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Business of Managing

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Business of Managing Example Organizational Development Perspective Topic Agenda Managing an Enterprise Within Its Environment Management & Strategy Creating ... – PowerPoint PPT presentation

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Title: Business of Managing


1
Business of Managing
2
Example Organizational Development Perspective
Strategy Vision/Mission Strategic Planning New
Business/Markets Strategic Change
Management Knowledge Management Building
Sponsorship Acquisitions
Adapted from Designing Organizations by Jay
Galbraith
3
Topic Agenda
  • Managing an Enterprise Within Its Environment
  • Management Strategy
  • Creating Executing Business Processes Around
    Strategy
  • Organizing the Enterprise
  • Categorizing Jobs Within the Organization
  • Determining Who What Authority
  • Determining Form of the Organization
  • What Is Strategy Why Is It Important

4
Types or Levels of Strategy
  • Enterprise
  • Revenue Market Share Growth Objectives
  • Product Lines to Maintain/Grow or Enter
  • Markets (Foreign/New Region) to Enter/Develop
  • Growth by Acquisition Growth by Partnerships,
    etc.
  • Business or Competitive
  • Supply Value Chain Definitions
  • Marketing Promotion Campaigns
  • Cost Cutting Initiatives
  • Functional
  • Planning Execution KPI Tracking Management

5
Why Strategy?
  • Every organization operates on a Theory of the
    Business, that is, a set of assumptions as to
  • What its business is
  • What its objectives are
  • How it defines results
  • Who its customers are
  • What the customers value and pay for
  • Strategy converts this into performance!
  • Peter Drucker, Management Challenges for the 21st
    Century

6
Does Strategy Need to Evolve?
The things I tend to be paranoid about vary. I
worry about products getting screwed up, and
about products getting introduced prematurely. I
worry about factories not performing well and
about having too many factories. I worry about
hiring the right people and about morale
slacking off. And of course, I worry about
competitors. I worry about other people figuring
out how to do what we do better or cheaper, and
displacing us with our customers. But these
worries pale in comparison to how I feel about
strategic inflection points. Andy Grove, CEO
Intel, Only the Paranoid Survive
7
So What is a Strategic Inflection Point?
  • Time in a business when its fundamentals are
    about to change
  • Full-scale changes in the way business is
    conducted.. More than technology or competition
  • Companies that begin a decline as a result of
    its changes rarely recover their previous
    greatness
  • Growth opportunity vs. beginning of the end

8
Topic Agenda
  • Managing an Enterprise Within Its Environment
  • What is Strategy Why Is It Important
  • Creating Executing Business Processes Around
    Strategy
  • Organizing the Enterprise
  • Categorizing Jobs Within the Organization
  • Determining Who What Authority
  • Determining Form of the Organization
  • Creating Executing Business Processes Around
    Strategy

9
Strategy Converts Business Theory Into Performance
Clarity About What the Key Goals of the
Organization Are
Commitment to Initiatives That Promote Key Goals
Accountability For Actions That Affect The Key
Goals
10
Example General Electric
  • 125 Billion in Sales (Intel 27B, MS 32B)
  • 310,000 Employees
  • Spans Manufacturing, Services Even Media (NBC
    Television Network) Sectors

11
General Electric Produces
  • Aircraft engines
  • Locomotives other transportation equipment
  • Appliances (kitchen and laundry equipment)
  • Lighting, electric distribution control
    equipment
  • Generators and turbines
  • Nuclear reactors
  • Medical imaging equipment
  • Plastics

12
GE Capital Provides
  • Commercial finance
  • Consumer finance
  • Equipment management
  • Insurance
  • Accounts for nearly half of GE's sales

13
GE Strategy for Performance Six Sigma
  • Basic Definition of Six Sigma
  • Application of statistical methods to business
    processes to improve operating efficiencies
  • Six Sigma Provides
  • Companies with a series of interventions
    statistical tools to improve both profits
    quality
  • Key Metric of Six Sigma
  • A Six Sigma Quality Level is 3.4 Defects Per
    Million Operations in a Manufacturing or Service
    Process

14
GE Strategy for Performance Six Sigma
  • 1995 Jack Welch initiates within a year
  • 200 Projects on Six Sigma
  • 30,000 employees trained
  • 200 million training expense
  • 1996
  • 3000 Projects
  • Bonuses for entire company
  • 60 based on financials
  • 40 Six Sigma results
  • Stock option grants especially for black belts
  • 1997 6000 Projects

15
GEs Six Sigma Results
  • 1997
  • Strategic Target of 150 Million Productivity
    Gains Profits
  • Actual Productivity Gains Profits 320 Million
  • 1998
  • Actual Productivity Gains Profit 750 Million
  • Still between 3 to 4 defects per million or 8-12
    BILLION a year in inefficiencies and lost
    productivity

16
Extending Six Sigma to Customers
  • Aircraft Engines
  • 1500 Projects
  • Over 50 Airlines
  • 230 Million Operating Margin Earned by Customers
  • Medical Systems
  • 1000 Projects
  • 100 Million Operating Margin Earned by
    Hospitals
  • Both of these are for 2000..

17
Topic Agenda
  • Managing an Enterprise Within Its Environment
  • Defining Enterprise Strategy
  • Creating Executing Business Processes Around
    Strategy
  • Organizing the Enterprise
  • Categorizing Jobs Within the Organization
  • Determining Who What Authority
  • Determining Form of the Organization
  • Categorizing Jobs Within the Organization

18
Simple Form, Lean Staff
Along with bigness comes complexity,
unfortunately. And most big companies respond to
complexity in kind, by designing complex systems
and structures. They then hire more staff to
keep track of all this complexity, and thats
where the mistake begins. The paradox is clear.
On the one hand, size generates legitimate
complexity, and a complex systems or structural
response. On the other hand, making an
organization work has everything to do with
keeping things understandable for the tens or
hundreds of thousands who make things happen. And
that means keeping things simple. Tom Peters,
In Search of Excellence
19
Core Considerations of Organizing
  • Categorizing Jobs Within the Organization
  • Specializations
  • Departments
  • Determining Who What Authority
  • Levels of Authority
  • Type of Authority
  • Determining Form of Organization
  • Functional, Divisional, Matrix, International
  • Categorizing Jobs Within the Organization

20
Categorizing Jobs Specialization
  • Determining Who Will Do What Specific Tasks
  • Matching Employees with Skills to Specific Tasks
  • Some Different Examples
  • Laughter Therapists
  • Vermiculturist Worm Farmer (www.happydranch.com)
  • Heritage Management Officer (Archeology Degree
    Required)
  • Golf Ball Marshal
  • Frito-Lay QA Expert

21
Categorization of Jobs Departments
  • Grouping Jobs into Logical Units
  • Ways of Departmentalizing
  • Functional
  • Geographic
  • Product
  • Customer

22
Basic Functional Departments
  • Sales Marketing
  • High Level 5 Year Sales Forecast
  • Detailed Level Order Tracking, Customer Mgmt
  • Research Development
  • High Level Product Trends, Technology Directions
  • Detailed Level Design Collaboration Prototype
  • Manufacturing/Operations/Planning
  • High-Level 5-Year Operating Plan or Supply Chain
  • Detailed Level Machine Control, Plant Scheduling
  • Finance
  • High-Level 5-Year Budget Forecasting, Cost
    Analysis
  • Detailed Level Securities Trading, Cash Mgmt
  • Accounting
  • High-Level Profit Planning
  • Detailed Level Payroll, Accounts Payable,
    Accounts Receivable
  • Human Resources
  • High Level Personnel Recruitment Planning
  • Detailed Level Relocation, Compensation,
    Training Development

23
Dont Forget the Leadership Team!
Thomas Bus
Chairman, President and Chief Executive Officer
Dave Berry
Bill Helmsmen
Jane Hedrick
Roger Hurst
Senior Vice President Secretary
Senior Vice President, Treasurer, Chief Financial
Officer
Senior Vice President General Counsel
Senior Vice President
  • Finance Leadership Team
  • Human Resources
  • Legal
  • Corporate Security

Jose Garcia
Badri Krishna
Terri West
Rich Temple
Senior Vice President
Senior Vice President
Senior Vice President
Executive Vice President
  • Public Affairs
  • Communications
  • Investor Relations
  • Semiconductor
  • Materials Controls
  • Educational Productivity
  • Digital Imaging
  • Controller

24
Other Departmentalization Options
  • Organize Around Geographic Sales Areas
  • Examples
  • Global EMEA (Europe, Middle East, Africa) vs. NA
  • National Northeast vs. Southwest
  • Organize Around Customer Base
  • Example PG Customer Support
  • VMI Customers
  • Web-Customers
  • EDI (Electronic Data Interchange) Customers
  • Organize Around Products or Services
  • Example
  • Semiconductor Purchasing Silicon, Gases,
    Hazardous
  • Semiconductor Selling DSP, ASIC, Memory,
    Microprocessors

25
Core Considerations of Organizing
  • Categorizing Jobs Within the Organization
  • Specializations
  • Departments
  • Determining Who What Authority
  • Levels of Authority
  • Type of Authority
  • Determining Form of Organization
  • Functional, Divisional, Matrix, International
  • Determining Who What Authority

26
Some Hierarchy-Related Buzz Words
  • Responsibility Assigned to Perform a Task
  • Authority Ability to Make Decisions on Task
  • Delegation Assign Task to Subordinate
  • Accountability Consequences for Results

27
Hierarchy Attributes
  • Centralized vs. Decentralized
  • Flat vs. Tall
  • Span of Control at each Level

28
Tall Organizations
  • Advantages
  • Allow for categorized work
  • Provide predictable career compensation ladder
  • Establish clear accountability
  • Value Experience
  • Disadvantages
  • Expensive, time-consuming resistant to change
  • Promote self-importance, status, buck passing,
    bureaucratic

29
Flat Organizations
  • Advantages
  • Promote ownership of tasks
  • Eliminate redundancy
  • More responsive to change
  • Facilitate creativity innovation
  • Put people closer more responsive to customers
  • Empower employees
  • Disadvantages
  • Fewer opportunities for advancement
  • Put more responsibility stress on individuals
  • Require skilled, experienced employees
  • Reduce independent checks, balances controls

30
Flat Organization Example Nokia RD
  • 1 Manufacturer of Cell Phones
  • Founded 1865 as Forest Product Company
  • 1992 Shed All Divisions Except Mobile
    Communications
  • Two Divisions Now Cell Phones Mobile Networks
  • 2001 27 Billion Sales
  • 2001 Roughly 54,000 Employees

31
Nokias RD Team
  • 1992 Yrjo Neuvo joins from Finland University
    (EE)
  • 18,000 Engineers, Designers Socialogists
  • 69 Sites from Boston to Bangalore
  • Flat Hierarchy Free-Range Engineering Culture
  • Promotes Hacker Spirit
  • Example
  • 2000 Addition of Text Messaging in 3310 Model
  • Last Minute w/out Manager Approval

32
Nuevos Five Rules
  • Dont Locate All RD in One Place
    (Make it Global Spread from HQ)
  • Keep Teams Small (Less than 50 People)
  • Flatten Hierarchy Stay Close to Engineers
  • Celebrate Secret Tinkering Side Projects
  • Welcome Mistakes

33
Forms of Authority
  • Line Authority flows up down chain of command
  • Example TI Fab Managers, Mfg Plant Manager
  • Staff Authority based on job expertise/specializ
    ation
  • Example HR Manager Assigned to a Business Unit
  • Committee/Team Authority groups play central
    role
  • Example Corporate Logistics Group Oversees
    Evaluates Performance of Regional DCs

34
Core Considerations of Organizing
  • Categorizing Jobs Within the Organization
  • Specializations
  • Departments
  • Determining Who What Authority
  • Levels of Authority
  • Type of Authority
  • Determining Form of Organization
  • Functional, Divisional, Matrix, International
  • Determining Form of Organization

35
Basic Forms of Organization Structure
  • Functional
  • Typically small to medium size enterprises
  • Organize around basic functions (I.e., sales,
    RD, ops)
  • Divisional/Business Unit
  • Overall enterprise made up of independent
    businesses
  • Typically segmented across
  • Product Departmentalization
  • Campbells Soup, Franco-American, Godiva, Pace,
    Pepperidge Farm
  • Acquisitions
  • Safeway Randalls/Tom Thumb, Vons (So. Cal),
    Dominicks (Chicago)..
  • Matrix
  • Cross-functional teams with individuals reporting
    to two or more managers

36
Example Business Unit Organization
ASIC Application Specific Integrated Circuits
37
Change to Matrix Royal Dutch/Shell
  • 3 Oil Gas Group (Behind Exxon BP)
  • 135 Billion in Sales 91,000 Employees
  • 9.5 Billion Barrels of Oil Reserves
  • 55.8 Trillion Cu. Ft. Gas Reserves
  • 46,000 Gas Stations World-Wide
  • Operations in 130 Countries
  • Headquarters in both London The Hague

38
Royal Dutch/Shell Before 1994-1995
  • 1993 Cornelius Herkstroter Promoted to CEO
  • Attributes
  • Insular company, introverted control freaks
  • Managers who rarely talked to rank and file
  • Risk adverse, headquarters based six man
    committee of managing directors (CMD)
  • 100 country CEOs act as local chieftains
  • Public relations bombs (associations w/Nigerian
    dictatorship that executed environmentalist)

39
Royal Dutch/Shell After 1994-1995
  • 30 cut of 3000 HQ jobs
  • Deep cuts in many regional functional areas
  • Committees to oversee global operations
  • Exploration Production
  • Oil products
  • Gas coal
  • Chemicals
  • Central staff functions

40
Matrix Organization Results?
  • Lower prices for raw materials as single giant
    buyer
  • Better alignment of supply chain to customer
    locations (I.e., Louisiana vs. Britain in
    chemicals)
  • Net Income Return on Average Capital Employed

ROACE is the main measure of financial success
in the oil business
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