Chapter Five

Strategy, Organization Design

and Effectiveness

1
Top Management Role in Organization
Direction, Design, and Effectiveness

External Environment
Opportunities Organization
Threats Design
Uncertainty
Resource Availability Structural Form – Effectiveness
learning vs.
Strategic Direction efficiency Outcomes
Information and Resources
Define Select control systems Efficiency
CEO, Top mission, operational Production Goal attainment
Management official goals, technology Competing values
goals competitive Human resource
Team strategies policies,
incentives
Organizational
culture
Internal Situation Interorganizational
Strengths linkages
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Design,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewin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:
2
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

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 Competitive
Scope Advantage Strategy Example
Low-Cost
Broad Low Cost Leadership Dell Computer
Air Deccan
Big Bazaar
Starbucks
Broad Uniqueness Differentiation Coffee Co.
Focused Low-Cost Subhiksha
Narrow Low Cost Leadership
Focused BMW
Narrow Uniqueness Differentiation Mercedes
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

Envir Size/
o nmen Life C
t Technology ycle
Cul
tur
e
t egy
a
St r

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
Product and
Resource Internal
activities Service
Inputs
and Outputs
processes

Resource-based Internal Goal

approach process approach
approach

9
 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. 10
 Four Models of
Effectiveness Values
STRUCTURE
Flexibility

Human Relations Emphasis Open Systems Emphasis

Primary Goal: human resource Primary Goal: growth,
development resource acquisition
F Subgoals: cohesion, morale, training Subgoals: flexibility, readiness,
O Internal external evaluation
External
C
Internal Process Emphasis Rational Goal Emphasis
U
S Primary Goal: stability, equilibrium Primary Goal: productivity, efficiency,
profit
Subgoals: information management, Subgoals: planning, goal setting
communication

Adapted from Robert E. Quinn and John Rohrbaugh,

Control
“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. 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 Open Systems
Emphasis Emphasis

F ORGANIZATION
O A
INTERNAL EXTERNAL
C
U
S ORGANIZATION
B
Internal Process Rational Goal
Emphasis Emphasis
CONTROL

13
 Identifying Company
Workbook
Activity

Goals and Strategies

Goals from Strategies
Exhibit 2.8 from Porter
Company #1

Company #2

Company #3

14
Workshop
Activity Competing Values and
Organizational Effectiveness
What doyou
Goal or Performance Howto Sourceof consider
subgoal Gauge measure data effective?
Compare
percentages 25%
(Example) Turnover of workers reductionin
Equilibrium rates wholeft HRMfiles first year

1
Open
System 2

3
Human
Relations 4

5
Internal
Process 6

7
Rational
Goal 8

15