Rothaermel Ch11 - Kapitel 11 Strategy Buch PDF

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Kapitel 11 Strategy Buch...

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THE AFI STRATEGY FRAMEWORK

Analysis: Getting Started 1. What Is Strategy and Why Is It Important? 2. The Strategic Management Process

PART 3

External and Internal

Implementation 11. Organizational Design: Structure, Culture, and Control 12. Corporate Governance, Business Ethics, and Strategic Leadership

4. Internal Analysis: Resources, Capabilities, and Activities

9. Corporate Strategy: Acquisitions, Alliances, and Networks 10. Global Strategy: Competing Around the World

5. Competitive Advantage and Firm Performance

GAINING & SUSTAINING COMPETITIVE ADVANTAGE

Formulation: Corporate Strategy 8. Corporate Strategy: Vertical Integration and Diversification

Analysis

3. External Analysis: Industry Structure, Competitive Forces, and Strategic Groups

Formulation: Business Strategy 6. Business Strategy: Differentiation, Cost Leadership, and Integration 7. Business Strategy: Innovation and Strategic Entrepreneurship

PART 3 Strategy Implementation CHAPTER 11

Organizational Design: Structure, Culture, and Control 300

CHAPTER 12

Corporate Governance, Business Ethics, and Strategic Leadership 332

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CH A P T E R

11

Organizational Design: Structure, Culture, and Control

LEARNING OBJECTIVES After studying this chapter, you should be able to:

LO 11-1

Define organizational design and list its three components.

LO 11-2

Explain how organizational inertia can lead established firms to failure.

LO 11-3

Define organizational structure and describe its four elements.

LO 11-4

Compare and contrast mechanistic versus organic organizations.

LO 11-5

Describe different organizational structures and match them with appropriate strategies.

LO 11-6

Describe the elements of organizational culture, and explain where organizational cultures can come from and how they can be changed.

LO 11-7

Compare and contrast different strategic control and reward systems.

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CHAPTERCASE 11

Zappos: An Organization Designed to Deliver Happiness

D

ELIVERING HAPPINESS is the title of The New York Times bestseller by Tony Hsieh, CEO of Zappos, the online shoe and clothing store (www.zappos.com). Delivering happiness is also Zappos’s mission. To make its customers, employees, and shareholders happy, Tony Hsieh (pronounced “shay”) and other Zappos leaders designed a unique organization. To live up to its mission, Zappos decided that exceptional customer service should be its core competency. They put several policies and procedures in place to “deliver WOW through service”—the first of its 10 core values (see Exhibit 11.1 on the next page). For example, shipments to and from customers within the U.S. are free of charge, allowing customers to order several pairs of shoes and send back (within a liberal 365 days) those that don’t fit or are no longer wanted. Repeat customers are automatically upgraded to complimentary express shipping. One of the most important lessons Hsieh learned is, “never outsource your core competency!”1 Customer service, therefore, is done exclusively in-house. Perhaps even more importantly, Zappos does not provide a script or measure customer-service reps’ call times. Rather, the company leaves it up to the individual “Customer Loyalty Team” member to deliver exceptional customer service: “We want our reps to let their true

personalities shine during each phone call so that they can develop a personal emotional connection with the customer.”2 (In fact, one customer-service phone call lasted almost six hours!) The same trust in the customer-service reps applies to e-mail communication. Zappos’s official communication policy is to “be real and use your best judgment.”3 As Zappos grew, its managers realized that it was critical to explicitly define a set of core values from which to develop the company’s culture, brand, and strategy. It wanted to make sure that, in a time of fast growth, all employees understood the same set of values and expected behaviors. Zappos’s list of 10 core values was crafted through a bottom-up initiative, in which all employees were invited to participate. Zappos also restructured its performance-evaluation system, to give these values “teeth”: The firm rewards employees who apply the values well in their day-to-day decision making. In this way, Zappos’s managers directly connected the informal cultural control system to the formal reward system. CEO Tony Hsieh states, “Ideally, we want all 10 core values to be reflected in everything we do, including how we interact with each other, how we interact with our customers, and how we interact with our vendors and business partners. . . . Our core values should always be the framework from which we make all of our decisions.”4 When establishing customer service as a core competency, one of the hardest decisions Tony Hsieh made was to pull the plug on drop-shipment orders (orders for which Zappos would be the intermediary, relaying orders to particular shoe vendors who then ship directly to the customer). Such orders were very profitable (Zappos would not have to stock all the shoes) and were appealing because the fledgling startup was still losing money. The problem 301

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was two-fold. The vendors were slower than Zappos in filling orders. In addition, they did not accomplish the reliability metric that Zappos wanted for exceptional service: 95 percent accuracy was simply not good enough! Instead, Zappos decided to forgo drop shipments and instead built a larger warehouse to stock a full inventory. This move enabled the firm to achieve close to 100 percent accuracy in its shipments, many of which were overnight. In addition to making customers happy, Zappos also works to keep its own employees happy. Although it now employs over 1,500 people, Zappos’s organizational structure is extremely flat. Once an employee has mastered a job, he or she is rotated to a different job, often horizontally. This system allows Zappos to create a large pool of trained talent, and makes it

easier to promote from within. In keeping with another of its core values, “create fun and a little weirdness,” the Las Vegas–based startup offers employees “free” lunches, employer-paid health care benefits, a designated nap room, concierge service, an onsite life coach who is also a chiropractor, a library of books on happiness (along with other bestsellers), onsite seminars on personal growth, and fun events such as pajama parties at work. In 2011, Zappos was ranked #6 in Fortune’s “100 Best Companies to Work For” list (the highest ranking for a relatively young firm). Finally, Zappos has also made its shareholders happy. In 2009, Amazon acquired the startup in a deal valued at $1.2 billion. Although now a subsidiary of Amazon, Zappos continues to operate as an independent brand.5

After reading the chapter, you will find more about this case, with related questions, on page 324.

▲ ZAPPOS’S CEO Tony Hsieh and other managers thought long and hard about what type of structure, culture, and processes to put in place that would support the firm’s strategic goals. They proactively designed an organization that enabled them to implement its differentiation strategy effectively. Zappos’s managers further refined their organizational design through trial-and-error, being transparent, and soliciting bottom-up feedback, while making the tough strategic decisions of what not to do.

It is key to gaining and sustaining competitive advantage. Although the discussion of strategy formulation (what to do) is distinct from strategy implementation (how to do it), formulation and implementation must be part of an interdependent, reciprocal process in order to ensure continued success. That need for interdependence is why the AFI EXHIBIT 11.1 Zappos’s 10 Core Values Source: Hsieh, T. (2010), Delivering Happiness: A Path to Profits, Passion, and Purpose (New York: Business Plus), pp. 157–160.

1. Deliver WOW through service. 2. Embrace and drive change. 3. Create fun and a little weirdness. 4. Be adventurous, creative, and open-minded. 5. Pursue growth and learning. 6. Build open and honest relationships with communication. 7. Build a positive team and family spirit. 8. Do more with less. 9. Be passionate and determined. 10. Be humble.

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CHAPTER 11

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Organizational Design: Structure, Culture, and Control

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framework is illustrated as a circle, rather than a linear diagram. The design of an organization, the matching of strategy and structure, and its control and reward systems determine whether an organization that has chosen an effective strategy will thrive or wither away. In this chapter, we study the three key levers that managers have at their disposal when designing their organizations for competitive advantage: We begin our discussion with organizational structure. We discuss not only different types of organizational structures, but also why and how they need to change over time as successful firms grow in size and complexity. We highlight the critical need to match strategy and structure, and then dive into corporate culture. An organization’s culture can either support or hinder its quest for competitive advantage.6 Finally, we study strategic control systems, which allow managers to receive feedback on how well a firm’s strategy is being implemented. Managers employ these three levers—structure, culture, and control—to coordinate work and motivate employees across different levels, functions, and geographies. How successful they are in this endeavor determines whether they are able to translate their chosen business, corporate, and global strategies into strategic actions and business models, and ultimately whether the firm is able to gain and sustain a competitive advantage.

HOW TO ORGANIZE FOR COMPETITIVE ADVANTAGE >> LO 11-1

The goal is to design an organization that allows managers to effectively translate their chosen strategy into a realized one. Simply formulating an effective strategy, however, is a necessary but not sufficient condition for gaining and sustaining competitive advantage. Some might argue that strategy execution is more important.7 Often, managers do a good job of analyzing the firm’s internal and external environments to formulate a promising business, corporate, and global strategy, but then fail to implement the chosen strategy successfully. That is why some scholars refer to implementation as the “graveyard of strategy.”8 Not surprisingly, the inability to implement strategy effectively is the number-one reason boards of directors fire CEOs.9 Strategy Highlight 11.1 (next page) shows the result of Yahoo’s co-founder and CEO Jerry Yang’s failure to make the necessary changes to the Internet firm’s organizational structure. Since strategy implementation transforms theory into strategic actions and business models, it often requires changes within the organization. However, strategy implementation often fails because managers are unable to make the necessary changes due to its effects on resource allocation and power distribution within an organization.10 As demonstrated by business historian Alfred Chandler in his seminal book Strategy and Structure, organizational structure must follow strategy in order for firms to achieve superior performance: “Structure can be defined as the design of organization through which the enterprise is administered… the thesis deduced [from studying the administrative history of DuPont, GM, Sears Roebuck, and Standard Oil from the early to mid-1900s] is that structure follows strategy.”11 This tenet implies that to implement a strategy successfully, organizational design must be flexible enough to accommodate the formulated strategy and future growth and expansion.

= ermüdung

and the Failure of Established Firms 12

This reversal implies that some managers consider only strategies that do not change existing organizational

Define organizational design and list its three components.

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

>> LO 11-2 Explain how organizational inertia can lead established firms to failure.

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Strategy Implementation

ST RAT EGY HIGHLIGHT 11.1

structures; they that often exists in established organizations.16

Draw Me Yahoo’s Org Chart

can set the stage for the firm’s subsequent failure. Successful firms often plant the seed of subsequent failure: They optimize their organizational structure to the current situation. That tightly coupled system can break apart when internal or exterIn the fall of 2008, Yahoo’s co-founder and CEO Jerry nal pressures occur. Yang was ousted precisely because he failed to impleExhibit 11.2 shows how success in the current enviment necessary strategic changes after Yahoo lost its 13 ronment can lead to a firm’s downfall in the future, competitive advantage. In the two years leading up when the tightly coupled system of strategy and structo his exit, Yahoo had lost more than 75 percent of its ture experiences internal or external shifts.17 First, the market value. Mr. Yang was described as someone managers achieve a mastery of, and fit with, the firm’s who preferred consensus among his managers to current environment. Second, the firm often defines making tough strategic decisions needed to change and measures success by financial metrics, with a Yahoo’s structure. That preference, though, led to focus on short-term performance. (See the discussion bickering and infighting. of metrics in Chapter 5.) Third, the firm puts in place Carol Bartz, who replaced Jerry Yang as CEO, metrics and systems to accommodate and manage recalls saying, “Well, Jerry, why don’t you draw me increasing firm size due to continued success. Finally, an org chart.... Why don’t you show me who on this as a result of a tightly coupled (albeit successful) sysorg would make the big decision—the big search tem, organizational inertia sets in—and with it, resisdecision. So he started drawing arrows. And it was tance to change. like a Dilbert cartoon. It was very odd. I said, you Such a tightly coupled system is prone to break need management here. I couldn’t figure out who apart when external and internal shifts put pressure was in charge of anything, and he didn’t explain that on the system.18 In Exhibit 11.2, the blue arrows part very well.”14 One of the first things Ms. Bartz show the firm’s tightly coupled organizational did, therefore, was to change Yahoo’s organizational design. The gray arrows indicate pressures emanatstructure both to decentralize decision making and to ing from internal shifts (such as accelerated growth, a increase the accountability of individual employees. change in business model, entry into new markets, a In addition, she clarified the lines of authority. With its change in the top management team, or mergers and new organizational design in place, Ms. Bartz hopes acquisitions). The purple arrows indicate external Yahoo’s rate of innovation will increase to improve its 15 pressures, which can stem from any of the PESTEL competitiveness. forces (political, economic, sociocultural, technological, ecological, and legal, as discussed in Chapter 3). Strong external or internal pressure can break apart the current system, which may lead to firm failure.

The Key Elements of Organizational Structure Some of the key decisions managers must make when designing effective organizations pertain to the firm’s organizational structure. That structure determines how the work Define organizational efforts of individuals and teams are orchestrated and how resources are distributed. In parstructure and describe ticular, and integrated, its four elements. defines formal commudelineates = beschreiben nication channels, and prescribes The key building blocks of an organizational structure are >> LO 11-3

r. Larger firms, such as Fortune 100 companies, tend to have a high

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CHAPTER 11

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Organizational Design: Structure, Culture, and Control

External Shifts: – PESTEL Factors (1) Mastery of, and Fit with, Current Environment

(4) Organizational Inertia

Internal Shifts: – Accelerated growth – Change in business model – Entry into new markets – Change in TMT – Mergers and acquisitions

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EXHIBIT 11.2 Organizational Inertia and the Failure of Established Firms When External or Internal Environments Shift hmmm wirklich???

(2) Success, Usually Measured by Financial Metrics

(3) Measures to Accommodate and Manage Size External Shifts: – PESTEL Factors

External Shifts: – PESTEL Factors

degree of specialization; smaller entrepreneurial ventures tend to have a low degree of specialization. (e.g., internal audit), whereas an accountant in a small firm needs to be more of a generalist and take on many different things (e.g., not only internal auditing, but also payroll, accounts receivable, financial planning, and taxes). Specialization requires a trade-off between breadth versus depth of knowledge. While a high degree of the division of labor increases productivity, it can also have unintended side-effects such as reduced employee job satisfaction due to repetition of tasks.

These are often codified in . , for example, uses detailed standard operating procedures throughout the world to ensure consistent quality and service. also rely on a high degree of formalization to instruct Formalization, therefore, should not necessarily be considered bad; often it is necessary to achieve consistent and predictable results. Yet a high degree of formalization can slow decision making, reduce creativity and innovation, and hinder customer service.19 Most customer service reps in call centers, for example, follow a detailed script. This is especially true when call centers are outsourced to overseas locations. (As you recall, Zappos deliberately avoided organizational structure A key building block of organizational design that determines how the work efforts of individuals and teams are orchestrated and how resources are distributed.

specialization An element of organizational structure that describes the degree 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 controlled by explicit and codified rules and procedures.

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this approach when it made customer service its core competency.) W. L. Gore uses an extremely informal organizational structure to foster employee satisfaction, retention, and creativity, as discussed in Strategy Highlight 11.2.

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

In decentralized organizations, decisions are made and problems solved by empowered lower-level employees who are closer to the sources of issues. Different strategic management processes (discussed in Chapter 2) match with different degrees of centralization. Top-down strategic planning takes place in highly centralized organizations, whereas planned emergence is found in...