Organisation and Change
Structuring for Strategy
Organisational design must fit strategy. Candidates must understand structure types (functional, divisional, matrix, network), centralisation vs decentralisation, and span of control. Also know configuration (Mintzberg's six parts) and change context (incremental vs transformational).
Common Traps
- Assuming one best structure: The trap is that structure follows strategy (Chandler) but there is no universal ideal; contingency factors (size, technology, environment) matter.
- Confusing matrix with project teams: Matrix has dual reporting lines; it can cause conflict but increases flexibility.
- Ignoring informal organisation: Culture and networks influence behaviour.
- Overlooking change readiness: Transformational change requires strong leadership and communication.
Worked Example
"A growing firm with diverse products struggles with coordination. Which structure is likely most appropriate?" Answer: Divisional structure (by product or market) to enable focus and accountability, though it may duplicate resources. The trap is choosing functional structure, which may not handle diversity well.
Rule of thumb: Match structure to strategy and environment: stable environment → mechanistic (functional); dynamic → organic (divisional, matrix, network). Use Mintzberg's configurations to diagnose.
Key Concepts to Master
- Chandler's structure follows strategy.
- Functional, divisional, matrix, network structures and their pros/cons.
- Mintzberg's six parts and configurations.
- Mechanistic vs organic forms.
- Change types: incremental, transformational, reactive, proactive.
Strategic Evaluation
Measuring and Judging Strategy
Strategic evaluation assesses whether strategy is delivering results and remains appropriate. Candidates must understand performance measurement (financial and non-financial), Balanced Scorecard, benchmarking, and strategic control (vs operational control). Also know SAF criteria and gap analysis.
Common Traps
- Over-reliance on financial metrics: Short-termism may sacrifice long-term value; use balanced measures.
- Confusing strategic with operational control: Strategic control monitors strategy validity; operational control monitors efficiency.
- Ignoring external signals: Evaluation must scan environment for changes that invalidate strategy.
- Benchmarking pitfalls: Comparing incomparable firms leads to false conclusions.
Worked Example
"A firm meets profit targets but customer satisfaction is falling. Which evaluation tool would reveal this?" Answer: Balanced Scorecard-customer perspective highlights non-financial decline that financials miss. The trap is relying solely on profit.
Rule of thumb: Use the Balanced Scorecard to evaluate across four perspectives; apply SAF to test strategy; use gap analysis to compare actual vs desired performance and identify corrective action.
Key Concepts to Master
- Balanced Scorecard four perspectives.
- Strategic control vs operational control.
- Benchmarking types (internal, competitive, functional).
- Gap analysis and critical success factors.
- Key performance indicators (KPIs) and performance prism (stakeholder focus).
Governance and Risk
Governing Strategy and Managing Risk
Corporate governance ensures accountability and alignment of interests. Candidates must understand agency theory, board roles (executive vs non-executive), stakeholder vs shareholder models, and risk management (identification, assessment, mitigation). Also know internal controls, ethics, and CSR.
Common Traps
- Confusing governance with management: Governance oversees; management executes.
- Assuming NEDs are always independent: Independence can be compromised by relationships.
- Ignoring risk appetite: Risk management must align with strategy and appetite.
- Overlooking ethical culture: Formal controls fail without ethical tone at the top.
Worked Example
"A board approves a risky expansion without challenge. Which governance failure?" Answer: Lack of effective non-executive challenge and poor risk oversight-agency problem where executives pursue growth for personal benefit. The trap is blaming strategy content rather than governance process.
Rule of thumb: Apply the UK Corporate Governance Code principles (leadership, effectiveness, accountability, remuneration, relations with shareholders) as a checklist. Use a risk register to assess likelihood and impact, and ensure segregation of duties.
Key Concepts to Master
- Agency theory and stewardship theory.
- Board composition and NED independence.
- Risk management process (ISO 31000).
- Internal control (COSO framework).
- CSR and stakeholder accountability.