Strategy, Organization Design, and Effectiveness South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

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1 Chapter Two Strategy, Organization Design, and Effectiveness 2001 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e 2- Top Management Role in Organization Direction, Design, and Effectiveness External Environment Opportunities Threats Uncertainty Resource Availability CEO, Top Management Team Internal Environment Strengths Weaknesses Distinctive competence Leadership Style Past Performance Strategic Management Define mission, official goals 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from Arie Y. Lewin and Carroll U. Stephens, Individual Properties of the CEO as Determinants of Organization Design, unpublished manuscript, Duke University, 1990; and Arie Y. Lewin and Carroll U. Stephens, CEO Attributes as Determinants of Organization Design: An integrated, Organization Studies 15, no. 2 (1994): Select operational goals, collaborative strategies Organization Design 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 Stakeholders Competing values 1

2 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 Emphasis Strategy Example Low-Cost Broad Low Cost Leadership GoFly Ltd. Starbucks Broad Uniqueness Differentiation Coffee Co. Focused Low-Cost Enterprise Narrow Low Cost Leadership Rent-a- Car Focused Edward Jones Narrow Uniqueness Differentiation Investments 2

3 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), ; 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), 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), ; 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),

4 Contingency Factors Affecting Organization Design Environment Technology Size/ Life Cycle Strategy Culture Organizational Structure and Design The right mix of design characteristics fit the contingency factors Contingency Approaches to the Measurement of Organizational Effectiveness External Environment Resource Inputs Organization Internal activities and processes Product and Service Outputs System resource approach Internal process approach Goal approach 4

5 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 Four s of Effectiveness Values STRUCTURE Flexibility F O C U S Internal Human Relations Goal values: human resource development Subgoals: cohesion, morale, training Internal Process Goal values: stability, equilibrium Subgoals: information management, communication Open Systems Goal values: growth, resource acquisition Subgoals: flexibility, readiness, external evaluation Rational Goal Goal values: productivity, efficiency, profit Subgoals: planning, goal setting External Adapted from Robert E. Quinn and John Rohrbaugh, A Spatial of Effectiveness Criteria: Toward a Competing Values Approach to Organizational Analysis, Management Science 29 (1983): ; and Robert E. Quinn and Kim Cameron, Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence, Management Science 29 (1983): Control 5

6 Effectiveness Values for Two Organizations Human Relations STRUCTURE FLEXIBILITY Open Systems F O C U S INTERNAL Internal Process ORGANIZATION A ORGANIZATION B CONTROL Rational Goal EXTERNAL 6