Discussion Question 11.1: Why is it important for an organization to have alignment between its strategy and organizational structure? The relationship between an organization’s strategy and structure are extremely important because it “directly impacts a firm’s performance” (Rothaermel, 2013, p. 309). Also, as an organization grows, it should reevaluate the current strategy and structure to ensure that it remains the optimal choice for the organization (Rothaermel, 2013). The four types of organizational structures, listed in order of least to most complex according to Rothaermel (2013), are: (1) simple, (2) functional, (3) multidivisional, and (4) matrix. The simple structure is for small firms or organizations that are just starting out (Rothaermel, 2013). The decision-making structure is quite flat, as “the founders tend to make all the important strategic decisions” (Rothaermel, 2013, p. 309). Growth will often cause the higher-ups to feel overwhelmed under this type of structure, requiring the organization to adopt a different, more complex structure (Rothaermel, 2013).
A functional structure groups employees into teams, allowing for increased decision-making at lower levels of the managerial chain (Rothaermel, 2013). The opportunity for specialization allows for the functional structure to be employed with each of the business-level strategies: cost leadership, differentiation, or integration (Rothaermel, 2013). One of the hurdles to overcome would be the likely increase in difficulties which arise from departmentalization of the varying teams (Rothaermel, 2013). The best way to overcome such a hurdle is through cross-functional teams (Rothaermel, 2013).
Whenever the organization seeks greater diversification, into varying product lines and service offerings, it will likely look into utilizing a multidivisional structure (Rothaermel, 2013). Under this structure, the organization is further compartmentalized into strategic business units (“SBUs”) which are governed by their own profit-and-loss (“P&L”) responsibilities (Rothaermel, 2013). At this level, each of the SBUs is viewed as its own independent entity, pursuing its own profit-creating goals (Rothaermel, 2013). While organizations with a corporate-level strategy with a single or dominant business would be best served by a functional structure, organizations seeking related or unrelated diversification would be wise to utilize a multidivisional structure (Rothaermel, 2013).
Lastly, the matrix structure is a combination of the functional and multidivisional structures (Rothaermel, 2013). It is most appropriate when an organization needs a structure which allows for both centralized and decentralized decision-making, and can be organized by geographic areas and product divisions (Rothaermel, 2013). While a global strategy does not automatically lend to a matrix structure, a transnational strategy which has the requirements above is better served through a matrix structure (Rothaermel, 2013). Discussion Question 11.3(a): What commonalities across the products would likely be enhanced by flexible cross-functional teams? Gore has product lines which include consumer products like guitar strings and vacuum filters, cables and cable assemblies, electronic and electrochemical materials, fabrics, fibers, filtration products, medical products, pharmaceutical processing, sealants, and venting products (Gore, 2015). Its product lines are used in industries ranging from aerospace and automotive to military and textiles (Gore, 2015).
Gore utilizes cross-functional teams to help develop its many products within varying lines (Rothaermel, 2013). Cross-functional teams allow for individuals from differing functional areas within an organization to temporarily come together and work on a particular project (Rothaermel, 2013). These teams would allow for the differing products, though developed for a particular function, to be developed for use in more than one of the organization’s products (Rothaermel, 2013). As an example, the cables developed for aeronautics can likely be used in other electronic or automotive applications if developed by members from the appropriate cross-functional teams. Discussion Question 11.3(b): What would be your expectations of the type of norms found at W. L. Gore? Organizational norms “define appropriate employee attitudes and behaviors” (Rothaermel, 2013, p. 318).
The norms which exist at Gore likely arise from founder imprinting, which means that Bill Gore, the founder of W. L. Gore & Associates, has helped to establish and define the company’s culture (Rothaermel, 2013). The organization’s four core values, stated succinctly, are: (1) fairness, (2) freedom, (3) individual commitment, and (4) consultation and collaboration (Rothaermel, 2013). These values, coupled with the open nature of the organization’s structure, result in organizational norms which encourage the free exchange of ideas and collaboration up and down the organizational ladder (Rothaermel, 2013). Employees, associates as they are called at Gore, likely show great respect to one another and to the customers for whom their products are developed (Rothaermel, 2013).
Discussion Question 12.1: How can a firm lower the chances that key managers will pursue their own self-interest at the expense of the stockholders? At the expense of the employees? Corporate governance tools are utilized to help align the interests of principals and agents, or organizations and employees (Rothaermel, 2013). A board of directors is one such tool which helps to prevent key managers to avoid pursuing their own self-interest at the expense of the stockholders (Rothaermel, 2013). A board of directors is independent, made up of both inside and outside directors, and answers directly to the shareholders (Rothaermel, 2013). Another tool is executive compensation which links compensation to the performance of the company (Rothaermel, 2013). This means that the CEO would receive certain stock options in lieu of pay (Rothaermel, 2013).
If the company’s stocks are doing well, likely showing that the company is successfully operating, then the CEO receives greater value in the stock options (Rothaermel, 2013). The concept of the market as a corporate control has the potential to protect both stockholders’ and employees’ interests through a key manager’s fear of being replaced if the company performs poorly (Rothaermel, 2013). If a company is not performing well, then the stock prices will begin to plummet, increasing the opportunity for an entity to purchase enough shares to exert significant control over the company (Rothaermel, 2013).
Such control would likely result in the removal of current management, and possibly the dismantling of the organization (Rothaermel, 2013). This clearly injures the management, employees, and shareholders of the failing organization. As such, managers are motivated by the external market to perform well, thereby protecting the interests of stockholders and employees alike (Rothaermel, 2013). Discussion Question 12.2: Why are these two roles typically separated? Is it a positive development for so many firms to have a combined CEO and board chair?
The two roles of management and ownership are typically separated to ensure that the board of directors maintains its necessary independence (Rothaermel, 2013). Where a board of directors is The decline stage differs from those above, as it introduces four strategic options for firms to pursue: (1) exit, (2) harvest, (3) maintain, and (4) consolidate (Rothaermel, 2013). The exit strategy is precisely as it says: it involves the firm choosing to leave the market to pursue other endeavors (Rothaermel, 2013).
The harvest strategy means that the firm will still sell the product or service, but will reduce the level of investment in its maintenance and development (Rothaermel, 2013). The maintain strategy is also exactly what it sounds like: the firm continues offering the product or service at the same level as it has been, despite the declining demand (Rothaermel, 2013). The consolidate strategy involves the purchasing of rivals in an effort to shrink the industry, which provides firms employing this strategy to reach near-monopolistic status (Rothaermel, 2013).
Rothaermel, F. T. (2013). Strategic Management. New York: McGraw-Hill/Irwin. Walmart. Our story. Retrieved on January 25, 2015, from http://corporate.walmart.com/our-story/