Strategy, Organization Design, and Effectiveness Organization Theory and Design Eleventh Edition Richard L. Daft ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Strategy Direction and Organization Design Organizational goal - a desired state of affairs that an organization attempts to reach ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organizational Purpose Strategic intent - organization’s energies and resources are directed toward a focused, unifying, and compelling goal Operating Goals Overall Performance Resources Market Employee Development Innovation and Change Productivity Mission Competitive Advantage Core Competence ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Mission Statement for Machias Savings Bank ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organizational Operating Goals ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Importance of Goals ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Operative goals – SMART • Specific: – Is the indicator specific and clear? Is it concrete? • Measurable: – Will you be able to collect the necessary information for this indicator? Is there a source for the information you need? Do you have the resources to collect the information or will it require too much time and skill to do so? • Actionable: – Would you be able to take action, if necessary, in response to the information that the indicator provides? Will the indicator tell you enough to make an informed decision? • Relevant: – Will the indicator give you information that is necessary for decision-making about your project/program, or will it give you information that is only “nice to know”? • Timely: – Will the indicator tell you what you need to know at the right time? Are the methods used to collect data for your indicator (e.g., median family income) done frequently enough to enable you to make timely decisions?

Selecting Strategy and Design A strategy is a plan for interacting with the competitive environment Managers must select specific strategy design Models exist to aid in formulating strategy: Porter’s Five Forces Miles and Snow’s Strategy Typology ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Strategic planning Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. techniques – SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats ) – PEST analysis (Political, Economic, Social, and Technological analysis) or – STEER analysis involving Socio-cultural, Technological, Economic, Ecological, and Regulatory factors and – EPISTEL analysis (Environment, Political, Informatic, Social, Technological, Economic and Legal)

Porter’s Competitive Strategies Differentiation strategy – to distinguish products or services from others in the industry Low-Cost Leadership – increase market share by keeping costs low compared to competitors Organizations may choose to focus broad or narrow in reaching multiple markets. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Porter’s Competitive Strategies ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Miles and Snow’s Strategy Typology Managers should seek to formulate strategy that matches the demands of the external environment Prospector Learning orientation; flexible, fluid, decentralized structure Values creativity, risk-taking, and innovation Defender Efficiency orientation; centralized authority and tight cost control Emphasis on production efficiency, low overhead Analyzer Balances efficiency and learning; tight cost control with flexibility and adaptability Emphasis on creativity, research, risk-taking for innovation Reactor No clear organizational approach; design characteristics may shift abruptly depending on current needs ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

How Strategy Affects Organization Design Managers must design the organization to support the firm’s competitive strategy Strategy impacts internal organization characteristics ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Organization Design Outcomes of Strategy ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Bindings between particular types of plans Responsibility person Mission (vision) of company Shareholders of company, top management Strategically plan of company development Long-term plans divisional or functional sections Top management, manager of divisions and functional departments Medium-term plans divisions and departments Year plan of company Top management, shareholders Operational plan functional regions Leaders of departments, leaders of working party, individuals

Contingency Factors Affecting Organization Design ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Assessing Organizational Effectiveness Effectiveness takes into consideration a range of variables at both the organizational and departmental levels. Efficiency relates to the working of the organization and amount of resources used to produce output. Measuring Effectiveness: The Goal Approach The Resource-Based Approach The Internal Process Approach The Strategic Constituents Approach ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Indicators of Organizational Effectiveness ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Approaches to Measuring Organizational Effectiveness ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

An Integrated Effectiveness Model Competing values model tries to balance concern with various parts of the organization The human relations emphasis incorporates the values of an internal focus and flexible structure ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Four Approaches to Effectiveness Values ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Effectiveness Values for Two Organizations ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Design Essentials Organization exist for a purpose Strategic intent includes competitive advantage and core competence Strategies may include many techniques There are models to aid in the development of strategy Organizational effectiveness must be assessed No approach is suitable for every organization ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Year plan Budget generally refers to a list of all planned expenses and revenues. It is a plan for saving and spending. The budget is compiled annually. A finished budget usually requires considerable effort and can be seen as a financial plan for the new financial year.

Year plan Sales budget - an estimate of future sales, it is used to create company sales goals. Production budget - estimates the number of units (also costs involved with manufacturing) that must be manufactured to meet the sales goals. Cash Flow/Cash budget - a prediction of future cash receipts and expenditures for a particular time period. (short term future) Project budget - is a prediction of the costs associated with a particular company project. Revenue budget - of revenue receipts of government and the expenditure met from these revenues. Expenditure budget