help them since they're not the only one with that skillset

• In case of an illness, the task still gets finished since that employee is not the only one working on that task

Drawbacks of Organic Structures

• Due to the lack of specialisation, it is sometimes hard to get high-quality results

• The decision-making process is slow since everyone is included

• In the case of a bad final solution to a task, it is often hard to determine who is at fault

• Promotion can get difficult since it is not always clear who is best suited or does the best work

Examples

• Tech companies

• Creative agencies

Mechanistic Structures

• More formal and bureaucratic

• Associated with centralized decision-making and supervision

• Formal communication methods

• Favors standardized policies and procedures

• Little perceived need to change

Benefits of Mechanistic Structures

• Clearly defined paths/ tasks

• High specialisation of employees

• Usually good results (due to high specialization)

• Tasks are usually delivered within the provided time

• It ensures that rules and regulations are followed

• Promotion processes may be easy (it is clearly visible who is suited and does good work)

Drawbacks of Mechanistic Structures

• High specialisation of employees

• If someone has a bad solution for a task, it is hard to correct it or do better due to the high level of specialisation

• In the case of an illness, the tasks just do not get done since nobody is able to finish them

• Demoralises employees as they're not included in the decision-making process

• A stiff structure that doesn't allow employees to learn new tasks

Examples

• General Motors

• McDonald's

Kotter & Schlesinger: Overcoming Resistance to Change

Ways of overcoming resistance to change:

• Education and Communication

• Participation and Involvement

• Facilitation and Support

• Manipulation and Co-Option

• Negotiation and Bargaining

• Explicit and Implicit Coercion

Education and Communication

• The starting point for successful change is to communicate effectively the reasons why change is needed

• Honest communication about the issues and the proposed action helps people see the logic of change

• Effective education helps address misconceptions about the change, including misinformation or inaccuracies

• Education and communication are unlikely to be successful in the short term. They need to be delivered consistently and over a long period for maximum impact

Participation and Involvement

• Involvement in a change programme can be an effective way of bringing "on-board" people who would otherwise resist

• Effective participation often leads to commitment, not just compliance A common issue in any change programme is just how much involvement should be permitted.

• Delays and obstacles need to be avoided

Facilitation and Support

• Kotter & Schlesinger identified what they called "adjustment problems" during change

• Some people will need support to help cope with change

• Might include training, counselling and mentoring as well as simply listening to the concerns of people affected

• If fear and anxiety are causing resistance to change, then facilitation and support is particularly important

Manipulation and Co-Option

• Co-option involves bringing specific individuals into roles that are part of change management (perhaps managers who are likely to be otherwise resistant to change)

• Manipulation involves the selective use of information to encourage people to behave in a particular way

• Whilst the use of manipulation might be seen as unethical, it might be the only option if other methods of overcoming resistance to change prove ineffective

Negotiation and Bargaining

• The idea here is to give people who resist an incentive to change - or leave

• The negotiation and bargaining might involve offering better financial rewards for those who accept the requirements of the change programme

• Alternatively, enhanced rewards for leaving might also be offered

Explicit and Implicit Coercion

• This approach is very much the "last resort" if other methods of overcoming resistance to change fail

• Explicit coercion involves people being told exactly what the implications of resisting change will be

• Implicit coercion involves suggesting the likely negative consequences for the business of failing to change, without making explicit threats

• The big issue with using coercion is that it almost inevitably damages trust between people in a business and can lead to damaged morale (in the short-term)

Kotter & Schlesinger: Causes for Resistance to Change

• 4 main reasons:

  • Self-interest

  • Different Assessment of the Situation

  • Low tolerance for change and Inertia

  • Misinformation and Misunderstanding

Self-Interest

• Self-interest is a powerful motivator

• Arises from a perceived threat to job security, status and financial position

• Understandable- Why would you want to lose something you believe to be valuable?

• Individuals often place their organisation, particularly if they don’t feel a strong loyalty to it

Low Tolerance and Inertia

• Many people suffer from inertia or reluctance to change, preferring things to stay ‘the way they are’

• Many people need security, predictability and stability in their work

• If there is a low tolerance of change (perhaps arising from past experience) then resistance to change may grow

Different Assessment of the Situation

• Here, there is disagreement about the need for change or what that change needs to be

• Some people may disagree with the change proposed, or they may feel they have a better solution

• This is different from ‘self-interest’ - the resistance here is based on disagreement about what is best for the business

Misinformation and Misunderstanding

• People don’t understand why change is needed, perhaps because they are misinformed about the position of the business

• Perception may be widespread that there is no compelling reason for change

• Perhaps even an element of people fooling themselves that things are better than they really are

Initiators

• The people in the organisation who want to decide on and introduce the change and carry it through

Resistors

• The personnel or employees who are affected by the change. They may resist the change with different degrees of opposition depending on how they are affected

Handy's Four Classifications of Organisational Culture

• Power Culture

  • Control radiates from the centre

  • Concentrates power among a few

  • Few rules and little bureaucracy

  • Swift decisions

Benefits:

• Allows multiple orientations

• Maintains consistency between different departments and projects

• Provide mechanisms to deal with multiple sources of power in the organisation

Drawbacks:

• Can cause role conflict for the individual who can be caught between the demands of two managers

• Very difficult to introduce

• High managerial costs and support

Role Culture

• People have clearly delegated authorities within a highly defined structure

• Hierarchical bureaucracy

• Power derives from a person’s position

• Little scope exists for expert power

Benefits:

• Succeed in stable environments

• Provide secure employment

• Roles and responsibilities are clearly defined

• A clear system for processing work exists

Drawbacks:

• Unsuitable to changing environments can be boring

• Does not often have room for personal growth and is slow to adapt to things like new technology

Task Culture

• Teams are formed to solve particular problems

• Power derives from expertise as long as a team requires expertise

• No single power source

• Matrix organisation

Benefits:

• Extremely adaptable

• Teams can be easily reformed, abandoned or continued

• Can work quickly- As each group often has all the decision-making power it requires

• Individuals have a large degree of control over their work

Drawbacks:

• Finds producing economies of scale difficult

• Often cannot produce depth of expertise

• Control in such organisations is difficult

Person Culture

• People believe themselves to be superior to the business

• Business full of people with similar training, background and expertise

• Common in firms of professionals- e.g. accountants and lawyers

• Power lies in each group of individuals

Benefits:

• Individuals have a greater deal of power

• Decisions are by mutual consent

• The role one plays depends on one’s expertise

Drawbacks:

• Control mechanisms are impossible to implement except by mutual consent

• Organisations are often powerless to evict such individuals

• Individuals with this orientation are not easy to manage

Culture types and Leadership style

• Power:

  • Autocratic

• Role:

  • Autocratic or Paternalistic

• Task:

  • Paternalistic/ Democratic

• Person:

  • Democratic

Importance of Organisational Culture

• Various ways of identifying culture:

  • How decisions are made

  • Methods and style of communication

  • How customers are treated

Handy’s 4 Classes of Culture

• Power

• Role

• Task

• Persons

Role Culture:

• People have clearly delegated authorities within a highly defined structure

• Hierarchal bureaucracy

• Power derives from a person’s position

Schein's 4 Layers

• Values

  • Often formally stated/communicated (e.g. our ‘core values’)

• Beliefs

  • More specific than values

  • How people talk about issues facing the organisation

• Behaviours

  • Day-to-day ways in which an organisation operates

  • E.g. work routines, org structure

• Paradigm

  • The set of assumptions held in common that are taken for granted

  • Usually not talked about - they are just generally accepted

Strong Culture

• Staff understand and responds to culture

• Little need for policies and procedures

• Consistent behaviour

• Culture is embedded

Weak Culture

• Little alignment with business values

• Inconsistent behaviour

• A need for extensive bureaucracy & procedures

Examples of a business built on a strong positive culture

• Customers are "guests"

• A job is a "part"

• A uniform is a "costume"

• Being on duty is "onstage"

• Being off duty is "backstage"

Examples of Positive Culture

• Zappos (Online Shoe Retailer)

• South West Airlines (World’s Largest Low-Cost Airline)

Examples of Competitive Advantage

• Ikea

4 Factors that Shape Managerial Behaviours

• Organisational Culture

• Organisation Structure, Systems, Policies and Plans

• Leadership

• External Environment (PESTLE)

  • The Behaviour of a Firm’s Managers and Leaders

Shadow of the Leader

• A phenomenon where the organisational culture is the reflection of the founder or senior team

Toxic Culture

• "A toxic culture in an organisation creates an environment that can damage the emotional, physical or financial wellbeing of employees, customers and those associated with that organisation"

• Possible signs of toxic culture:

  • Weak leadership

  • Authoritarian or bullying leadership

  • Lack of transparency & morality

  • Dishonesty & corruption

  • Reluctance to embrace change

  • Lack of openness and honesty

Why might culture need changing?

• Improved business performance

  • Declining profits and sales

  • Low quality or standards of customer service

  • Loss of market share or leadership

• To respond to significant change

  • Respond to issues around ethics & illegality

  • Change of ownership (e.g. acquisition)

  • Change of leadership (e.g. a new CEO)

  • Economic conditions (e.g. downturn)

Influences on Organisational Culture:

Key Influences on the Organisational Culture of a Business:

• Founder

• Business Size

• Rewards

• Industry/Market

• Organisational Structure

• Work Environment

Influence of the Founder:

• The influence of the founder of Ikea, Ingvar Kamprad, is perhaps one of the best examples of how organisational culture can be shaped by the founder of a business. Whilst a business may eventually grow to become a multinational, its culture is often formed or shaped by those who started it. The founders set the vision and core values of the business they create, which in turn shape how the organisational structure, reward systems, approach to decision-making and more are determined.

Business Size and Complexity:

• As a business becomes larger and more complex, then it is perhaps inevitable that its culture is changed too. For example, a small or start-up business is likely to have a more informal approach to "how things are done". By contrast, a larger, more complex business is likely to have a more formal approach to how things are done, including methods of communication, rules and procedures, etc.

Rewards:

• The reward systems used by businesses can often be a significant influence on culture. For example, a business where employees are routinely paid through commission and/or performance-related bonuses might be expected to have a different approach to doing things than a business where employees are only paid a salary. As an example, the financial services industry is often held-up as an example of where rewards systems led to a strong culture of that encouraged excessive risk-taking.

Industry/Market:

• This is linked to the influence of reward systems, since employee rewards are often based on the nature of the industry or market in which a business operates. Whilst most industries and markets are highly competitive these days, in some there is a different expectation as to how things are done. For example, some industries such as energy and pharmaceuticals are highly regulated, which therefore influences how decisions are made, what controls and checks are in place etc. In some markets, such as the creative industries, culture is shaped by the need to encourage creativity, innovation, team-work etc.

Organisational Structure:

• You might ask - which comes first - the organisational structure or the culture? In reality, both influence each other! For example, a culture that is built on strong control from the centre will need different policies and controls compared with one where authority is distributed away from the centre. Similarly a business might develop quite informally into a structure with a flat hierarchy, where the organisation structure simply adapts to reflect the ways that the people in the business find works best.

Work Environment:

• There are many classic examples out there of work environments that have been deliberately designed to support the existing and/or desired culture. The famous Googleplex (the corporate headquarters complex of Google) and more recently Apple's new HQ are good examples. However, at a simpler level, the physical environment in which people work together must surely influence the culture at a business, not the least because of the impact on communication. Are functional teams housed in different parts of a building - or even different buildings? Are employees allowed to work remotely? Do staff "hot-desk" or do they have somewhere in the work environment to call their own?

Reasons for Changing Organisational Culture:

Symptoms of the Need for Culture Change:

• Evidence of declining customer service

• Internal fighting; management criticism ("us & them mentality")

• Higher staff turnover and absenteeism

• Processes become more bureaucratic

• Innovation is no longer valued

• Leadership show double standards or decision-making becomes inconsistent

• Communication is more closed and restricted

Key Reasons to Change Organisational Culture:

• Business Performance

• Change in External Environment

• New Leadership/ Strategy

• To Support Change Management

Successful Culture Change examples:

• Netflix shifted from a hierarchical model to one that is agile and innovative, emphasising freedom and responsibility.

• Microsoft moved from a competitive and siloed culture to one that is more collaborative and customer-focused.

• Zappos created a culture based on its core values, empowering employees to make decisions, take risks, and express themselves.

Failed Culture Change Examples:

• Uber faced a series of scandals and controversies due to its aggressive and toxic culture, which it attempted to reform by hiring a new CEO and introducing new values and policies. However, it struggled to overcome its deep-rooted cultural problems.

• GE tried to reinvent its culture from a bureaucratic and hierarchical one to a more lean and agile one, inspired by the startup mentality. It launched Fast Works, but faced many challenges in implementing it.

• Sears attempted to change its culture from a traditional and centralised one to a more entrepreneurial and decentralized one, but this created a culture of distrust, conflict, and dysfunction. Additionally, Sears neglected some of its core competencies.

Problems with Changing Organisational Culture:

Overall:

• The key problem facing management wanting to change organisational culture is that the culture will usually be deeply embedded or ingrained in the organisation.

Johnson and Scholes:

• Johnson & Scholes point to a variety of features of organisational culture that might prove resistant to attempted change. For example, the power structures and control systems which determine who has authority in a business and how decisions are made are likely to be threatened by culture change. That might suggest that new leadership is required at the same time in order to increase the chance of success.

• Similarly, the routines and rituals that are embedded in a culture might also be hard to change. These are the daily actions and behaviours of individuals within the organisation. Routines indicate what is expected of employees on a day-to-day basis - for example, how employees deal with customers, communicate with each

Schein:

• Schein's famous model of organisational culture also helps explain why culture change is tough. The model (represented above) is often described as an onion model as it has different layers. The outer layer of organisational culture is relatively easy to adapt or change. The deeper the layer, the harder it becomes to change.

• At the centre of Schein's onion (sorry - model) is the "paradigm". This is the unspoken, generally-accepted way of doing things that is prevalent in a business's culture. It is hard to identify or to describe - except that people in the business recognise it when they see it, or perhaps more likely, know when something is not consistent with the culture.

Strategy Planning:

Process for Strategic Planning:

• Set mission and business objectives

• Plan how to achieve the objectives

• Implement the plan

• Monitor and Evaluate the results

Benefits of effective:

• Clear direction (motivating)

• Efficient use of business resources

• A way of measuring progress

• More effective decision-making

Drawbacks:

• Money/budget:

  • Be careful when budgeting for strategy planning. Make sure there is a little wiggle room for error but not too much

• Lack of alignment:

  • Make sure it matches the culture of the business. Make sure to include team members’ feedback when implementing strategic planning

• Lack of ownership:

  • Make sure that not too many people are in charge of the same objective. Too many people voicing their opinions may lead to no one implementing change

• Incorrect approach:

  • Make sure the right approach is used which matches the organisational culture and make it tangible

Strategic planning tools:

• Swot analysis

• PESTLE analysis

• Porters five forces

• Balanced Scorecard

• Ansoff Matrix

• Stakeholder analysis

Managing Strategic Implementation:

Factors influencing strategies:

• Businesses consider the internal and external environment when deciding and considering their strategic plans

• The leadership of a business can affect its strategic plans and the implementation of a strategy

Impact of implementing a new strategy:

• Implementing a new strategy can mean that the business experiences large cultural changes

• Leaders are needed to guide businesses through this period of change and ensure that employees are supporting the change and the business’ direction

Importance of leaders for implementing new strategies:

• Leaders often understand the process of change and their guidance and expertise can help make sure that any change is successful

• Leaders often take responsibility for monitoring and renewing any strategic changes and ensuring that appropriate actions are taken to address concerns. Leaders may also delegate these decisions to others within the organisation

• Leaders motivate and empower staff and ensure that employees are not resistant

Communication:

• The quality of communication within a business can affect its strategic plans and the implementation of a strategy

Importance of communication for implementing a new strategy:

• Communication involves employees and ensures that key stakeholders understand why change is happening. This can reduce employee resistance and support strategic change

• Communication between functional areas is vital to ensure that all functions have the resources available to support the strategic change

• Communication is vital to employees to report on and review the success of the change and relay this information to managers and leaders

Importance of Organisational Structure:

Functional structures:

• Focused on functions, departments and main activities.

Advantages:

*Increased productivity:
*People in a functional structure setting have specialised skills that allow them to work more quickly and efficiently than those who may be unfamiliar with specific subjects, which leads to greater productivity. Employees within this system of hierarchy who demonstrate high levels of productivity often receive promotions to other positions
*Skills development:
*Within each team, experienced managers have the chance to teach their team members the same skills they possess, resulting in an enhanced skill set for all involved
*Clarity:
*Anytime within the company needs high-level information related to marketing, human resources, customer service or operations, they know where to go. The hierarchal nature of the functional structure clarifies the specific roles and responsibilities of every person within a department
*Minimised cost of operation:
*By organising employees according to business functions, departments can reduce the chance for multiple departments to be individuals with the right skills. It also saves money because work gets performed more efficiently

Disadvantages:

*Hindered decision-making:
*Formal organisational structures typically require employees to seek approval from management and other authority figures before making decisions. When management is unavailable for feedback
*Competition between departments:
*As employees within each department work together, they begin to operate as a team focused on achieving specific goals. While this goal-
oriented mindset is typically positive, it may prompt competition between departments.
*Narrow scope:
*Without extra guidance and information from managers, employees within departments may work with limited knowledge of how their roles relate to the company's objectives. They may also not understand how their work relates to other departments.

Product:

• The systematic arrangement of a product's components and sub-components—as they relate to one another and the final product. This includes the physical and logical parts and assemblies that make up the product, as well as the documentation and information that support it throughout its lifecycle.

Advantages:

• Improve communications between different functional experts within each product division.

• Allows a business to adapt different products more easily in response to customer needs.

• Allows each division to focus on its own customers.

• Monitor product performance- the business can monitor the performance and profits for each product unit.

Disadvantages:

• There can be wasteful duplication of management functions (marketing, finance, etc) for each product division.

• There may be wasteful competition for the same customers between different product divisions.

• Poor communication between the product units may result in the business missing opportunities in the market.

Regional:

• The arrangement and organisation of various elements within a specific area or territory impact how political power is distributed and exercised

Advantages:

• Local Managers provide local consumers with products that satisfy their needs. This helps to increase customer loyalty.

• Friendly Competition- There is a friendly competition between the geographic units. Each unit tries to outdo the others in terms of increasing sales and reducing costs. This helps to increase profits for the entire business.

• Promotion- Managers in geographic units make decisions on behalf of the business in their region. This helps them to prepare for future promotion opportunities.

Disadvantage:

• Duplication of work- There may be duplicate departments working in different geographic areas, with employees doing the same job. This increases business costs.

• Conflict between management- Decisions made my senior management for the entire business can have a negative effect on local areas.

• Communication may be poor between the different geographic areas. The development of new products/processes may not be shared, which can result in organisational inefficiency.

Matrix:

• In a matrix structure, individuals work across teams and projects as well as within their own department or function.

• For example, a project or task team established to develop a new product might include engineers and design specialists as well as those with marketing, financial, personnel and production skills.

• These teams can be temporary or permanent depending on the tasks they are asked to complete. Each team member can find himself/herself with two managers - their normal functional manager as well as the team leader of the project.

Advantages:

• Can help to break down traditional department barriers, improving communication across the entire organisation

• Can allow individuals to use particular skills within a variety of contexts

• Avoid the need for several departments to meet regularly, reducing costs and improving coordination

• Likely to result in greater motivation among the team members

• Encourages cross-fertilisation of ideas across departments – e.g. helping to share good practice and ideas

• A good way of sharing resources across departments – which can make a project more cost-effective

Disadvantages:

• Members of project teams may have divided loyalties as they report to two line managers. Equally, this scenario can put project team members under heavy pressure of work.

• There may not be a clear line of accountability for project teams given the complex nature of matrix structures.

• Difficult to coordinate

• It takes time for matrix team members to get used to working in this kind of structure

• Team members may neglect their functional responsibilities It is important to remember that a matrix structure often sites alongside a traditional functional structure – it is not necessarily a replacement.

Network Analysis:

What is Critical Path Analysis:

• It is a project analysis and planning method that allows a project to be completed in the shortest possible time

Why businesses need to plan complex projects:

• Many larger businesses get involved in projects that are complex and involve significant investment and risk

• As the complexity and risk increase it becomes even more necessary to identify the relationships between the activities involved and to work out the most efficient way of completing the project