Organizational controls and structure in business

plaqueal controls and body social organization in pipeline instaurationorganisational construction whoremonger be defined as the titular system of task and trust relationships that control how slew coordinate their actions and physical exercise resources to achieve organisational goals. (J wholenesss, et al, 2010)iOrganizational structure specifiesThe firms variantal pull relationships, procedures, controls, and authority and decision-making subroutinees and,The act to be d wholeness and how to do it, given the firms dodge or strategiesDeveloping an organizational structure that effectively supports the firms scheme is difficult, especi tout ensembley beca occasion of the distrust about the ca recitation-effect relationship in the spherical economys rapidly changing and propellant rivalrous environments.iiOrganizational ControlsOrganization Control implys any process fancyed to as original that organization plans are carried out the mien they were casted. C ontrol in the organizational context can be classified as1. strategic controls2. financial controlsStrategic controls are largely subjective criteria intended to ensure that the firm is using appropriate strategies for conditions in external environment and the attach tos competitive advantage.iiiStrategic controls are concerned with examining the fit amongWhat the firm superpower do (opport building blockies in its external environment)What the firm can do (competitive advantages)Financial controls, on the other hand, are largely objective criteria used to flyer the firms exercise against previously established quantitative mensurations.iii Financial controls ease up cardinal criteriaAccounting-based measures involveRe knock over on investmentReturn on assetsMarket-based measures includeEconomic Value Added (EVA)Relative use of controls varies by type of strategy. round diversified firms using a follow leadership strategy try financial controls. Companies and agat e line units using a variantiation strategy emphasize strategic controls. In relation with organizational structure, organizational controls are cardinal to measure the effect caused by a kind in the structure.Relationships betwixt Strategy and organizeStrategy and structure require a interactional relationship. social organisation flows from or follows the selection of the firms strategy provided once in limit, structure can influence current strategic actions as hygienic as choices about future strategies.Evolutionary Patterns of Strategy and Organizational StructureThe relationship between organizations strategy and structure was studied extensively by Alfred D. Chandler in his legendary book Strategy and Structure Chapters in the bill of the American Industrial destroyprise. According to Chandler (1962), firms grow in predictable patterns beginning(a) by volumeThen by geographyThen integration (vertical, horizontal)And finally through product/business diversificatio nChandler also says that a firms proceeds patterns determine its structural form. All organizations enquire some form of organizational structure to implement and manage their strategies. Firms frequently alter their structure as they grow in size and multiplexity. The one-third basic structure types areSimple structure operable structureMulti elemental structure (M-form) innovation(a) expansion structureThe following figure explains the change in organizational structure with egression and strategy.DChap11graphicsMultidiv_fig 11.1.jpgDChap11graphicsFunctional_fig 11.1.jpgDChap11graphicsSimple_fig 11.1.jpgEfficient implementation of formulated strategyEfficient implementation of formulated strategyDChap11graphicsSalesHigher_fig 11.1.jpgDChap11graphicsSalesLower_fig 11.1.jpgSimple StructureA simple structure is where the proclaimer-manager passs all the major decisions and monitors all activities piece the staff serves as an extension of the managers supervisory authority. ( C. Levicki, 1999). This type of a structure is matched with focus strategies and business-level strategies where firms comm muchover compete by offering a wiz product line in a single geographic market.Functional StructureA functional structure is a design that groups population together on the groundwork of their common expertise and experiences or because they use the same resources. (Jones, et al, 2010) Functional structure supports use of business-level strategies and some corporate-level strategies single or dominant business with low levels of diversification.Multi-divisional StructureThe multi-divisional structure (M-form) consists of operational divsions, severally representing a separate business or bread concentrate in which the top corporate officer delegates responsibilities for day-to-day operations and business-unit strategy to division managers. Multi-divisional structure has deuce-ace major benefitsCorporate officers are able to to a greater extent accuratel y monitor the implementation of for each(prenominal) one business, which simplifies the problem of controlFacilitates comparisons between divisions, which improves the resource al post processStimulates managers of poorly performing divisions to look for shipway of improving performance multinational Strategies and World vast StructuresInternational strategies are bonny increasingly important for yen-term competitive success in what continues to construct a globular economy. The following framework explains how organizations proper in a spheric economy orbicular expansion strategiesGlobal expansion strategies can be understood in terms of topical anaesthetic antiphonaryness and geographic integration within the phoner. On the basis of these dickens parameters, four strategies of world(prenominal) expansion have been arrived at. These areInternational strategyMulti-domestic strategyGlobal strategyTransnational strategyInternational StrategyIn cheek of international str ategy, firms decentralize all value- induction functions except for RD and marketing.Multi-domestic StrategyMulti-domestic strategy is point towards local responsiveness by decentralizing control to subsidiaries and divisions in each country.Global expansion StrategyGlobal expansion strategy is lie towards cost reduction, with all the principal value-creation functions centralized at the lowest cost worldwide location.Transnational StrategyIn a transnational strategy some functions are centralized, musical composition others are decentralized at the global location scoop suited to achieving these objectives.TransnationalGlobal ExpansionInternational integrationMulti-domestic StrategyInternational StrategyLocal ResponsivenessAn posting on structure and strategyThe theory developed above is only a guideline to how organizations might structure themselves in their pursuit of growth and global expansion. However, these are not universal rules and many organizations have prospered in spite of structures completely out of sync with those discussed above. Organizations can also use structures which are a hybrid of those detailed above.This study analyses the cases of dickens organizations, ABB and Semco, which have used severalizely various structures to implement their strategies.ABB FileABB logo.svgAsea brownish Boveri (ABB) is seen by more and more global business leaders as the model of the way that organizations will have to assure to thrive in the 21st century-that is, streamlined in structure, rapid in conveyance of titlering information, having employees who are mellowedly empowered, committed to continuous learning, running world-class HRD programs, and team working and ne devilrking globally.1ABB became one of the or so widely admired companies in the world, not because of its products, or its advanced(a) technology, only when because of its organizational structure. ABB prided itself on macrocosm an organization that its former chief di rect officer, Percy Barnevik, apothegm as being at the same time global and local, big and small, centralized and decentralized. constitution of ABB Merger of Asea Brown BoveriABB was created by the merger in 1987-88 of two companies whose roots lie in the nineteenth century Asea, founded in Sweden in 1890, and Brown Boveri, established in Switzerland in 1891. The two companies were among the surge of industrial enterprises established towards the end of the 19th century to provide equipment for the rapidly expanding galvanising power industry, which involved generating, transmitting, and distributing power, and using it in industrial motors.The strategic payload to the power industry and to a global strategy was demonstrated in a rapid series of alliances and acquisitions. These moves rapidly extended ABBs international bump off into North America and Eastern Europe. The speed with which these acquisitions were integrated into ABB was attributed to the flexibility of its in the altogether organization design.Strategic ContextABBs largest business is producing and servicing the equipment for generating, transmitting, and distributing electrical power. The customers in this business are electric utilities virtually the world, many of which are state-owned or strongly state-regulated. Because national or local governments either directly own or indirectly control the utilities, they had a strong tendency to opt suppliers with a local manu detailuring front line, both because local companies are contributing to the local economy and because they can be relied upon for servicing and changement parts for the complex power systems, any rupture bulge of which can have enormous be for local business and for the reputation of the utility. But they have also touch suppliers to lower their prices and increase the life age of equipment, cutting profit margins for suppliers that are inefficient to achieve greater cogency in production.ABB is also a world l eader in rail transportation systems, such as locomotives, glisten rail vehicles, and signaling. Again, this is a business in which rail networks are state-owned or state-regulated and subject to the same somewhat contradictory pressures to manufacture locally and to be locally responsive to customers, while achieving efficiency through scale economies and cost savings.A third set of products in ABB is directed to a truly different type of customer. Its building systems and industrial production systems are sell to industrial companies, whose concerns are much more focused on price.ABBs businesses require the follow to be locally responsive and to maintain a credible local presence in each of its major markets, and simultaneously to be efficient and cost-competitive. Moreover, direct in one hundred forty countries in a wide variety of product lines, many of which are closely related in the eyes of the customer, the friendship needs to have a high layer of intra-product and cr oss-product coordination if the partnership is to capture fully the benefits of its product diversity. However, it also needs to be able to respond quickly to customers and local problems, and to encourage its managers to take righteousness for their units.Organizational Design of ABB unity of the setoff steps taken subsequently the merger of Asea and Brown Boveri was announced in August 1987 was the creation of a task force of five top managers from each of the two companies to generate an organizational architecture for ABB. The task force had agreed on the principal features of the in the raw organization. The structure was to be an international intercellular substance of business and geography. The basic organizing principle was to create highly focused local companies make knowning both to a worldwide business manager, who would be responsible for achieving efficiency in that product line and growing the business on a global scale, and to a country manager responsible for coordinating the different businesses within a particular country.In drawing up the shortlists for the high level managers, emphasis was placed on identifying flexible individuals who could cooperate in multi-cultural environments and for whom innovation, risk- fetching and the ability to motivate others were almost second nature. oneness of the goals of the new design was to push accountability, decision-making, and the responsibility for action far down the organizational hierarchy.One of the first steps taken by the new top care was the radical reduction of the company transmitquarters. Within a few months, the headcount at corporate HQ in Zurich went from over 1,300 professional staff to just over 100.Another crucial step in the process was the design of a company-wide information system, called ABACUS (Asea Brown Boveri Accounting and Communication System).ABACUS smooth monthly performance data from each unit, put it into a standard currency (US dollars), and transmi tted the information to its main data processing center in Sweden, which compiled the data and passed it to the top managers at the Swiss headquarters and to the designated managers at each level of the company.The basic unit on which performance data are collected for ABACUS is the profit center, the smallest organizational unit in the new organization. severally month they report their performance data to the next highest level of the organization, the local operate company/ short letter Unit (BU) , which in turn put the data into the ABACUS system.The local operating company composed of two or more profit centers and focused on single business and market. ABBs strategy was to concentrate on radically reducing costs in each site, reducing throughput times, maximizing design and production flexibility, and focusing on local customer needs.The local operating company president had CEO responsibilities for his operations. However, the heads of the local operating companies report t o two bosses one was the clientele part manager the other was the country manager for the country in which the operating company was located.The Business Side of the Matrix The Business AreaThe Business Area (BA) manager was responsible for the worldwide strategy and performance of a business.BA management tasks include coordinating technology development, deciding on transfer prices among local operating companies in the BA, transferring expertise within the BA, capturing economies of scale in purchasing, and, perhaps most important, allocation of markets and production to local operating companies.The fact that the BA manager was also the head of a local operating company change magnitude his or her motivation to push responsibility and decision-making down to the local operating companies, on the basis of time pressure, if not ain management philosophy. In addition, they were supported by a BA Board, which aided the BA manager in setting strategy, reviewing performance, an d identifying and addressing diagnose problem areas. The BA Manager selected the members of the Board, and membership varied considerably depending on the nature of the business. The BA Board was an international group, and usually met in a different location for each of its meetings over the course of a year.In addition to the BA Board, the BA had a number of functional councils that brought together key managers in a function for quarterly meetings to assess and exchange internal best practices and to identify and propose solutions for key problems in their area of expertise. For particular problems, the BA Board also formed task forces from among the high-potential younger managers in the BA.The BA manager received monthly reports through ABACUS on the performance of each of the profit centers and operating companies in the BA. The BA manager contumacious how to disseminate this kind of information crosswise the local operating companies.One of the most important roles of the B A was the dissemination of best practice. Sharing information about performance and exposing managers to different ways of operating, through transfers and through depart help in achieving this. The combination of strict performance requirements with the resources for performance returns was a powerful driver of change in ABB.The Business discussion sectionThe BA managers in turn report to Business Segment Managers. Business segments were groupings of related BAs. Each segment was headed by a member of the executive director delegacy, the highest-level organizational unit in the company.The Country LevelThe local operating company managers also reported to the country manager of the nation in which it is located. The country manager had profit-and-loss responsibilities for all ABB activities within that country. The country managers task was to visualize the potential synergies across the various ABB local operating companies, to present a local face for major projects within that country, to provide the legal and semipolitical infrastructure for operations, to coordinate certain personnel development programs, and to make sure that the local political and social environment was understood and considered appropriately in business decisions.The country manager received monthly reports through ABACUS on the performance of each of the local operating companies in the country, and could use these data to identify common problems they faced.The heads of the local operating companies were supported in their contrasting duties to the country manager and the BA manager by a focal point Committee, with representatives from the national company, the BA, and other closely-related local operating companies in the same company. procedure evaluations of the president of the local operating companies were conducted by both the BA head and the country manager. Each share the same basic performance metrics, but each has somewhat different expectations.Managing the Mat rix The Top ManagementAt the top of the company the two dimensions of the intercellular substance met at the level of the decision maker Committee, which was chaired by the CEO.The CEO chaired the Committee, and each of the ten executive VPs had responsibility for one or more of the segments and countries. The extent of their individual responsibilities varied by the field of their tasks. Each BA manager and each country manager reported directly to a member of the Executive Committee.With ABBs acquisitions, the individual responsibilities assign to Executive Committee members changed over time, especially in terms of geographies. The major change was on geography instead of having different members responsible for a portfolio of different national companies, geographic responsibilities were clustered into three regions Europe, the Americas, and Asia Pacific. Each member was assigned either one of the four industrial segments or one of three geographical regions.The move to make the geography side of the matrix report to Committee members with regional rather than individual country responsibilities also reflected ABBs global strategy.Each Executive Committee member was involved in the yearly planning process of each of the BAs and geographic units reporting to him. But as important were their collective responsibilities in graphing the overall strategic direction for the company. considerable communication in a company that operates in 140 countries required a common language, which in ABBs case was English. Communication also took place on a more individual level, between the Executive Committee and their direct reports, and even between the Executive Committee and the heads of the local operating companies.Executive Committee members had access to monthly performance data for all the operating companies, national companies, and business areas for which they were responsible. The ABACUS system provided rapid feedback on changes in the performance of any of these units, and the monthly data were routinely scrutinized carefully at the top of the company.Alignment Developing the Global ManagerOne of the key challenges which faced ABB was developing managers who could work effectively in the demanding system. The development of the global managers who could occupy key positions in the Business Areas and at the top of the company on the Executive Committee was the most important task.The global managers should be satisfactory of balancing the very much contradictory pulls of being locally responsive and globally efficient, pushing decision-making and responsibility for action down while enforcing accountability and control, and simultaneously encouraging local operating companies to be entrepreneurial while making sure that ABB does not lose the competitive advantage of being a multi-business global company. Keeping this philosophy in mind, such people were developed through the training programs, experience on cross-national teams, a nd rotation across locations. One of the hallmarks of the cadre of global managers was that they spent a lot of their time travelling internationally.RegionBusiness SegmentExecutive CommitteeRegionLocal operate CompanyProfit CentersCeBusiness SegmentFigure 1. ABBs Organizational Structure from 1988-1998 (note ABB has now moved on from a matrix organizational structure to a more customer-centric organizational structure).Learning from the ABB organizational structure and its impact on its strategy and performanceABBs modeling clearly shows the example of an organization which can self-madely compete on a global level by being both locally responsive as salubrious as paying attention to its global integration strategy. Each local operating company head was given the freedom to operate as the CEO of his business and was free to make his own decisions. By fixing dual responsibility, both to the country manager as well as to the product manager on a global level, ABB was successful i n achieving its strategic aim of becoming the leader in the electrical systems and the power generation and distribution business.ABB successfully demonstrated how successful matrix organizations can be. Matrix organizations always had been an important theoretical concept but even other very large organizations with a global presence had failed in implementing it. Matrix organizations were widely touted to be as the organizations of the future in the 1970s and organizations such as Citibank and IBM tried to model their organizations around the matrix structures, but failed, as they found the model too complicated. In fact, ABB was the first company on a global level to implement the matrix organizational model so efficiently. Seeing the success of ABB, many organizations around the world also adopted the matrix structure successfully.The various performance indicators of ABB during the 1988-1996 period clearly showed that when the organizational structure is in sync with strategy o f the organization and vice-versa, it guides in achieving great results. ABB achieved the co-ordination of 210,000 employees, 310 business units and 5000 profit centers in 140 countries through the matrix structure. This demonstrated the crucial role of linking mechanisms in number a complex kaleidoscope of grouping patterns into a smoothly functioning organization. ABB simultaneously achieved the goal of acting as a global powerhouse amassing resources know-how on a global scale and responding swiftly to meet the demand of local markets and customers.ABBs net income rose to $1.3 billion in 1996 and its stock price double between 1992 and 1996, reinforcing the choice of its organization structure.The SEMCO ModelWhat makes the SEMCO model so raise is that it for the first 20years it was in operation its structure and culture were autocratic and relied firmly on command and control management calls. However, for the last 20years it has been run representativeally. SEMCO is a mode lf how companies who have not yet evolved into democratic cultures can make the transition with credible success.What is also unique about the SEMCO model of democratic organization is how effectively it works in brazil-nut tree-a country that is still developing, often unstable and known for economic boons and busts. One could reason that in highly unpredictable environment, command and control corporate structures are even more inadequate for dealing with a dynamic socio-economic climate. Perhaps this is why the SEMCOs reconciling model has been a highly effective model of company introduction Semco a Brazilian company which manufactures over two thousand different products including industrial pumps, cooling towers etc. and also provides environmental and internet services, cut its revenues growing from $32 million in 1990 to $212 million in 2003.It achieved this growth rate in an economic environment characterized by staggering inflation, and higgledy-piggledy national economic policy in Brazil. Between 1982 and 1998, Semcos productivity increased nearly sevenfold and profits rose fivefold. Semco was also one of the most sought after Brazilian companies as far as occupation was concerned. Turnover among its 3,000 employees was about 1% during the period 1994 to 2004. Repeat customers accounted for around 80% of Semcos 2003 annual revenues. The culture at Semco was unique in the sense that on that point were no power-packed job titles employees including top managers themselves did the photocopying, sent faxes, typed letters, and made and received call back calls. There were no executive dining rooms, and parking was strictly first-come, first-served. Organizational profits were overlap with the employees and the salaries were set by the employees themselves. Behind this maverick organization was Ricardo Semler (Semler), the CEO of the company who referred to himself as the Chief Enzyme Officer Wrote Semler, If you ask me to describe it in conv entional business terms, Id have to admit I have no liking what business Semco is in. For years, I have resisted defining Semco for a simple reason once you say what business youre in, you create boundaries for your employees, you moderate their thinking and give them a reason to ignore new opportunities. Semlers way of thinking resulted in an organisation which had no conventional structure, no organisational chart no fixed CEO, no VPs, CFOs, COOs or CIOs. There was no long term strategic business plans, no career plans, no job descriptions or dress codes for the employees. Some of the important organisational decisions like relocating a unit or acquiring a company were taken on the basis of employees votes.HistorySemlers father, Antionio Curt Semler, an Austrian-born engineer, migrated to Argentina in1937. A visit to Brazil in 1952 prompted him to think about the prospects a vast, undeveloped country like Brazil presented. During this time, he was working on a centrifuge technol ogy capable of separating oil from vegetables. With an urge to exposit his own business, he selected the city of Sao Paulo to start his venture, Semco, a contraction of Semler Co, in 1953. Soon after, he obtained a unpatterned for his technology. Through the 1960s and 1970s, Semco was mainly a manufacturer of marine pumps. In the late1960s, ninety percent of the sales of Semco were to the Brazilian shipbuilding industry. Semco was a stratified organization with twelve layers of management. According to a Fortune article, Fear was the authorities principle. Guards patrolled the factory floor, timed peoples trips to the bathroom, and frisked workers as they left the plant. Anyone unlucky enough to break a piece of equipment would replace it out of his own pocket.According to Semler it was a company with a pyramidal structure and a rule for every contingency.Enter SemlerIn 1980, at the age of 21, Semler took over as the CEO of Semco. Semlers views on running the company were comple tely different from those of his father. He felt that the company in its existing form was too rigid. He wanted to replace the old way of doing business and planning with a participatory style of management. But the old guard at Semco was not open to this, with the result that Semler fired two thirds of the top management. Semler started out with a functional organizational structure at Semco. Under this structure, decision-making took a long time and each department took independent decisions that sometimes were not in the interests of other departments. Then, the company shifted to a matrix structure. But, unhappy with its effectiveness, Semler changed the structure of the organization once again. sensitive Organization Structure From Pyramid to spreadThough the company worked on the principle of no Organization structure but it actually had was a very flexible organization structure in the form of 3 concentric circles and few triangles floated in it.The smaller innermost circle would include team of a dozen people the eqivalent of VPs and aboveSecond circle would include the 7- 1o leaders of SEMCOs business units and be called partners.Last immense circles would brook virtually everyone else at Semco machine operators, cafeteria workers, janitors, salesman, security guards and so on. They will be called associatesThe triangles- They will be distributed around the big circle each envelopment a single person we would call a coordinator. These people would symbolise the first crucial level of Management A the marketing,sales and production supervisors, the design and assembly area foreman, anyone who had a basic leadership role in our old system.Organizational CultureThe replication of business units into smaller units as and when the need arose created units small enough to operate with a commonly shared set of values, philosophy and culture. The organization was bound together by the three interdependent core values Employee Participation, Profit Shari ng and Free feed of Information. These three values stemmed from the belief that participation in design and implementation of work procedures would give employees control over their work profit sharing would bring in a sense of ownership and the handiness of information as and when needed would help the employees understand to improve their work practices continuously Leadership and Change ManagementSemler can be credit with sustaining the radical changes at Semco. He nurtured changes that might have been viewed as taking away his power and authority. He created an empowered environment where employees could innovate continuously. An idea he generated would later permeate to the whole work force. For example, after eyesight a company order file cabinets worth $50,000, which were meant only to hold in documents which were hardly ever referred to, Semler said that every person in the company should clear his own file cabinets of documen