File Name: organizational structure and strategy implementation .zip
Cite as: Yabarow, M. The paper aims to investigate the relationship between organisational structure and strategy implementation in oil marketing companies. The study attempts to ascertain the perceptions of the employees regarding the impact of organisational structure on strategy implementation using four organisational variables: hierarchical levels, organisational communication, decision making structures and organisational culture. Based on a sample of respondents working in Kenyan oil marketing companies, the study found that hierarchical levels, organisational communication, decision making structures and organisational culture have a certain influence on strategy implementation. By considering the influence of communication, decision-making, and organisational culture, this study attempts to explore the ways in which organisational structure influences strategy implementation in Kenyan oil marketing companies.
When a company finds itself unable to execute strategy, all too often the first reaction is to redraw the organization chart or tinker with incentives. Far more effective would be to clarify decision rights and improve the flow of information both up the line of command and across the organization. Then, the right structures and motivators tend to fall into place.
From this data they have distilled—and ranked in order of importance—the top 17 traits exhibited by the organizations that are most effective at executing strategy. The single most common attribute of such companies is that their employees are clear about which decisions and actions they are responsible for. As a result, decisions are rarely second-guessed, and accurate competitive information quickly finds its way up the hierarchy and across organizational boundaries.
Managers communicate the key drivers of success, so frontline employees have the information they need to understand the impact of their day-to-day actions. Motivators—like performance appraisals that distinguish high, adequate, and low performers and rewards for fulfilling particular commitments—are also important but are most effective when applied after decision rights and information flows have been addressed.
That holds true for structural moves as well. Surprisingly, the most effective structural moves turn out to be promoting people laterally—and more slowly. How can you make the most educated and cost-efficient decisions about which change initiatives to implement? The authors have developed a powerful online diagnostic and simulation tool that can help you test the effectiveness of various approaches virtually, without risking significant amounts of time and money.
A brilliant strategy may put you on the competitive map. But only solid execution keeps you there. Unfortunately, most companies struggle with implementation. Though structural change has its place in execution, it produces only short-term gains. For example, one company reduced its management layers as part of a strategy to address disappointing performance.
Costs plummeted initially, but the layers soon crept back in. Research by Neilson, Martin, and Powers shows that execution exemplars focus their efforts on two levers far more powerful than structural change:.
Tackle decision rights and information flows first, and only then alter organizational structures and realign incentives to support those moves. In one global consumer-goods company, decisions made by divisional and geographic leaders were overridden by corporate functional leaders who controlled resource allocations. Decisions stalled. Overhead costs mounted as divisions added staff to create bulletproof cases for challenging corporate decisions.
To support a new strategy hinging on sharper customer focus, the CEO designated accountability for profits unambiguously to the divisions. So the leadership team encouraged country managers to delegate standard operational tasks. To improve information flow to senior levels of management, the company took steps to create a more open, informal culture.
To better manage relationships with large, cross-product customers, a B2B company needed its units to talk with one another. It charged its newly created customer-focused marketing group with encouraging cross-company communication. The group issued regular reports showing performance against targets by product and geography and supplied root-cause analyses of performance gaps. Quarterly performance-management meetings further fostered the trust required for collaboration. At a financial services firm, salespeople routinely crafted customized one-off deals with clients that cost the company more than it made in revenues.
For customized deals, it established standardized back-office processes such as risk assessment. It also developed analytical support tools to arm salespeople with accurate information on the cost implications of their proposed transactions. Profitability improved. A brilliant strategy, blockbuster product, or breakthrough technology can put you on the competitive map, but only solid execution can keep you there. You have to be able to deliver on your intent. Execution is the result of thousands of decisions made every day by employees acting according to the information they have and their own self-interest.
In efforts to improve performance, most organizations go right to structural measures because moving lines around the org chart seems the most obvious solution and the changes are visible and concrete. Such steps generally reap some short-term efficiencies quickly, but in so doing address only the symptoms of dysfunction, not its root causes. Several years later, companies usually end up in the same place they started.
In fact, our research shows that actions having to do with decision rights and information are far more important—about twice as effective—as improvements made to the other two building blocks.
When a company fails to execute its strategy, the first thing managers often think to do is restructure. But our research shows that the fundamentals of good execution start with clarifying decision rights and making sure information flows where it needs to go. If you get those right, the correct structure and motivators often become obvious. Take, for example, the case of a global consumer packaged-goods company that lurched down the reorganization path in the early s.
We have altered identifying details in this and other cases that follow. Disappointed with company performance, senior management did what most companies were doing at that time: They restructured.
They eliminated some layers of management and broadened spans of control. The layers had crept back in, and spans of control had once again narrowed. In addressing only structure, management had attacked the visible symptoms of poor performance but not the underlying cause—how people made decisions and how they were held accountable.
This time, management looked beyond lines and boxes to the mechanics of how work got done. Instead of searching for ways to strip out costs, they focused on improving execution—and in the process discovered the true reasons for the performance shortfall. They did not intuitively understand which decisions were theirs to make. Moreover, the link between performance and rewards was weak.
This was a company long on micromanaging and second-guessing, and short on accountability. Armed with this understanding, the company designed a new management model that established who was accountable for what and made the connection between performance and reward. For instance, the norm at this company, not unusual in the industry, had been to promote people quickly, within 18 months to two years, before they had a chance to see their initiatives through. As a result, managers at every level kept doing their old jobs even after they had been promoted, peering over the shoulders of the direct reports who were now in charge of their projects and, all too frequently, taking over.
As a consequence, forecasting has become more accurate and reliable. These actions did yield a structure with fewer layers and greater spans of control, but that was a side effect, not the primary focus, of the changes. Our conclusions arise out of decades of practical application and intensive research. Nearly five years ago, we and our colleagues set out to gather empirical data to identify the actions that were most effective in enabling an organization to implement strategy.
What particular ways of restructuring, motivating, improving information flows, and clarifying decision rights mattered the most? We started by drawing up a list of 17 traits, each corresponding to one or more of the four building blocks we knew could enable effective execution—traits like the free flow of information across organizational boundaries or the degree to which senior leaders refrain from getting involved in operating decisions.
With these factors in mind, we developed an online profiler that allows individuals to assess the execution capabilities of their organizations. That allowed us to rank all 17 traits in order of their relative influence. From our survey research drawn from more than 26, people in 31 companies, we have distilled the traits that make organizations effective at implementing strategy. Here they are, in order of importance. Ranking the traits makes clear how important decision rights and information are to effective strategy execution.
The first eight traits map directly to decision rights and information. Only three of the 17 traits relate to structure, and none of those ranks higher than 13th. Blurring of decision rights tends to occur as a company matures. Young organizations are generally too busy getting things done to define roles and responsibilities clearly at the outset. And why should they? So for a time, things work out well enough.
As the company grows, however, executives come and go, bringing in with them and taking away different expectations, and over time the approval process gets ever more convoluted and murky. One global consumer-durables company found this out the hard way. It was so rife with people making competing and conflicting decisions that it was hard to find anyone below the CEO who felt truly accountable for profitability. The company was organized into 16 product divisions aggregated into three geographic groups—North America, Europe, and International.
Decisions made by divisional and geographic leaders were routinely overridden by functional leaders. Overhead costs began to mount as the divisions added staff to help them create bulletproof cases to challenge corporate decisions. Decisions stalled while divisions negotiated with functions, each layer weighing in with questions. Functional staffers in the divisions financial analysts, for example often deferred to their higher-ups in corporate rather than their division vice president, since functional leaders were responsible for rewards and promotions.
Only the CEO and his executive team had the discretion to resolve disputes. All of these symptoms fed on one another and collectively hampered execution—until a new CEO came in. The new chief executive chose to focus less on cost control and more on profitable growth by redefining the divisions to focus on consumers.
As part of the new organizational model, the CEO designated accountability for profits unambiguously to the divisions and also gave them the authority to draw on functional activities to support their goals as well as more control of the budget.
For the most part, the functional leaders understood the market realities—and that change entailed some adjustments to the operating model of the business. Headquarters can serve a powerful function in identifying patterns and promulgating best practices throughout business segments and geographic regions. But it can play this coordinating role only if it has accurate and up-to-date market intelligence. Otherwise, it will tend to impose its own agenda and policies rather than defer to operations that are much closer to the customer.
Consider the case of heavy-equipment manufacturer Caterpillar. Decision rights were hoarded at the top by functional general offices located at headquarters in Peoria, Illinois, while much of the information needed to make those decisions resided in the field with sales managers. We tested organizational effectiveness by having people fill out an online diagnostic, a tool comprising 19 questions 17 that describe organizational traits and two that describe outcomes.
To determine which of the 17 traits in our profiler are most strongly associated with excellence in execution, we looked at 31 companies in our database for which we had responses from at least individual anonymously completed profiles, for a total of 26, responses. Finally, we indexed the result to a point scale. Pricing, for example, was based on cost and determined not by market realities but by the pricing general office in Peoria.
In , the company posted the first annual loss in its almostyear history. By the end of , Caterpillar had lost a billion dollars.
A Strategy is an essential management contrivance in any organization today. The tests of the modern business environment and fast changing global economy demands high productivity speed and flexibility for organizations that seeks to thrive. In order to achieve the required efficiency and effectiveness, organizations must change their structure strategically. The main aim of this research work was to analyze the key drivers affecting strategy implementation in the commercial banks in Nairobi, Kenya. Specifically the study endeavored to determine whether communication systems affect implementation of strategy in commercial banks, establish whether leadership styles affect implementation of strategy in commercial banks, establish whether organizational structure affect implementation of strategy in commercial banks and establish whether organizational culture affects the implementation of strategy in commercial banks in Nairobi, Kenya. The study adopted a descriptive and quantitative design. The study targeted top management of the head offices of listed commercial banks in Nairobi consisting of a total of respondents.
Managing Strategic Change For managing the change formulation and implementation of strategy. Two linkages exist between strategy formulation and strategy implementation: i Forward linkage: deals with preparing organizational activities like organizational structure, leadership, culture etc. Issues in Strategy Implementation Project Implementation: Project is a highly specific programme for which the time schedule and specific costs are determined in advance. Projects create all necessary conditions and facilities for the strategy implementation. Procedural Implementation: Strategy implementation requires executing the strategy, based on the rules, regulations and procedures formulated by the government.
Designing structure that fits company needs is a major challenge. Each structure has its advantages and disadvantages on how it contributes to its effectiveness, and organization has to mull over the decision on what structures it follows, plus the autonomy organizations provide to its employees for purpose of decision making. Structure serves as basis for orchestrating organizational activities.
The implementation of strategy, directly or indirectly, relates to all facets of management. Therefore, it is essential to follow a holistic approach when analyzing and evaluating complex issues of implementation. However, research in this area is still limited, and offers few practical propositions. The role and importance of each implementation factor, as well as its relationship with other factors, are explained. It is believed that the framework developed in this article can assist executives and researchers to better understand and evaluate complex factors of implementation and deal with challenges from a holistic perspective. Suggestions for practice and future research are also given. Okumus, F.
The objective of this work is to review the literature of the main concepts that lead to determining the strategic approach, creation of strategies, organizational structures, strategy formulation, and strategic evaluation as a guide for the organizational management, taking into account the effects produced by the different types of strategies on the performance of organizations. In this article, the systemic literature review method was used to synthesize the result of multiple investigations and scientific literature. The process of reading and analysis of the literature was carried out through digital search engines with keywords in areas related to the strategic management. This research reveals the lack of scientific literature containing important theoretical concepts that serve the strategists as a guide in the creation, formulation, and evaluation of strategies. This review contributes to the existing literature by examining the impact of the strategic management on the organizational performance. Through time, its meaning has been evolving, being applied to other human activities and, in particular, to business strategies.
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When a company finds itself unable to execute strategy, all too often the first reaction is to redraw the organization chart or tinker with incentives. Far more effective would be to clarify decision rights and improve the flow of information both up the line of command and across the organization. Then, the right structures and motivators tend to fall into place. From this data they have distilled—and ranked in order of importance—the top 17 traits exhibited by the organizations that are most effective at executing strategy. The single most common attribute of such companies is that their employees are clear about which decisions and actions they are responsible for. As a result, decisions are rarely second-guessed, and accurate competitive information quickly finds its way up the hierarchy and across organizational boundaries. Managers communicate the key drivers of success, so frontline employees have the information they need to understand the impact of their day-to-day actions.
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