Why is organizational design important? Affects a company’s ability to deal with contingencies (events that might occur) Used to manage diversity Can influence an organization’s ability to be efficient and innovative

Why is organizational design important? Can be a source of competitive advantage, which is the ability of one company to outperform another by creating more value. Competitive advantage springs from core competencies, managers’ skills and abilities in manufacturing, R&D, new technology, and organizational design.

Why is organizational design important? The consequence of ignoring it is often organizational decline: Talented people leave the organization Resources are harder to acquire Value creation process slows down

Organizational Stakeholders Organizations create value for various groups of stakeholders. Stakeholders have an interest, claim, or stake in the organization, in what it does, and in how well it performs. Stakeholders will participate if inducements (what they get) are greater than contributions (what they give).

Organizational Stakeholders Inside stakeholders are closest to an organization: Shareholders Managers Workforce Outside stakeholders are less attached: Customers Suppliers Government Unions Communities General Public

Organizational Effectiveness At least minimally satisfy interests of all stakeholders Three essential areas of effectiveness Control of external environment Innovation of new products and processes Increasing production efficiency