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Hershey's organizational chart and organizational structure

17/11/2021 Client: muhammad11 Deadline: 2 Day

Discussion Forum On Chapter Readings

REQUIRED TEXT

David, Fred R. & David, Forest R. (2017). Strategic Management: A competitive advantage approach, 16th. Pearson

Chapter 7 Implementing Strategies: Management, Operations, and Human Resource Issues

Research Hershey's organizational chart and organizational structure. Describing Hershey's organizational structure and how it benefits or detracts from, Hershey's strategic plans.

Strategic Management Concepts: A Competitive Advantage Approach

Sixteenth Edition

Chapter 7

Implementing Strategies: Management, Operations, and Human Resource Issues

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Learning Objectives (1 of 2)

7.1 Describe the transition from formulating to implementing strategies.

7.2 Discuss five reasons why annual objectives are essential for effective strategy implementation.

7.3 Identify and discuss six reasons why policies are essential for effective strategy implementation.

7.4 Explain the role of resource allocation and managing conflict in strategy implementation.

7.5 Discuss the need to match a firm’s structure with its strategy.

After studying this chapter, you should be able to do the following:

7-1. Describe the transition from formulating to implementing strategies

7-2. Discuss five reasons why annual objectives are essential for effective strategy

implementation.

7-3. Identify and discuss six reasons why policies are essential for effective strategy

implementation.

7-4. Explain the role of resource allocation and managing conflict in strategy

implementation.

7-5. Discuss the need to match a firm’s structure with its strategy.

7-6. Identify, diagram, and discuss seven different types of organizational structure.

7-7. Identify and discuss fifteen dos and don’ts in constructing organizational charts.

7-8. Discuss four strategic production/operations issues vital for successful strategy

implementation.

7-9. Discuss seven strategic human resource issues vital for successful strategy

implementation.

Learning Objectives (2 of 2)

7.6 Identify, diagram, and discuss seven different types of organizational structure.

7.7 Identify and discuss fifteen dos and don’ts in constructing organizational charts.

7.8 Discuss four strategic production/operations issues vital for successful strategy implementation.

7.9 Discuss seven strategic human resource issues vital for successful strategy implementation.

Figure 7-1 Comprehensive Strategic-Management Model

Source: Fred R. David, “How Companies Define Their Mission,” Long Range Planning 22, no. 3 (June 1988): 40. See also Anik Ratnaningsih, Nadjadji Anwar, Patdono Suwignjo, and Putu Artama Wiguna, “Balance Scorecard of David’s Strategic Modeling at Industrial Business for National Construction Contractor of Indonesia,” Journal of Mathematics and Technology, no. 4, (October 2010): 20.

This chapter is highlighted in the strategic planning model.

The Nature of Strategy Implementation

Strategy Formulation

Strategy formulation is positioning forces before the action.

Strategy formulation focuses on effectiveness.

Strategy formulation is primarily an intellectual process.

Strategy formulation requires good intuitive and analytical skills.

Strategy Implementation

Strategy implementation is managing forces during the action.

Strategy implementation focuses on efficiency.

Strategy implementation is primarily an operational process.

Strategy implementation requires special motivation and leadership skills.

It is always more difficult to do something (strategy implementation) than to say you are going to do it (strategy formulation)! Although inextricably linked, strategy implementation is fundamentally different from strategy formulation.

Annual Objectives

Annual Objectives:

Represent the basis for allocating resources

Are a primary mechanism for evaluating managers

Are the major instrument for monitoring progress toward achieving long-term objectives

Establish organizational, divisional, and departmental priorities

Are essential for keeping a strategic plan on track

Annual objectives are desired milestones an organization needs to achieve to ensure successful strategy implementation.

Figure 7-3 The Stamus Company’s Hierarchy of Aims

Clearly stated and communicated objectives are critical to success in all types and sizes of firms. Annual objectives are often stated in terms of profitability, growth, and market share by business segment, geographic area, customer groups, and product.

Policies (1 of 3)

Policy

specific guidelines, methods, procedures, rules, forms, and administrative practices established to support and encourage work toward stated goals

instruments for strategy implementation

Changes in a firm’s strategic direction do not occur automatically. On a day-to-day basis, policies are needed to make a strategy work.

Policies (2 of 3)

Policies

set boundaries, constraints, and limits on the kinds of administrative actions that can be taken to reward and sanction behavior

let both employees and managers know what is expected of them, thereby increasing the likelihood that strategies will be implemented successfully

provide a basis for management control and allow coordination across organizational units

Policies are essential instruments for strategy implementation, for at least six reasons.

Policies (3 of 3)

Policies

reduce the amount of time managers spend making decisions. Policies also clarify what work is to be done and by whom.

promote delegation of decision making to appropriate managerial levels where various problems usually arise.

clarify what can and cannot be done in pursuit of an organization’s objectives.

Types of Resources

Financial

Physical

Human

Technological

All organizations have at least four types of resources (or assets) that can be used to achieve desired objectives: (1) financial resources, (2) physical resources, (3) human resources, and (4) technological resources.

Resource Allocation

central management activity that allows for strategy execution

Strategic management enables resources to be allocated according to priorities established by annual objectives

Resource allocation can be defined as distributing an organization’s “assets” across products, regions, and segments according to priorities established by annual objectives. Allocating resources is a vital strategy-implementation activity.

Managing Conflict

Conflict

Disagreement between two or more parties on one or more issues

Establishing annual objectives can lead to conflict because individuals have different expectations and perceptions, schedules create pressure, personalities are incompatible, and misunderstandings occur between line managers and staff managers

Honest differences of opinion, turf protection, and competition for limited resources can inevitably lead to conflict. Conflict can be defined as a disagreement between two or more parties on one or more issues.

Managing Conflict (1 of 2)

Avoidance

Includes such actions as ignoring the problem in hopes that the conflict will resolve itself or physically separating the conflicting individuals

Defusion

Includes playing down differences between conflicting parties while accentuating similarities and common interests

Various approaches for managing and resolving conflict can be classified into three categories: avoidance, defusion, and confrontation.

Managing Conflict (2 of 2)

Confrontation

exemplified by exchanging members of conflicting parties so that each can gain an appreciation of the other’s point of view or holding a meeting at which conflicting parties present their views and work through their differences

Table 7-5 Some Management Trade-Off Decisions Required in Strategy Implementation

To emphasize short-term profits or long-term growth
To emphasize profit margin or market share
To emphasize market development or market penetration
To lay off or furlough
To seek growth or stability
To take high risk or low risk
To be more socially responsible or more profitable
To outsource jobs or pay more to keep jobs at home
To acquire externally or to build internally
To restructure or reengineer
To use leverage or equity to raise funds
To use part-time or full-time employees
Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Table 7-5 reveals some important management trade-off decisions required in strategy implementation. Strategic planning necessitates making effective trade-off decisions.

Matching Structure With Strategy

Structure largely dictates how objectives and policies will be established

Structure dictates how resources will be allocated

Changes in strategy often require changes in the way an organization is structured, for two major reasons.

Table 7-6 Symptoms of an Ineffective Organizational Structure

1. Too many levels of management
2. Too many meetings attended by too many people
3. Too much attention being directed toward solving interdepartmental conflicts
4. Too large a span of control
5. Too many unachieved objectives
6. Declining corporate or business performance
7. Losing ground to rival firms
8. Revenue or earnings divided by number of employees or number of managers is low compared to rival firms
Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

When a firm changes its strategy, the existing organizational structure may become ineffective.

The Functional Structure

Functional Structure

groups tasks and activities by business function, such as production/operations, marketing, finance/accounting, research and development, and management information systems

The most widely used structure is the functional or centralized type because this structure is the simplest and least expensive of the seven alternatives.

Table 7-7 Advantages and Disadvantages of a Functional Organizational Structure

Advantages Disadvantages
1. Simple and inexpensive 1. Accountability forced to the top
2. Capitalizes on specialization of business activities such as marketing and finance 2. Delegation of authority and responsibility not encouraged
3. Minimizes need for elaborate control system 3. Minimizes career development
4. Allows for rapid decision making 4. Low employee and manager morale
Blank 5. Inadequate planning for products and markets
Blank 6. Leads to short-term, narrow thinking
Blank 7. Leads to communication problems
Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Table 7-7 summarizes the advantages and disadvantages of a functional organizational structure.

Divisional Structure

Functional activities are performed both centrally and in each separate division

Organized by geographic area, product or service, customer, or process

The divisional (decentralized) structure is the second-most common type. Divisions are sometimes referred to as segments, profit centers, or business units. As a small organization grows, it has more difficulty managing different products and services in different markets.

Table 7-8 Advantages and Disadvantages of a Divisional Organizational Structure

Advantages Disadvantages
1. Clear accountability 1. Can be costly
2. Allows local control of local situations 2. Duplication of functional activities
3. Creates career development chances 3. Requires a skilled management force
4. Promotes delegation of authority 4. Requires an elaborate control system
5. Leads to competitive climate internally 5. Competition among divisions can become so intense as to be dysfunctional
6. Allows easy adding of new products or regions 6. Can lead to limited sharing of ideas and Resources
7. Allows strict control and attention to products, customers, or regions 7. Some regions, products, or customers may receive special treatment
Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

Table 7-8 summarizes the advantages and disadvantages of divisional organizational structure.

The Strategic Business Unit (S B U) Structure

S B U Structure

groups similar divisions into strategic business units and delegates authority and responsibility for each unit to a senior executive who reports directly to the chief executive officer

can facilitate strategy implementation by improving coordination between similar divisions and channeling accountability to distinct business units

As the number, size, and diversity of divisions in an organization increase, controlling and evaluating divisional operations become increasingly difficult for strategists.

The Matrix Structure (1 of 2)

Matrix Structure

most complex of all designs because it depends upon both vertical and horizontal flows of authority and communication

A matrix structure can result in higher overhead because it creates more management positions.

The Matrix Structure (2 of 2)

For a matrix structure to be effective, organizations need participative planning, training, clear mutual understanding of roles and responsibilities, excellent internal communication, and mutual trust and confidence

Despite its complexity, the matrix structure is widely used in many industries, including construction, health care, research, and defense.

Table 7-9 Advantages and Disadvantages of a Matrix Structure

Advantages Disadvantages
1. Clear project objectives 1. Requires excellent vertical and horizontal flows of communication
2. Results of their work clearly seen by employees 2. Costly because creates more manager positions
3. Easy to shut down a project 3. Violates unity of command principle
4. Facilitates uses of special equipment, personnel, and facilities 4. Creates dual lines of budget authority
5. Shared functional resources instead of duplicated resources, as in a divisional structure 5. Creates dual sources of reward and punishment
Blank 6. Creates shared authority and reporting
Blank 7. Requires mutual trust and understanding
Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

As indicated in Table 7-9, some advantages of a matrix structure are that project objectives are clear, there are many channels of communication, workers can see the visible results of their work, shutting down a project can be accomplished relatively easily, and it facilitates the use of specialized personnel, equipment, and facilities.

Figure 7-6 Typical Top Managers of a Large Firm

Note: Titles spelled out as follows.

Chief Executive Officer (CEO)

Chief Finance Officer (CFO)

Chief Strategy Officer (CSO)

Chief Information Officer (CIO)

Human Resources Manager (HRM)

Chief Operating Officer (COO)

Chief Legal Officer (CLO)

Research & Development Officer (R&D)

Chief Marketing Officer (CMO)

Chief Technology Officer (CTO)

Competitive Intelligence Officer (CIO)

Maintenance Officer (MO)

Restructuring

involves reducing the size of the firm in terms of number of employees, number of divisions or units, and number of hierarchical levels in the firm's organizational structure

primary benefit sought from restructuring is cost reduction

Restructuring and reengineering are becoming commonplace on the corporate landscape across the United States and Europe.

Reengineering

involves reconfiguring or redesigning work, jobs, and processes for the purpose of improving cost, quality, service, and speed

does not usually affect the organizational structure or chart, nor does it imply job loss or employee layoffs

In contrast to restructuring, reengineering is concerned more with employee and customer well-being than shareholder well-being.

Managing Resistance to Change

Force Change Strategy

involves giving orders and enforcing those orders

Educative Change Strategy

presents information to convince people of the need for change

Self-interest Change Strategy

attempts to convince individuals that the change is to their personal advantage

Resistance to change can emerge at any stage or level of the strategy-implementation process. Although there are various approaches for implementing changes, three commonly used strategies are a force change strategy, an educative change strategy, and a rational or self-interest change strategy.

Strategic Human Resource Issues

Seven human resource issues:

Linking performance and pay to strategy

Balancing work life with home life

Developing a diverse work force

Using caution in hiring a rival’s employees

Creating a strategy-supportive culture

Using caution in monitoring employees’ social media

Developing a corporate wellness program

Any organization is only as good as its people! Thus, human resource issues can make or break successful strategy implementation.

Linking Performance and Pay to Strategies

Decisions on salary increases, promotions, merit pay, and bonuses need to support the long-term and annual objectives of the firm

Gain sharing and bonus systems can be used

An organization’s compensation system needs to be aligned with strategic outcomes.

Balance Work and Home Life

Work and family strategies now represent a competitive advantage for those firms that offer such benefits as:

elder care assistance

flexible scheduling

job sharing

adoption benefits

onsite summer camp

employee help line

pet care

lawn service referrals

A corporate objective to become more lean and mean must today include consideration for the fact that a good home life contributes immensely to a good work life.

Develop a Diverse Workforce

Six benefits of having a diverse workforce are:

Women and minorities have different insights, opinions, and perspectives that should be considered.

A diverse workforce portrays a firm committed to nondiscrimination.

A workforce that mirrors a customer base can help attract customers, build customer loyalty, and design/offer products/services that meet customer needs/wants.

A diverse workforce helps protect the firm against discrimination lawsuits.

Women and minorities represent a huge additional pool of qualified applicants.

A diverse workforce strengthens a firm’s social responsibility and ethical position

An organization can perhaps be most effective when its workforce mirrors the diversity of its customers.

Creating a Strategy-Supportive Culture (1 of 2)

Formal statements of organizational philosophy, charters, creeds, materials used for recruitment and selection, and socialization

Designing of physical spaces, facades, buildings

Deliberate role modeling, teaching, and coaching by leaders

Explicit reward and status system, promotion criteria

Stories, legends, myths, and parables about key people and events

Strategists should strive to preserve, emphasize, and build on aspects of an existing culture that support proposed new strategies.

Creating a Strategy-Supportive Culture (2 of 2)

What leaders pay attention to, measure, and control

Leader reactions to critical incidents and organizational crises

How the organization is designed and structured

Organizational systems and procedures

Criteria used for recruitment, selection, promotion, leveling off, retirement, and “excommunication” of people

Monitoring Social Media

Proponents of companies monitoring employees’ social-media activities emphasize that

a company’s reputation in the marketplace can easily be damaged by disgruntled employees venting on social media sites

social-media records can be subpoenaed, like email, and used as evidence against the company.

Many companies monitor employees’ and prospective employees’ social media activities, and have the legal right to do so, but there are many pros and cons of this activity.

Corporate Wellness Program

The Affordable Care Act increased the maximum incentives and penalties employers may use to encourage employee well-being

Most companies have both

“carrots,” such as giving employee discounts on insurance premiums or even extra cash,

“sticks,” such as imposing surcharges on premiums for those who do not make progress toward getting healthy.

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