Organizational Effectiveness Chapter Three Organizational Effectiveness

Top Management Role in Organization Direction, Design, and Effectiveness External Environment Organization Design Opportunities Threats Uncertainty Resource Availability Structural Form – learning vs. efficiency Information and control systems Production technology Human resource policies, incentives Organizational culture Interorganizational linkages Effectiveness Outcomes Strategic Direction Resources Efficiency Goal attainment Competing values Define mission, official goals Select operational goals, competitive strategies CEO, Top Management Team Internal Situation 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from Arie Y. Lewin and Carroll U. Stephens, “Individual Properties of the CEO as Determinants of Organization Design,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewin and Carroll U. Stephens, “CEO Attributes as Determinants of Organization Design: An integrated Model,”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

Organizational Purpose Mission The overall goals for an organization is often call the mission. The mission describes the organization’s vision. The mission is sometimes called the official goals which refers to the formally state definition of business scope and outcomes the organization is trying to achieve.

Organizational Purpose Mission statement of Halmark We believe that : Our product and services must enrich people’s lives and enhance their relationship Creativity and quality-in our concept product and services-are essential to our success.

Organizational Purpose Operative Goals Describe specific measurable outcomes and are often concern with short run. Operative goals include : Overall Performance : Profitability may be expressed in terms of net income, earning per share or return on investment. Other overall performance goals are growth and output volume.

Organizational Purpose Operative Goals Resources Obtaining financing for the construction of new plants, finding less expensive source of materials, or hiring top-quality technology graduate. Resource goals for Harvard University include attracting to professor and student. Honda Motor Company has resource goals of obtaining high-quality auto parts at low cost.

Organizational Purpose Operative Goals Market Market goals relate to the market share desire by organization. Market goals are responsibility of marketing, sales, and advertising department. For example, Honda’s desire to over take Toyota Motor Company as the number one seller of cars in Japan.

Organizational Purpose Operative Goals Employee Development Employee development pertains to the training, promotion, safety, and growth of employee. It include managers and workers. According to Barbara Wallace, Fetzer’s director of human resources “… our company feels that developing people’s capabilities strengthens the organization, it’s a way of creating loyalty.

Organizational Purpose Operative Goals Innovation and Change Innovation goals pertain to internal flexibility and readiness to adapt to unexpected changes in environment. Innovation goals are often defined with respect to the development of specific new services, product or production process.

Organizational Purpose Operative Goals Productivity Productivity goals concern the amount of output achieved from available resources.

Organizational Purpose The Importance of Goals Both official goals (mission) and operative goals are important for organization, but they serve very different purpose. Official goals describe a value system for the organization Operative goals represent the primary tasks of the organization.

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

Porter’s Competitive Strategies Competitive Scope Competitive Advantage Strategy Example Broad Low Cost Low-Cost Leadership Dell Computer Uniqueness Differentiation Starbucks Coffee Co. Narrow Focused Low-Cost Enterprise Rent-a- Car Focused Edward Jones Investments

Miles and Snow’s Strategy Typology Prospector To innovate, take riskd, seek out new opportunities and grow. This strategy is suited to a dynamic, growing environment where creative is more important than efficiency. For example, Federal Express Corporation, which innovates in both services and production technology in rapidly changing overnight mail industry. 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 Snow’s Strategy Typology Defender Concern with stability Efficiency orientation; centralized authority and tight cost control Emphasis on production efficiency, low overhead This strategy can be successful when the organization exists in the declining industry or stable environment. 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 Snow’s Strategy Typology (cont’d) Analyzer Try to maintain stable business while innovating on periphery. It seems to lie midway between the prospector and the defender. Efficient production for stable product lines; emphasis on creativity, research, risk-taking for innovation P&G strategy is to maintain a stable business for strong brands like pampers, while also pushing to invent new catagories product, such as those developed for home dry cleaning. 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 Snow’s Strategy Typology (cont’d) Reactor Respond to environmental threaths and opportunities in an ad hoc fashion. In reactor strategy, top management has not defined a long-run plan, so the organization takes whatever action seem to meet immediate needs. For example franchisees lack of clear strategic direction for the future, 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 Environment Size/ Life Cycle Technology Culture Strategy Organizational Structure and Design The Right Mix of Design Characteristics Fits the Contingency Factors

Contingency Factors Affecting Organization Design In stable environment, the organization can have a traditional structure that emphasizes on : vertical control, efficiency, speciallization, standard procedure and centralization decision making. Rapidly changing environment may call for a more flexible structure, with strong hirizontal coordination and collaboration through team or mechanism.

Contingency Factors Affecting Organization Design Young small organization are generally : Informal and have little division of labor, Few rules and regulations Large organization such IBM, Sears, have An extensive division of labour, numerous rule and regulations, and innovation.

Contingency Factors Affecting Organization Design Design must also fit the workflow technology of the organization Mass production technology, such as a traditional automobile assembly line, the organization best by emphazing efficiency, formalization, specialization, centralzed decision making and tight control An e-business Might need to be informal and flexibility.

Contingency Approaches to the Measurement of Organizational Effectiveness External Environment Resource Inputs Organization Internal activities and processes Product and Service Outputs Resource-based approach Internal process approach Goal approach

Contingency Approaches to the Measurement of Organizational Effectiveness Goal approach Consists of identifying an organization’s output goals and assessing how well the organization has attained those goals For example, President Val Ackerman set agoal of 4,000 to 5,000 ticket per game of national basket ball, the ticket average sold 9,700 tickets per game. So it was highly effective meeting its goal for attendance.

Contingency Approaches to the Measurement of Organizational Effectiveness Goal approach Goals indicator Efforts to measure effectiveness have been more productive using operative goal than using official goals. One example of multiple goals is from a survey of US Business corporation below.

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.

Contingency Approaches to the Measurement of Organizational Effectiveness Goal approach Goals usefullness Two problems that must be resolved are the issues of Multiple goals High achievement on one goal might mean low achievement on another. Most organization use a balanced approach to measuring goals

Contingency Approaches to the Measurement of Organizational Effectiveness Goal approach Goals usefullness Two problems that must be resolved are the issues of Subjective indicator For business organizations, there are often objective indicators for certain goals, such as profit and growth. However, subjective assesment is needed for other goals, such as employee welfare or social responsibility

Contingency Approaches to the Measurement of Organizational Effectiveness Goal approach Goals usefullness Two problems that must be resolved are the issues of Multiple goals High achievement on one goal might mean low achievement on another. Most organization use a balanced approach to measuring goals Subjective indicator For business organizations, there are often objective indicators for certain goals, such as profit and growth.

Resource based approach Contingency Approaches to the Measurement of Organizational Effectiveness Resource based approach Looks at the input side of the transformation process. It is defined as the ability of organization, in either absolute or relative terms, to obtain scare and valued resources and successfully integrate and manage them.

Contingency Approaches to the Measurement of Organizational Effectiveness Resource based approach Indicators Bargaining position : the ability of organization to obtain from its environment scarce and valued resources, raw materials, human resources, knowledge and technology The abilities the organization’s decision makers to perceive and correctly interpret of the external environment. The ability of managers to use tangible (supplies, people) and intangible (knowledge, corporate culture) in day-to-day organizational activities The ability of organization to respond to chenges in the environment.

Resource based approach Contingency Approaches to the Measurement of Organizational Effectiveness Resource based approach Usefullness The resource-based approach is valuable when other indicators of performance are difficult. For example, Mathsoft, Inc which provide analytical software for business evaluate its efectiveness for business partly by looking at how many top rate PhD’s it can recruit

Internal process approach Contingency Approaches to the Measurement of Organizational Effectiveness Internal process approach It is measured as internal organizational health and efficiency. Employees are happy and satisfied. This approach does not consider external environment.

Contingency Approaches to the Measurement of Organizational Effectiveness Indicators Organization’s economic efficiency, the best known proponents of a process model are from the human relations approach to organization. A study of two hundred secondary schools showed that both human resources and employee oriented process were important in explaining and promoting effectiveness in those organization.

Contingency Approaches to the Measurement of Organizational Effectiveness Indicators Strong corporate culture and positive work climate Team spirit, group loyalty, and team work. Confidence, trust, and communication between workers and management. Rewards to managers for performance, growth, and development of suordinate and for creating an effective working group.

Contingency Approaches to the Measurement of Organizational Effectiveness Usufulness Effeciency use of resources and harmonious internal functioning are ways to measure effectiveness Keeping employees happy is the key to longrun success for his organization.

Four Models of Effectiveness Values STRUCTURE Flexibility Human Relations Emphasis Primary Goal: human resource development Subgoals: cohesion, morale, training Open Systems Emphasis Primary Goal: growth, resource acquisition Subgoals: flexibility, readiness, external evaluation F O C U S Internal External Internal Process Emphasis Primary Goal: stability, equilibrium Subgoals: information management, communication Rational Goal Emphasis Primary Goal: productivity, efficiency, profit Subgoals: planning, goal setting Control 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.

Four Models of Effectiveness Values Indicators Focus, which is whether dominant values concern issues that are internal or external to the firm Internal focus reflects a management concern for the well-being and efficiency of employees External focus represents an emphasis on the well-being of the organization it self with respect to the environment.

Four Models of Effectiveness Values Indicators Structure, whether stability versus flexibility Stability reflects a management value for efficiency and top down control Flexibility represent a value for learning and change.

Effectiveness Values for Two Organizations STRUCTURE FLEXIBILITY Human Relations Emphasis Open Systems Emphasis ORGANIZATION A ORGANIZATION B F O C U S INTERNAL EXTERNAL Internal Process Emphasis Rational Goal Emphasis CONTROL

Effectiveness Values for Two Organizations Organization A is a young organizationconcern with finding a niche and becoming established in the external environment. Primary emphasis is given to flexibility, innovation, acquisition of resources from the environment. Moderate emphasis to human relations and even less emphasis to current productivity and profits.

Effectiveness Values for Two Organizations Organization B Is an established business in which the dominant value is productivity and profits Characteristic by planning and goal setting Flexibility and human resources are not major concerns. This organization prefers to stability.