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Chapter2.StrategyOrganizationDesignandEffectiveness.pptx

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Chapter 2 Strategy, Organization Design, and Effectiveness

Organization Theory and Design

Thirteenth Edition

Richard L. Daft

Chapter

Learning Objectives

Describe the role of strategy when designing an organization.

Describe the key similarities and differences between Porter’s strategy model and Miles and Snow’s strategy typology.

Identify key distinctions among the goal, resource, internal process, and strategic constituents approaches to measuring effectiveness.

Explain the competing values model and how it relates to effectiveness.

The Role of Strategic Direction in Organization Design

Organizational goal: A desired state of affairs that an organization attempts to reach

Primary responsibility of top management is to determine an organization’s goals, strategy, and design so that the organization adapts to a changing environment

SWOT analysis: An assessment of the strengths, weaknesses, opportunities, and threats that affect organizational performance

Scenario planning: Involves looking at the current trends and discontinuities and visualizing future possibilities

Top Management Role in Organization Direction, Design, and Effectiveness

Organizational Purpose (slide 1 of 2)

Strategic intent: All the organization’s energies and resources are directed toward a focused, unifying, and compelling goal

Three aspects of strategic intent:

Mission

Competitive advantage

Core competence

Mission Statement for CVS Health

Organizational Purpose (slide 2 of 2)

Operating goals:

Designate the ends sought through the actual operating procedures of the organization

Explain what the organization is actually trying to do

Describe specific measurable outcomes

Are often concerned with the short run

Typically pertain to the primary tasks an organization must perform

Examples of operating goals:

Overall performance, resource, market, employee development, innovation and change, productivity

Goal conflict:

Pursuing some goals means that others have to be delayed or set aside

Typical Operating Goals for an Organization

Goals Types and Purposes

Two Frameworks for Selecting Strategy and Design

A strategy is a plan for interacting with the competitive environment

Strategies can include any number of techniques to achieve the goal

Models exist to aid in formulating strategy:

Porter model of competitive strategies

Miles and Snow strategy typology

Porter’s Competitive Strategies (slide 1 of 2)

Differentiation strategy: Distinguish products or services from others in the industry

Low-cost Leadership: Increase market share by keeping costs low compared to competitors

Organizations can compete in many market and customer segments or focus on a specific market or buyer group

Porter’s Competitive Strategies (slide 2 of 2)

Miles and Snow’s Strategy Typology

Prospector:

Learning orientation; flexible, fluid, decentralized structure

Strong capability in research

Defender:

Efficiency orientation; centralized authority; tight cost control

Emphasis on production efficiency; low overhead

Close supervision; little employee empowerment

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

Other Contingency Factors Affecting Organization Design

Emphasis given to efficiency and control (mechanistic) versus learning and flexibility (organic) is determined by the contingencies of strategy, environment, size and life cycle, technology, and organizational culture

Design must fit the workflow technology of the organization

Contingency Factors Affecting Organization Design

Assessing Organizational Effectiveness

Effectiveness evaluates the extent to which multiple goals are attained.

Efficiency relates to the working of the organization and amount of resources used to produce output.

Measuring Effectiveness:

The Goal Approach

The Resource-Based Approach

The Internal Process Approach

The Strategic Constituents Approach

Approaches to Measuring Organizational Effectiveness

Indicators of Organizational Effectiveness

Meeting deadlines; on-time delivery

Timely material and equipment acquisition

Quality of product or service

Customer satisfaction/complaints

Market share compared to competitors

Employee training and development (number of hours)

Staying within budget

Shareholder satisfaction

Reduction in costs

Supply chain delays or improvements

Productivity; dollars spent for each unit of output

Employee engagement

Achieving sales targets

Product development cycle time (reduction in cycle time)

Number of hours/days and so on to complete tasks

An Integrated Effectiveness Model

The competing values model tries to balance concern with various parts of the organization

Effectiveness is shown through a combination of two dimensions: focus and structure

Four approaches to effectiveness values:

Open systems emphasis

Rational goal emphasis

Internal process emphasis

Human relations emphasis

Four Approaches to Effectiveness Values

Effectiveness Values for Two Organizations

Organizational Design Essentials (slide 1 of 2)

Leaders’ choices of mission and purpose influence how the organization should be designed and have a tremendous impact on organizational effectiveness.

Setting a direction for the organization begins with top leaders looking at both the external environment and the organization’s internal situation.

Operating goals designate specific ends sought through the actual operating procedures of the organization.

Official and operating goals are a key element in organizations because they meet certain needs, such as providing employees with a sense of direction and motivation.

Organizational Design Essentials (slide 2 of 2)

Strategies may include any number of techniques to achieve the stated goals.

Organization design should fit the firm’s competitive approach and the various contingency factors to contribute to organizational effectiveness.

No easy, simple, guaranteed measure will provide an unequivocal assessment of effectiveness. To be successful, organizations must perform diverse activities well.

The competing values model acknowledges different areas of focus (internal, external) and structure (flexibility, stability) and allows managers to choose the values to emphasize in their organization.