2. Thomson Learning © 2004 2-1 Chapter Two Strategy, Organization Design, and Effectiveness

3. Thomson Learning © 20042-2 Top Management Role in Organization Direction, Design, and Effectiveness CEO, Top Management Team External Environment Opportunities Threats Uncertainty Resource Availability Internal Situation Strengths Weaknesses Distinctive Competence Leadership Style Past Performance Strategic Direction Organization Design Effectiveness Outcomes Define mission, official goals Select operational goals, competitive strategies Resources Efficiency Goal attainment 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from Arie Y. Lewin and Carroll U. Stephens, “Individual Properties of the CEO as Determinants of Organization Design,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewin and Carroll U. Stephens, “CEO Attributes as Determinants of Organization Design: An integrated Model,”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

4. Thomson Learning © 20042-3 Goal Type and Purpose Type of GoalsPurpose of Goals Official Goals, mission: Legitimacy Operative goals:Employee direction and motivation Decision guidelines Standard of performance

5. Thomson Learning © 20042-4 Porter’s Competitive Strategies Competitive Scope Competitive Advantage StrategyExample BroadLow Cost Low-Cost LeadershipDell Computer BroadUniquenessDifferentiation Starbucks Coffee Co. NarrowLow Cost Focused Low-Cost Leadership Enterprise Rent-a- Car NarrowUniqueness Focused Differentiation Edward Jones Investments

6. Thomson Learning © 20042-5 Miles and Snow’s 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

7. Thomson Learning © 20042-6 Miles and Snow’s Strategy 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 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

8. Thomson Learning © 20042-7 Contingency Factors Affecting Organization Design Strategy Environment Technology Size/ Life Cycle Culture Organizational Structure and Design The Right Mix of Design Characteristics Fits the Contingency Factors

9. Thomson Learning © 20042-8 Contingency Approaches to the Measurement of Organizational Effectiveness Organization Internal activities and processes Resource Inputs Product and Service Outputs Resource-based approach Internal process approach Goal approach External Environment

10. Thomson Learning © 20042-9 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. 71-19.

11. Thomson Learning © 20042-10 Four Models of Effectiveness Values Human Relations Emphasis Primary Goal: human resource development Subgoals: 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 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): 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.

12. Thomson Learning © 20042-11 ORGANIZATION B ORGANIZATION A Effectiveness Values for Two Organizations Human Relations Emphasis Internal Process Emphasis Rational Goal Emphasis Open Systems Emphasis STRUCTURE FOCUSFOCUS FLEXIBILITY CONTROL INTERNALEXTERNAL

13. Thomson Learning © 20042-12 Identifying Company Goals and Strategies Goals from Exhibit 2.8 Strategies from Porter Company #1 Company #2 Company #3 Workbook Activity

14. Thomson Learning © 20042-13 Competing Values and Organizational Effectiveness Workshop Activity