Good Example of Chapter Summary

CHAPTER 14: THE INTERNAL ENVIRONMENT: ORCHESTRATING STRUCTURE,
SYSTEMS AND RESOURCES.
The balanced scorecard is an approach to strategic management and performance

measurement that has generated substantial interest among academics and practitioners. The
balanced scorecard allows managers to look at the business from 4 critical indicators of current
and future performance (Kaplan and Norton, 1992:72) 1) Financial perspective (how do we look
to shareholders?): managers need to investigate whether improvements in manufacturing
capabilities are leading to an increase in profitability as there can be a disparity between improved
operational performance and financial results 2) Customer perspective (how do customers see us?):
managers must identify the customer and market segments in which the company competes and
clarify the appropriate measures of performance in these targeted segments 3) Internal business
perspective (what must we excel at?): it is important for organizations to decide the processes and
competences they must excel at and to provide measures for each 4) Innovation and learning
perspective (can we continue to improve and create value?). Kaplan and Norton (2004) balanced
scorecard has evolved from a performance measurement tool to a framework for determining the
alignment of strategy with an organization’s human, information and resource capital.
When founders or managers of firms develop organizational structures in order to enable

growth or to seize opportunities, they have to deal with the challenges involved in organizational
design, a course of action that involves decisions about 6 key elements 1) work specialization: the
degree to which a task is divided into separate jobs, has been identified as a critical factor in
determining employee’s productivity 2) departmentalization: can also take place according to
product: where jobs are grouped around a particular product and service; geography: where jobs are
brought together around geographical location; process: where jobs are grouped based on process or
customer flow 3) chain of command: refers to formal lines of authority, which span different
hierarchical levels, from top management to workplace employees, and aim to clarify who reports
to whom in the work setting. 4) span of control: as the number of people reporting directly to a
manage. Flat structures are usually characterized by a wide span of control, they emphasize work
autonomy and empowerment. Companies have adopted flatter structures in order to avoid some of
the more common problems associated with tall structure. Including the following (Hill and Jones,
1995): problems of coordination, distortion of information, problems of motivation 5)
centralization and decentralization: occurs in firms where decisions making is devolved and where
lower levels of the hierarchy are encouraged to provide input. 6) formalization: refers to the degree
to which jobs within a firm are standardized through formal job description, and the degree of
discretion available to employees in pursuing activities and tasks (Cohn and Turyn, 1980;
Kaluzny et al., 1974). When job formalization is low, employees are given relatively high
discretion on how and when they may do their work.
The common factors that managers should consider to select the most appropriate and
effective structure of their firms comprise 1) corporate strategy: effective leadership is about
selection an appropriate strategy and matching it with an appropriate structure (Hannah and
Lester, 2009). When a structure’s elements are properly aligned with one another, the structure
facilitates effective use of the firm’s strategies 2) organizational size: they are often characterized
by high degrees of specialization, a large number of department groupings and formalized rules and
procedures 3) environmental uncertainty: it is getting increasingly difficult to develop
organizational structure that effectively supports the firm’s strategy due to the global economy’s
rapidly changing and dynamic competitive environment (Tieying et al.,2008).
Research in the electronics industry on technological innovation identified 2 ideal types of
organizational structure 1) mechanistic structure: tend to be evident in environment that are stable,
while organic structure usually exists under more turbulent conditions 2) organic structures are
better suited to rapidly changing external environments where innovation is perceived as an
important factor in maintain a firm’s competitive advantage (Zaltman et al., 1973).
In systems, Shalley et al (2000) have considered managers should look into the specific
oraginzational systems that support and promote creativity at work. These often relate to the careful
planning and management of creativity goals, making creativity a job requiremnet, providing
feedback and using appropriate and recognition systems that value employee creativity. Next, we
consider the effects of rewards and goals on creativity. Locke and Latham (1990) noted the
significance of goal-setting as a means of enhancing employees’s performance and increasing
business productivity. The notion of reward is widely used in organizations to compensate
employees’ contribuution. Reward can range from monetary (financial rewards) to non- monetary
rewards (recognition or praise). So, goals and rewards should be as informative as possible and
should not be considered as a fixed evaluation mechanism. Emloyees should be rewarded both for
their overall behavoiour and the generation of new processes and practices that inmprove current
thinking (Shalley and Gilson,2004). Eisenberger and Armeli (1997) argue that rewards are not
always bad for creativity but two factors need to be considered: 1/ What types of behaviours are
being rewarded. 2/ How are the rewards being distributed. According evaluation, Amabile (1998)
think that evaluation can have a negative effect on creativity because evaluation concentrate on
extrinsic motivation and forget intrinsic motivation. The authors also show that evaluate
environment more create a climate of fear and negative feelings arise in response to the way
managers treat people whose ideas are not implemented. On the other hand, Cumings (1965) say
supportive evaluations can enhance an intrinsically motivated state that is conductive to creativity.
With resources, there are four characteristics of resources that are important determinants
in sustaining competitive advantage: 1/ Durability, 2/ Transparency, 3/ Transferability, 4/
Replicability. In sufficient resourcing, Chatterjee and Wernefelt (1991) divide in three main
categories: physical (company’s buildings, raw materials and equipment), intangible (brand names,
patents, reputation, trademarks) and financial resources (equity, debt, cash flow,etc). Amabile
(1998) introduces the notion of the “threshold of sufficiency” with regard to all the necessary
resources for sustaining creativity in the workplace. About systems of communication, how
managers of creative firms need to find ways to promote both group communication and the
asquistion of external information (Mumford et al,2002). Basadur (2004) suggests that one of most
effective ways to encourage employees to think creativity is to introduce an ‘employee suggestion’
system. Sutton and Kelley (1997) iilustrates some of the benefits of bringing outsiders into creative
environments: Bringing new knowledge, teaching creative individuas to interact with outsiders and
breaking down stereotypes. Lastly, according to project selection, complex and challenging projects
are likely to get people excited about their work, usually provides them with the motivation to
complete the projects on time (Oldhalm and Cummings, 1996). They have identified benefits when
employees are involved in highly complex jobs: they are able to perceive the significance of, and
exercise responsibility for, the whole of their work, they have the discrestion to assess options about
how and when the work gets done using a variety of skills and they are more open to receiving
feedbacks from the work itself in monitoring their own progress.
In my reflection, this chapter has shown how the generation of new ideas or products can
create creativity and innovation. The need to translate strategic goals into tangible objectives and
measures, the importance of the internal environment to enhancing creativity and innovation.
Besides, two elements that managers of creative organizations should focus on when evaluating
their employees is how feedback is communicated to creative individual and provide constructive
and development feedback to improve creative outcomes.

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CHAPTER 14: THE INTERNAL ENVIRONMENT: ORCHESTRATING STRUCTURE,

SYSTEMS AND RESOURCES.

The balanced scorecard is an approach to strategic management and performance

When founders or managers of firms develop organizational structures in order to enable

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