Chapter Two

Strategy, Organization Design,

and Effectiveness

Top Management Role in Organization Direction, Design, and Effectiveness

CEO, Top

Management

Team

External Environment

Opportunities

Threats

Uncertainty

Resource Availability

Internal Environment

Strengths

Weaknesses

Distinctive competence

Leadership Style

Past Performance

Strategic Management

Organization

Design

Effectiveness

Outcomes

Define

mission,

official

goals

Select

operational

goals,

collaborative

strategies

Resources

Efficiency

Goal attainment

Stakeholders

Competing values

Structural Form learning vs.

efficiency

Information and

control systems

Production

technology

Human resource

policies,

incentives

Organizational

culture

Interorganizational

linkages

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Design, unpublished manuscript, Duke University, 1990; and Arie Y. Lewin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

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

Porters Competitive Strategies

Competitive

Scope

Competitive

Emphasis

Strategy

Example

Broad

Low Cost

Low-Cost

Leadership

GoFly Ltd.

Broad

Uniqueness

Differentiation

Starbucks

Coffee Co.

Narrow

Low Cost

Focused Low-Cost

Leadership

Enterprise

Rent-a- Car

Narrow

Uniqueness

Focused

Differentiation

Edward Jones

Investments

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 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 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 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

Organizational Structure and Design

The right mix of design characteristics fit the contingency factors

Contingency Approaches to the Measurement of Organizational Effectiveness

Organization

Internal

activities

and

processes

Resource

Inputs

Product and

Service

Outputs

System

resource

approach

Internal

process

approach

Goal

approach

External Environment

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

Human Relations Model

Goal values: human resource

development

Subgoals: cohesion, morale, training

Internal Process Model

Goal values: stability, equilibrium

Subgoals: information management,

communication

Rational Goal Model

Goal values: productivity, efficiency,

profit

Subgoals: planning, goal setting

Open Systems Model

Goal values: growth,

resource acquisition

Subgoals: flexibility, readiness,

external evaluation

Flexibility

Control

Internal External

STRUCTURE

F

O

C

U

S

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.

Effectiveness Values for Two Organizations

ORGANIZATION

B

ORGANIZATION

A

Human Relations

Model

Internal Process

Model

Rational Goal

Model

Open Systems

Model

STRUCTURE

F

O

C

U

S

FLEXIBILITY

CONTROL

INTERNAL EXTERNAL

Identifying Company Goals and Strategies

Goals from

Exhibit 2.8

Strategies

from Porter

Company #1

Company #2

Company #3

Workbook

Activity

Competing Values and Organizational Effectiveness

Workshop

Activity

Goal or

subgoal

Performance

Gauge

How to

measure

Source of

data

What do you

consider

effective?

(Example)

Equilibrium

Turnover

rates

Compare

percentages

of workers

who left HRM files

25%

reduction in

first year

1

Open

System 2

3

Human

Relations 4

5

Internal

Process 6

7

Rational

Goal 8