This document discusses the role of strategic direction in organizational design. It outlines that top management's primary responsibility is to determine an organization's goals, strategy, and design to adapt to a changing environment. This involves assessing opportunities and threats, defining strategic intent and specific operational goals, and designing the organization to achieve these goals. The strategic direction then affects organizational design, with different strategies like low-cost leadership requiring different designs than those emphasizing differentiation.

1. Role of Strategic
Direction in
Organizational Design

2. INTRODUCTION
• An organizational goal is a desired state of affairs that the organization attempts to reach. Top managers give direction to organizations;
• This is one of manager’s primary responsibilities is to potion their organizations
• For success by creating goals and strategies that can keep the organization competitive.
• Direction alters how organizations should be designed.

3. Top management’s primary responsibility: determine an organizations
goals, strategy, and design, thereby adapting the organization to a changing
environment.
Direction (Goal setting Process)
1) Assessment of Opportunities and Threats (Both internal and external
environments).
2) Define Strategic Intent: Overall mission/goals fit to the previous
environmental assessments.
A. Formulate Specific Operational Goals: How to accomplish
overall mission.
3) Organizational Design: Design the Organization to achieve these
specific goals.

4. 4) Effectiveness / Outcomes : Measure results and feed back into the international situation analysis.
Organizational Purpose: Organizations exist for a purpose.
Strategic Intent: Means that all the organizations energies and resources and directed towards a focused, unifying, and compelling overall goals. [Microsoft’s
early goal: “Put a computer on every desk in every home”]
Mission: The overall goal for an organization, the reason for its existence. Also called official goals, the purpose is to communicate to both internal and external
stakeholders, what the organization is trying to achieve.
Organizational Purpose: Organizations exist for a purpose.
➢ Strategic Intent: Means that all the organizations energies and resources and directed towards a focused, unifying, and compelling overall goals. [Microsoft’s
early goal: “Put a computer on every desk in every home”]

5. ✧ Mission: The overall goal for an organization, the reason for its existence. Also called official goals, the purpose is to communicate to both internal and
external stakeholders, what the organization is trying to achieve. Also provides legitimacy to any potential stakeholders.
✧ Competitive Advantage: Refers to what sets the organization apart from other and provides it with a distinctive edge for meeting customer or client needs in
the marketplace. Apple’s Competitive advantage is its brand recognition and simplicity
Competitive Openings: Any opportunity to gain to upper hand in the industry. If the market is an ocean, where is the best place to fish?
→ Red Ocean : Companies compete against each other is rowed spaces.
→ Blue Ocean : Companies find empty spaces that their company can fill. [Nintendo Wii targeted the general audience].

6. Core Competence: Something the organization does especially well in comparison to its competitors. Examples include: superior RD, excellent customer service,
or manufacturing efficiency. [Amazon’s CC is fast shipping]
➢ Operating Goals: Designate the ends sought through the actual operating procedures of the organization and explain what the organization is actually trying to
do. They describe specific measurable outcomes and are often concerned with the short run. [Performance goals, resource goals, market goals, employee
development goals, market goals, etc.
✧ Overall Performance
◆ Profitability reflects the overall performance of “For-Profit” organizations.
→ Growth: increases in sales or profits over time.
→ Volume pertains to total sales of the amount delivered.
◆ Other Metrics: NGOs and similar organizations have goals that specify the delivery of services to clients or members. Some will also use growth.

7. ✧ Resource Goals: Pertain to the acquisition of needed material and financial resources from the environment. [Walmart wants to hire every veteran who wants a
job. Starbucks partnered with India’s Tata group to acquire Arabica coffee beans].
✧ Market: The market share of market standing desired by the organization. Primarily the responsibility of marketing and sales. [L’Oreal wants to double its
current clientele, adding a billion consumers by 2020.]
✧ Employee Development: Pertains to the training, growth, and safety of employees, both managers and workers [Merryl Lynch Junior partners should work on a
wide variety of assignments for their development].
✧ Productivity: Concerned with the amount of output achieved from available resources. Normally stated as “cost per unit of production / units produced per
employee.” [Illumination entertainment uses productivity goals to make animated films at half the price of larger studios.]
✧ Innovation and Change: Pertain to the internal flexibility and readiness to adapt to unexpected changes in the environment. Often defined in relation to
development of new products and services. [P&G made a goal of getting 50% of their innovation from

8. ◆ Effect of Strategies on Organizational Design
→ Low Cost Leadership: Mechanistic efficiency to organizational design. Strong, centralized authority.
→ Differentiation: Structure is fluid and flexible with strong horizontal coordination. Employees are empowered to take risks.
→ Prospector: Similar to differentiation.
→ Defender: Efficiency approach like low-cost leadership.
→ Analyser: Mixed of characteristics, fluid like its strategy.
→ Reactor: No direction or clear approach to design.
✧ Other Contingency Factors Affecting Design
◆ Strategy: Mechanistic vs. Organic
◆ Environment: Stable vs. Rapidly Changing
◆ Size/Life cycle: Small vs. Large.
◆ Technology: Production vs. Creative Production

9. Four Possible Measurement Approaches
◆ The Goal Approach
◆ The Resource-Based Approach
◆ The Internal Process Approach
◆ The Strategic Constituents Approach
✧ Goal Approach: Identify an organization’s output goals and assess how well they have been attained.
◆ Indicators : Draws heavily on the organization’s operating goals.
→ Profitability: Positive gain from business operations or investments after expenses are subtracted.
→ Market Share: The proportion of the market the firm is able to capture relative to competitors.
→ Growth: Ability to increase sales, profits, client base over time.

10. ✧ Resource-Based Approach: Input focused. The ability to obtain scarce and valued resources and successfully integrate and manage them.
◆ Indicators : Obtaining and successfully managing resources.
→ Bargaining Position: the ability of the organization to obtain from its environment scare and valued resources, both tangible and intangible.
→ Perceiving and correctly interpreting the real properties of the external environment.
→ Ability of managers to use tangible(supplies, people, etc.) and intangible(knowledge, corporate culture) resources and capabilities in activities to achieve
performance.
→ Ability to respond to changes in the environment.

11. ✧ Internal process Approach: Effectiveness is measured as internal organization health and efficiency. The external environment is not considered.
◆ Indicators : One indicator is economic efficiency, but a lot of focus is on the human relations approach to organizations.
→ A strong, adaptive corporate culture and positive work climate.
→ Confidence and trust between employees and management.
→ Operation efficiency, minimal input to maximum output.
→ Undistorted horizontal and vertical communication.
→ Employee development and growth.
→ Organization-wide cooperation, conflict management.

12. ✧ Strategic Constituents Approach: Measures effectiveness by focusing on the satisfaction of critical stakeholders.
◆ Indicators: Stakeholders and classified into groups and their effectiveness criteria. Differs per organization.
→ Owners: Financial return
→ Employees: Pay, good supervision, worker satisfaction.
→ Customers: Quality of goods and services
→ Creditors: Creditworthiness
→ Community : Contribution to Community affairs.
→ Suppliers : Satisfactory transactions.
→ Government : Obedience to laws and regulations.

13. ➢ An Integrated Effectiveness Model
✧ Competing values model tries to balance a concern with various parts of the organization rather than focusing on one part. It takes into considering that
organizations do many things and have many outcomes. [Nasa’s Challenger Explosion / BP Deep water Horizon, different viewpoints cause issues, this model
wants to take these into consideration.]
◆ Indicators (Seven Value Dimensions)
→ Focus: What are the dominant-values focused on?
✓ Internal: Employee wellbeing and efficiency.
✓ External Organization’s wellbeing in relation to environment.
→ Structure: Which is the dominant structural consideration?
✓ Stability : Efficiency and top-down control.