Matching structure to strategy centers around making strategy-critical activities the main organizational building blocks, finding effective ways to bridge organizational lines of authority and coordinate the related efforts of separate internal units and individuals, and effectively networking the efforts of internal units and external collaborative partners. Other big consideration includes what decisions to centralize and what decisions to decentralize.
All organization structures have strategic advantages and disadvantages; there is no one best way to organize. Functionally specialized organization structures have traditionally been the most popular way to organize single-business companies. Functional organization works well where strategy-critical activities closely match discipline-specific activities and minimal interdepartmental cooperation is needed. But it has significant drawbacks: functional myopia, empire building, interdepartmental rivalries, excessive process fragmentation, and vertically layered management hierarchies. In recent years, business process reengineering has been used to circumvent may of the disadvantages of functional organization.
Whatever basic structure is chosen, it usually has to be supplemented with interdisciplinary task forces, incentive compensation schemes tied to measures of joint performance, empowerment of cross-functional and/or self-directed work teams to perform and unity fragmented process and strategy-critical activities, special project teams, relationship managers, and special top management efforts to knit the work of different individuals and groups into valuable competitive capabilities. Building core competencies and competitive capabilities emerges from establishing and nurturing collaborative working relationships between individuals and groups in different departments and between a company and its external allies, not from how the boxes are arranged on an organization chart.
New strategic priorities like short design-to-market cycles, multi-version production, personalized customer service, aggressive pursuit of e-commerce opportunities, and winning the race for positions of leadership in global markets and/or industries of the future have prompted increasing numbers of companies to create lean, flat, horizontal structures that are responsive and innovative. Such designs for matching structure to strategy involve fewer layers of management authority, managers and workers empowered to act on their own judgment, reengineered work processes to reduce cross-department fragmentation, collaborative partnerships with outsiders (suppliers, distributors/dealers, companies with complementary products/services and even select competitors), increased outsourcing of selected value chain activities, leaner staffing of internal support functions, and rapidly growing use of e-commerce technologies and business practices.
A change in strategy nearly always calls for budget reallocations. Reworking the budget to make it more strategy-supportive is a crucial part of the implementation process because every organization unit needs to have the people, equipment, facilities and other resources to carry out its part of the strategic plan (but no more than what it really needs). Implementing a new strategy often entails shifting resources from one area to another-downsizing units that are overstaffed and over-funded, up-sizing those more critical to strategic success, and killing projects and activities that are no longer justified.
Anytime a company alter its strategy, managers are well advised to review existing policies and operating procedures, deleting or revising those that are out of sync and deciding if additional ones are needed. Prescribing new or freshly revised policies and operating procedures aids the task of business strategy implementation (1) by providing top-down guidance to operating managers supervisory personnel, and employees regarding how certain things need to be done; (2) by putting boundaries on independent actions and decisions; (3) by promoting consistency in how particular strategy-critical activities are performed in geographically scattered operating units; and (4) by helping to create a strategy supportive work climate and corporate culture. Thick policy manuals are usually unnecessary. Indeed, when individual creativity and initiative are more essential to good execution than standardization and conformity, it is better to give people the freedom to do things however they see fit and hold them accountable for good results rather tan try to control their behavior with policies and guidelines for every situation? Hence, creating a supportive fit between strategy and policy can mean many policies, few policies, or different policies.
Competent strategy execution entails visible, unyielding managerial commitment of best practices and continuous improvements. Benchmarking, the discovery and adoption of best practices, reengineering core business processes, and total quality management programs all aim to improved efficiency, lower costs, better products quality, and greater customer satisfaction. All these techniques are important tools for learning how to execute a strategy more proficiently. Benchmarking provides ad realistic basis for setting performance targets. Instituting “best-in-industry” or “best-in-world” operating practices in most or all value chain activities provide a means for taking strategy execution to a higher plateau of competence and nurturing a high-performance work environment. Reengineering is a way to make quantum progress toward becoming a world-class organization, while Total Quality Management (TQM) installs a commitment to continuous improvement. Effective use of TQM and continuous improvement techniques is a valuable competitive asset in a company’s resource portfolio-one than can product important competitive capabilities (in reducing costs, speeding new products to market, or improving product quality, service, or customer satisfaction) and be a source of competitive advantage.
Company strategies can’t be implemented or executed will without a number of support systems to carry on business operations. Well-conceived state-of-the-art support systems not only facilitate better strategy exaction is to make strategically relevant measures of performance the dominating basis for designing incentives, evaluating individual and group effort, and handing out rewords. Positive motivation practice generally work better than negative ones, but there is a place for booth. There’s also a place both monetary and no monetary incentives.
For an incentive compensation system to work well (1) the monetary payoff should be a major percentage of the compensation package,(2) the use of incentives should extend to all managers and workers,(3) the system should be administered with care and fairness, (4) the incentives should be linked to performance target spelled out in the strategic plan, (5) each individual’s performance targets should involve outcomes the person can personally effect,(6) rewards should promptly follow the determination of good performance.(7) monetary rewards should be supplemented with liberal use of no monetary rewards, and (8) skirting the system to reward non-performers should be scrupulously avoided.