Designing Organizations to Create Value: From Strategy to Structure

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A Three-Pronged Strategy for Boosting Organizational Performance—and Shareholder Value

As a business leader in today's increasingly competitive global race, you need more than fads and buzzwords. You need a focused, cross-functional organizational design, one that will foster intercompany communication and help you identify and resolve minor issues before they become major barriers to success.

Designing Organizations to Create Value draws on ...

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A Three-Pronged Strategy for Boosting Organizational Performance—and Shareholder Value

As a business leader in today's increasingly competitive global race, you need more than fads and buzzwords. You need a focused, cross-functional organizational design, one that will foster intercompany communication and help you identify and resolve minor issues before they become major barriers to success.

Designing Organizations to Create Value draws on recent research as well as the authors' hands-on experience to outline an integrated framework for coordinating the three critical aspects of organizational architecture:

  • Assignment of decision-making authority
  • Development of effective performance evaluation systems
  • Creation of a logical and motivating compensation structure

Executives and senior-level decision makers must focus on the entirety of their organizations—as opposed to one particular facet such as strategy, quality, or logistics—to build an efficient and interconnected company. Let Designing Organizations to Create Value provide you with methods to systematically analyze all of your organizational issues and reconstruct your workforce into that of a balanced, functional, and battle-ready market leader.

"In today's environment, managers are under increasing pressure to address organizational issues and manage organizational change. . . . The business literature to date has . . . failed to provide managers with an integrated approach to identifying and solving organizational problems. Our book is designed to provide a systematic, comprehensive framework for analyzing organizational issues, one that can be consistently applied in addressing problems and structuring more effective organizations."—From the Preface

"Value creation" is more than just another buzz phrase; it is, in fact, the time-honored key to business success. Designing Organizations to Create Value is today's most top-to-bottom examination of the ever-elusive topic of value—how it is measured, how firms create and capture it, and how the drive for value impacts the strategy of the entire firm.

Rather than focusing on one aspect or strategy, however, this comprehensive book details virtually every area that influences value creation, including:

  • Proven strategies for efficient deployment of knowledge throughout an organization
  • Decentralization, and the necessity of implementing proper checks and balances
  • The essential and interwoven roles of institutional innovation, strategy, and dynamic leadership

By whatever name, in whatever era, value creation is a requisite for long-term organizational survival and success. Designing Organizations to Create Value combines decades of multidisciplinary research with case studies from market leaders such as General Electric, Honda, and Wal-Mart to illustrate the payoffs from effective organizational design—and provide a practical, sensible approach for creating value at every level and with every process of your organization.

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Product Details

  • ISBN-13: 9780071393928
  • Publisher: McGraw-Hill Professional Publishing
  • Publication date: 8/21/2002
  • Edition number: 1
  • Pages: 320
  • Product dimensions: 6.30 (w) x 9.30 (h) x 1.01 (d)

Meet the Author

James A. Brickley, Ph.D., is the Gleason Professor of Business Administration at the University of Rochester's Simon Graduate School of Business. He has coauthored a number of influential books, and his work has appeared in numerous professional journals, including The Journal of Business and The Journal of Finance.

Clifford W. Smith, Jr., Ph.D., is the Louise and Henry Epstein Professor of Business Administration at the Simon Graduate School of Business. He is the author or coauthor of more than a dozen books and numerous journal articles and has served as an economist with the Securities and Exchange Commission.

Jerold L. Zimmerman, Ph.D., is the Ronald L. Bittner Professor of Business Administration at the Simon Graduate School of Business. The author or coauthor of several books, he is a founding editor of the Journal of Accounting and Economics and has (along with coauthors Brickley and Smith) extensive corporate consulting experience.

Janice Willett is a senior manuscript editor with the Journal of Financial Economics and associate editor of the Journal of Applied Corporate Finance.

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Table of Contents

Preface ix
1. Organizational Architecture: The Three-Legged Stool 1
Design Flaws 2
Organizational Architecture 7
A Question of Balance 8
Economic Darwinism: Survival of the Fittest 11
Benchmarking 12
Our Approach to Organizations 16
2. Maximizing Shareholder Value: Crafting a Strategy to Create and Capture Value 19
Changing Organizational Architecture to Create Value 20
Shareholder Value 22
Why Successful Managers Care about Shareholder Value 24
Creating and Capturing Value 25
How to Create Value 27
Can Firms Capture the Value They Create? 33
Strategy 36
Architectural Considerations 38
Can All Firms Create and Capture Value? 40
3. Knowledge and Incentives in Organizations 43
Unlocking Knowledge within Organizations 43
Converting Organizational Knowledge into Value 44
Incentives within Organizations 50
Alternative Models of Behavior 55
Which Model Should Managers Use? 59
4. The First Leg: Decision Authority, the Level of Empowerment, and Centralization versus Decentralization 65
From Centralization to Decentralization and Back 66
Assigning Tasks and Decision Authority 68
Centralization versus Decentralization 70
Lateral Decision Authority 80
Assigning Decision Authority to Teams 82
Decision Management and Control 87
Influence Costs 92
5. Decision Authority II: Bundling Tasks into Jobs and Jobs into Business Units 95
Reconfiguring Jobs to Boost Productivity 96
Specialized versus Broad Task Assignment 97
Forming Business Units: Function versus Product or Geography 103
Operating Environment, Strategy, and Architecture 111
Matrix Organizations 113
Recent Trends in Assignment of Decision Authority 117
6. The Second Leg: Performance Evaluation 123
Performance Evaluation That Works 124
The Contribution to Value 125
Setting Performance Benchmarks 128
Measurement Costs 130
Relative Performance Evaluation 134
Subjective Performance Evaluation 136
Combining Objective and Subjective Performance Measures 143
Team Performance 145
Government Regulation 149
7. Divisional Performance Measurement 151
Performance Measures Matter 152
Measuring Divisional Performance 153
Transfer Pricing 163
Internal Accounting and Performance Measurement 177
8. The Third Leg: Compensation 183
Compensation Structure Matters 184
Human Capital and the Level of Pay 185
Internal Labor Markets 192
Career Paths and Lifetime Pay 195
The Mix of Salary and Fringe Benefits 201
9. Incentive Compensation 209
Not All Incentive Plans Work 210
Forms of Incentive Pay 211
The Benefits of Incentive Pay 213
Reinforcing Strategic Objectives 216
Incentives from Ownership 217
Optimal Risk Sharing 218
Effective Incentive Contracts 220
Group Incentive Pay 223
An Application: Telecommuting 226
Do Incentives Work? 228
10. Leadership: Initiating, Motivating, and Managing Change 231
Leading the Vision 232
Leadership and Decision Making 234
Managing the Process of Change 239
Organizational Power 244
The Use of Symbols 248
Ethics and Organizational Architecture 250
11. The Process of Management Innovation 257
Management Innovations 258
The Risk of TQM and Other Innovations 262
Why Management Innovations Often Fail 265
Failure to Consider Other Legs of the Stool 271
Managing Changes in Architecture 277
Organizational Change Checklist 278
Sources 281
For Further Reading 295
Index 301
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Customer Reviews

Average Rating 3.5
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  • Anonymous

    Posted January 2, 2003

    Excellent management text

    This book is easy to read and supplies managers with a single source of practical and thoughtful information about establishing not only a strategic directions but an organization that supports that direction. I found the examples super.

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  • Anonymous

    Posted November 9, 2009

    No text was provided for this review.

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