Organization Alignment

The 7s Model
 Organization Alignment: The 7s Model
Best Way Manage and Organize firms
There is no single best way to organize
The ideal organization Aligned or fits its
environment
Organization: Complex system with inter related
elements and each contributes to organizational
effectiveness
Seven key elements organization effectiveness: 1)
Strategy, 2) Structure, 3)Systems, 4) Staffing, 5) Skills,
6) Styles, and Shared values
Effective organization: High degree of fit or alignment
among these seven elements; Each Sis consistent with
and reinforces the other Ss
Organization Alignment: The 7s Model

Strategy Structure

Staffing Systems

Skills Styles

Shared
Values
 Elements of the 7s Model
Strategy
The way competitive advantage will be achieved
- Sources of sustainable competitive strategy and strategic priority
Structure
The way is which tasks and people are specialized and
divided and authority is distributed
- Grouping of activities and reporting relationships into
organizational sub-groups
- Mechanism by which activities of members are coordinated
Four basic structural forms
- Functional
- Divisional
- Matrix
- Network
 Elements of the 7s Model
Systems
Formal Process and Procedures used to manage the
organization including
- Management control system
- Performance measurement and reward systems
- Planning, Budgeting, and Resource allocation systems
- Information systems
- Distribution systems
 Elements of the 7s Model
Staffing
The people, their background, and competencies
- Approaches to recruitment, selection, and socialization
- Training & Development; Career management
- Core competencies
Style
The leadership style of top management and operating style
of the organisation. It impacts
- The norms the people follow
- How people work and interact with each other and customers
How top management takes decisions, how the spend time
(meetings / working around), focus (External or Internal)
 Elements of the 7s Model
Skills
Distinctive Competencies
- People
- Management practices, systems, and technology

Shared Values
Core values as guiding principles
- Communicated is simple ways
- Great meanings and a sense of purpose
Why the company exists, whats vision, issues of
importance, what makes the company distinctive
Staffing, Skills, Style, and Shared values are soft part of
the organisation. Relatively hard to change
Organization Alignment: The 7s Model

Strategy Structure

Staffing Systems

Skills Styles

Shared
Values
 Managing Change
All seven variables are interconnected . Change
management often fails as organization fails to
recognise such interconnections
No natural starting point for change efforts
Determining the focus needing attention: A thorough
diagnosis of alignment of all Ss
The soft factors (
Staffing, skills, style, and shared values )
need as much attention, if not more, as required for
hard factors ( )
Strategy, Structure, and Systems
Designing
Organizational
Structures

10
Organizational Structure Defined

Division of labor and

patterns of coordination,
communication, workflow,
and formal power that
direct organizational
activities
Relates to many OB topics
(e.g. job design, teams,
power, work standards,
information flow)
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 Division of Labor

Subdividing work into separate jobs assigned to

different people
Division of labor is limited by ability to
coordinate work
Potentially increases work efficiency
Necessary as company grows and work becomes
more complex

12
 Coordinating Work Activities
1. Informal communication
Sharing information, forming common mental models
Good for flexibility, non-routine and ambiguous
situations
Easiest in small firms
Larger firms apply informal communication through
Liaison roles
Integrator roles
Concurrent engineering
13
 Coordinating Work Activities
2. Formal hierarchy
Direct supervision
Assigns legitimate power to manage others
Necessary in most firms, but has problems

3. Standardization
Standardized processes (e.g., job descriptions)
Standardized outputs (e.g., sales targets)
Standardized skills (e.g., training)

14
Elements of Organizational Structure

Department- Span of
alization Control

Elements of
Organizational
Structure

Formalization Centralization

15
 Span of Control

Number of people directly reporting to the next level

Related to coordination through direct supervision
Wider span of control possible when:
1.Other coordinating mechanisms are present
2.Routine tasks
3.Low employee interdependence

16 15-16
 Centralization and Decentralization
Centralization -- Formal
decision making authority Information
Production Systems Sales
is held by a few people, Upper Mgt Upper Mgt Upper Mgt
usually at the top
Decentralization increases
as companies grow Middle Mgt Middle Mgt Middle Mgt

Varying degrees of
centralization in different Supervisory Supervisory Supervisory

areas of the company

Example: sales decentralized; Front line Front line Front line

info systems centralized

= locus of decision making authority
17
 Formalization
The degree to which organizations standardize
behavior through rules, procedures, formal training,
and related mechanisms.
Formalization increases as firms get older, larger, and
more regulated
Problems with formalization
Reduces organizational flexibility
Discourages organizational learning/creativity
Reduces work efficiency
Increases job dissatisfaction and work stress
18
 Mechanistic vs. Organic Structures

Mechanistic Structure
Narrow span of control
High formalization
High centralization
Organic Structure
Wide span of control
Low formalization
Decentralized decisions

19
 Effects of Departmentalization
Specifies how employees and their activities are
grouped together
Three functions:
1. Establishes chain of command
2. Creates common mental models, measures of
performance, etc
3. Encourages staff to coordinate through informal
communication

20
Functional Organizational Structure

Organizes employees around specific

knowledge or other resources (e.g., marketing,
production)
CEO

Finance Production Marketing HR

21
 Evaluating Functional Structures
Benefits
Economies of scale
Supports professional identity and career paths
Easier supervision
Limitations
More emphasis on subunit than organizational goals
Higher dysfunctional conflict
Poorer coordination -- requires more controls

22
 Divisional Structure

Organizes employees around outputs,

clients, or geographic areas

CEO

Lighting Consumer
Healthcare
Products Lifestyle

23
 Divisional Structure

Different forms of divisional structure

Geographic structure
Product structure
Client structure
Best form depends on environmental diversity
or uncertainty

24
 Globally Integrated Enterprise
Fewer geographic divisions because:
Less need for local representation
Reduced geographic variation
More global clients
Globally integrated enterprise
Connects work processes around the world rather
than replicating them within each country or region
Functional heads are geographically distributed
Firms home country is no longer focus of business

25
 Evaluating Divisional Structures

Benefits
Building block structure -- accommodates growth
Focuses on markets/products/clients
Limitations
Duplication, inefficient use of resources
Specializations are dispersed--silos of knowledge
Revising divisional structure emphasis produces
politics and conflict among executives

26
 Team-Based Structure
Self-directed work teams
Teams organized around work processes
Typically organic structure
Usually found within divisionalized structure

27 15-27
Evaluating Team-Based Structures
Benefits
Responsive, flexible
Lower admin costs
Quicker, more informed decisions
Limitations
Interpersonal training costs
Slower during team development
Role ambiguity increases stress
Problems with supervisor role changes
Duplication of resources
28
 Matrix Structure (Project-based)
Employees ( ) are temporarily assigned to a specific
project team and have a permanent functional unit

CEO

Game1 Game2 Game3

Project Leader Project Leader Project Leader

Art Dept
Leader

Software
Dept Leader

Audio Dept
Leader

29
 Matrix Structure
Div
.A

s
Sale
Div
S .B
Div
ufg M
S .C
Man

S
M
nc e

F M
Fina

F
R&D

R F
R
R
 Matrix Structure
CEO

Fin. HR M&S Tech. Div A Div B Div C

Fin HR Sales Manfg

 Evaluating Matrix Structures
Benefits
Uses resources and expertise effectively
Improves communication, flexibility, innovation
Focuses specialists on clients and products
Supports knowledge sharing within specialty
Solution when two divisions have equal importance
Limitations
Increases goal conflict and ambiguity
Two bosses dilutes accountability
More conflict, organizational politics, and stress

32
 Network Organizational Structure

Product Call center

development partner
partner (Philippines)
Alliance of firms (France)
creating a product
Core
or service
Firm
(USA)
Supporting firms Package
Accounting
beehived around partner
design
partner
a hub or core (USA)
(UK)
firm
Assembly
partner
(India)

33
 Evaluating Network Structures

Benefits
Highly flexible
Potentially better use of skills and technology
Not saddled with same resources for all products
Limitations
Exposed to market forces
Less control over subcontractors than in-house

34
 Contingencies of Organization Structure

External Environment & Structure

Organizational Size
Technology
Organizational Strategy
External Environment & Structure

Dynamic Stable
High rate of change Steady conditions,
Use team-based, network, or predictable change
other organic structure Use mechanistic structure

Complex Simple
Many elements (such as
Few environmental elements
stakeholders)
Less need to decentralize
Decentralize

36
External Environment & Structure (cont)

Diverse Integrated
Several products, clients,
Single product, client, place
regions
Use functional structure, or
Use divisional form aligned
geographic division if global
with the diversity

Hostile Munificent
Competition and resource Plenty of resources and
scarcity product demand
Use organic structure for Less need for organic
responsiveness structure

37
 Effects of Organizational Size

As organizations grow, they have:

More division of labor (job specialization)
Greater use of standardization
More hierarchy and formalization
More decentralization

38
 Technology and Structure
Technology refers to mechanisms or processes
by which an organization turns out its product or
service
Two contingencies:
Variability -- the number of exceptions to standard
procedure that tend to occur.
Analyzability -- the predictability or difficulty of the
required work

39
 Organizational Strategy
Structure follows strategy
Strategy points to the environments in which the
organization will operate
Leaders decide which structure to apply
Innovation strategy
Providing unique products or attracting clients who
want customization
Cost leadership strategy
Maximize productivity in order to offer
competitive pricing 40