Stretegy Design Effectiveness

Chapter Five Strategy, Organization Design and Effectiveness

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Top Management Role in Organization Direction, Design, and Effectiveness External Environment Organization Design

Opportunities Threats Uncertainty Resource Availability

Strategic Direction CEO, Top Management Team

Define mission, official goals

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from Arie Y. Lewin and Carroll U. Stephens, “Individual Properties of the CEO as Determinants of Organization Design,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewin and Carroll U. Stephens, “CEO Attributes as Determinants of Organization Design: An integrated Model,”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

Select operational goals, competitive strategies

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

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Organizational Purpose Mission Operative Goals Overall Performance Resources Market Employee Development Innovation and Change Productivity

The Importance of Goals 3

Goal Type and Purpose Type of Goals

Purpose of Goals

Official Goals, mission:

Legitimacy

Operative goals:

Employee direction and motivation Decision guidelines Standard of performance 4

Porter’s Competitive Strategies Competitive Scope Broad

Broad Narrow Narrow

Competitive Advantage Low Cost

Strategy Low-Cost Leadership

Example Dell Computer Air Deccan Big Bazaar Starbucks Coffee Co.

Uniqueness

Differentiation

Subhiksha

Low Cost

Focused Low-Cost Leadership

Uniqueness

Focused Differentiation

BMW Mercedes 5

Miles and Snow’s 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 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 Snow’s Strategy Typology (cont’d) 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 – No clear organizational approach; design characteristics may shift abruptly depending on current needs 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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Contingency Factors Affecting Organization Design Envir

onme nt

Str

Technology

Size/ Life C ycle

y

g ate

Cul tur

e

Organizational Structure and Design

The Right Mix of Design Characteristics Fits the Contingency Factors 8

Contingency Approaches to the Measurement of Organizational Effectiveness External Environment Organization Resource Inputs

Resource-based approach

Internal activities and processes

Internal process approach

Product and Service Outputs

Goal approach

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Reported Goals of U.S. Corporations Goa l

% Cor por at ions

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.

89 82 66 65 62 60 54 51 50 49 39 35 10

Four Models of Effectiveness Values STRUCTURE Flexibility

F O Internal C U S

Human Relations Emphasis

Open Systems Emphasis

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

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

Internal Process Emphasis

Rational Goal Emphasis

Primary Goal: stability, equilibrium

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

Subgoals: information management, communication

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.

External

Control

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Contingency Effectiveness Approaches Goal Approaches Indicators Usefulness

Resource Based Approach Indicators Usefulness

Internal Process Approach  Indicators  Usefulness 12

Effectiveness Values for Two Organizations STRUCTURE FLEXIBILITY

Human Relations Emphasis

F O C U S

INTERNAL

Open Systems Emphasis

ORGANIZATION A

Internal Process Emphasis

ORGANIZATION B

EXTERNAL

Rational Goal Emphasis

CONTROL

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Workbook Activity

Identifying Company Goals and Strategies Goals from Exhibit 2.8

Strategies from Porter

Company #1 Company #2 Company #3 14

Workshop Activity

Competing Values and Organizational Effectiveness Goal or subgoal

Performance Gauge

(Example) Equilibrium

Turnover rates

How to measure Compare percentages of workers who left

Source of data

What do you consider effective?

HRM files

25% reduction in first year

1 Open System

2 3

Human Relations

4 5

Internal Process

6 7

Rational Goal

8

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