Objectives To evaluate the 7-S framework

1. Organization structure and design - 2 • Objectives • To evaluate the 7-S framework • To introduce the concept of the ‘intellectual holding company’ • To analyze aspects of executive remuneration from a strategic management perspective

2. Leadership and organizational factors in strategy • Challenge to managers • Large organizations have difficulty with learning which crosses functional lines • Impetus for change should come from within the organization, rather than being imposed from without • The central task of management is continuous building of knowledge base which contributes to the learning process

3. Structure Strategy Systems Super-ordinate goals Skills Style Staff The 7-S framework – a new view of the organization

4. Organizational effectiveness stems from the interaction of several factors • Multiplicity of actors that influence and organization's ability to change and its proper mode of change • “interconnectedness’ of variables: it is difficult to make significant progress in one area without making progress in others • 90% of carefully planned strategies don’t work (Fortune) - failures in execution, resulting from inattention to all S’s • No starting point or implied hierarchy; a priori it is not obvious which factor will be the driving force for change

5. Structure The issue is no longer how to divide tasks (Decentralization, matrix, etc) It is one of emphasis and co-ordination – how to make the whole thing work: developing the ability to focus on dimensions currently important to the organization’s evolution Strategy “Strategy follows structure” “Chandler, 1962) where strategy is the way a company aims to improve its position vis-a vis competition: how do we create unique value? If there is little wrong with their structures, and companies are replete with strategy, why can they not implement it?

6. Systems Formal and informal procedures which make the organization “tick” Style Style is patterns of action; the power of style is essentially manageable … style is symbolic behaviour (Quinn)

7. Staff (= People) Morale Appraisal systems Attitude Pay scales Motivation Formal training Behaviour Hr Planning How do organizations shape the basic values of their management cadre?

8. Skills The nation of skills captures the crucial attributes of an organization We do not characterize a company by its strategies and structures, but by what it does best Organizations facing large discontinuities in business conditions must do more than shift strategic focus – the need to add new capability, new skills Super ordinate goals Guiding concepts – the fundamental values and aspirations going beyond the conventional formal statement of corporate objectives These goals are the starting points on which a system is built: the ultimate test of their value is not their loc but the usefulness of the systems that ensue

9. THE HR STRATEGY FRAMEWORK • Organization structure depicting the key positions, reporting relationship, job profile analysis and performance measurement system • The JCPC model is as follows: Strategy link Process Driven Job Recast Competency Mapping • Skill sets • Talent sketch • Knowledge & experience • Managerial skills Performance Management System (PMS) Training & Development Quarterly Performance Appraisal • Targets • Achievements • Internal • External • Three options based on competency sketch • Immediate Fitment • Redeployment • Post Training Positioning S  Situation T  Tacking A  Action R  Result

10. Learning to love the hollow organization (Mintzberg) For each activity, the organization must ask: are we really competitive with the world’s best here? If not, can intelligent outsourcing improve our long term position? Manufacturing industries are becoming loosely structured networks of service enterprises which join together for one purpose – yet are each other’s suppliers, competitors or customers elsewhere The move is now away from vertical integration which allows and organization to command and co-ordinate a constantly changing network of the world’s best production and service suppliers on a global basis

11. The task of the leader is to redefine the ‘ focused company’ • True focus in strategy is the capacity to bring more power to bear on a selected sector than anyone else can • Dominate a set of service skills that has importance to its customers • Obtain at least strategic parity through necessary outsourcing • Block competitors from entering the market (where a competitor in the broadest sense is defined as “someone” with substitutable skill bases, not necessarily with similar product lines”)

12. Executive remuneration At executive level, job evaluation and conventional salary structuring are not directly applicable, and do not consider strategic direction

13. Policy decisions Programming decisions Interpreting Decisions Routine decisions Semi-skilled Unskilled

14. Executive remuneration … Factors which typically determine executive remuneration may include: • Turnover • Number of employees • Value of tangible assets • Salary and wage bill • Net profit before tax • Industry sector • Company structure

15. Remuneration structure Pay (log scale) Perquisites Long term incentives Short term incentives Benefits Basic salary Job evaluation grade

16. Remuneration structure Pay (log scale) Perquisites Long term incentives Short term incentives Benefits Basic salary Job evaluation grade

17. Market cycle impact Threshold Growth Maturity Decline Compensation element

18. Tends in variable pay CEO Senexecs 100 80 60 40 20 0 Long term Short term Fixed pay

19. The scaling of bonuses needs to be achieved following the principle that, at target level, the level of the bonus puts the executive in the same position as if he/ she received a fixed package of market- related remuneration Cap CEO 100 80 60 40 20 Bonus % of basic remuneration Cap Sen execs 100 60 80 120 140 Target

20. Interface with the remuneration system Long term bonus Package compared to market at this level Short term bonus Fringe benefits Guaranteed pay

21. Merit and competency pay Fixed remuneration is determined in the bottom row at the selected competency level. Job-related performance will be assessed on the vertical axis at the end of the year, and a bonus paid as a percentage of basic remuneration Performance rating Experience and competency grading

22. Principles of executive remuneration • Basic fixed remuneration, with short-term performance bonuses, remunerates executives for their contractually-agreed contribution to corporate performance • Long-term bonuses are • Addition rewards for outstanding entrepreneurial achievement • Proportional to corporate performance (not personal performance) • Geared towards some economic partnership