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Design, unpublished manuscript, Duke University, 1990; and Arie Y. Lewin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