1. Organizational Effectiveness
Chapter Three
Organizational Effectiveness

2. 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Design,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewin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):

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

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

11. 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.

12. 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

13. 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

14. 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), ; 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),

15. 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), ; 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),

16. 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), ; 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),

17. 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), ; 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),

18. 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

19. 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.

20. 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.

21. 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.

22. 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

23. 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.

24. 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.

25. 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

26. 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

27. 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

28. 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.

29. 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.

30. 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.

31. 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

32. 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.

33. 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.

34. 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.

35. 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.

36. 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): ; and Robert E. Quinn
and Kim Cameron, “Organizational Life Cycles and Shifting
Criteria of Effectiveness: Some Preliminary Evidence,”
Management Science 29 (1983):

37. 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.

38. 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.

39. 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

40. 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.

41. 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.