s110 module 2

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SOCI110 Module 2 - GOALS, STRATEGIES & EFFECTIVENESS

0. OBJECTIVES

In this module you will learn

the difference between official and operative goals of an organization
generic organizational strategies (Porter's low-cost leadership, differentiation, and focus strategies; Miles & Snow's prospector, defender, analyzer and reactor strategies)
three traditional approaches to organizational effectiveness (goal, system resource, internal process approaches); within the goal approach, standard strategies to handle multiple and inconsistent goals
two contemporary balanced approaches to effectiveness (stakeholder-constituency and competing values approaches)

1. OFFICIAL & OPERATIVE GOALS

Goal: a desired state of affair an organization attempts to reach

Official goals (or mission): an outcome that an organization states it is trying to achieve.
Official goals are typically vague, describing a value system; they are akin to ideologies.

Exhibit: Hallmark mission statement (Daft E2-2 p. 54)
Exhibit: Toro mission statement (Daft old edition)

Operative goal: an end sought through the actual operating procedures of the organization.
Operative goals are more concrete, short term; they describe what the organization is actually trying to do.

Coomon types of operative goals:

overall performance (EX: profitability, growth, amount of services delivered)
resource (EX: obtain financing, research grants, hire minorities)
market (EX: increase market share by x%)
employee development
innovation (EX: develop new products)
productivity (EX: measured in terms of units produced per employee, or cost per unit produced)

The purposes of official goals, on one hand, and operative goals, on the other, are different.

**Goal Type and Purpose** (Daft E2.3 p. 56)
Type of Goals	Main Purposes of Goals
Official goals (mission)	Legitimacy
Operative goals	Employee direction & motivation Decision guidelines Criteria of performance

Q - Zachary Cronbach is head of the marketing department of Columbus Tool and Die Co. One of his goals is to increase market share by 10% in the next year. This is an example of an ___ goal. (OFFICIAL/OPERATIVE?)

Q - "Official goals provide (a), while operative goals and strategies provide (b)." Match (a) and (b) with 1 or 2 of

employee direction
legitimacy

2. GENERIC ORGANIZATIONAL STRATEGIES

Strategy refers to the techniques used by an organization to reach its goals.

Two studies have described generic strategies used by organizations.

1. Michael Porter's Competitive Strategies

Michael Porter distinguishes three main strategies. He argues that each strategy implies a specific pattern of organizational characteristics.

**Michael Porter's Competitive Strategies** (cf. Daft E2.5 p. 62)
Strategy		Organizational Design Emphasis
Low-cost Leadership	Increase market share by emphasizing low cost compared to competitors. EX: Walmart. Other examples?	efficiency with strong centralizaiton, tight cost control standard operating procedures efficient procurement & distribution close supervision, routinization of tasks, limited empowerment of employees
Differentiation	Attempt to distinguish organization's product or service from others in the industry. EX: Godiva Chocolates. Other examples?	organizational learning research customer intimacy innovation & risk-taking
Focus	Concentrate on specific market (region or group of customers). EX: Other examples? Note: Porter distinguishes further between focused low-cost & focused differentation strategies. See Daft.

Q - Food Lion's old slogan "When we save, you save!" exemplifies which of Michael Porter's 3 competitive strategies?

2. Raymond Miles & Charles Snow's Framework

Miles and Snow have proposed an alternative typology of organizational strategies that distinguishes between prospector, defender, analyzer, and reactor strategies.

Exhibit: Organizational strategies according to Miles & Snow (Daft old edition; cf E2.5 p. 62)

3. EFFECTIVENESS - TRADITIONAL ("PURE") APPROACHES

Effectiveness - the degree to which an organization realizes its goals (which may be multiple)
Efficiency - amount of output produced for a given unit of input

Q - Are effectiveness and efficiency the same thing? Find counterexamples of

an organization that is effective but not efficient
an organization that is efficient but not effective

The three traditional approaches to effectiveness are related to the model of an organization as an open system. The three approaches are each associated with the output, input, and internal process of the organization, respectively.

Exhibit: Traditional approaches to effectiveness (Daft E2.7 p. 65)

1. Goal Approach (associated with OUTPUT)

Emphasizes the ability of organization to achieve its operating goals.

PRO:

straightforward approach, especially when goals are measurable
often appropriate for for-profit irganizations (can use profitability, market share,...)

CON:

goals are often multiple & conflicting
goals not always easy to identify & to measure, especially for not-for-profit organizations (EX: "public safety" as a police department goal)

MORE ON GOAL MULTIPLICITY & INCONSISTENCY (in relation to the Goal Approach)

The following exhibit illustrates the typical multiplicity & inconsistency of goals of business organizations.

Exhibit: Reported goals of U.S. corporations (Daft E2.8 p. 66)

Multiple operative goals are often conflicting. EX: profit (return to stockholders) versus market share (which may mean reinvesting profits into R&D, advertising, etc., which reduces profit)

Therefore organizations use standard techniques for managing multiple & conflicting goals, including

bargaining: when managers disagree about which of multiple inconsistent goals to pursue, bargaining may lead to a coalition (= alliance among managers who agree on goals)
satisficing: accept a satisfactory, rather than optimal, level of performance on any single goal ("satisfice" was coined from "satisfy" + "suffice")
sequential attention: attend to a goal for a period of time, and then turn to other goals
priority setting: define preference ordering among goals

Q - A student who chooses social activities and work for money over studies throughout most of the semester and then concentrates on studying as final exams approach is managing conflicting goals by which standard technique?

Q - How does one call an alliance among several managers who agree on organizational goals?

Q - What does "satisficing" mean?

2. System Resource Approach (associated with INPUT)

Emphasizes the ability of the organization to acquire scarce & valued resources.

Indicators of system resource effectiveness:

bargaining position: acquiring scarce resources
correct perception and interpretation of the environment
ability to respond to environmental changes

PRO:

useful when other indicators of performance are unavailable (EX: quality of a university measured as amount of research grants, acquisition of top faculty, average SAT score of entering students)

CON:

assessment of effectiveness is indirect (EX: police department has acquired 3 new cruisers; but did the crime rate go down?)

3. Internal process approach (associated with INTERNAL PROCESS)

Emphasizes internal health & efficiency.

Indicators reflect 2 different perspectives:

human relations perspective: team spirit, positive work climate, good communications, good "atmosphere"
economic efficiency perspective: given costs of Input (I) and Output (O), measured as O/I

Example of the economic efficiency perspective:

Honda produces 870 cars per day with 2423 workers -> O/I = 0.36 c/w per day
Jeep produces 750 cars per day with 5400 workers -> O/I = 0.14 c/w per day
Thus Honda is more efficient than Jeep

PRO:

consistent with current emphasis on quality (EX: Deming approach)

Exhibit: The Deming Approach (Daft old edition)

human relations perspective consistent with current trend of empowerment of human resources

CON:

internal health often subjective (elements are hard to quantify)
does not consider impact of the organization on external environment

Q - The degree to which an organization achieves its goals is its ___ . (EFFICIENCY/EFFECTIVENESS?)

Q - Two colleges of comparable size are located in adjacent towns. The admissions office at College A has been telling prospective students that College A is better than College B because their freshman class has an average SAT score 23 points higher than the freshman class at College B. Which effectiveness approach is the admissions office of College A using?

Q - In evaluating the effectiveness of professors, universities are more likely to use the number of scholarly publications rather than their teaching ability. Why is this?

Q - Managers at the PETSEC Corporation believe that efficiency is the key to success. Therefore, they instituted a piece-rate incentive program to increase productivity. This is an example of which traditional approach to effectiveness?

Q - The system resource approach emphasizes the ____ of an organization. (INPUT/OUTPUT/TRANSFORMATION PROCESS?)

4. EFFECTIVENESS - BALANCED APPROACHES

1. Stakeholder (aka Constituency) Approach

A stakeholder is any group (within or outside the organization) that has a stake in the organization's performance
NOTE: let us not confuse a "stakeholder" with a "stockholder" or a "steakholder"!

Exhibit: Effectiveness criteria from the viewpoints of different stakeholders (Daft p. 69)

EX: How does it apply to a university?

Exhibit: Stakeholder approach applied to a university (Daft old edition)

Minicase: Delta Airlines (Daft p. 70). Illustrates how CEO Allen's cost-cutting efforts pleased stockholders but alienated employees and damaged the reputation of the firm in Atlanta.

PRO:

it is a broad view of effectiveness
it does consider the external environment

CON:

hard to weigh different criteria to obtain single indicator
difficult to satisfy all criteria simultaneously

Q - The strength of the constituency (aka stakeholder) approach is that it takes a broad view of effectiveness and ___ ?

2. Competing Values Approach (Quinn & Rohrbaugh)

In Q&R's research experts rate indicators of effectiveness for similarity; statistical analysis produces 2 underlying dimensions:

FOCUS: internal (emphasis on efficiency & well being of employees) <--> external (emphasis on well being of organization itself with respect to its environment)
STRUCTURE: stability (emphasis on efficiency & top-down control) <--> flexibility (emphasis on learning & change)

Putting these 2 dimensions together produces 4 models representing different emphases on basic values: the open system model, the rational goal model, the internal process model, and the human relations model.

Exhibit: Four models of effectiveness values (Daft E2-8 p. 66)

Exhibit: Effectiveness values for 2 organizations (Daft E2-9 p. 67)

Minicase: Ford Motor Company (Daft old edition p. 68). The company has shifted to a growth-oriented strategy since 1994, resulting in an increase in domestic share of 7% and progress in other countries. This illustrates a shift from the rational goal model to the open system model.

PRO:

integrates different criteria into single perspective
aknowledges simultaneous coexistence of opposing values with different priorities depending on circumstances

Q - The Stevens Corporation has goals of growth and resource acquisition. In the competing values approach to effectiveness, the organization would be described primarily by which model?

Q - A recent article in the DTH States: "Chapel Hill-Carrboro schools have long been regarded as the best in the state, and a comparison of funding, salaries and test scores with county schools seems to substantiate that belief." What approach(es) to measuring organizational effectiveness is the author of the article using?

Last modified 24 August 2001