CORPORATE MANAGEMENT in ACTION

Sessions 3 & 4. Organizational System Factors: Soft & Hard

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Chapter Objectives

Sessions 3 & 4. Organizational System Factors: Soft & Hard

Define Organizational System Factors

Understand Hard Factors and Soft Factors

Evaluate the impact of those factors on the organization

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Organizational System Factors

System Factors

Organizational system is affected by a collection of organizational factors that affect the overall performance at various levels

Hard & Soft Factors

Factors affecting organizational systems are divided into two main categories:

i.Hard Factors: factual and easy to identify; can be found in strategy plans, organization charts, etc…

ii.Soft Factors: human-related factors; difficult to identify; relate to perception, psychology, character, ego, satisfaction, etc…; highly impact performance.

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Organizational System Factors

McKinsey “7-S” Model

McKinsey: organizational system is affected by 7 main categories of factors:

Strategy

Structure

Systems

Style / Culture

Staff

Skills

Superordinate goals

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““HARD” System FactorsHARD” System Factors

1. STRATEGY1. STRATEGY

A set of plans set out in line with the organizational vision and mission in order to achieve organizational goals

i.Business Level Strategy

ii.Corporate Level Strategy

(explained in Session 2)

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““HARD” System FactorsHARD” System Factors

2. STRUCTURE2. STRUCTURE

Organization Structure: represented by organization chart that defines:

formal reporting relationshipslevels in hierarchyspans of controlDepartmentalization

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““HARD” System FactorsHARD” System Factors

2. STRUCTURE2. STRUCTURE

Forms of Organization Structure: many forms…

Functional Structure (flat structure)

Divisional Structure

Geographical Structure

Matrix Structure

Horizontal Structure /

Product Line Structure

Hybrid Structure

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““HARD” System FactorsHARD” System Factors

2. STRUCTURE2. STRUCTURE

Organizational Structure variants & dimensions•Joint Ventures, Licensing agreements, Strategic, Alliances, Consortia, Virtual organizations, Work Teams….

Work Teams:Team members from different departmentsTask orientedSave timeEffective communication, cooperation, and trust: very crucial for success.

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““HARD” System FactorsHARD” System Factors

3. SYSTEMS:3. SYSTEMS:

Organizational Systems organize work transactions in line with work procedures

Operational Systems: communication, approvals, task process, etc…

Management Systems: reporting procedures, decision making, …

Financial Systems: budgeting, cost control, expenditure planning, etc…

HR Systems: compensation, rewards, job descriptions, succession plans, …

Management Information Systems

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““SOFT” System FactorsSOFT” System Factors

4. STYLE / CULTURE:4. STYLE / CULTURE:

Organizational culture:

•dominant values, beliefs and norms initiated by primary owners and shaping organization life

•Inherited but not written: difficult to change

•Culture: Symbols, Ceremonies, Stories, Behaviors, Language, Dress

•Underlying Roots: Values, Assumptions, Beliefs, Attitudes, Feelings, …

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““SOFT” System FactorsSOFT” System Factors

5. STAFF:5. STAFF:

Human Resource Management: Human Resource Management:

•Staff / human resources are the most Staff / human resources are the most important organizational resource. important organizational resource.

•Managing staff: job descriptions, Managing staff: job descriptions, compensation systems, career compensation systems, career development, training, staff development, training, staff communication and cooperation, communication and cooperation, hierarchy, empowerment, … hierarchy, empowerment, …

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““SOFT” System FactorsSOFT” System Factors

6. SKILLS:6. SKILLS:

CompetenciesCompetencies

•Training & Development to enhance Training & Development to enhance skills and competenciesskills and competencies

•Competencies: affect performanceCompetencies: affect performance

•Core competencies: strategic Core competencies: strategic advantageadvantage

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““SOFT” System FactorsSOFT” System Factors

7. Superordinate Values / Shared Values:7. Superordinate Values / Shared Values:

•Guiding concepts, fundamental ideas around which a Guiding concepts, fundamental ideas around which a business is builtbusiness is built

•simple, usually stated at abstract levelsimple, usually stated at abstract level

•have great meaning inside the organization, although have great meaning inside the organization, although outsiders may not understand themoutsiders may not understand them

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Organizational System Evaluation

System Evaluation

•Organizational system performance: evaluated through evaluation of both Hard and Soft Factors

•Efficient system depends on Equilibrium of performance of all factors

•System problems can be caused by a problem in any of the system factors or a combination of factor problems

•Soft factors have very significant impact on performance

•Managers / leaders overlook soft factors

•Corporate governance: maintains success of factor performance

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