Designing Effective Organizations

MGT363 – Strategy, Organizational Design, and Effectiveness – Lecture 2

 Organizational Design and Strategy
o Organizational design is the implementation and execution of the
company’s strategy
 Strategy is heavily influenced by current structure
 Structure may be revised given strategy outcomes
o External Environment: 1) Opportunities, 2) Threats, 3) Uncertainty,
4) Resource availability  CEO, Top Management Team 
Strategic Direction: 1) Define mission, official goals, 2) Select
operational goals, competitive strategies  (and ) Organizational
Design: 1) Structural form – learning vs. efficiency, 2) Information
and control systems, 3) Production technology, 4) Human resource
policies, incentives, 5) Organizational culture, 6) Interorganizational
linkages  Effectiveness Outcomes: 1) Resources, 2) Efficiency, 3)
Goal attainment, 4) Competing values  Internal Situation: 1)
Strengths, 2) Weaknesses, 3) Distinctive competence, 4) Leader style,
5) Part performance  (back to) CEO, Top Management Team

 Mission, Vision and Goals

o Mission = overall goal for an organization
 Reason for existence
 Sets the scope for the business
o Vision = core ideology of an organization
 Envisioned future
 Core values/beliefs
o Goals = describe specific measurable outcomes
 Provide employees with direction
 Opportunities for assessment
 Could describe: performance, resources, market, employee
development, innovation and change, productivity
 Strategy Framework
o Porter’s Competitive Strategies
o Miles and Snow’s Typology

 Porter’s Competitive Strategies

o Competitive Advantage (Low Cost/Uniqueness) & Competitive Scope
(Broad/Narrow)
 Low-Cost Leadership (Low Cost & Broad) – Walmart
 Focused Low-Cost Leadership (Low Cost & Narrow) –
RedBox
 Differentiation (Uniqueness & Broad) – Holt Renfrew
 Focused Differentiation (Uniqueness & Narrow) – Lamborghini

 Miles and Snow’s Typology

o Prospector (Apple)
 Innovate & take risks
 Seek new opportunities
 Growth
 Dynamin & Creative
o Defender (Hudson’s Bay)
 Stable
 Maintain current customers
 Little innovation and growth
 Concerned with internal efficiency
o Analyser (Sony)
 Stable yet still innovating
 Mix of products (to keep current customers, others to grow
where possible)
o Reactor
 Responds to threats and opportunities as they arise
 “Blind management”
 No strategy?

 Strategy & Organizational Design

o Organizational design characteristics must support the firm’s strategy
 But strategy should have taken the organizational structure into
consideration
 o Recall: structural and contextual dimensions of organizational design
 The organizations  Culture, Environment, Goals & Strategy,
Size, Technology  Structure: 1) Formalization, 2)
Specialization, 3) Hierarchy of authority, 4) Centralization, 5)
Professionalism, 6) Personnel ratios

 Organizational Effectiveness
o Resource-Based Approach
o Internal-Process Approach
o Goal Approach
o Competing Values Model
o Balanced Scorecard

 Organizational Effectiveness: Resource-Based Approach

o Whether the organization effectively obtains resources needed for
high performance
o Evaluation Criteria:
 Bargaining position,
 Ability to foresee needs,
 Efficiency in using resources
 Ability to respond to change
o Useful when performance indicators are difficult to obtain
o Does not consider the customer
o Cannot really assess effectiveness – not too good for organizations
like non-profits

 Organizational Effectiveness: Internal-Process Approach

o Assesses effectiveness using indicators of internal health and
efficiency
o Evaluation Criteria:
 Work climate and culture
 Loyalty and teamwork
 Communication between employees and management
 Undistorted communication and interaction throughout the
organization
 Management incentives for employee development
o Useful when trying to improve internal efficiency
 o Subjective evaluation criteria (difficult to quantify things like loyalty
and teamwork) & no consideration of external environment

 Organizational Effectiveness: Goal Approach

o Whether the organization achieves its desired output goals
o Evaluation Criteria:
 Operative goals
o Goal attainment is easily measured
o Does not easily account for multiple simultaneous goals

 Organizational Effectiveness: Competing Values Approach

o Designed to combine several typical indicators of performance
 A single model cannot gauge performance across all companies
 Gives managers a choice
o Evaluation Criteria:
 Focus:
 Internal – internal efficiency and employee wellbeing
 External – organization and its external environment
 Structure
 Stability – efficiency and control
 Flexibility – adaptation, learning and change

 Focus (Internal/External) & Structure (Flexible/Stable)

o Human Relations Emphasis (Internal & Flexible)
o Open Systems Emphasis (External & Flexible)
o Internal Process Emphasis (Internal & Stable)
o Rational Goal Emphasis (External & Stable)

 Organizational Effectiveness: Balanced Scorecard

o Balances organizational performance among 4 major perspectives:
 Financial Performance
 Customer Service Indicators
 Business Process Indicators
  Potential for Learning and Growth
o Managers responsible for identifying evaluation criteria inside each
category
 Links to specific mission, strategy, and goals