Relationships:

is the ability to integrate the knowledge and activities of different parts of an organization both horizontally and vertically, and also with other organizations (particularly with the partners in the value chain)

Contd
Basic issue in both internal and external relationships is
how these relationships are built and maintained, whether the processes which help make the relationships are fluid enough to respond to uncertain environment.

The issues for this are:

Relating internally, especially with regards to where the responsibility and authority for operational and strategic decisions should be vested in the organization. Relating externally, for example through outsourcing, alliances, networks and virtuality.

Relating internally
Devolution: concerns the extent to which center of an organization delegates decision making to units and managers lower down in hierarchy where
Important knowledge is dispersed throughout the organization Responsiveness to changing needs of different segments is important.

Relating Internally and Externally

Responsibilities styles
Responsibilities for strategic decision making are divided into three styles:
1. Strategic planning 2. Financial control 3. Strategic control

Strategic Planning :
The relationship between the center and the business units is one of the parent who is the master planner prescribing detailed roles for departments and business units

 Center (Master planner): prescribes detailed roles for departments and business units. Manages infrastructure and provide corporate services. Center orchestras coordinates and controls all of business unit activities through extensive use of formal planning and control.

Strategic Planning

Financial Control
The role of center is confined to setting financial targets, allocating resources, appraising performance, and intervening to avert or correct poor performance. As name suggests relationship is financial and there is little concern for detailed product/market strategy of business units to the extent that they can compete openly with each other.

Rarely found in public sector, due to political accountability, however in private sector, it I sstable to organizations in stable markets where there is short time lag between decisions and financial consequences. Also where diversity of business units is great. Major concern: Dominance of short termism

Financial Control

Strategic Control
Style lies between Strategic Planning and Financial Control Operated in most organizations Center: Strategic shaper, influencing the behavior in business units and forming contexts within which managers are operating. More suitable where center has little knowledge about business unit operations and business unit strategies

Strategic Control

Relating externally

Relationships with customers, suppliers, subcontractors and partners. Look at 4 relationships:

1. 2. 3. 4. Outsourcing Strategic alliance Networks Virtual organization

 Outsourcing
Occurs where organization decide to buy in services or products that were previously produced in-house. Outsourcing requires managers to be much more competent at maintaining performance through relationship management rather as compared to by management control systems within the organization. Eg. Payroll, component manufacture, IT services and training

Strategic alliance
Issue of managing relationships with other organizations/other part of same organization. Alliances can be with specialized knowledge companies, or it can be with the companies offering related products for better customer satisfaction Maruti has entered into alliances with SBI finance and Bajaj Insurance for car finance and insurance respectively.

Networks
Outsourcing, alliances and virtuality are particular cases of general trend to rely on network relationships outside the organizational boundaries. Taken together, they mean that more organizations have become dependent on internal and external networks to ensure success. Today IT technology permits collaborative working between the people located across different geographic locations and people across nations. This has opened up new vistas of collaborative working. Airbus 380 development and production are live examples before us of such networked working.

Virtual organization
Held together not through formal structure and Logical extension of networking, outsourcing and aliances would be an organization where in-house resources and activities are minimized and all resources and activities reside outside organization.

Configurations
Interdependence of structures, processes and relationship rather than through independent
1. Sterotypical 2. Reinforcing cycles and imolications for change 3. Managing dilemmas in configurations

Configurational Dilemmas