ENTR 3312 - Chapter 9

ENTR 3312 - Chapter 9 - Chapter 9 Structuring the Company...

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Unformatted text preview: Chapter 9 Structuring the Company for Entrepreneurship Copyright (c) 2007 by Donald F. Kuratko All rights reserved. E Introduction Structure refers to the formal pattern of how people and jobs are grouped and how the activities of different people or functions are connected. Structures are created to bring order and logic to company operations. Once formalized, the structure is not static. It is continuously changed as management struggles with the need to balance differentiation of activities and people against integration of activities and people. E The Components of Structure Differentiation is about the ways decision-making authority is distributed, tasks are grouped, and people are assigned to tasks. Integration refers to the ways in which people and functions are coordinated. E The Components of Structure How many levels should there be in the organization? What should be the targeted span of control? How centralized or decentralized should operations be? How formal or informal should structural relations be? Should the interaction emphasize functional specialization or cross-functional interaction? E The Components of Structure How much of a sense of bigness vs. smallness should the structure convey? To what extent should the structure emphasize control vs. autonomy? How rigid vs. how flexible should the structure be? To what extent should decision making and communication be more top down vs. bottom up? E How Structures Evolve Larry Greiner's work on organizational life cycle: Evolution and revolution E How Structures Evolve The transformations that occur as a company ages, grows, and diversifies include both major redesigns and ongoing adjustments. That is, structural transitions take place that represent changes in kind as well as degree. Types of Structures: Link to an Entrepreneurial Strategy Regardless of the type of structure currently in place, as environments become more dynamic, threatening and complex, organizations find that competitive survival forces them to become more entrepreneurial. This, in turn, means they must find ways to move the company towards more organic structures. E E of Structures: Link to an Types Entrepreneurial Strategy Simple structure Machine bureaucracy Organic Divisional (See Table 9.1) E Elements of Mechanistic vs. Organic Organizational Structures Mechanistic Structure Operating Styles must be uniform and restricted Reluctant adaptation with insistence on holding fast to tried-and-true management principles despite changes in business conditions Tight control through sophisticated control systems Mechanistic More benign or controllable external environment Conservative management style is more appropriate Mechanistic/bureaucratic structure is effective E E Elements of Mechanistic vs. Organic Organizational Structures Organic Structure Operating styles allowed to vary freely Free adaptation by the organization to changing circumstances Loose, informal control with emphasis on norm of cooperation E Organic More hostile external environment Management style must be more entrepreneurial Organic structure is needed to facilitate entrepreneurship E Entrepreneurial Structure and the An Concept of Cycling "Organizational designs that facilitate variety, change, and speed are sources of competitive advantage. These designs are difficult to execute and copy because they are intricate blends of many different design policies." -Galbraith, 1995 E Entrepreneurial Structure and the An Concept of Cycling Covin and Slevin (1990) propose some additional elements: Managers allowed to freely vary their operating styles Authority that is assigned based on the expertise of the individual Free adaptation of the organization to changing circumstances An emphasis on results rather than processes or procedures An Entrepreneurial Structure and the Concept of Cycling Loose, informal controls with an emphasis on a norm of cooperation Flexible on-the-job behavior, shaped by requirements of the situation and personality of the employee Frequent use of group participation and group consensus Open channels of communication with free flow of information E MANAGEMENT PseudoEffective Entrepreneurial entrepreneurial entrepreneurial firms firms 2 1 3 4 Conservative Efficient bureaucratic firms Mechanistic Unstructured unadventurous firms Organic E Structures to Support New Product/Service Development Projects -- Table 9-4 When deciding which type of organizational structure will be most effective, management must decide to what extent the structure is more: E Simple versus Complex Centralized versus Decentralized Formal versus Informal Autonomous versus Integrated Highly Specialized versus More Generalist Full-time versus Part-time E Entrepreneurial Projects: Structures within Structures The company needs a mechanism that reflects the evolutionary nature of entrepreneurial events inside the organization. We recommend that companies adopt an approach wherein innovation opportunities are produced through 3 different internal channels or structural mechanisms. The Entrepreneurial Project Development Framework Table 9-5 E Ray of Light projects No budget Not approved Early conceptualizing The Entrepreneurial Project Development Framework (Table 9.5) E Emerging Potential Projects Seed capital Approved by Opportunity Review Board Concept refinement/prototype testing The Entrepreneurial Project Development Framework (Table 9.5) E Mainstream Development Projects Formal budget Approved by senior mgt/directors Formal NPD process E Relationships between Entrepreneurial Structuring Partly Related Initiatives and the Corporation: Some Organization Unrelated Special Business Independent Complete Spin Design Alternatives Units Business Units Off New Product /Business Department New Venture Division Contracting Operational Relatedness Strongly Related Direct Integration Micro New Ventures Department Nurturing and Contracting Very Important Uncertain Not Important Strategic Importance Matching Strategy with Structure: The Value of Venture Teams Collective Entrepreneurship where individual skills are integrated into a group and the team's collective capacity to innovate becomes greater than the sum of its parts Example: Signode's V-Team (venture team) approach. A $750 million/year manufacturer of plastic and steel strapping for packaging and materials handling E ...
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