Organizational Purpose & Module 2
Structural Design Organizational Design & Planning
Stage 1: Analysis of the Organizational
Situation
SWOT ANALYSIS SCENARIO PLANNING
Stage 2: Defining Organisational Purpose
Strategic Intent
Operating Goals
Addressing Goal Conflicts
Stage 3: Selecting Strategy & Design
Contigency
Potter’s
Miles & Snow’s Factors affecting
Competitive
Strategy Typology Organisational
Strategies
Design
Stage 4: Assessing the Organizational
Effectiveness
Goal Approach Resource-Based Internal Process Strategic Constituents
Approach Approach Approach
Satge 1: Role of Strategic
Direction in Organization Design
• Organisational goal
• A desired state of affairs that the organisation
attempts to reach.
• A goal represents a result or end point toward
which organisational efforts are directed.
• The primary responsibility of top management is to
determine an organisation’s goals, strategy, and
design, thereby adapting the organisation to a
changing environment.
• How to finalize the organisational Goal?
• SWOT Analysis
• Scenario Planning
• Strengths, weaknesses, opportunities, and threats from
External & Internal Environment
• External Environment
• opportunities and threats in the external environment,
including the amount of change, uncertainty, and
resource availability
• Data Sources: customers, government reports,
professional journals, suppliers, bankers, friends in
1.1. SWOT other organizations, consultants, and association
meetings
Analysis • Internal Environment
• Internal strengths and weaknesses to define the
company’s distinctive competence compared with
other firms in the industry.
• Data Sources: company budgets, financial ratios, profit
and loss statements, and surveys of employee
attitudes and satisfaction
• Looking at current trends and discontinuities and
visualizing future possibilities
1.2. Scenario • Rather than looking only at history and thinking about
what has been, managers think about what could be.
Planning • Typically, two to five scenarios are developed for each set
of factors, ranging from the most optimistic to the most
pessimistic view.
Stage 2: Defining Organisational Purpose
Strategic Intent
Operating Goals
Addressing Goal Conflicts
All organizations exists for a purpose
• Strategic Intent
• Means that all the organization’s energies and resources are directed
2.1. toward a focused, unifying, and compelling overall goal
• Microsoft- Put a computer on every desk in every home
Strategic • Coca Cola- To put a coke within arm’s reach of every consumer in the
world
Intent • Has three aspects à Mission, Core Competence & Competitive
Advantage
2.1.1. Mission
• The overall goal for an organization àthe
organization’s reason for existence.
• Describes the organization’s shared values and
beliefs and its reason for being.
• Official goals à refers to the formally stated
definition of business scope and outcomes the
organization is trying to achieve.
• Defines business operations and may focus on
values, markets, and customers that
distinguish the organization.
• Mission statement
• The organization’s general statement of its purpose and philosophy is often written down
in a policy manual or the annual report.
• Vision
• Where does the organisation wants to reach by completing the end goals
• Need for Mission
• Communicates to current and prospective employees, customers, investors, suppliers,
and competitors what the organization stands for and what it is trying to achieve.
• Communicates legitimacy to internal and external stakeholders who may join and be
committed to the organization because they identify with its stated purpose and values.
2.1.2. Competitive Advantage
• The overall aim of strategic intent à help the organization achieve a sustainable competitive
advantage.
• Competitive advantage à Refers to what sets the organization apart from others and provides
it with a distinctive edge for meeting customer or client needs in the marketplace.
• Managers need to continuously analyse competitors and the internal and external
environments à to find potential competitive openings
• Competitive openings might be thought of as spaces that a company can potentially fill.
• Once competitive openings are identified, use it to create an advantage
• Might include readjusting the structure, goals, or learning new capabilities the organization
needs to gain the upper hand against other companies in the industry.
[Link] Competence.
• A company’s core competence is something the
organization does especially well in comparison
to its competitors.
• A core competence may be in the area of
superior research and development, expert
technological know-how, process efficiency, or
exceptional customer service.
• Apple à superior design and marketing skills.19
In each case, managers identified what their
company does especially well and built the
strategy around it.
2.2. Operating Goals
• The organization’s mission and overall goals provide a basis
for developing more specific operating goals.
• Operating goals
• designates the ends sought through the actual
operating procedures of the organization and explain
what the organization is actually trying to do.
• Features
• Operating goals describe specific measurable outcomes
• Are often concerned with the short run.
• Operating goals typically pertain to the primary tasks
an organization must perform.
• Overall Performance
• Often defined in terms of profitability
• Expressed in terms of net income, earnings per share, or
return on investment.
• Growth à increases in sales or profits over time
Types of • Volume à total sales or the number of products or
services delivered.
Organisational • Resources.
• Pertain to the acquisition of needed material and
Goals financial resources from the environment.
• They may involve obtaining financing for the construction
of new plants, finding less expensive sources for raw
materials, or hiring top-quality technology graduates.
• Eg: Starbucks & Tata Group à premium Arabica coffee
beans
• Eg: Walmart à hire every veteran who wants a job,
provided the person left the military in the previous year
and did not have a dishonorable discharge.
• Market
• Relates to the market share or market standing desired
by the organization.
• Market goals are largely the responsibility of
marketing, sales, and advertising departments.
Types of • Employee Development
Organisational • Pertains to the training, promotion, safety, and growth
of employees.
Goals • It includes both managers and workers.
• Productivity.
• Amount of output achieved from available resources.
• The amount of resource inputs required to reach
desired
• Stated in terms of “cost for a unit of production,”
“units produced per employee,” or “resource cost per
employee.”
Types of Organisational
Goals
• Innovation and Change
• Pertain to internal flexibility and
readiness to adapt to rapid changes
in the environment.
• Often defined with respect to the
development of specific new
services, products, or production
pro-cesses.
Goal Conflict
• This happens when many goals are simultaneously
persued to accomplish an overall mission.
• Employee development goals might conflict with
productivity goals; goals for innovation might hurt
profitability.
• Eg: Facebook à goals of protecting user privacy and
personal data have long been in conflict with goals of
growth and increased advertising revenue.
Stage 3: Selecting Strategy & Design
Contigency
Potter’s
Miles & Snow’s Factors affecting
Competitive
Strategy Typology Organisational
Strategies
Design
Two Frameworks for Selecting Strategy
and Design
• Strategy & Design is selected
• to support and accomplish the organization’s strategic intent, and
• To keep people focused in the direction determined by organizational mission, vision, and operating
goals,
• that can help the organization achieve its purpose and goals within its competitive environment.
• Strategy
• A plan for interacting with the competitive environment to achieve organizational goals.
• While goals define where the organization wants to go and strategies define how it will get there.
• Two models for formulating strategies are the Porter model of competitive strategies and the Miles
and Snow strategy typology.
Porter’s Competitive Strategies
• Michael E. Porter studied a number of business organizations
• Proposed that managers can make the organization more profitable and less vulnerable by adopting either a
differentiation strategy or a low-cost leadership strategy.
• Differentiation.
• With a differentiation strategy, the organisation attempts to distinguish its products or services from others
in the industry.
• Managers may use advertising, distinctive product features, exceptional service, or new technology to
achieve a product perceived as unique.
• This strategy usually targets customers who are not particularly concerned with price, so it can be quite
profitable.
• A differentiation strategy can reduce rivalry with competitors and fight off the threat of substitute products
because customers are loyal to the company’s brand.
• Successful differentiation strategies require a number of costly activities, such as product research and
design and extensive advertising.
• Companies that pursue a differentiation strategy need strong marketing abilities and creative employees who
are given the time and resources to seek innovations. One good illustration of a company that benefits
• Low-Cost Leadership.
• The low-cost leadership strategy tries to
increase market share by keeping costs low
compared to competitors.
• The organization aggressively seeks efficient
facilities, pursues cost reductions, and uses
tight controls to produce products or
services more efficiently than its
competitors.
• The low-cost leadership strategy is
concerned primarily with stability rather
than taking risks or seeking new
opportunities for innovation and growth.
• A low- cost leadership position means a
company can achieve higher profits than
competitors because of its efficiency and
lower operating costs.
Miles and Snow’s
Strategy Typology
• Developed from the study of business strategies by
Raymond Miles and Charles Snow.
• Managers seek to formulate strategies that will be
congruent with the external environment.
• Organisations strive for a fit among internal
organisation characteristics, strategy, and the
external environment.
• There are four strategies that organisations adopt
to be congruent with the external environment.
Strategy types (as per Miles & Snow’s Typology)
• Prospector
• To innovate, take risks, seek out new opportunities, and grow.
• Best suited to a dynamic, growing environment, where creativity to separate the
organization from competitors is more important than efficiency.
• Eg: Nike
• Keeps introducing a new line of shoes (even designs that can be produced using
recycled materials and limited amounts of toxic chemical-based glues)
• Eg; Cadillac division of General Motors.
• Enclosed cabin, Electric starter, Thermostatically regulated heating, ventilation and
air conditioning system, invented magnetic ride control, and was the first to
integrate a global positioning satellite (GPS) system.
Strategy types (as per Miles & Snow’s Typology)
• Defender.
• Concerned with stability or even retrenchment (opposite of the prospector)
• Less interest in taking risks and seeking out new opportunities.
• This strategy seeks to hold on to current customers, but it neither innovates nor seeks
to grow.
• Concerned primarily with internal efficiency and control to produce reliable, high-
quality products for steady customers.
• Best when the organization exists in a declining industry or a stable environment.
• Eg: Paramount Pictures
• Turns out a steady stream of reliable hits but few blockbusters à doesn't move to
variety of movies
• Started in 1916 à still sticking to movies only
Strategy types (as per Miles & Snow’s
Typology)
• Analyzer
• Tries to maintain a stable business while innovating on the periphery.
• Midway between the prospector and the defender.
• Some products à targeted at stable environments in which an efficiency strategy designed
to keep current customers
• Other products à Targeting new, more dynamic environments, where growth is possible.
• Eg: Amazon
• Defend its core business of selling books and other physical goods over the Internet ||
also building other businesses à music and video streaming even space exploration
Strategy types (as per Miles & Snow’s
Typology)
• Reactor.
• Respond to environmental threats and opportunities in an ad hoc fashion.
• Top management has not defined a long-range plan or given the organization an
explicit mission or goal, so the organization takes whatever actions seem to meet
immediate needs.
How do Strategies Affect Organization
Design?
• Low Cost Strategy
• Mechanistic Designs à centralized authority and tight control, standard operating
procedures, and emphasis on efficient procurement and distribution systems.
• Employees generally perform routine tasks under close supervision and control and are not
empowered to make decisions or take action on their own.
• Differentiation strategy
• Organic Designs à Requires that employees be constantly experimenting and learning.
• Structure is fluid and flexible, with strong horizontal coordination.
Contingency Factors that effects designing
• Young, small organisations àgenerally informal and have
Size and life little division of labour, few rules and regulations, and ad hoc
budgeting and performance systems.
cycle • Large organizations à extensive division of labour, numerous
rules and regulations, and standard procedures and systems
for budgeting, control, rewards, and innovation
• Design must also fit the workflow technology of the
organization.
Technology • Mass production technology à efficiency, formalisation,
specialization, centralized decision making, and tight control.
• E-business à more informal and flexible.
Corporate • Culture that values teamwork, collaboration, creativity, and
open communication à will not work well with a mechanist
culture system
Ways to measure organizational
Effectiveness
• Goal Approach
• Assessing how well the organisation has attained organisational goals.
• Logical approach because organizations do try to attain certain levels of output, profit, or client
satisfaction.
• Eg: Uber
• Lost license to operate in London (most profitable markets) à toning down its “grow-at- any-cost”
culture, and the company’s goals now include proving to government officials that Uber can comply
with local rules and regulations.
• Indicators of Goal Approach
• Percentage of success of operational goals like profitability, market share, product quality
Ways to measure organizational
Effectiveness
• Resource-Based Approach
• Looks at the input side of the transformation process
• Success is defined as the ability to obtain and manage valued resources
• Defined as the ability of the organisation, in either absolute or relative terms, to obtain scarce and
valued resources and successfully integrate and manage them.
• Indicators.
• Bargaining position à the ability of the organisation to obtain from its environment scarce and valued
resources, including tangible resources such as a prime location, financing, raw materials, and quality
employees, and intangible assets such as a strong brand or superior knowledge
• The ability of the organisation to respond to changes in resource sectors of the environment
Ways to measure organizational
Effectiveness
• Internal Process Approach
• Effectiveness is measured as internal organisational health and efficiency.
• An effective organization has a smooth, well-oiled internal process.
• Employees are happy and satisfied.
• Department activities mesh with one another to ensure high productivity
• Does not consider the external environment..
• Indicators.
• A strong, adaptive corporate culture and positive work climate
• Confidence and trust between employees and management
• Operational efficiency, such as using minimal resources to achieve outcomes
• Undistorted horizontal and vertical communication
• Growth and development of employees
• Coordination among the organization’s parts, with conflicts resolved in the
• The interest of the larger organization
Ways to measure organizational
Effectiveness
• Strategic Constituents Approach
• Stakeholder approach
• Focusing on the satisfaction of key stakeholders, those who are critical to the organization’s ability to survive
and thrive.
• Indicators.
An Integrated Effectiveness Model to assess
Organisational Effectiveness
• Intergrated Effectiveness Model:
• A balance between various parts of the organisation rather than focusing on one part.
• This approach to effectiveness acknowledges that organisations do many things and have many outcomes.
• The model is based on the assumption that there are disagreements and competing viewpoints about what constitutes effectiveness.
• Developed by Robert Quinn and John Rohrbaugh to combine the diverse indicators of performance used by managers and
researchers.
• Indicators.
• Focus à Whether dominant values concern issues that are internal or external to the firm. The internal focus reflects a management
concern for the well-being and efficiency of employees, and the external focus represents an emphasis on the well-being of the
organization itself with respect to the environment.
• Structure à and whether stability or flexibility is the dominant structural consideration. Stability reflects a management value for
efficiency and top-down control, whereas flexibility represents a value for learning and change.
Organizational Effectiveness Quadrants on the basis of focus &
Structure
Open systems emphasis.
• External focus and flexible structure
• The primary goals are growth and resource acquisition.
• The organization accomplishes these goals through the subgoals of flexibility, readiness, and a
positive external evaluation.
• Establishing a good relationship with the environment to acquire resources and grow.
Rational goal emphasis
• Structural control and external focus.
• The primary goals are productivity, efficiency, and profit.
• The organisation wants to achieve output goals in a controlled way.
• Establishing internal planning and goal setting
Internal process emphasis
• Values internal focus and structural control.
• The primary goal is to have a stable organizational setting that maintains itself in an
orderly way.
• The organizations are well established in the environment and simply want to
maintain their current position
• Focus on efficient communication, information management, and decision making.
Human relations emphasis
• values of an internal focus and a flexible structure.
• Primary goal is for the development of human resources.
• Employees are given opportunities for autonomy and development.
• Focus cohesion, morale, and training opportunities. Organizations adopting this
emphasis are more concerned with employees than with the environment.
Millier Machine Parts & Services
150 employees
50,000 sqft
A large chunk of employees to be
retiring
70% market share which is declining
CEO
Marketing Finance HR Manufacturing Communication Issues between
departments
Internal Focus Organisation à
Innovation Employee Wellbeing
Hiring New People
Less Centralization & Hierarchy
