Description
An organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims.
Organisational Structure and Controls
Chapter 11
Organisational Structure
• It is observed that performance of a firm declines if firm’s strategy is not matched with the most appropriate structure and controls • Organisational structure is defined as the firm’s formal reporting relationship, procedures, controls and authority and decision making processes • Developing an effective structure that supports the strategy is tough due to ever changing and dynamic global environment • Effective structure provide a firm with stability which is needed to implement strategy and generate competitive advantage for the current and future • Structural stability and structural flexibility ( for exploring future possibilities) • Alfred Chandler’s contribution – strategy is followed by structure – if strategy changes, structure has to change
Organisational Controls
• Organisational controls guide the use of strategy, indicate how to compare actual results with expected results and suggest corrective action to take when the difference is unacceptable • There are two types of controls – strategic control and financial control
Strategic Controls
• Strategic controls is concerned with checking the fit between the opportunities that the environment is giving ( what the firm might do) and what are the firm’s competitive advantages( what the firm can do) • For business level strategy, strategic controls are used to study primary and support activities • At corporate level they are used to study the sharing of strategic factors like knowledge, markets and technologies across business
Financial Controls
• They are largely objective criteria used to measure the firm’s performance against previously established quantitative standards • Accounting measures like return on investment (ROI) and return on assets (ROA) • Market measures like Economic value added (EVA) • Comparision are made with past performances, rival’s performance and industry averages • The type of controls used depends on the type of firm (Firm using cost leadership strategy might emphasize on financial control while firm using differentiation might use strategic control) • At corporate level, related diversification might see stress on strategic control while unrelated diversification might focus on financial control
Evolution of Structure
Simple structure Efficient strategy implementation Sales growth – coordination and control problems
Functional Structure Efficient strategy implementation Sales growth – coordination and control problems Multidivisional structure
doc_283578488.ppt
An organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims.
Organisational Structure and Controls
Chapter 11
Organisational Structure
• It is observed that performance of a firm declines if firm’s strategy is not matched with the most appropriate structure and controls • Organisational structure is defined as the firm’s formal reporting relationship, procedures, controls and authority and decision making processes • Developing an effective structure that supports the strategy is tough due to ever changing and dynamic global environment • Effective structure provide a firm with stability which is needed to implement strategy and generate competitive advantage for the current and future • Structural stability and structural flexibility ( for exploring future possibilities) • Alfred Chandler’s contribution – strategy is followed by structure – if strategy changes, structure has to change
Organisational Controls
• Organisational controls guide the use of strategy, indicate how to compare actual results with expected results and suggest corrective action to take when the difference is unacceptable • There are two types of controls – strategic control and financial control
Strategic Controls
• Strategic controls is concerned with checking the fit between the opportunities that the environment is giving ( what the firm might do) and what are the firm’s competitive advantages( what the firm can do) • For business level strategy, strategic controls are used to study primary and support activities • At corporate level they are used to study the sharing of strategic factors like knowledge, markets and technologies across business
Financial Controls
• They are largely objective criteria used to measure the firm’s performance against previously established quantitative standards • Accounting measures like return on investment (ROI) and return on assets (ROA) • Market measures like Economic value added (EVA) • Comparision are made with past performances, rival’s performance and industry averages • The type of controls used depends on the type of firm (Firm using cost leadership strategy might emphasize on financial control while firm using differentiation might use strategic control) • At corporate level, related diversification might see stress on strategic control while unrelated diversification might focus on financial control
Evolution of Structure
Simple structure Efficient strategy implementation Sales growth – coordination and control problems
Functional Structure Efficient strategy implementation Sales growth – coordination and control problems Multidivisional structure
doc_283578488.ppt