Organizational Theory: Strategy and Design (ADMN 2510H) Module 3

# Organizational theory ## Organization Strategy and Design ### ADMN 2510H ### Recall... Organization Types? - Government - Business, Corporations - Not-for-profits, creative/sharing industries, worker co-operatives, charities, unions, non-governmental organizations, United Nations, grassroots orga...

# Organizational theory ## Organization Strategy and Design ### ADMN 2510H ### Recall... Organization Types? - Government - Business, Corporations - Not-for-profits, creative/sharing industries, worker co-operatives, charities, unions, non-governmental organizations, United Nations, grassroots organizations, social platforms, Multi-National Corporations (MNCs) ## Strategic Design - Organizations are designed to achieve a purpose (product, service) - The purpose shapes how the organization is designed and managed - Managers determine an organization's goals (mission), competitive strategy to establish a design, structure to deliver outcomes - Environmental factors are within the organization (internal), and externally that need to be considered when designing a strategy - Examples of Strategic Methods: SWOT, PEST Analysis, looking at past performance, resource (complex term!) availability ## Strategic Direction | External Environment | | | | CEO, Top Management Team | Strategic Direction | Organization Design | Effectiveness Outcomes | Internal Situation | |---|---|---|---|---|---|---|---|---| | Opportunities | | | | | Define mission, official goals | Structural form-learning vs. efficiency | Resources | Strengths | | Threats | | | | | Select operational goals, competitive strategies | Information and control systems | Efficiency | Weaknesses | | Uncertainty | | | | | | Production technology | Goal attainment | Distinctive competence | | Resource availability | | | | | | Human resource policies, incentives | Competing values | Leader style | | | | | | | | Organizational culture | | Past performance | | | | | | | | Interorganizational linkages | | | **Top Management Role in Organization Direction, Design, and Effectiveness** ## Organizational Purpose - Mission statement (Official goals) – shared vision, values, beliefs - This is what the organization stands for - Does the organization embrace it, practice it, abide by it, enforce it? - Organizational Culture, Ethics (Enron), Codes of Conduct - Day to day goals (Operative goals) - Performance (profit, service), Resources (acquisition), Market (sales, share), Employee Development, Innovation and Change (adapt to the environment), Productivity (inputs to outputs) ## Organizational Operative Goals - Employee Development Goals - Overall Performance Goals - Resource Goals - Market Goals - Innovation and Change Goals - Productivity Goals ## Framework for Selecting Strategy and Design - A plan for interacting with the competitive environment to achieve organizational goals - **Lawrence and Lorsch Strategy:** - When environment is stable – mechanistic type of organization structure is suitable, employees are comfortable being controlled, prefer rigid task assignments – motivated just enough to complete tasks, tasks are simple - When environment is volatile – organic structure needed - employees prefer autonomy and loose task specifications were more motivated and higher performance, enriched jobs - **Porter Competitive Strategy** – focus on specific market (broad and narrow) - Competition based on low-cost leadership (low-cost compared to competitors) - Differentiation (uniqueness to other products, services) - Miles and Snow (next slide) - Blue Ocean Strategy – create a new market for products, services - **Strategies and Organizational Design** – strategies affects the internal characteristics (structure) of an organization - Organization design may also need to be changed due to the following Contingency Factors: Strategy (as mentioned), Environment (stable or volatile), Technology, Size/Life Cycle, Culture (needed or not?) ## Framework for Selecting Strategy and Design **Porter's Competitive Strategies** | COMPETITIVE SCOPE | COMPETITIVE ADVANTAGE | |---|---| | Broad | Low Cost | Uniqueness | | | Low-cost leadership | Differentiation | | | Example: Walmart | Example: Bullfrog Power | | Narrow | Focused low-cost leadership | Focused differentiation | | | Example: WestJet | Example: Four Seasons Hotels | ## Strategies | STRATEGY | DEFINED | APPLICATION | |---|---|---| | DEFENDER | PROTECT CURRENT PRODUCTS AND SERVICES | STABLE, SIMPLE ENVIRONMENT | | | HOLD CURRENT MARKET SHARE | MECHANISTIC, BUREAUCRATIC, HUMAN RELATIONS | | | | PRODUCTION EFFICIENCY | | PROSPECTOR | PROACTIVE | COMPLEX, GROWING, CHANGING ENVIRONMENT | | | INNOVATE | ORGANISMS, HUMAN RELATIONS | | | FIND NEW MARKETS | CREATIVE, INNOVATIVE, FLEXIBLE | | | TAKE RISKS | | | ANALYZER | MAINTAIN CURRENT PRODUCTS AND SERVICES, MARKET SHARE, BUT INNOVATE FOR NEW OPPORTUNITIES | MODERATE CHANGE IN ENVIRONMENT | | | SOME RISK TAKING | SAME AS DEFENDER, BUT SOME CREATIVITY AND INNOVATION (R&D), FLEXIBILITY | | REACTOR | REACT TO MARKET CHANGES | ANY ENVIRONMENT | | | NO CLEAR STRATEGY | NO CLEAR ORGANIZATION APPROACH | | | NO LONG-TERM GOALS | DEPENDS ON CURRENT FOCUS ON PRODUCTS, SERVICES | | | COMPETE BASED MOSTLY ON PRICE, QUALITY, SERVICE, EFFICIENCY | | ## Framework for Selecting Strategy and Design | | | | |---|---|---| | Strategy | Environment | Technology | | Size/Life Cycle | Culture | | | Organizational Structure and Design | | | **The Right Mix of Design Characteristics Fits the Contingency Factors** ## Organizational Effectiveness **Are goals being attained?** **Approaches to measuring effectiveness:** - Resource-based – obtaining and managing resources effectively? - Internal-Process – internal health and efficiency (employee well-being) - Goal approach – have the operative day to day goals been attained? - Competing-values model – balance the concerns, viewpoints of various parts of the organization – internal and external - Organizations focus on own well-being (financial), shareholders, employees, customers, other stakeholders – balance all of these interests, but can lead to conflicts ## Contingency Effectiveness ## Approaches: Competing Values | FOCUS | STRUCTURE | |---|---| | Internal | Flexibility | Control | | | Human Relations Emphasis | | | | Primary goal: human resource development | | | | Subgoals: cohesion, morale, training | | | | Internal-Process Emphasis | | | | Primary goal: stability, equilibrium | | | | Subgoals: information management, communication | | | External | Open-Systems Emphasis | | | | Primary goal: growth and resource acquisition | | | | Subgoals: flexibility, readiness, external evaluation | | | | Rational-Goal Emphasis | | | | Primary goal: productivity, efficiency, profit | | | | Subgoals: planning, goal setting | | ## Competing Values - **Open-systems emphasis** – external focus and flexible structure - Growth and resource acquisition (resource-based) - Relationship with the environment - **Rational-goal emphasis** – structural control and external focus - Productivity, efficiency, profit - Achieve outputs goals through planning and control, setting goals (goal approach) - **Internal-process emphasis** – internal focus and structural control - Stable and orderly - Bureaucracy for efficiency - **Human relations emphasis** – internal focus and flexible structure - Employee autonomy and development - Moral, training - Employees before environment ## Contingency Effectiveness ## Approaches ## The Balanced Scorecard - Customer Service Indicators - How well do we serve our customers? - Examples of measures: customer satisfaction, customer loyalty - Financial Performance - Do actions contribute to better financial performance? - Examples of measures: profit, return on investment - Internal Business Process Indicators - Do work processes add value for customers and shareholders? - Examples of measures: order-rater fulfillment, cost per order - Potential for Learning and Growth - Are we learning, changing, and improving? - Examples of measures: continuous process improvement, employee retention **Major Perspectives of the Balanced Scorecard**