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Chapter Two

Strategy, Organization Design,

and Effectiveness

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Top Management Role in Organization Direction, Design, and Effectiveness

CEO, TopManagement

Team

External Environment

OpportunitiesThreats

UncertaintyResource Availability

Internal Situation

StrengthsWeaknesses

Distinctive CompetencePast Performance

Strategic Direction

Organization Design

Effectiveness Outcomes

Definemission,officialgoals

Selectoperationalgoals,competitivestrategies

ResourcesEfficiencyGoal attainmentCompeting values

Structural Form – learning vs. efficiencyInformation and control systemsProduction technologyHuman resource policies, incentivesOrganizational cultureInterorganizational linkages

Source: Adapted from Arie Y. Lewin and Carroll U. Stephens,“Individual Properties of the CEO as Determinants of OrganizationDesign,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewinand Carroll U. Stephens, “CEO Attributes as Determinants of Organization Design:An integrated Model,” Organization Studies 15, no. 2 (1994): 183-212

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Goal Type and Purpose

Type of Goals Purpose of Goals

Official Goals, mission: Legitimacy

Operative goals: Employee direction and motivationDecision guidelinesStandard of performance

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Porter’s Competitive Strategies

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CompetitiveAdvantage

Low Cost Uniqueness

Competitive Scope

BroadLow-Cost

LeadershipDifferentiation

Narrow

Focused Low-Cost

Leadership

FocusedDifferentiation

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Miles and Snow’sStrategy 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 empowermentSource: 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; andRaymond 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 Thomson Learning ©

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Miles and Snow’sStrategy 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

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Contingency FactorsAffecting Organization Design

Prospector Defender Analyzer Reactor

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Low Cost Leadership

Differentiation

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Contingency FactorsAffecting Organization Design

Strategy

Environment Technolog

y

Size/Life Cycle Culture

Organizational Structure and Design

The Right Mix of Design Characteristics Fits the Contingency Factors

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Contingency Approaches to the Measurement of Organizational Effectiveness

Organization

Internalactivities

andprocesses

ResourceInputs

Product andServiceOutputs

Resource-basedapproach

Internalprocess

approach

Goalapproach

External Environment

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Contingency Approaches to the Measurement of Organizational Effectiveness

Goal Approach

Resource-based Approach

Internal Process Approach

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Four Models ofEffectiveness Values

Human Relations Emphasis

Primary Goal: human resource developmentSubgoals: cohesion, morale, training

Internal Process Emphasis

Primary Goal: stability, equilibrium

Subgoals: information management, communication

Rational Goal Emphasis

Primary Goal: productivity, efficiency, profit Subgoals: planning, goal setting

Open Systems Emphasis

Primary Goal: growth, resource acquisitionSubgoals: flexibility, readiness, external evaluation

Flexibility

Control

Internal External

STRUCTURE

FOCUS

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. Thomson Learning ©

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ORGANIZATIONB

ORGANIZATIONA

Effectiveness Valuesfor Two Organizations

Human RelationsEmphasis

Internal ProcessEmphasis

Rational Goal Emphasis

Open Systems Emphasis

STRUCTURE

FOCUS

FLEXIBILITY

CONTROL

INTERNAL EXTERNAL

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