Strategy, Organization Design, and

Effectiveness

CHAPTER 2

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 The Role Of Strategic Direction In
Organization Design

 An Organization is created to achieve some purpose

 Top executives decide on the end purpose of the
organization VISION and the direction it will take to
accomplish it MISSION.
 It is this PURPOSE and DIRECTION that shapes
how the organization is DESIGNED and MANAGED.
 The primary responsibility (?)is to determine an
organization goals, strategy, and design, therein
adapting it to a changing environment.

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  Middle management does the same for major
departments within the guidelines provided by top
management.
 The direction setting process begins with an
assessment of the opportunities and threats in the
external environment, including the amount of
change , uncertainty, and resource availability.

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  Top management also assesses internal
strengths and weaknesses to define the
company’s distinctive competence compared
with other firms.
 The next step is to define the overall mission
and official goals based on the correct fit
between the external opportunities and
internal strengths-(weaknesses and threats?)

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  Organization design reflects the way goals
and strategies are implemented (?).
Organization Design affects the
administration and execution of a strategic
plan(?). Organization direction is
implemented through decisions about
structural form, including whether the
organization will be designed for learning or
efficiency.

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  Other factors like information and control
systems, the type of production technology
human resource policies culture linkages to
other organizations has to be taken into
consideration.
 Finally the figure shows that management
evaluates the effectiveness of organizational
efforts-(realization of GOALS).

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 ORGANIZATIONAL PURPOSRE

 Organizationsare created and continued to

accomplish goals (something).

 Many types of goals exist in an organization,

officially stated goals and departmental
operative goals (major distinction).

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 MISSION

 The overall goal for an organization is often

called the MISSON , (the organization reason
for existence).
 The mission describes the organization’s
vision , its shared values and beliefs.
 The mission is sometimes called the
OFFICIAL GOALS.

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  The mission statement is often written in a
policy manual or the annual report.
 The PRIMARY purpose of a mission
statement is to serve as COMMUNICATION
tool (customers, investors, suppliers, and
competitors what the organization stands for
and what it is trying to achieve).

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 OPERATIVE GOALS

 Designates the ends sought through the

actual operating procedures of the
organization and explains what the
organization is trying to do. It describes
SPECIFIC MEASURABLE OUTCOMES,
and are often concerned with the short run.
 Operative goals typically pertain to primary
tasks an org. must perform (subsystems).

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  These goals concern overall performance,
boundary spanning, maintenance,
adaptation, and production activities.

 Specific goals for each primary task,

provide direction for the day-to-day decisions
and activities within departments.

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  Overall Performance. Profitability reflects
the overall performance of the organization.
 Profitability is a LAG INDICATOR.

 Performance may be expressed in terms of

net income, earnings per share, or return on
investment. Other overall performance goals
are growth and output volume.

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  Resources. Resource goals pertain to the
acquisition of needed material and financial
resources from the environment.

 Market.Market goals relate to market share

or market standing desired by the
organization (niche strategy).

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  Employee Development. Pertain to the
training, promotion, safety, and growth of
employees. It includes both managers and
workers. Return on talent is becoming an
important measure in today organization
evaluation.

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  Innovation and change. Innovation goals
pertain to internal flexibility and readiness to
adapt to unexpected changes in the
environment. Innovation goals are often
defined with respect to development of new
services, products, or production processes.

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  Productivity. Productivity goals concern the
amount of output achieved from available
resources. Are stated in terms of “ cost for
unit of production”, ”units produced per
employee”, or “resources cost per
employee”.

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  Successful organizations use a carefully
balanced set of operative goals. (BALANCED
SCORE CARDS).
 Although profitability is important, some of
today’s best companies recognize that a
single-minded focus on bottom-line profits is
not the best way to achieve high
performance.

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 THE IMPORTANCE OF GOALS

 Both official and operative goals are

important for the organization (why?), but
they serve very different purposes.
 Official goals and mission statements
describe a value system for the organization;
operative goals represent the primary tasks
of the organization. (HOW CAN WE ALIGN
BOTH ?).

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 A FRAMEWORK FOR SELECTING
STRATEGY AND DESIGN

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