Chapter Two
Strategy, Organization Design
and Effectiveness
1
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Design,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewin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
2
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
Strategy
Example
Low-Cost
Leadership
Dell Computer
Uniqueness
Differentiation
Starbucks
Coffee Co.
Low Cost
Focused Low-Cost
Leadership
Enterprise
Rent-a- Car
Uniqueness
Focused
Differentiation
Edward Jones
Investments
Low Cost
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
6
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
7
Contingency Factors
Affecting Organization Design
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
9
Reported Goals
of U.S. Corporations
Goal
% Corporations
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
11
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
13
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
15