1 Chapter Two Strategy, Organization Design, and Effectiveness ©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e 2-

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e 2-2 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from Arie Y. Lewin and Carroll U. Stephens, “Individual Properties of the CEO as Determinants of Organization Design,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewin and Carroll U. Stephens, “CEO Attributes as Determinants of Organization Design: An integrated Model,”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):

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e 2-3 Goal Type and Purpose Type of GoalsPurpose of Goals Official Goals, mission: 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 2-4 Porter’s Competitive Strategies Competitive Scope CompetitiveEmphasisStrategyExample Broad Low Cost Low-CostLeadership GoFly Ltd. BroadUniquenessDifferentiationStarbucks Coffee Co. Narrow Low Cost Focused Low-Cost LeadershipEnterprise Rent-a- Car NarrowUniquenessFocusedDifferentiation Edward Jones Investments

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e 2-5 Miles and Snow’s Strategy Typology b Prospector Learning orientation; flexible, fluid, decentralized structureLearning orientation; flexible, fluid, decentralized structure Strong capability in researchStrong capability in research Values creativity, risk-taking, and innovationValues creativity, risk-taking, and innovation b Defender Efficiency orientation; centralized authority and tight cost controlEfficiency orientation; centralized authority and tight cost control Emphasis on production efficiency, low overheadEmphasis 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), ; 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),

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e 2-6 Miles and Snow’s Strategy Typology (cont’d) b Analyzer Balances efficiency and learning; tight cost control with flexibility and adaptabilityBalances efficiency and learning; tight cost control with flexibility and adaptability Efficient production for stable product lines; emphasis on creativity, research, risk-taking for innovationEfficient production for stable product lines; emphasis on creativity, research, risk-taking for innovation b Reactor No clear organizational approach; design characteristics may shift abruptly depending on current needsNo 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), ; 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),

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e 2-7 Contingency Factors Affecting Organization Design Strategy Environment Technology Size/ Life Cycle Culture 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 2-8 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

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e 2-9 Reported Goals of U.S. Corporations Goal% Corporations Profitability89 Growth82 Market Share66 Social Responsibility65 Employee welfare62 Product quality and service60 Research and development54 Diversification51 Efficiency50 Financial stability49 Resource conservation39 Management development35 Source: Adapted from Y. K. Shetty, “New Look at Corporate Goals,” California Management Review 22, no. 2 (1979), pp

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e 2-10 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 FOCUSFOCUS 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): ; and Robert E. Quinn and Kim Cameron, “Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence,” Management Science 29 (1983):

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e 2-11 ORGANIZATION B ORGANIZATION A Effectiveness Values for Two Organizations Human Relations Model Internal Process Model Rational Goal Model Open Systems Model STRUCTURE FOCUSFOCUS FLEXIBILITY CONTROL INTERNALEXTERNAL

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e 2-12 Identifying Company Goals and Strategies Goals from Exhibit 2.8 Strategies from Porter Company #1 Company #2 Company #3 Workbook Activity

©2000 South-Western College Publishing Cincinnati, Ohio Daft, Organization Theory and Design 7/e 2-13 Competing Values and Organizational Effectiveness Workshop Activity