ORGANISATION STUDIES

Lecture 3: organisation strategy, design and effectiveness

Business transformations:

 Many organisations need to constantly change in order to fit

into the environment and stay relevant.
 Eg. changes in Microsoft (now you subscribe whereas in olden
days you would buy a program) and Netflix.

Who controls an organisation

 Top management and CEO controls an organisation and they
are also looking at the internal and external environment
surrounding as well as within an organisation.
 Internal situation (strengths, weaknesses, leader style and
past performance) and external env ( opportunities, threats,
uncertainty, resource availability) are considered by CEO and
top management which then leads to strategic intent -
organisation design and finally effectiveness outcomes

Organisation design
 Threats from and opportunities in the environment influence
and shape the goals and strategy
 Goals and strategy influence the design of the organisation
 Tension between rational and political process (paradoxical
situations)

Goals in organisations

 What an organisation aims to achieve

 Office goals-> mission
 Organisation's reason for existence and what it stands for
 Legitimize the organisation to internal and external
stakeholders
 Captures organisations vision, shared values and beliefs
 Formally stated definition of business scope and outcomes the
organisation is trying to achieve

Office goals vs operative goals

 Operative goals: steps taken to help organisations fulfill their
mission, refer to specific measurable outcomes, provide
direction for day-to day decision, related to key tasks of the
organisation. Eg. Overall performance, resources, market

Importance of goals
 Goals serve several important purposes:
 Employee direction and motivation
  Guidelines for decision making and behaviour
 Standards of performance

Strategy
 What is a strategy ?
 Plan for interacting with the competitive environment to
achieve organizational goals
 Managers select specific strategy and design to achieve
official and operative goals within the competitive
environment
 Clear competitive strategy one of the main
organization’s success factors

 Two typologies of strategies:

 Porter’s Competitive Strategies
 Miles and Snow’s Strategy Typology

 Porter's competitive Strategies- explanations

 Two factors:
 Competitive advantage
 Competitive scope

Three competitive strategies

(1) Low cost leadership: aim to increase market share through low cost
compared to competitors
(2) Differentiation: aim distinguish products or services from others in
the industry
(3a) Focus: focused low cost OR
(3b) Focus: focused differentiation

 (3a, 3b) Organization concentrates on a specific regional

market or buyer group

Porter’s Differentiation Strategy

 - Learning orientation; flexible, loosely knit, strong horizontal
coordination
 - Strong capability in research
 - Values and incorporates mechanisms for customer intimacy
 - Rewards employee creativity, risk taking and innovation

Porter’s Low-Cost Leadership Strategy

- Efficiency orientation; strong central authority; tight cost control,
frequent, detailed control reports
- Standard operating procedures
- Highly efficient procurement and distribution systems
- Close supervision; routine tasks; limited employee empowerment

 The mile and snow typology

 The defender
 Strategy focuses on stability and retrenchment.
 Seeks to hold onto existing customers, little innovation
or growth
 Concerned with internal and efficiency and control to
produce reliable, high quality products for existing
customers.
 organisation design: efficiency orientation; centralised
authority and tight cost control, emphasis on production
efficiency, low overhead, close supervision; little
employment empowerment

 The prospector
 Strategy is to innovate, take risks, seek out new
opportunities and grow
 Suited to a dynamic, growing environment
 Creativity is more important than efficiency
 Organisation design: learning orientation, flexible fluid,
decentralised structure, values creativity,risk-taking and
innovation, strong capability in research

 The analyser
 Strategy aims to maintain a stable business while
innovating on the periphery.
 Some products targeted towards stable, low innovation
environments with an efficiency strategy to keep current
customers.
 Other products targeted towards new, dynamic
environments where growth is possible.
 This strategy attempts to balance efficient production
for current product lines with creative development of
new product lines.
 Organisation design: Balances efficiency and learning;
tight cost control with flexibility and adaptability,
Efficient production for stable product line; emphasis on
creativity, research, risk-taking for innovation

 The reactor
 No real strategy
 Respond to environmental threats and opportunities
in an ad hoc fashion.
 Top management has not defined a long-term strategy
or given an organization an explicit mission or goals.
 Actions a taken that seem to meet immediate needs.
  Can be successful but also leads to failure
 Organisation design: No clear organizational approach;
design characteristics may shift abruptly depending on
current needs.

Organisational effectiveness

 Degree to which an organization realizes its goals

 Broad concept

 Effectiveness evaluates multiple goals (official & operative)

 Overall effectiveness can be difficult to measure→
o multiple indicators (for different goals)
o multiple stakeholders
o multiple levels
o multiple time-frames
 Managers determine what to measure

Concept
“What do you goals, financial indicators, satisfaction, efficiency,
assess?” resource exploitation, internal process, social
impact
“For who / individual, groups, team, department,
what?” (level) organization, interorganizational relationship,
network, society
“Who is internal stakeholders (what function, what
assessing?” hierarchical level etc), external stakeholders
(customers, suppliers, competitors, general public)
“In what time short term, long term, medium term...
frame?”

what stakeholders expect:

 A stakeholder any group within or outside organization that
has a stake in its performance
 ▪ Stakeholder approach – balancing the needs of groups in
and outside of the organization that have a stake in
organization’s performance

Approaches to asses organisational effectiveness

 Contigency approaches focus on different parts of the

organisation
 These approaches are:
  Goal approach
 Resource-based approach
 Internal process approach
 Integrated approach aims to balance multiple and sometimes
conflicting aspects of effectiveness

 Goal approach
The goal approach - concerned with progress towards attainment of
organizational output goals
▪ Indicators: operative goals (official goals too abstract)
▪ Usefulness: widely used in business organizations where output goals
can be readily
measured
▪ Problems:
- Multiple goals
- Subjective indicators of goal attainment, but also
- Different hierarchical levels and/or units in organizations
can have divergent time frames - Goals change over time

 Resource-based approach
 The resource-based approach assesses the input side of
the transformation process → evaluates whether organization
effectively obtains resources necessary for high performance
 ▪ Indicators
▪ bargaining position
▪ ability to interpret external environment
▪ ability to use tangible and intangible resources in operations
(i.e. supplies,
people)
▪ ability to respond to changes
 ▪ Usefulness: valuable when other indicators of
performance difficult to obtain
 ▪ Problems: e.g. fails to adequately consider organization’s
link to customers

 Internal process approach

The internal process approach focus on internal activities; assesses
effectiveness as internal health and efficiency
▪ Indicators : there are 7 indicators (e.g. strong corporate culture and
positive work climate, and team spirit and teamwork).
▪ Usefulness: deployment of resources and harmonious internal
functioning are considered indicators of organizational effectiveness
▪ Problems: e.g. evaluation often subjective, link with environment

An integrated effectiveness model

The competing values model aims to balance multiple and sometimes
conflicting aspects of effectiveness
▪ Indicators : two (competing) management value dimensions: focus
(internal vs. external) and structure (stability/control vs. flexibility)
- Open systems emphasis→ growth & resource acquisition
- Rational goal emphasis→ output goals (productivity & efficiency) -
Internal process emphasis→ organizational stability
- Human relations emphasis→ development of human resources
▪ Usefulness:
- Integrates diverse concepts of effectiveness
- Calls attention to effectiveness criteria as management values

Wrap up/ discussed today

 Goals: official (mission) and operative
 Strategy→ different typologies
 Relationship between strategy and design
 Organizational effectiveness
 Stakeholders
 Models for measuring organizational effectiveness

 Organizations exist for a purpose

 Official and operative goals are a key in organizations
 There are a number, divergent strategies that organizations
can follow
 Strategy, among other factors, affects organizational design
 Organizational effectiveness must be assessed
 Overall effectiveness is impossible to assess
 There are various approaches to assessing effectiveness but
no approach is suitable for every organization