The Decision-Driven Organisation Many CEOs assume that organizational structurethe boxes and lines on a company's org chartis a key determinant of financial performance. Like generals, they see their job as putting the right collection of troops in the right places. If the battle is about innovation, for example, then the CEO's duty is to create the best possible structure for channelling resources towards innovation. This belief helps explain why reorganizations are so popular with chief executives. In fact, nearly half of all CEOs launch a reorg during their first two years on the job. Some preside over repeated restructurings. The immediate motives vary. Some are about cutting costs; others are about promoting growth. Some are about shaking up a culture; others are about shifting strategic focus. Whatever the specifics, though, reorgs almost always involve making major structural changes in pursuit of better performance. Despite the fanfare that usually greets them, however, most reorganizations fall flat. A recent Bain & Company study of 57 reorgs between 2000 and 2006 found that fewer than one-third produced any meaningful improvement in performance. Most had no effect, and some actually destroyed value. Chrysler, for instance, reorganized its operations three times in the three years preceding its bankruptcy and eventual combination with Fiat. Each time, executives proclaimed that the company was on a new path to profitability. Each time, performance didn't improve. We believe that this failure is rooted in a profound misunderstanding about the link between structure and performance. Contrary to popular belief, performance is not determined solely by the nature, scale, and disposition of resources, important though they may be. An army's success depends at least as much on the quality of the decisions its officers and soldiers make and execute on the ground as it does on actual fighting power. A corporation's structure, similarly, will produce better performance if and only if it improves the organization's ability to make and execute key decisions better and faster than competitors. It may be that the strategic priority for your company is to become more innovative. In that case, the reorganization challenge is to structure the company so that its leaders can make decisions that produce more and better innovation over time. For most companies, this requires a fundamental rethinking of their approach to reorganization. Instead of beginning with an analysis of strengths, weaknesses, opportunities, and threats (SWOT), structural changes need to start with what we call a decision audit. The goals of the audit are to understand the set of decisions that are critical to the success of your company's strategy and to determine the organizational level at which those decisions should be made and executed to create the most value. If you can align your organization's structure with its decisions, then the structure will work better, and your company's performance will improve. What Drives Your Performance? Organizational structure is not the only determinant of performance. In some cases, it is not even particularly important. That's why changing a company's structure to meet a particular strategic goal can actually exacerbate problems rather than help solve them. For example, an organization struggling to innovate may try to gather more and more creative inputand end up getting too many people involved, thereby slowing the pace of decision making and stifling innovation. Take the case of Yahoo. In December 2006, then-CEO Terry Semel announced a sweeping reorganization of the company, replacing Yahoo's product-aligned structure with one focused on users and advertiser customers. Seven product units were merged into a group called Audience and another seven moved into a group called Advertisers and Publishers. A unit dubbed Technology would provide infrastructure for the two new operating groups. The idea was to accelerate growth by exploiting economies of scope across Yahoo's rich collection of audience and advertiser products, Semel's team had thought they'd carefully defined roles and responsibilities under the new structure, but decision making and execution quickly became bogged down. Audience demanded tailored solutions that Technology could not provide at a reasonable cost. Advertisers and Publishers needed its own set of unique products and so was constantly competing coordinate the units. The organization ballooned to 12 layers, product development slowed as decisions stalled, and overhead costs increased. Yahoo's experience shows how a lack of attention to the decision-making process can thwart the best-intentioned reorganization and undermine performance. Ultimately, a company's value is no more (and no less) than the sum of the decisions it makes and executes. Its assets, capabilities, and structure are useless unless executives and managers throughout the organization make the essential decisions and get those decisions right more often than not. Ultimately, a company's value is just the sum of the decisions it makes and executes, Our research and experience confirm the tight link between performance and decisions. In 2008, we and our colleagues at Bain & Company surveyed executives worldwide from 760 companies, most with revenues exceeding $1 billion, to understand how effective those companies were at making and executing their critical decisions. We used the responses to assess decision quality (whether decisions proved to be right more often than not), speed (whether decisions were made faster or slower than competitors), yield (how well decisions were translated into action), and effort (the time, trouble, and expense required for each key decision). Then we calculated a composite score for each company and compared that score with each firm's financial performance. We found that decision effectiveness and financial results correlated at a 95% confidence level or higher for every country, industry, and company size in our sample. Indeed, the companies in our sample that were most effective at decision making and execution generated average total shareholder returns nearly six percentage points higher than those of other firms. We also found that many companies have enormous scope to improve their performance. Top-quintile companies score an average of 71 out of 100 in decision effectiveness, while companies in the other four quintiles score, on average, 30 and below. This means that the typical organization has the potential to more than double its decision effectiveness. What's more, the research revealed no strong statistical relationship between structure and performance. Survey respondents' views about the structure of their company were not an accurate predictor of either decision effectiveness or financial results. It's easy to see why so many CEOs are enticed by the temptation of reorganization. Today's corporate structures can be inordinately complex. Some date from a day when the demands of the business world were quite different than they are today. Simplification, alignment, modernization, a new vision of what the organization should look likeand all of it accomplished with the stroke of a pen. But to focus exclusively on structure is to confuse means with ends and to assume a connection that may not exist. The reorgs that work best, such as those at Ford, Xerox, and Cisco, focus first on the organization's critical decisions. Then they build an organization that can make and execute those decisions better and faster than the competition. The result is what executives always seek from reorgs yet so seldom accomplish: improved performance. A corporation's structure, similarly, will produce better performance if and only if it improves the organization's ability to make and execute key decisions better and faster than competitors. When reorganizing a company, decisions rather than structure should be the focus. The conclusion we draw is simple: In a reorganization, decisions rather than structure should be the primary focus. Source: Blenko, M.W., Mankins, M. and Rogers, P. (2010). The Decision-Driven Organisations, Harvard Business Review, 88(6): 54 - 62. Requirements for the proposed study: As a business researcher with a keen interest in organisational behaviour, you are particularly intrigued by the findings that "decision effectiveness and financial results correlated at a 95% confidence level or higher for every country, industry, and company size in our sample" (Blenko, Mankins and Rogers, 2010). With a positivist stance in mind, you are embarking on an investigation into the impact of decision effectiveness of JSE- listed companies on their financial performance. You have formulated the following objectives for the proposed study: To assess the decision effectiveness of JSE-listed companies through decision audits; To determine the impact of decision effectiveness of JSE-listed companies on their financial performance; To make recommendations to the management of JSE-listed companies on how to enhance financial performance through effective decision making. QUESTION 1 (30 Marks) Please outline how you would go about conducting the proposed study with reference to the following: 1.1 Suggest a suitable title for the proposed study. (2 marks) 1.2 State THREE (3) research questions that your study will attempt to answer. (3 marks) 1.3 With regard to the proposed research design: 1.3.1 Briefly discuss the essential ontological and epistemological elements of the research philosophy that would underpin your study. (4 marks) 1.3.2 Briefly elaborate on the research design that you would use in the study and the essence of the particular design you have chosen. (4 marks) 1.4 Based on your proposed design, discuss the methodology you would follow with regard to: 1.4.1 Sampling Methodology: (a) Provides any TWO (2) reasons for sampling in your study. (2 marks) (b) Identify the target population for the study. (2 marks) (c) Briefly discuss whether your sampling will be probability or nonprobability. (1 mark) (d) Elaborate on a selected method(s) of sampling that you would use in this study, explaining why it is appropriate for the study. (3 marks) 1.4.2 Method of Data Collection (a) What data collection instrument(s) and or method(s) would you use to collect your data? Provide a rationale for, and justify the appropriateness of the proposed data collection method. (3 marks) (b) What would inform your approach to data collection and the content of your proposed data collection instrument? (2 marks) 1.4.3 Method of Data Analysis Briefly discuss the method(s) of data analysis you would use in this study (Please note: you are required to specify the descriptive and inferential analyses you would employ to answer the research questions implied by the first two research objectives of the study). (4 marks) The Decision-Driven Organisation Many CEOs assume that organizational structurethe boxes and lines on a company's org chartis a key determinant of financial performance. Like generals, they see their job as putting the right collection of troops in the right places. If the battle is about innovation, for example, then the CEO's duty is to create the best possible structure for channelling resources towards innovation. This belief helps explain why reorganizations are so popular with chief executives. In fact, nearly half of all CEOs launch a reorg during their first two years on the job. Some preside over repeated restructurings. The immediate motives vary. Some are about cutting costs; others are about promoting growth. Some are about shaking up a culture; others are about shifting strategic focus. Whatever the specifics, though, reorgs almost always involve making major structural changes in pursuit of better performance. Despite the fanfare that usually greets them, however, most reorganizations fall flat. A recent Bain & Company study of 57 reorgs between 2000 and 2006 found that fewer than one-third produced any meaningful improvement in performance. Most had no effect, and some actually destroyed value. Chrysler, for instance, reorganized its operations three times in the three years preceding its bankruptcy and eventual combination with Fiat. Each time, executives proclaimed that the company was on a new path to profitability. Each time, performance didn't improve. We believe that this failure is rooted in a profound misunderstanding about the link between structure and performance. Contrary to popular belief, performance is not determined solely by the nature, scale, and disposition of resources, important though they may be. An army's success depends at least as much on the quality of the decisions its officers and soldiers make and execute on the ground as it does on actual fighting power. A corporation's structure, similarly, will produce better performance if and only if it improves the organization's ability to make and execute key decisions better and faster than competitors. It may be that the strategic priority for your company is to become more innovative. In that case, the reorganization challenge is to structure the company so that its leaders can make decisions that produce more and better innovation over time. For most companies, this requires a fundamental rethinking of their approach to reorganization. Instead of beginning with an analysis of strengths, weaknesses, opportunities, and threats (SWOT), structural changes need to start with what we call a decision audit. The goals of the audit are to understand the set of decisions that are critical to the success of your company's strategy and to determine the organizational level at which those decisions should be made and executed to create the most value. If you can align your organization's structure with its decisions, then the structure will work better, and your company's performance will improve. What Drives Your Performance? Organizational structure is not the only determinant of performance. In some cases, it is not even particularly important. That's why changing a company's structure to meet a particular strategic goal can actually exacerbate problems rather than help solve them. For example, an organization struggling to innovate may try to gather more and more creative inputand end up getting too many people involved, thereby slowing the pace of decision making and stifling innovation. Take the case of Yahoo. In December 2006, then-CEO Terry Semel announced a sweeping reorganization of the company, replacing Yahoo's product-aligned structure with one focused on users and advertiser customers. Seven product units were merged into a group called Audience and another seven moved into a group called Advertisers and Publishers. A unit dubbed Technology would provide infrastructure for the two new operating groups. The idea was to accelerate growth by exploiting economies of scope across Yahoo's rich collection of audience and advertiser products, Semel's team had thought they'd carefully defined roles and responsibilities under the new structure, but decision making and execution quickly became bogged down. Audience demanded tailored solutions that Technology could not provide at a reasonable cost. Advertisers and Publishers needed its own set of unique products and so was constantly competing coordinate the units. The organization ballooned to 12 layers, product development slowed as decisions stalled, and overhead costs increased. Yahoo's experience shows how a lack of attention to the decision-making process can thwart the best-intentioned reorganization and undermine performance. Ultimately, a company's value is no more (and no less) than the sum of the decisions it makes and executes. Its assets, capabilities, and structure are useless unless executives and managers throughout the organization make the essential decisions and get those decisions right more often than not. Ultimately, a company's value is just the sum of the decisions it makes and executes, Our research and experience confirm the tight link between performance and decisions. In 2008, we and our colleagues at Bain & Company surveyed executives worldwide from 760 companies, most with revenues exceeding $1 billion, to understand how effective those companies were at making and executing their critical decisions. We used the responses to assess decision quality (whether decisions proved to be right more often than not), speed (whether decisions were made faster or slower than competitors), yield (how well decisions were translated into action), and effort (the time, trouble, and expense required for each key decision). Then we calculated a composite score for each company and compared that score with each firm's financial performance. We found that decision effectiveness and financial results correlated at a 95% confidence level or higher for every country, industry, and company size in our sample. Indeed, the companies in our sample that were most effective at decision making and execution generated average total shareholder returns nearly six percentage points higher than those of other firms. We also found that many companies have enormous scope to improve their performance. Top-quintile companies score an average of 71 out of 100 in decision effectiveness, while companies in the other four quintiles score, on average, 30 and below. This means that the typical organization has the potential to more than double its decision effectiveness. What's more, the research revealed no strong statistical relationship between structure and performance. Survey respondents' views about the structure of their company were not an accurate predictor of either decision effectiveness or financial results. It's easy to see why so many CEOs are enticed by the temptation of reorganization. Today's corporate structures can be inordinately complex. Some date from a day when the demands of the business world were quite different than they are today. Simplification, alignment, modernization, a new vision of what the organization should look likeand all of it accomplished with the stroke of a pen. But to focus exclusively on structure is to confuse means with ends and to assume a connection that may not exist. The reorgs that work best, such as those at Ford, Xerox, and Cisco, focus first on the organization's critical decisions. Then they build an organization that can make and execute those decisions better and faster than the competition. The result is what executives always seek from reorgs yet so seldom accomplish: improved performance. A corporation's structure, similarly, will produce better performance if and only if it improves the organization's ability to make and execute key decisions better and faster than competitors. When reorganizing a company, decisions rather than structure should be the focus. The conclusion we draw is simple: In a reorganization, decisions rather than structure should be the primary focus. Source: Blenko, M.W., Mankins, M. and Rogers, P. (2010). The Decision-Driven Organisations, Harvard Business Review, 88(6): 54 - 62. Requirements for the proposed study: As a business researcher with a keen interest in organisational behaviour, you are particularly intrigued by the findings that "decision effectiveness and financial results correlated at a 95% confidence level or higher for every country, industry, and company size in our sample" (Blenko, Mankins and Rogers, 2010). With a positivist stance in mind, you are embarking on an investigation into the impact of decision effectiveness of JSE- listed companies on their financial performance. You have formulated the following objectives for the proposed study: To assess the decision effectiveness of JSE-listed companies through decision audits; To determine the impact of decision effectiveness of JSE-listed companies on their financial performance; To make recommendations to the management of JSE-listed companies on how to enhance financial performance through effective decision making. QUESTION 1 (30 Marks) Please outline how you would go about conducting the proposed study with reference to the following: 1.1 Suggest a suitable title for the proposed study. (2 marks) 1.2 State THREE (3) research questions that your study will attempt to answer. (3 marks) 1.3 With regard to the proposed research design: 1.3.1 Briefly discuss the essential ontological and epistemological elements of the research philosophy that would underpin your study. (4 marks) 1.3.2 Briefly elaborate on the research design that you would use in the study and the essence of the particular design you have chosen. (4 marks) 1.4 Based on your proposed design, discuss the methodology you would follow with regard to: 1.4.1 Sampling Methodology: (a) Provides any TWO (2) reasons for sampling in your study. (2 marks) (b) Identify the target population for the study. (2 marks) (c) Briefly discuss whether your sampling will be probability or nonprobability. (1 mark) (d) Elaborate on a selected method(s) of sampling that you would use in this study, explaining why it is appropriate for the study. (3 marks) 1.4.2 Method of Data Collection (a) What data collection instrument(s) and or method(s) would you use to collect your data? Provide a rationale for, and justify the appropriateness of the proposed data collection method. (3 marks) (b) What would inform your approach to data collection and the content of your proposed data collection instrument? (2 marks) 1.4.3 Method of Data Analysis Briefly discuss the method(s) of data analysis you would use in this study (Please note: you are required to specify the descriptive and inferential analyses you would employ to answer the research questions implied by the first two research objectives of the study). (4 marks)