This chapter discusses the role of top management in determining an organization's strategic direction, design, and effectiveness. It presents various models for analyzing strategy, organizational structure, and performance, including Porter's competitive strategies, Miles and Snow's strategy typology, and Quinn and Rohrbaugh's four models of effectiveness values. The chapter also examines contingency factors, goals and priorities of U.S. corporations, and approaches for defining and measuring organizational effectiveness.

1. Thomson Learning
© 2004 2-1
Chapter Two
Strategy, Organization Design,
and Effectiveness

2. Thomson Learning
© 2004 2-2
Top Management Role in
Organization Direction, Design, and
Effectiveness
CEO, Top
Management
Team
External Environment
Opportunities
Threats
Uncertainty
Resource Availability
Internal Situation
Strengths
Weaknesses
Distinctive Competence
Leadership Style
Past Performance
Strategic Direction
Organization
Design
Effectiveness
Outcomes
Define
mission,
official
goals
Select
operational
goals,
competitive
strategies
Resources
Efficiency
Goal attainment
Competing values
Structural Form –
learning vs.
efficiency
Information and
control systems
Production
technology
Human resource
policies,
incentives
Organizational
culture
Interorganizational
linkages
Source: Adapted from Arie Y. Lewin and Carroll U. Stephens,
“Individual Properties of the CEO as Determinants of Organization
Design,” unpublished manuscript, Duke University, 1990; and Arie Y. Lewin
and Carroll U. Stephens, “CEO Attributes as Determinants of Organization Design:
An integrated Model,” Organization Studies 15, no. 2 (1994): 183-212

3. Thomson Learning
© 2004 2-3
Goal Type and Purpose
Type of Goals Purpose of Goals
Official Goals, mission: Legitimacy
Operative goals: Employee direction and motivation
Decision guidelines
Standard of performance

4. Thomson Learning
© 2004 2-4
Porter’s Competitive Strategies
Competitive
Scope
Competitive
Advantage Strategy Example
Broad Low Cost
Low-Cost
Leadership Dell Computer
Broad Uniqueness Differentiation
Starbucks
Coffee Co.
Narrow Low Cost
Focused Low-Cost
Leadership
Enterprise
Rent-a- Car
Narrow Uniqueness
Focused
Differentiation
Edward Jones
Investments

5. Thomson Learning
© 2004 2-5
Miles and Snow’s
Strategy Typology
 Prospector
 Learning orientation; flexible, fluid, decentralized
structure
 Strong capability in research
 Values creativity, risk-taking, and innovation
 Defender
 Efficiency orientation; centralized authority and tight
cost control
 Emphasis on production efficiency, low overhead
 Close supervision; little employee empowerment
Source: Based on Michael Treacy and Fred Wiersema,
“How Market Leaders Keep Their Edge,” Fortune February 6,
1995, 88-98; Michael Hitt, R. Duane Ireland, and Robert E. Hoskisson,
Strategic Management (St. Paul, Minn.: West, 1995), 100-113; and
Raymond E. Miles, Charles c. Snow, Alan D. Meyer, and Henry L.
Coleman, Jr., “Organizational Strategy, Structure, and Process,”
Academy of Management Review 3 (1978), 546-562

6. Thomson Learning
© 2004 2-6
Miles and Snow’s
Strategy Typology (cont’d)
 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
Source: Based on Michael Treacy and Fred Wiersema,
“How Market Leaders Keep Their Edge,” Fortune February 6,
1995, 88-98; Michael Hitt, R. Duane Ireland, and Robert E. Hoskisson,
Strategic Management (St. Paul, Minn.: West, 1995), 100-113; and
Raymond E. Miles, Charles c. Snow, Alan D. Meyer, and Henry L.
Coleman, Jr., “Organizational Strategy, Structure, and Process,”
Academy of Management Review 3 (1978), 546-562

7. Thomson Learning
© 2004 2-7
Contingency Factors
Affecting Organization Design
Organizational Structure and Design
The Right Mix of Design Characteristics Fits the Contingency Factors

8. Thomson Learning
© 2004 2-8
Contingency Approaches to the
Measurement of Organizational
Effectiveness
Organization
Internal
activities
and
processes
Resource
Inputs
Product and
Service
Outputs
Resource-based
approach
Internal
process
approach
Goal
approach
External Environment

9. Thomson Learning
© 2004 2-9
Reported Goals
of U.S. Corporations
Goal % Corporations
Profitability 89
Growth 82
Market Share 66
Social Responsibility 65
Employee welfare 62
Product quality and service 60
Research and development 54
Diversification 51
Efficiency 50
Financial stability 49
Resource conservation 39
Management development 35
Source: Adapted from Y. K. Shetty, “New Look at Corporate Goals,”
California Management Review 22, no. 2 (1979), pp. 71-19.

10. Thomson Learning
© 2004 2-10
Four Models of
Effectiveness Values
Human Relations Emphasis
Primary Goal: human resource
development
Subgoals: cohesion, morale, training
Internal Process Emphasis
Primary Goal: stability, equilibrium
Subgoals: information management,
communication
Rational Goal Emphasis
Primary Goal: productivity, efficiency,
profit
Subgoals: planning, goal setting
Open Systems Emphasis
Primary Goal: growth,
resource acquisition
Subgoals: flexibility, readiness,
external evaluation
Flexibility
Control
Internal External
STRUCTURE
F
O
C
U
S
Adapted from Robert E. Quinn and John Rohrbaugh,
“A Spatial Model of Effectiveness Criteria: Toward a
Competing Values Approach to Organizational Analysis,”
Management Science 29 (1983): 363-377; and Robert E. Quinn
and Kim Cameron, “Organizational Life Cycles and Shifting
Criteria of Effectiveness: Some Preliminary Evidence,”
Management Science 29 (1983): 33-51.

11. Thomson Learning
© 2004 2-11
ORGANIZATION
B
ORGANIZATION
A
Effectiveness Values
for Two Organizations
Human Relations
Emphasis
Internal Process
Emphasis
Rational Goal
Emphasis
Open Systems
Emphasis
STRUCTURE
F
O
C
U
S
FLEXIBILITY
CONTROL
INTERNAL EXTERNAL

12. Thomson Learning
© 2004 2-12
Identifying Company
Goals and Strategies
Goals from
Exhibit 2.8
Strategies
from Porter
Company #1
Company #2
Company #3
Workbook
Activity

13. Thomson Learning
© 2004 2-13
Competing Values and
Organizational Effectiveness
Workshop
Activity
Goal or
subgoal
Performance
Gauge
How to
measure
Source of
data
What do you
consider
effective?
(Example)
Equilibrium
Turnover
rates
Compare
percentages
of workers
who left HRM files
25%
reduction in
first year
1
Open
System 2
3
Human
Relations 4
5
Internal
Process 6
7
Rational
Goal 8