Strategy, Organization Design and Effectiveness Chapter Two Strategy, Organization Design and Effectiveness

Top Management Role in Organization Direction, Design, and Effectiveness External Environment Organization Design Opportunities Threats Uncertainty Resource Availability Structural Form – learning vs. efficiency Information and control systems Production technology Human resource policies, incentives Organizational culture Interorganizational linkages Effectiveness Outcomes Strategic Direction Resources Efficiency Goal attainment Competing values Define mission, official goals Select operational goals, competitive strategies CEO, Top Management Team 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from Arie Y. Lewin and Carroll U. Stephens, “Individual Properties of the CEO as Determinants of Organization Design,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewin and Carroll U. Stephens, “CEO Attributes as Determinants of Organization Design: An integrated Model,”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

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

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

Porter’s Competitive Strategies Competitive Scope Competitive Advantage Strategy Example Broad Low Cost Low-Cost Leadership Dell Computer Uniqueness Differentiation Starbucks Coffee Co. Narrow Focused Low-Cost Enterprise Rent-a- Car Focused Edward Jones Investments

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

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

Contingency Factors Affecting Organization Design Environment Size/ Life Cycle Technology Culture Strategy Organizational Structure and Design The Right Mix of Design Characteristics Fits the Contingency Factors

Contingency Approaches to the Measurement of Organizational Effectiveness External Environment Resource Inputs Organization Internal activities and processes Product and Service Outputs Resource-based approach Internal process approach Goal approach

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

Four Models of Effectiveness Values STRUCTURE Flexibility Human Relations Emphasis Primary Goal: human resource development Subgoals: cohesion, morale, training Open Systems Emphasis Primary Goal: growth, resource acquisition Subgoals: flexibility, readiness, external evaluation F O C U S Internal External Internal Process Emphasis Primary Goal: stability, equilibrium Subgoals: information management, communication Rational Goal Emphasis Primary Goal: productivity, efficiency, profit Subgoals: planning, goal setting Control 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.

Contingency Effectiveness Approaches Goal Approaches Indicators Usefulness Resource Based Approach Internal Process Approach

Effectiveness Values for Two Organizations STRUCTURE FLEXIBILITY Human Relations Emphasis Open Systems Emphasis ORGANIZATION A ORGANIZATION B F O C U S INTERNAL EXTERNAL Internal Process Emphasis Rational Goal Emphasis CONTROL

Identifying Company Goals and Strategies Workbook Activity Identifying Company Goals and Strategies Goals from Exhibit 2.8 Strategies from Porter Company #1 Company #2 Company #3

Competing Values and Organizational Effectiveness Workshop Activity Competing Values and Organizational Effectiveness