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Strategy organizational design_and_effec32
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- 2. Strategy, Organizational Design, andEffectiveness Organizations exist to attain goals and top managers give direction to organizations. This chapter explores strategic direction in organizations in terms of the types of goals and strategies that top management develops, as well as two frameworks for determining strategic action. Several approaches are then explored for measuring organizational effectiveness.
- 3. The Role ofStrategic Direction in Organizational Design
- 4. The Role ofStrategic Direction in Organizational Design The primary responsibility of top management is to determine an organization’s goals, strategy, and design, therein adapting the organization to a changing environment. Direction setting begins with an assessment of opportunities and threats in the environment and an evaluation of internal strengths and weaknesses. Then the company can determine its mission, goals and strategies. Organizational design reflects the way goals and strategies are implemented. This is the role of organization theory. Consider how organization design is affected by The choice of goals and strategy. New goals and strategy are often selected based upon environmental needs, and then top management attempts to redesign the organization to achieve those ends. Performance measurements feed back into the internal environment, so that past performance of the organization assessed by top management in setting new goals and strategies for the future. Choices that top management make about goals, strategy and organizational design have a huge impact on organizational effectiveness.
- 5. Organizational Purpose Purposemay be referred to as the overall goal or mission. Different parts of the organization establish their own goals to help the organization achieve its overall purpose. Purpose refers to why you do what you do, not what you do or how you do it but why you do it. Purpose has been shown to positively impact employee engagement and commitment to an organization thereby impacting organizational effectiveness.
- 6. Mission The officialoverall goal for an organization is its mission. The mission describes the organization's vision, its shared values and aspirations, and its reason for existence.
- 7. Operative goals Referto the ends sought through operating procedures and describe specific measurable outcomes in the short run. These goals concern overall performance, boundary spanning, and maintenance, adaptation, and production activities. Overall performance goals may be expressed in terms of profitability, delivery of service, growth, or volume. Resource goals pertain to the acquisition of needed material and financial resources. Market goals relate to the market share or market standing desired. Employee development goals pertain to the training, promotion, safety, and growth. Innovation and change goals pertain to internal flexibility and readiness to adapt to unexpected changes in the environment. Productivity goals concern the amount of output achieved from available resources.
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- 9. The Importance ofGoals The mission or official goals provide legitimacy to stakeholders and overall direction for the company. In contrast, operative goals provide employee direction and motivation, decision guidelines, and criteria of performance. An increasing number of companies are now using triple- bottom-line accounting - a system which assesses their environmental and social performance as well as their financial performance.
- 10. A Framework forSelecting Strategy and Design A strategy is a plan for interacting with the competitive environment to achieve organizational goals. Goals define where the organization wants to go and strategies define how the organization will get there.
- 11. A Framework forSelecting Strategy and Design
- 12. A Framework forSelecting Strategy and Design
- 13. Porter’s Competitive Strategies Michael Porter introduced a framework describing four competitive strategies. To use this model, managers evaluate two factors: competitive advantage and competitive scope. Whether the organization competes on a broad or narrow scope determines the selection of strategies. Low-cost leadership strategy involves techniques for excelling at cost reduction and efficiency, with broad competitive scope. Differentiation strategy strives to create and market unique products by innovative product characteristics and advertising. Focus strategies concentrate on a narrow market or buyer group. The company tries to achieve either a focused low-cost or a focused differentiation advantage within a narrowly defined market.
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- 15. Miles and Snow’sStrategy Typology Raymond Miles and Charles Snow assume that managers create strategies congruent with the external environment. Organizations strive to fit internal organization characteristics and strategy to the external environment. The prospector strategy involves innovation, taking risks, seeking out new opportunities and growth. The defender strategy involves retrenchment, focusing on stability and seeking to keep current customers without innovation or growth. The analyzer strategy lies between the prospector and defender by efficiently maintaining a stable business for current product lines, while innovating on the periphery. The reactor approach is really just responding in an ad hoc manner to environmental threats and opportunities, without a real long-range plan.
- 17. How Strategies Affect OrganizationalDesign? Design must support the firm’s competitive approach. For example, if the organization uses the low-cost leadership or defender strategy, the design should be focused on efficiency, whereas if the organization uses the differentiation or prospector strategy, the design calls for a learning organizational structure with strong horizontal coordination mechanisms to increase collaboration and teamwork
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- 19. Assessing Organizational Effectiveness It is important to differentiate organizational effectiveness from efficiency. Effectiveness is the degree to which an organization realizes its multiple goals. Efficiency refers to the resources used to produce outputs (ratio of inputs to outputs). Effectiveness is often difficult to measure in organizations, especially those that are large, diverse, fragmented and those that have multiple goals and measures of effectiveness like not-for profit organizations.
- 20. Contingency Effectiveness Approaches Contingency effectiveness approaches are based on an examination of specific parts of the organization that are considered to be the most important to measure, in contrast to balanced effectiveness approaches that integrate several parts of the organization in an effort to measure effectiveness.
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- 23. Resource-Based Approach Theresource-based approach evaluates the ability of the organization to obtain valued resources from the environment. Thus it looks at the input side of the transformation process. This approach is useful when other indicators of performance are difficult to obtain. Indicators of system resource effectiveness include dimensions such as bargaining position, ability to correctly interpret properties of the environment, maintenance of internal day-to-day activities, and ability to respond to environmental changes. A shortcoming can be overemphasis on acquisition of resources rather than on their utilization.
- 24. Internal Process Approach The internal process approach evaluates effectiveness by examining internal organizational health and economic efficiency. An evaluation of human resources and their effectiveness is important. Indicators of effectiveness include strong corporate culture, team spirit, trustful communication, decision making near sources of information, undistorted communication, managerial rewards for performance, and interaction between the organization and its parts
- 25. Goal Approach Thegoal approach measures effectiveness by evaluating the extent to which operative goals are achieved. It is more productive to measure effectiveness using operative goals than using official goals which are more abstract and difficult to measure. The goal approach is used because output goals can be readily measured, after issues of multiple goals and subjective indicators of goal attainment are resolved.
- 26. Managing multiple andconflicting goals is necessary when different managers champion different goals, or when it is necessary to serve different environmental demands. Therefore, effectiveness has to be measured by several factors and often cannot be assessed by a single indicator.
- 27. An Integrated EffectivenessModel The competing values approach, recognizes that managers may emphasize different indicators of performance and tries to balance a concern with various parts of the organization rather than focusing on one part. Two values can be used to categorize four models of effectiveness. Organizational focus is whether issues internal or external to the firm are valued. Organization structure is the emphasis on either flexibility or stability. The four resulting areas of management emphasis reflect the two values: The open systems emphasis combines an external focus and flexible structure, with management's primary goals being resource acquisition and growth; The rational goal emphasis focuses on stable structure and external environment with management's primary goals being productivity, efficiency, and profit; The internal process emphasis reflects the values of internal focus and stability, with management's primary goal being to maintain the status quo; The human relations emphasis combines internal focus and flexible structure with management's primary goal being employee development.
- 28. Four Approaches toEffective Values
- 29. Effectiveness Values forTwo Organizations