Question

How to make outline and summary for written report in subject business policy and strategies management?

Title:

Aligning Strategy and Organizational Structure

Outline => ?????????????????????????

Objectives

Analyze a methodology developed and applied to align organizational structure with strategy through business processes analysis.

Introduction

Aligning organization structure to strategy is crucial for strategy execution success. The organization structure needs to support the strategy and its execution. When possible, management must ensure that the organization structure is clear, decentralized and formalized. When the existing structure does not meet these requirements, it is a hindrance to strategy implementation and needs to be changed. An organization structure is a system that arranges the hierarchy in an organization. It refers to the way in which tasks and responsibilities are assigned, coordinated and controlled in an organization. It involves who reports to whom and how information flows between the different levels of management.

The Star Model: We consider the Star Model developed by Galbraithas our frame work for organization design. It has five main elements: Strategy, Structure, Processes, Rewards and People Practices. Its basic premise is: different strategies require different organizations to execute them. A strategy implies a set of capabilities at which an organization must excel in order to achieve the strategic goals. The leader has the responsibility to design and influence the structure, processes, rewards and people practices of the organization in order to build these needed capabilities. Although culture is an essential part of an organization, it is not an explicit part of the model because the leader cannot design the culture directly. An organization’s culture consists of the common values, mindsets and norms of behavior that have emerged over time and that most employees share. It is an outcome of the cumulative design decisions that have been made in the past and of the leadership and management behaviors that result from those decisions. The idea of alignment is fundamental to the Star Model. Each component of the organization, represented by a point on the model, should work to support the strategy. The more that the structure, processes, rewards, and people practices reinforces the desired actions and behaviors the better able the organization should be to achieve its goals. Just as important as initial alignment is having the ability to realign as circumstances changes. The configuration of resources, the processes used, and the mental models that contribute to today’s success will influence the plans made for the future. In a time of stability, this creates efficiency. In a time of change, such static alignment can become a constraint. The organization must have alignment, but it also needs the flexibility to recognize and respond to opportunities and threats. It is always easier to change a business strategy than to change an organization just as it is easier to change a course beforehand than it is to turn a large ship that is already under way. The more rapidly the organization can be realigned the faster the leaders can “turn the ship” and execute new strategies and opportunities as they arise. This is especially important for large companies that must compete against smaller, nimbler organizations. Therefore, alignment is best thought of as ongoing process rather than a one-time event. The Star Model has five main elements, we will comment about them.

Strategy: is a company’s formula for success. It sets the organization’s direction and encompasses the company’s vision and mission, as well as its short and long-term goals. The strategy derives from the leadership’s understanding of the external factors (competitors, suppliers, customers, and emerging technologies) that bear on the firm, combined with their understanding of the strengths of the organization in relationship to those factors. The organization’s strategy is the cornerstone of the organization design process. Without knowledge of the goal no one can make rational choices along the way. In other words, if you don’t know where you are going any road will get you there. The purpose of a strategy is to gain competitive advantage: the ability to offer a customer better value through either lower prices or greater benefits and services than competitors can. These advantages can be gained through external factors such as location or favorable government regulation. They can also be secured through superior internal organizational capabilities. Organizational capabilities are defined as the unique combination of skills, processes, technologies, and human abilities that differentiate a company. They are created internally and are those difficult to others to replicate. Creating superior organizational capabilities in order to gain competitive advantage is the goal of organization design. Organization design is a series of choices and decisions. In any decision making process, clear criteria serve the purpose of allowing alternatives to be evaluated against agreed–on standards. The criteria used for organization design decisions are the organizational capabilities that will differentiate the organization and help it execute its strategy. The organizational capabilities are the link between the strategy and organizational requirements that strategy demands.

Structure:an organization’s structure determines where formal power and authority are located. Typically, units are formed around functions, products, geographies, or customers, and then configured to a hierarchy for management and decision making. The structure is what is shown in a typical organization chart. Organization design is not limited to structural considerations, and many variations of a structure can be made to work. But if the structure is not approximately right, then it will be harder to align the other design elements with the strategy. The structure sets out the reporting relationships, power distribution, and communications channels. It determines who comes in contact with whom. The structure projects a message about what work is most important. If the structure does not at least normally support the strategy, then everyone in the organization will find themselves working around a formidable obstacle. Processes:leaders frequently lament the organizational silos that prevent people from working together. Silo evokes an image of an invisible but windowless tower surrounding vertically stacked groups not just from interacting with one another but from even being able to see another group’s perspective. “Breaking down the silos” is a common theme in discussions of organizational change.

All structures create silos. Whenever people are grouped according to one logic, boundaries are created that make it difficult for them to interact with groups formed according to a different logic. This is not a problem if the strategy does not require a high level of interaction or collaboration across these boundaries. But if the strategy does require collaboration, then the organization’s structure- no matter how well thought out- will create some barriers to collaboration. The organizational challenge becomes how to bridge these internal boundaries and integrate activities. Processes and lateral connections provide the required mechanisms of integration. We use the term process to mean a series of connected activities that move information up and down and across the organization. This includes work processes, such as developing a new product, closing a deal, or filling an order. It also includes management processes, such as planning and forecasting sales, business portfolio management, price setting, standards development, capacity management, and conflict resolution. Processes that cross organizational boundaries force organizational units to work together vertically or laterally. Clear articulation of roles and responsibilities at the boundary interfaces is essential for the design of good processes.

Rewards:Metrics and rewards align individual behaviors and performance with the organization’s goals. For employees, a company’s score card and reward system communicate what the company values more clearly than written statement can. Metrics are the measures used to evaluate individual and collective performance. The reward system motivates employees and reinforces the behaviors that add value to the organization through salary, bonuses, stock, recognition, and benefits.

People Practices:By people practices, we mean the human resource policies for selection, staffing, training, and, development that are established to help from the capabilities and mind-sets necessary to carry out the organization’s strategy. Complex organizations require employees at all levels to have a fundamental set of competencies to interact across organizational boundaries, participate on teams, and make decisions that take multiple perspectives into account.

Why are we interested in the process management role inside the Star Model Framework?

Positioning ourselves in theStar Model context, and having worked with management process systems for severalyears, comes out our interest in analyze the method for organizational processes and management system alignment with the strategy, and how tolink this information with theorganization structure alignment. We identify a potential favorable impact in structure validation or redefinition process agility, and formalizing organization lateral connections in job descriptions.

Contents

These are the types of questions you need to explore when you look at organization design.

Many people equate organization design with an organization's structure: The words "lean" and "flat" are used to describe organization design as well as it's structure. In fact, organizational design encompasses much more than simply the structure: Organization design is the process of aligning an organization's structure with its mission. This means looking at the complex relationship between tasks, workflow, responsibility and authority, and making sure these all support the objectives of the business.

Good organizational design helps communications, productivity, and innovation. It creates an environment where people can work effectively.

Many productivity and performance issues can be traced back to poor organization design. A company can have a great mission, great people, great leadership, etc. and still not perform well because of poor organizational design.

Take the example of a company whose sales department and production department both work well as separate units. Yet they need to communicate about customer needs and have not been organized to do so: Company performance suffers as a result. Then take the example of a company that wants to grow by acquiring new customers. Yet its sales team is rewarded for customer retention instead: Again, company performance is compromised as a result.

How work is done, business processes, information sharing and how people are incentivized; all of these directly affects how well the organization performs. All of these factors are facets of the organization's design and each facet is important to organization's success.

Given the importance of organizational design, why is it so often to blame for inefficiency and ineffectiveness? The reason is because organizations often evolve rather than get designed. With little or no planning and intervention, the organization design that emerges is likely to be flawed with misaligned incentives, processing gaps and barriers to good communications.

Without due planning, an organization's design often takes on a hierarchical structure. This structure is common because business executives and managers are often reluctant to relinquish control. However, such structures can lack flexibility, soak up resources and under-use key people and skills. When it comes to good organization design, it's a question of getting the right balance – getting the right controls, the right flexibility, the right incentives; and getting the most from people and other key resources.

In this article, we first look at types of organization design and their uses. We then look in more detail at the key facets of organization design and offer some tips on how to ensure your organization is aligned with your business objectives.

Types of Organization Structure

Most organizations are designed, or evolve, to have elements of both hierarchy and more flexible, organic structures within. (Organic structures are more informal, less complex and more "ad-hoc" than hierarchical structures. They rely on people within the organization using their initiative to change the way they work as circumstances change.)

Before looking at some of the common types of organization structure, its worth looking at what characterizes a hierarchical structure and how it contrasts with an organic structure. It's worth saying that one type of structure is not intrinsically better than another. Rather, it's important to make sure that the organization design is fit for organization's purpose and for the people within it. And the section on Making Organization Design Decisions below discusses this in more detail

Functional structures and divisional structure are both examples of hierarchical organization structures.

In a functional structure, functions (accounting, marketing, HR etc) are quite separate; each led by a senior executive who reports to the CEO. The advantage can be efficiency and economies of scale where functional skills are paramount. The main disadvantage is that functional goals can end up overshadowing the overall goals of the organization.

In a divisional structure, the company is organized by office or customer location. Each division is autonomous and has a divisional manager who reports to the company CEO. Each business unit is typically structured along functional lines. The advantage here relates to local results, as each division is free to concentrate on its own performance. The disadvantage is that functions and effort may be duplicated. For example, each division may have a separate marketing function, and so risk being inefficient in its marketing efforts.

More organic structures include: simple, flat structures, matrix organizations and network structures:

Simple Structure – Often found in small businesses, the simple organization is structure is flat. It may have only two or three levels; employees tend to work as a large team with everyone reporting to one person. The advantages are efficiency and flexibility, and responsibilities are usually clear. The main disadvantage is that this structure can hold back growth when the company gets to a size where the founder or CEO cannot continue to make all the decisions.

Matrix Structure – In a matrix structure, people typically have two or more lines of report. For example, a matrix organization may combine both functional and divisional lines of responsibility. For example, in this structure, a marketing manager may report both to the functional marketing director and the country director of the division he or she works in. The advantage is that the organization focuses on divisional performance whilst also sharing functional specialist skills and resources. The (often serious) downfall is its complexity – effectively with two hierarchies, and with the added complexity of tensions between the two.

Network Structure – Often known as a lean structure, this type of organization has central, core functions that operate the strategic business. It outsources or subcontracts non-core functions which, depending on the type of business, could include manufacturing, distribution, information technology marketing and other functions. This structure is very flexible and often can adapt to the market almost immediately. The disadvantage is inevitable loss of control, dependence on third parties and the complexity of managing outsource and sub-contract suppliers.

Making Organization Design Decisions

Given the many choices of structure, how do you go about making organization design decision for your business? Different organization structures have different benefits in different situations. What matters is the overall organization design is aligned with the business strategy and the market environment in which the business operates. It must then have the right business controls, the right flexibility, the right incentives, the right people and the right resources.

Here are just some of the many things that you can consider when thinking about the structure of your organization.

Strategy – The organization design must support your strategy. If your organization intends to be innovative then a hierarchical structure will not work. If however, your strategy is based on low cost, high volume delivery then a rigid structure with tight controls may be the best design.

Size – The design must take into account the size of your organization. A small organization could be paralyzed by too much specialization. In larger organizations, on the other hand, there may be economies of scale that can be gained by maintaining functionally specialist departments and teams. A large organization has more complex decision making needs and some decision making responsibilities are likely to be devolved or decentralized.

Environment – If the market environment you work in (customers, suppliers, regulators, etc.) is unpredictable or volatile, then the organization needs to be flexible enough to react to this.

Controls – What level of control is right in your business? Some activities need special controls (such as patient services in hospitals, money handling in banks and maintenance in air transport) whilst others are more efficient when there is a high degree of flexibility.

Incentives – Incentives and rewards must be aligned with the business's strategy and purpose. When these are misaligned, there is a danger that units within the organization become self-serving. Using the earlier example of a company that wants to grow by acquiring new customers, the sale team is incentivized on customer retention, and therefore is self-serving rather than aligned with the business purpose.

There is much more to organization design than deciding on its structure. This list shows just some of the facets organization design that can be taken into account in thinking about this. With each stage of growth or each change, the organization design needs to be reassessed and realigned as necessary. The list can also help you identify issues that might be causing team problems or holding back you business.

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Conclusion

Aligning organizational structure with strategy, through business processes analysis enriched structure definition with a combined view of functional and process accountabilities.

To accomplish the above point, there were identified two key aspects: a) strategy definition in terms of value proposition to customers and prospects, considering competitive advantages and key organizational capabilities and b) definition and characterization of organizational processes to facilitate their management (process visibility). On the other hand, it was important the team working method, which involved natural process owners in mapping current and desired situation stages, as it helped to break down functional inertia that we have found in these cases and in other interventions. We also noted that a scheme of this nature facilitated business objectives deployment, as processes and structure were aligned, it was done naturally from organization to personal objectives. Also it was possible to identify indicators of process closely linked with the organization goals and objectives. We noted that this approach is compatible and complementary with an outline of Balance Score Card, as it facilitates the causal relationships between main objectives and processes. Finally, the purpose of this article is to share our experiences in these organization design implementation cases. We consider that business processes management could have a major role on organizational capabilities systematization; we got some guidelines, questions and ideas for further work on this topic.

Answer 1

An outline usually puts forward the complete structure of a report. Here, it goes for this report:

Outline:

The report starts with an objective of analysing the methodology developed to align organisational structure with its strategy by analysing business processes. Then, it lays down the Star Model which has 5 basic elements: Strategy, Structure, Rewards, Processes and People Practices. Then, it explains each of these 5 elements individually and how each of them relate to organisational design. Then, it explains why this report has considered the Star Model as the basic framework for this analysis and identifies a potential favorable impact in structure validation and redefinition process agility.

The report goes on to discuss the types of organisation design, their uses and then goes on by giving a detailed explanation of how to keep any organisation aligned to its objectives, irrespective of the type of organisation design it is following.

Summary:

Aligning organisational structure with its strategy is of utmost importance and that is to be supported by aligning other elements of organisation like Processes, Fuctions, People Practices and Organisation Structure. If the strategy that the organisation is following is to be an innovative leader in terms of technology, a functional structure may not be the right choice, infact Matrix structure would help here. Also, a startup would not go by a properly defined organisational hierarchy and would rather define roles and responsibilities rather than posts and levels in the initial stages of its growth. People practices are linked to organisation structure as well since a bureaucratic structure would lead to slow decision making, which may be good for a certain type of organisation and may not be right for others. Hence, it is very important to link all the elements of an oganisation in order for its strategy to work out properly. The Star Model helps us think about each of these elements. Other factors like Size of the company, environment, level of control, incentives, etc should also be considered and aligned to the overall company strategy and then only the management can deliver expected results to its shareholders.