Chapter Two

Strategy, Organization Design, and Effectiveness

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Top Management Role in Organization Direction, Design, and Effectiveness

External Environment
Opportunities Threats Uncertainty Resource Availability

Organization Design Strategic Direction

Structural Form learning vs. efficiency Information and control systems Production technology Human resource policies, incentives Organizational culture Interorganizational linkages

Effectiveness Outcomes
Resources Efficiency Goal attainment Competing values

CEO, Top Management Team

Define mission, official goals

Select operational goals, competitive strategies

Internal Situation
Strengths Weaknesses Distinctive Competence Leadership Style Past Performance
Source: Adapted from Arie Y. Lewin and Carroll U. Stephens, Individual Properties of the CEO as Determinants of Organization Design, unpublished manuscript, Duke University, 1990; and Arie Y. Lewin and Carroll U. Stephens, CEO Attributes as Determinants of Organization Design: An integrated Model, Organization Studies 15, no. 2 (1994): 183-212

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Goal Type and Purpose

Type of Goals
Official Goals, mission:

Purpose of Goals
Legitimacy

Operative goals:

Employee direction and motivation Decision guidelines Standard of performance

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Porters Competitive Strategies

Competitive Scope
Broad Broad Narrow Competitive Advantage Low Cost Uniqueness Low Cost

Strategy
Low-Cost Leadership
Differentiation Focused Low-Cost Leadership Focused Differentiation

Example
Dell Computer Starbucks Coffee Co. Enterprise Rent-a- Car Edward Jones Investments
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Narrow

Uniqueness

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Miles and Snows Strategy Typology

Prospector

Learning orientation; flexible, fluid, decentralized structure Strong capability in research Values creativity, risk-taking, and innovation

Defender

Efficiency orientation; centralized authority and tight cost control Emphasis on production efficiency, low overhead

Close supervision; little employee empowerment

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Source: Based on Michael Treacy and Fred Wiersema, How Market Leaders Keep Their Edge, Fortune February 6, 1995, 88-98; Michael Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management (St. Paul, Minn.: West, 1995), 100-113; and Raymond E. Miles, Charles c. Snow, Alan D. Meyer, and Henry L. Coleman, Jr., Organizational Strategy, Structure, and Process, Academy of Management Review 3 (1978), 546-562

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Miles and Snows Strategy Typology (contd)

Analyzer

Balances efficiency and learning; tight cost control with flexibility and adaptability Efficient production for stable product lines; emphasis on creativity, research, risk-taking for innovation

Reactor

Source: Based on Michael Treacy and Fred Wiersema, How Market Leaders Keep Their Edge, Fortune February 6, 1995, 88-98; Michael Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management (St. Paul, Minn.: West, 1995), 100-113; and Raymond E. Miles, Charles c. Snow, Alan D. Meyer, and Henry L. Coleman, Jr., Organizational Strategy, Structure, and Process, Academy of Management Review 3 (1978), 546-562

No clear organizational approach; design characteristics may shift abruptly depending on current needs
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Contingency Factors Affecting Organization Design

Organizational Structure and Design

The Right Mix of Design Characteristics Fits the Contingency Factors

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Contingency Approaches to the Measurement of Organizational Effectiveness

External Environment Organization Resource Inputs
Internal activities and processes

Product and Service Outputs

Resource-based approach

Internal process approach

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Goal approach

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Reported Goals of U.S. Corporations

Goal % Corporations
89 82 66 65 62 60 54 51 50 49 39 35
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Profitability Growth Market Share Social Responsibility Employee welfare Product quality and service Research and development Diversification Efficiency Financial stability Resource conservation Management development
Source: Adapted from Y. K. Shetty, New Look at Corporate Goals, California Management Review 22, no. 2 (1979), pp. 71-19.

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Four Models of Effectiveness Values

STRUCTURE
Flexibility

Human Relations Emphasis

Open Systems Emphasis

Primary Goal: growth, resource acquisition Subgoals: flexibility, readiness, external evaluation

F O Internal C U S

Primary Goal: human resource development Subgoals: cohesion, morale, training

External

Internal Process Emphasis

Primary Goal: stability, equilibrium Subgoals: information management, communication

Rational Goal Emphasis

Primary Goal: productivity, efficiency, profit Subgoals: planning, goal setting

Adapted from Robert E. Quinn and John Rohrbaugh, A Spatial Model of Effectiveness Criteria: Toward a Competing Values Approach to Organizational Analysis, Management Science 29 (1983): 363-377; and Robert E. Quinn and Kim Cameron, Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence, Management Science 29 (1983): 33-51.

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Effectiveness Values for Two Organizations

STRUCTURE
FLEXIBILITY

Human Relations Emphasis

Open Systems Emphasis

F O C U S

INTERNAL

ORGANIZATION A

EXTERNAL

Internal Process Emphasis

ORGANIZATION B CONTROL

Rational Goal Emphasis

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Workbook Activity

Identifying Company Goals and Strategies

Goals from Exhibit 2.8 Company #1 Company #2 Company #3
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Strategies from Porter

Workshop Activity

Competing Values and Organizational Effectiveness

Goal or subgoal Performance Gauge (Example) Equilibrium 1 Open System 2 3 Human Relations 4 5 Internal Process 6 7 Rational Goal 8 Turnover rates How to measure Compare percentages of workers who left Source of data What do you consider effective? 25% reduction in first year

HRM files

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