Chapter Two

Strategy, Organization Design, and Effectiveness

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

2-1

Top Management Role in Organization Direction, Design, and Effectiveness
External Environment
Opportunities Threats Uncertainty Resource Availability

Organization Design Strategic Management
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

CEO, Top Management Team

Define mission, official goals

Select operational goals, collaborative strategies

Internal Environment
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from Arie Y. Lewin and Carroll U. Stephens, “Individual Properties of the CEO as Determinants of Organization Design,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewin and Carroll U. Stephens, “CEO Attributes as Determinants of Organization Design: An integrated Model,”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

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

2-2

Goal Type and Purpose
Type of Goals
Official Goals, mission:

Purpose of Goals
Legitimacy

Operative goals:

Employee direction and motivation Decision guidelines Standard of performance
©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

2-3

Porter’s Competitive Strategies
Competitive Competitive Scope Emphasis
Broad Broad Narrow Low Cost Uniqueness Low Cost

Strategy
Low-Cost Leadership
Differentiation Focused Low-Cost Leadership Focused Differentiation

Example
GoFly Ltd. Starbucks Coffee Co. Enterprise Rent-a- Car Edward Jones Investments
2-4

Narrow

Uniqueness

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

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

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

2-5

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

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

2-6

Contingency Factors Affecting Organization Design

Organizational Structure and Design

The right mix of design characteristics fit the contingency factors
©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

2-7

Contingency Approaches to the Measurement of Organizational Effectiveness
External Environment Organization Resource Inputs
Internal activities and processes

Product and Service Outputs

System resource approach

Internal process approach
©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

Goal approach
2-8

Reported Goals of U.S. Corporations
Goal % Corporations
89 82 66 65 62 60 54 51 50 49 39 35
2-9

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.

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

Four Models of Effectiveness Values
STRUCTURE
Flexibility

Human Relations Model Open Systems Model F O Internal C Internal Process Model U Goal values: stability, equilibrium S
Subgoals: information management, communication Goal values: human resource development Subgoals: cohesion, morale, training Goal values: growth, resource acquisition Subgoals: flexibility, readiness, external evaluation

External

Rational Goal Model
Goal values: productivity, efficiency, profit Subgoals: planning, goal setting

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.

Control
©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

2-10

Effectiveness Values for Two Organizations
STRUCTURE
FLEXIBILITY

Human Relations Model

Open Systems Model

F O C U S

INTERNAL

ORGANIZATION A

EXTERNAL

Internal Process Model

ORGANIZATION B CONTROL

Rational Goal Model

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

2-11

Workbook Activity

Identifying Company Goals and Strategies
Goals from Exhibit 2.8 Strategies from Porter

Company #1 Company #2 Company #3
©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

2-12

Workshop Activity

Competing Values and Organizational Effectiveness
Performance Gauge How to measure Compare percentages of workers who left Source of data What do you consider effective? 25% reduction in first year

Goal or subgoal

(Example) Equilibrium 1 Open System 2 3 Human Relations 4 5 Internal Process 6 7 Rational Goal 8

Turnover rates

HRM files

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e

2-13