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Strategy is the company's formula for winning. The company's strategy specifies the goals and objectives to be achieved as well as the values and missions to be pursued; it sets out the basic direction of the company. It also tells people what the company does NOT do.
There are three main components to strategy:
WHAT is your business proposition? (business objectives, growth goals, profit goals, market share strategy, etc.)
WHERE do you compete? (product lines, markets, geographies, etc.)
HOW do you compete? (success factors, competitive advantage, unique business processes, etc.)
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This area governs the human resource policies of recruiting, selection, rotation, training, and development. Human resource policies-in the appropriate combinations-produce the talent that is required by the strategy and structure of the organization, generating the skills and mind-sets necessary to implement its chosen direction.
Human resources policies also build the organizational capabilities to execute the strategic direction. Flexible organizations require flexible people. Cross-functional teams require people who are generalists and who can cooperate with each other.
Like the policy choices in the other areas of the Star Model, people policies work best when they are consistent and align with the other design choices.
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The structure of the organization determines the placement of power and authority in the organization. Structure policies fall into four areas:
- Specialization
- Shape
- Distribution of power
- Departmentalization
Specialization refers to the type and numbers of job specialties used in performing the work. Shape refers to the number of people constituting the departments (that is, the span of control) at each level of the structure. Large numbers of people in each department create flat organizational structures with few levels. Distribution of power, in its vertical dimension, refers to the classic issues of centralization or decentralization.
In its lateral dimension, it refers to the movement of power to the department dealing directly with the issues critical to its mission. Departmentalization is the basis for forming departments at each level of the structure. The standard dimensions on which departments are formed are functions, products, work flow processes, markets, and geography. |
The purpose of the rewards system is to align the goals of the employee with the goals of the organization. It provides motivation and incentive for the completion of the strategic direction. The reward system defines policies regulating salaries, promotions, bonuses, profit sharing, stock options and so on.
The Star Model suggests that the reward system MUST be congruent with the structure and processes to influence the strategic direction and desired behavior of employees.
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Processes have to do with the flow of information. Information and decision processes cut across and through the organization's structure, in both vertical and horizontal directions; if structure is thought of as the skeleton of the organization, processes are its physiology or functioning.
Vertical processes allocate the scarce resources of funds and talent and include business planning and budgeting.
Horizontal also known as lateral processes are designed around the work flow. These include new product development, order fulfillment, cycle time reduction, "six-sigma" or quality control processes.
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The Star Model shows the levers that managers can control, and as a result, can affect employee behavior. By choosing the desired behavior, managers can influence the organization's performance as well as its culture
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Jay Galbraith's Star Model depicts his all-encompassing approach to organizational design. There are three main implications of the Star Model:
- Organization is more than just structure.
- Different strategies lead to different organizations.
- For an organization to be effective, all parts of the star must be aligned.
In the Star Model, design policies fall into five categories. The first is strategy, which determines direction. The second is structure, which determines the location of decision-making power. Processes have to do with the flow of information; they are the means of responding to information technologies. Rewards provide motivation and incentives for desired behavior. And finally, the selection and development of the right people in alignment with the other policies allow the organization to operate at maximum efficiency.
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