Strategy and Organizational Effectiveness

External Environment
Opportunities Organization
Threats Design
Uncertainty
Resource Availability Structure: Effectiveness
mechanistic vs
Strategic Direction organic Outcomes
Information and Resources
Define Select control systems
CEO, Top Efficiency
mission, operational Production Goal attainment
Management official goals, technology Competitive adv.
goals competitive Human resource
Team strategies management:
Organizational
culture
Buffering &
Internal Situation Spanning
Strengths
Weaknesses
Leadership Style
Past Performance
 Through its strategy, the organization seeks to
use and develop core competences to gain a
competitive advantage.
 Strategy allows the company to shape and
manage its domain to use existing competences
and develop new ones to make it a better
competitor.
 HR’s primary responsibility is to develop an HR
policy framework that helps the organization
attract, develop and sustain its HR capital
 At the end of the day – the source of every core
competency and competitive advantage is human
resource
Manufacturing/Production
Sales and distribution
Marketing
Materials management
Product development
Customer services
 Provides benefits to the customers
 Difficult to imitate
 Can be leveraged to other products and/or
markets
1. Functional level strategy: a plan of action to
strengthen an organization’s functional and
organizational resources, as well as its
coordination abilities, in order to create core
competences
2. Business level strategy: a plan to combine
functional core competences in order to position
the organization so that it has a competitive
advantage in its domain
3. Corporate-level strategy: a plan to use and
develop core competences so that the
organization can not only protect and enlarge its
existing domain but can also expand into new
domains
1. Low Cost Leadership
 Strong central authority; tight controls
 Standard operating procedures
 Easy to use manufacturing technologies
 Highly efficient procurement and
distribution systems
 Close supervision; limited employee
empowerment
 Frequent, detailed controlled reports
2. Focused Low Cost leadership
 Relies on, more or less, the same
attributes as in low cost leadership,
focusing on a narrower/smaller market
3. Broad Differentiation
 Acts in an organic, loosely knit way, with
strong coordination
 Creative flair, thinks “out of the box”
 Strong capability in research
 Strong marketing abilities
 Rewards employee innovation
 Reputation for quality or technological
leadership
4. Focused Differentiation
 Combination of the same policies as in
broad differentiation directed at a narrow
target market
 Values and rewards flexibility and
customer intimacy
 Specializes in maintaining customer
loyalty
 Delegates empowerment to employees
with close customer contact
Competitive Competitive
Scope Advantage Strategy Examples
Low-Cost Dell,
Broad Low Cost Leadership Wall Mart,
Toyota
Broad Apple,
Broad Uniqueness Differentiation Microsoft,
BMW
Focused Low-Cost Imtiaz
Narrow Low Cost Leadership U-fone
Q Mobile
Focused Ferrari,
Narrow Uniqueness Differentiation Rolls Royce
Rolex,
 Cost Leadership:
 In cost leadership strategies, HR Department’s focus is on
reducing absenteeism and employee turnover
 Training programs are directed at increasing efficiencies
 Encourage cultural values of economy and frugality, and
common standards of behavior
 Differentiation:
 In differentiation strategies, HR strives to recruit highly
skilled work force and create incentives to sustain it
 Challenge is to develop innovative training programs to
foster creativity
 Encourage cultural values of innovation, quality,
excellence, and uniqueness
 QUESTIONS:
 When exactly do we say that an organization
is effective?
 What are the yardsticks/measures of
effectiveness?
 Is it necessary that two firms in the same
industry must have similar measures of
effectiveness?
Toyota  Ford

 16.1 veh/empl/year
57.7 veh/empl/year
 $2,379 labor
$630 labor cost/vehicle cost/vehicle

Earning $466 /vehicle  $ 555 per vehicle

 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, pp. 71-19.
External Environment
Organization’s
Resource Internal Product and
Inputs activities Service
and Outputs
processes

Resource-based Internal Goals

approach processes approach
approach
 The Goals Approach (Focusing on Ends)
 The Systems-Resource Approach: Combining
the Resource-based approach and the
Internal processes approach (Focusing on
Means)
 Believes that:
 Organizations are deliberate, rational, goal seeking
entities
 Organization’s effectiveness must be appraised in
terms of accomplishment of ends rather than means
 Goals must be identified and defined well enough
to be understood
 There must be general consensus or agreement on
these goals
 Progress towards these goals must be measurable
 Ultimately, it is the bottom line which counts
 Most explicit HR application of the goals approach
is MBO
 Every member of the organization remains
goal-oriented
 Managers have clear performance standards
and measures
 If applied diligently, results in better bottom
line performance, enhancing organization’s
ability to acquire more resources and invest
in developing more competencies
 Whose goals? Developing consensus on goal
setting is much more difficult than what might
appear in theory. Different strategic constituencies
(stake holder groups) often have conflicting goals
 Official goals do not always reflect organization’s
actual goals. Official goals tend to be influenced
strongly by standards of social desirability
 Bottom line pressures on managers often make
them resort to the short-term
Typical OE criteria of different strategic constituents
Constituent Typical criteria
Owners ROI, growth in earnings
Employees Compensation, fringe benefits,
satisfaction with working conditions
Customers Satisfaction with price, quality, service
Suppliers Satisfaction with payments, future sales
potential,
Creditors Ability to pay, indebtedness
Government
Agencies Compliance with laws, avoidance of
penalties and reprimands
 Ends are not ignored; but they are only one
element in a more complex set of criteria.
Systems model emphasizes criteria that will
increase the long-term survival of the
organization – such as the organization’s
ability to acquire resources, maintain itself
internally as a viable social organism, and
interact successfully with its external
environment
 Focuses not so much on specific ends as on
means needed for the achievement of those
goals
Believes that:
1. Organizations are complex systems made up of
interrelated sub-systems. If any one of these
sub-systems performs poorly, it will negatively
affect the performance of the entire system
2. Organizational effectiveness cannot be achieved
without successful interactions with
environmental constituencies
3. Survival requires a steady replenishment of
resources which are continuously being
consumed
4. In effect, this approach is based on the
“Strategic Constituencies Model”
5. HRD’s role in SRA is manifest in its ability to
develop and help implement organization wide
policies, rules and procedures which enhance
the communication, coordination and control
mechanisms (internal processes)
 Some SRA effectiveness measures in not-for-profit
organizations
Measure Hospital University

ROI Total number of Number of faculty

patients treated publications

Long term Capital investment in Cost of information

Investment medical technology systems/teaching
aids

Turnover Total number of Number of

patients treated students
graduated
Sales No. of Patients Student
volume admitted enrollment
1. Measurement of certain process variables
can be subjective
2. It focuses on the means necessary to
achieve effectiveness rather than on
organizational effectiveness itself,
therefore…,
3. Managers working on SRA can become
obsessed with acquisition of resources
and implementation of processes,
forgetting why these resources and
processes are required!
 Managers who use systems approach to OE
are less prone to look for immediate results.
They are less likely to make decisions that
trade off organization’s long-term health and
survival for ones that would make them look
good in near term.
 System’s approach increases managers’
awareness of interdependency of the
organization with its strategic constituents
(environment), and enables them to take a
holistic view of organizational activities
 The criteria an organization values and
uses in assessing effectiveness depends
on the shifting priorities of the
Management, in response to its
constituencies, for organization’s best
interests
 The contingency view believes that there is
no “ best” criterion for evaluating an
organization’s effectiveness
 The correct approach is contingent
(dependent) on organization’s changing
environment and priorities
1. Focus: Internal or External
 Internal focus reflects management’s concern for
well being and efficiency of employees
 External focus represents an emphasis on well
being of the organization itself with respect to
the its strategic constituencies
2. Structure: Stability or Flexibility
 Stability: Reflects management’s priority for top
down control
 Flexibility: Represents concern for adaptation and
change
 STRUCTURE
Human Relations
Model: Open Systems
FLEXIBILITY Model:
Human Resource
Development, Training, Growth, Resource Acquisition,
Morale, Cohesion, Job Innovation, Adaptation
F Satisfaction
O
C INTERNAL EXTERNAL
U
S
Internal Processes Rational Goals
Model: Model:
Discipline, Centralization, Efficiencies, Economies,
SOP’s, Formalization, Strict Bottom line concerns,
Hierarchy CONTROL Standardization
 STRUCTURE
Human
Relations FLEXIBILITY Open Systems
Emphasis Emphasis
F
O ORGANIZATION
C INTERNAL A EXTERNAL
U
S ORGANIZATION
Internal B Rational Goal
Processes Emphasis
Emphasis CONTROL