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Organizational Effectiveness
What is Strategy
Determination of the basic longterm goals and objectives of an
enterprise and the adoption of
courses of action and allocation of
resources necessary for carrying
out these goals
Types of Goals
Official Goals / mission
Types of Goals
a.
b.
c.
d.
e.
f.
Operative goals:
Designate ends sought through actual operating
procedures of the organization and explain what
organization is actually trying to do
Describe specific measurable outcomes and often are
concerned with short term
Specific goals for each primary task each organization
must perform
Overall performance: profitability
Resources
Market
Employee Development
Innovation and change
productivity
Importance of Goals
Type of Goals
Purpose of Goals
Legitimacy
Operative goals:
Opportunities
Threats
Uncertainty
Resource Availability
Strategic Direction
CEO, Top
Management
Team
Internal Situation
Strengths
Weaknesses
Distinctive Competence
Leadership Style
Past Performance
Define
mission,
official
goals
Select
operational
goals,
competitive
strategies
Structural Form
learning vs.
efficiency
Information and
control systems
Production
technology
Human resource
policies,
incentives
Organizational
culture
Interorganizational
linkages
Effectiveness
Outcomes
Resources
Efficiency
Goal attainment
Competing values
Environment
Factors and
Organization
capabilities
Strategy
Structure
Stage 3: Diversification
Growth proceeds into product diversification
A product diversification strategy demand a
Chandlers Thesis
Time
Product
diversification
Strategy
Structure
t+1
Low
Simple
t+2
High
Functional
Divisional
The Research
Additional studies that duplicated Chandlers work concludes
1.
2.
3.
1.
2.
3.
4.
Defenders
Seek stability by producing only a limited set of
Prospectors
Their strength is in finding and exploiting new-product
Analyzers
Capitalize on the best of both the preceding types
They seek to minimize risk and maximize opportunity for
profit
Move into new products or markets only after viability has
been proved by prospectors
Analyzers live by imitation
They essentially follow their smaller and more innovative
competitors superior products, but only after their
competitors have demonstrated that the market is there
Seek both flexibility and stability.
They achieve these goals by developing structure made up
of dual components
Parts of these organizations have high levels of
standardization, routinization, mechanization for efficiency
Other parts are adaptive to flexibility
In this way they seek structure to accommodate both
stable and dynamic areas of operations
Reactors
Represents a residual strategy
Describe the inconsistent and unstable patterns that
Goals
Environment Structural
Characteristics
Defender
Stability and
efficiency
stable
Analyzer
Stability and
flexibility
changing
Moderately centralized
control, tight control over
current activities, looser
control for new
undertakings
Prospector
Flexibility
Dynamic
Defender
Reactor
Analyzer
Prospector
Differentiation
Firm seeks to be unique in the industry in ways that
Focus
Either a cost advantage (cost focus) or
1.
Industry
Strategy
Structure
Capital requirements
High Example
Example
Aerospace
Product
innovation
Example
Metals and
Mining
low
a
c
Computer
software
b
d Example
Bicycle
manufacturers
Low
High
Low
High capital requirement tend to result in large organization, and a limited number of competitors
Type A and C industries will be highly structured and standardized. Type A being more decentralized to
facilitate rapid response to innovations
Type B and D because of low capital investment requirements will make up large number of small firms,
Type D will likely to have more division of labor, and more formalization
Type B organization will tend to have low formalization and more decentralization
Design
Organizational Design is a result of numerous
contingencies
The emphasis placed on efficiency and control
versus flexibility and learning is determined by
contingencies of
Strategy
Environment
Technology
Size
Life cycle and culture
Contingency Factors
Affecting Organization Design
Thomson Learning
2004
Assessing Organizational
Effectiveness
Overall effectiveness is difficult to measure in
organizations
Organizations are large, diverse, and fragmented
They perform many activities simultaneously,
pursue multiple goals, generate many outcomes
some intended and some unintended
Managers determine which indicators to measure
in order to gauge effectiveness
A number of approaches to measuring
effectiveness look at which measures
Contingency (Traditional)Approaches to
the Measurement of Organizational
Effectiveness
External Environment
Organization
Resource
Inputs
Resource-based
approach
2-34
Thomson Learning
2004
Internal
activities
and
processes
Internal
process
approach
Product and
Service
Outputs
Goal
approach
difficult to obtain
In many not-for profit and social welfare
organization it is hard to measure output goals or
internal efficiency
Number of PhD's is one example
Shortcomings:
Only vaguely considers the organizational link to
the needs of the customers in external
environment
A superior ability to acquire and use resources is
important only if resources and capabilities are
used to achieve something that meets the need in
the environment
Critics have challenged that approach assumes
stability in the market place and fails to
adequately consider the changing value of
various resources as the competitive environment
and customer needs change
1.
2.
3.
4.
5.
6.
7.
Indicators:
Strong corporate culture and positive work
environment
Team sprit, group loyalty, and team work
Confidence, trust, and communication between
workers and management
Decision making near the source of
information, regardless of where sources on
the organizational chart
Undistorted horizontal and vertical
communication, sharing of relevant facts and
feelings
Rewards to managers for performance, growth,
and development of subordinates, and for
creating an effective work group
Interaction between the organization and its
parts, with conflicts that incur over projects
resolved in the interest of the organization
Goal Approach
Identifying output goals and assessing how well the
Reported Goals
of U.S. Corporations
Goal
% Corporations
Profitability
Growth
Market Share
Social Responsibility
Employee welfare
Product quality and service
Research and development
Diversification
Efficiency
Financial stability
Resource conservation
Management development
Source: Adapted from Y. K. Shetty, New Look at Corporate Goals,
California Management Review 22, no. 2 (1979), pp. 71-19.
89
82
66
65
62
60
54
51
50
49
39
35
1.
2.
3.
4.
5.
Assumptions:
Assumes that organizations are deliberate, rational,
goal seeking entities. As such, successful goal
accomplishment becomes an appropriate measure of
effectiveness.
Use of goal approach implies other assumptions if it is
to be valid
Organizations must have ultimate goals
These goals must be identified and defined well
enough to be understood
These goals must be few enough to be manageable
There must be general consensus or agreement on
these goals
Progress towards these goals must be measurable
Goals Approach
Goals approach
Problems:
Whose goals? Top Management goals? Who is
included who is excluded?
Official goals does not always reflect organizations
actual goals. Official goals tend to be influenced
strongly by standard of social desirability
An organization short-term goals are frequently
different from its long term goals. Which goals shortterm or long-term should be used
Organizations have multiple goals. They can compete
with each other and some times are even
incompatible ( high product quality and low unit cost
Goals Approach
1.
2.
3.
4.
5.
Value to managers:
Ensuring that input is received from all those
having a major influence on formulating even
though if they are not the part of senior
management
Including actual goals by observing behavior of
organization members
Recognizing that organization pursue both shortterm and long-term goals
Insisting on tangible, verifiable, and measurable
goals
Viewing goals as a dynamic entities that change
over time rather than as rigid or fixed statements of
purpose
1.
2.
3.
Assumptions:
Organizations are assumed to be political arenas
where vested interest compete for control over
resources.
OE becomes an assessment of how successful the
organization has been in satisfying those critical
constituencies, upon whom the future survival of
organization depends
Organization has number of constituencies with
different degrees of power, each trying to satisfy its
demands. Each constituency has a unique set of
values, so it is unlikely that their preferences will be in
agreement
Assumes that managers pursue a number of goals and
the goals represent a response to those interest
groups that control the resources necessary for
organization to survive
5.
Typical of criteria
Owners
Employees
Customers
Suppliers
Creditors
Government
Compliance with laws, avoidance of
agencies
penalties and reprimands
1.
2.
1.
2.
Indicators:
Focus: whether dominant values concern issues that
are external or internal to the firm.
Internal focus reflects management concern for well
being and efficiency of employees
External focus represent an emphasis on well being of
the organization itself with respect to the environment
Structure: Whether stability versus flexibility is the
dominant structural consideration
Stability: reflects a management value for top down
control
Flexibility: represents a value for adaptation and
change
structure
Managements primary goals are growth and
resource acquisition
The organization accomplishes these goals
through sub goals of flexibility, readiness, and a
positive external evaluation
The dominant value is establishing a good
relationship with the environment to acquire
resources and grow
The emphasis is similar in some ways to the
resource based approach
control
The primary outcome is a stable organizational
setting that maintains itself in orderly manner
Organizations that are well established in
environment and simply wants to maintain their
current position reflect this emphasis
Sub goals include mechanism for efficient information
management and communication
Although this part of competing value model is similar
in some ways to internal process approach it is less
concerned with human resources than with other
internal processes that lead to efficiency
flexible structure
Man agent concern is for the development of
human resources
Employees are given opportunities for autonomy,
and development
Management works toward the subgoals of
cohesion, morale, and training opportunities
Organizations adopting this emphasis are more
concerned with employees than with the
environment
2.
3.
Entrepreneurial stage:
Organization is typified by innovation, creativity, and
marshalling resources. Getting external support is
crucial. The open system model emphasizes these
criteria
Collective stage:
Strategic constituents are likely to include union,
employees. Management needs to create a sense of
family within the organization and develop member
commitment. This is consistent with the criteria
articulated in human relations model
Formalization stage and control stage:
Efficiency and orderliness are sought. The organization
is becoming mature and the strategic constituents at
this point employees, leaders, suppliers, and
customers evaluate the organization in terms of its
stability and productivity. Such constituencies will look
to internal processes and rational goal model
5.
Effectiveness Values
for Two Organizations
F
O
C
U
S
STRUCTURE
Human
Relations
Emphasis
INTERNAL
FLEXIBILITY
ORGANIZATION
A
Internal Process
Emphasis
Open Systems
Emphasis
EXTERNAL
ORGANIZATION
B
Rational Goal
Emphasis
CONTROL
Value to Managers
Competing values acknowledges that multiple
Definition
The degree to which an organization attains its