Designing Organizations to Create Value: From Strategy to Structure

by Zimmerman, Jerold; Brickley, James; Smith, Clifford; Willett, Janice

• ISBN13: 9780071393928
• ISBN10: 0071393927
• Edition: 1st
• Format: Hardcover
• Copyright: 2002-09-11
• Publisher: McGraw-Hill Education

Summary

A three-pronged strategy for dramatically increasing organizational performance and value Business leaders today need more than fads and buzzwords to beat the competition; they need a solid organizational architecture for identifying and resolving the problems that prevent companies from reaching their full potential. Designing Organizations to Create Valueoutlines just such a framework, providing executives with the tools they need to build a balanced, functional organizationshy;shy;one that helps ensure the success of the business as it lays the groundwork for increased firm value. This practical, sensible book, based on the author's bestselling college classic, follows a step-by-step process for identifying the critical aspects of an organization's internal structure and taking the appropriate actions to address them and lead the organization to greatness. That process, adaptable to virtually any organization or organizational structure, details: Assignment of decision-making rights Rewarding individuals Evaluating performance

Author Biography

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.

Table of Contents

Preface	ix
Organizational Architecture: The Three-Legged Stool	1	(18)
Design Flaws	2	(5)
Organizational Architecture	7	(1)
A Question of Balance	8	(3)
Economic Darwinism: Survival of the Fittest	11	(1)
Benchmarking	12	(4)
Our Approach to Organizations	16	(3)
Maximizing Shareholder Value: Crafting a Strategy to Create and Capture Value	19	(24)
Changing Organizational Architecture to Create Value	20	(2)
Shareholder Value	22	(2)
Why Successful Managers Care about Shareholder Value	24	(1)
Creating and Capturing Value	25	(2)
How to Create Value	27	(6)
Can Firms Capture the Value They Create?	33	(3)
Strategy	36	(2)
Architectural Considerations	38	(2)
Can All Firms Create and Capture Value?	40	(3)
Knowledge and Incentives in Organizations	43	(22)
Unlocking Knowledge within Organizations	43	(1)
Converting Organizational Knowledge into Value	44	(6)
Incentives within Organizations	50	(5)
Alternative Models of Behavior	55	(4)
Which Model Should Managers Use?	59	(6)
The First Leg: Decision Authority, the Level of Empowerment, and Centralization versus Decentralization	65	(30)
From Centralization to Decentralization and Back	66	(2)
Assigning Tasks and Decision Authority	68	(2)
Centralization versus Decentralization	70	(10)
Lateral Decision Authority	80	(2)
Assigning Decision Authority to Teams	82	(5)
Decision Management and Control	87	(5)
Influence Costs	92	(3)
Decision Authority II: Bundling Task into Jobs and Jobs into Business Units	95	(28)
Reconfiguring Jobs to Boost Productivity	96	(1)
Specialized versus Broad Task Assignment	97	(6)
Forming Business Units: Function versus Product or Geography	103	(8)
Operating Environment, Strategy, and Architecture	111	(2)
Matrix Organizations	113	(4)
Recent Trends in Assignment of Decision Authority	117	(6)
The Second Leg: Performance Evaluation	123	(28)
Performance Evaluation That Works	124	(1)
The Contribution to Value	125	(3)
Setting Performance Benchmarks	128	(2)
Measurement Costs	130	(4)
Relative Performance Evaluation	134	(2)
Subjective Performance Evaluation	136	(7)
Combining Objective and Subjective Performance Measures	143	(2)
Team Performance	145	(4)
Government Regulation	149	(2)
Divisional Performance Measurement	151	(32)
Performance Measures Matter	152	(1)
Measuring Divisional Performance	153	(10)
Transfer Pricing	163	(14)
Internal Accounting and Performance Measurement	177	(6)
The Third Leg: Compensation	183	(26)
Compensation Structure Matters	184	(1)
Human Capital and the Level of Pay	185	(7)
Internal Labor Markets	192	(3)
Career Paths and Lifetime Pay	195	(6)
The Mix of Salary and Fringe Benefits	201	(8)
Incentive Compensation	209	(22)
Not All Incentive Plans Work	210	(1)
Forms of Incentive Pay	211	(2)
The Benefits of Incentive Pay	213	(3)
Reinforcing Strategic Objectives	216	(1)
Incentives from Ownership	217	(1)
Optimal Risk Sharing	218	(2)
Effective Incentive Contracts	220	(3)
Group Incentive Pay	223	(3)
An Application: Telecommuting	226	(2)
Do Incentives Work?	228	(3)
Leadership: Initiating, Motivating, and Managing Change	231	(26)
Leading the Vision	232	(2)
Leadership and Decision Making	234	(5)
Managing the Process of Change	239	(5)
Organizational Power	244	(4)
The Use of Symbols	248	(2)
Ethics and Organizational Architecture	250	(7)
The Process of Management Innovation	257	(24)
Management Innovations	258	(4)
The Risk of TQM and Other Innovations	262	(3)
Why Management Innovations Often Fail	265	(6)
Failure to Consider Other Legs of the Stool	271	(6)
Managing Changes in Architecture	277	(1)
Organizational Change Checklist	278	(3)
Sources	281	(14)
For Further Reading	295	(6)
Index	301