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Short Notes Chapter 6

Organizational architecture is the intentional arrangement of structure, processes, rewards, systems, people, and culture to effectively execute strategic objectives. Key models such as the McKinsey 7S Framework, Galbraith’s Star Model, and Nadler-Tushman Congruence Model emphasize the importance of aligning various elements for organizational success. Different business strategies require tailored architectural designs, with specific frameworks suited for diagnosis, execution, and performance measurement.

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4 views3 pages

Short Notes Chapter 6

Organizational architecture is the intentional arrangement of structure, processes, rewards, systems, people, and culture to effectively execute strategic objectives. Key models such as the McKinsey 7S Framework, Galbraith’s Star Model, and Nadler-Tushman Congruence Model emphasize the importance of aligning various elements for organizational success. Different business strategies require tailored architectural designs, with specific frameworks suited for diagnosis, execution, and performance measurement.

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birukteklu
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CHAPTER 6

Definition of Organizational Architecture Organizational architecture is the

intentional and dynamic arrangement of structure, processes, rewards,

systems, people, and culture to enable the effective execution of strategic

objectives. It serves as the "operating system" of an organization; while flawed

architecture leads to execution crashes, optimized design ensures seamless

strategy deployment. The modern expansion of Alfred Chandler’s principle is:

“Architecture enables strategy”.

Key Elements of Organizational Architecture Organizational architecture

represents the human side of the company and includes several

interconnected elements:

 Communications: Responsible for getting company information to

employees and the outside world.

 Control Systems: Needed to ensure smooth company functioning.

 Performance Measurement: Systems used to assess direction and

success.

 Human Resource System: Manages people-related issues.

 Structure: Shows people where they work and their relationship with

other parts of the company.

 Business Systems: Provide the productivity tools needed for work.

 Culture: The "glue" that binds the company together.


McKinsey 7S Framework This model emphasizes that for an organization to

perform well, seven elements must be aligned and mutually reinforcing:

 Hard Elements: Strategy, Structure, and Systems. These provide the

framework for execution.

 Soft Elements: Shared Values, Style, Staff, and Skills. These ensure

commitment and capability.

Galbraith’s Star Model The Star Model includes five design policies that must

be aligned for an organization to be effective:

1. Strategy: Sets the direction.

2. Structure: Determines the location of decision-making power.

3. Processes: The flow of information and AI integration (as of the 2025

update).

4. Rewards: The model’s core rule is that rewards must reinforce desired

execution behaviors.

5. People: Relates to the selection and development of human capital.

Nadler-Tushman Congruence Model This model views the organization as a

transformation process and structures analysis into three parts:

 Inputs: Strategy and Environment.

 Transformation Processes: The interaction between Tasks, People,

Structure, and Culture.


 Outputs: Implementation success and performance outcomes. The

core premise is that high congruence (fit) between these

transformation elements minimizes execution gaps.

Architecture Types for Different Strategies Different business strategies

require tailored architectural designs to be successful:

 Cost Leadership Strategy: Requires a centralized, functional structure.

 Differentiation Strategy: Best supported by a matrix or innovative

structure.

 Growth Strategy: Requires a network or agile structure.

 Turnaround Strategy: Needs a flat, empowered structure to facilitate

rapid change.

Framework Comparison

 McKinsey 7S: Best for holistic diagnosis.

 Star Model: Ideal for reward-driven execution.

 Congruence Model: Focused on the "fit" between components.

 Balanced Scorecard: Centered on Key Performance Indicators (KPIs).

 OKRs (Objectives and Key Results): Best for agile, results-oriented

environments.

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