Recap

1. Recap

2. Organizational Effectiveness • What is OE? • Why is it Important? • Approaches to Study OE • Goal Attainment Approach • Systems Approach • Strategic Constituencies Approach • Competing Values Approach • Comparing the Approaches

3. What is OE? • Indian Oil Corporation/ONGC? Largest Profits? • Reliance? Shareholder Value? • TATA STEEL? Lowest Cost Steel Producer, 5th Largest Steel Company? Value Based Company? • TVS Group? Highest Productivity? Winner of Deming Award? Strong systems and Processes? • Bennet Coleman? Profitability with Social Responsibility? • L&T? Pioneers in Engineering? • BCCI? For producing a world beating team and richest Board? For managing the constituencies?

4. What is OE? • It is there, but difficult to define • Structure influences OE • No universal agreementon what OE means

5. Early Approaches to OE • Degree to which organization realized its’ Goals Whose Goals? Long Term or Short Term Goals? Actual Goals or Official Goals?

6. OE Criteria (Goal Based)

7. So, What is OE? • No operational definition? True, from Research Perspective But, used operationally Some consensus emerging Multiple Criteria To evaluate different functions Means and Ends

8. Why is it Important? • To an aspiring employee? • To an investor • To an employee? • To a Customer? • To a Creditor? • To the Community?

9. The Goal Attainment Approach • Organizations exist to achieve goals • OE, therefore, must be appraised in terms of accomplishment of ‘Ends’ rather than ‘means’ • It is the ‘bottom line’ that counts • Profit Maximization, Victory in Battle, Winning a Game, Restoring a patient’s good health

10. The Goal Attainment Approach • Organizations have ‘Ultimate Goals’ • These ‘Goals’ are identified and well defined to be understood • Must be few enough to be manageable • There must be ‘consensus’ on these goals • Progress towards these Goals must be measurable Assumptions:

11. The Goal Attainment Approach • Key Decision Makers set the Goals • Measurement criteria put in place • MBO – SMART & Participative Goal Setting Making it Operational:

12. The Goal Attainment Approach • Whose Goals? Top Management? Where does ‘Top Management’ end? Dominant Coalition? • ‘Official’ or ‘Actual’ Goals? • ‘Short Term’ or ‘Long Term’ Goals? • Multiple conflicting Goals? Different Interest Groups? Quality vs Cost? • How to prioritize? What if the structure/hierarchy changes? • Goals around past accomplishments? • Are Goals created mainly to placate the dominant stake holder? Objections:

13. The Goal Attainment Approach • Problem lies with identification and measurement • More relevant if cross section of organization involved in Goal Identification, and not only top management • Including ‘actual goals’ by observing behavior of members • Recognizing that organizations pursue both short term and long term goals • Insisting on SMART goals • Viewing Goals as dynamic Value:

14. The Systems Approach Acquire Input Engage in Transformation Process Generate Output • Goal Attainment only a partial measure of effectiveness • Organization should also be judged on its’ ability to acquire inputs, ability to transform, channel the outputs, maintain balance and stability

15. The Systems Approach Acquire Input Engage in Transformation Process Generate Output • In the ‘Systems Approach’, end goals are not ignored • End Goals are only one element of a complex set • Systems Approach emphasize criteria that will emphasize long term survival • Focuses on ‘means’ rather than ‘ends’

16. The Systems Approach Assumptions: • Organizations are made up of inter-related sub parts • Sub-Parts can affect the whole system • Effectiveness requires awareness and successful interaction with environmental constituencies (Suppliers, Customers, Government) • Survival requires steady replenishment of resources (R/M, Men, Product Lines, Customers)

17. The Systems Approach Mining Lease, Campus Recruitment, Route Licensing Design to Market Time, Product Development Making it Operative: Relations with Environment (for replenishment of resources, favorable receipt of outputs) Flexibility of Response to Changes Factors Efficiency of Input-Output transformation Clarity of Internal Communication ICS Chain Level of Conflict

18. The Systems Approach Making it Operative: Critical System Criteria (i.e.Input, Transformation, Output) can be converted into OE Measures e.g.

19. The Systems Approach Making it Operative:

20. The Systems Approach Problems: • Measurement – Measuring ‘Ends’ is easier • Do ‘Means’ really matter? • Focus is on ‘Means’ to OE rather than OE itself Value to Managers: • Less prone to look into immediate future • Awareness of interdependency in an organization • Where the ‘Ends’ are vague

21. The Strategic Constituencies Approach • An effective is one that satisfies the demands of constituencies in the environment from whom it requires support for survival • PSU, Private Sector, NGO, Public Utility, Media

22. The Strategic Constituencies Approach Assumptions: • Political Arena • Vested Interests • Control of Resources OE = How successful an Organization has been in satisfying the critical constituencies, upon whom future depends • Identify Critical Constituencies • Assess their preference pattern • Satisfy those demands

23. The Strategic Constituencies Approach Making it Operative: • Dominant Coalition • Combine and Synthesize the list to arrive at critical constituencies • Relative Power of Each • Identify expectations • Preference Order (Common Interests, Eliminate Incompatible, Assigning Relative Weights to Constituencies) Problems: • Changing Environment • Strategic and Almost Strategic? • Dominant Coalition – Different Critical Constituencies • How to ‘Measure’?

24. Competing Values The criteria you value and use in assessing OE, depends on who you are, and whose interest you represent • An integrating Approach (1983) • Identify all Key Variables of OE • Determine how the variables related • No “best criterion” to measure OE • OE is a “subjective concept” • Goals or criterion that an evaluator chooses, depends upon his own values, interests and preferences • The preferences can be diverse • But they can be consolidated and organized • There are common elements underlying comprehensive list of OE Criteria • Elements are combined in such a way as to create basic sets of competing values

25. Competing Values • Three sets of competing Values • Flexibility vs Control • People (Internal) vs Organization (External) • Means vs Ends • 30 Criteria • Search for common themes • Three-D Space • Three sets of values combine to form 8 Cells • Combine 8 Cells into distinct models • 4 Diverse Models or definitions of Organizational Effectiveness

26. 8 Cells Flexibility Means People Organization Ends Control

28. Flexibility Open Systems Model Human Relations Model Ends: Skilled Work Force Means: Flexibility Means: Cohesive Work Force Ends: Acquisition of Resources Organization People Means: Availability of Information Ends: Efficiency & Productivity Means: Planning Ends: Stability Rational Goal Model Internal Processes Model Control

29. Open Systems Model Human Resources Model Rational Goal Model Internal Process Model

30. COMPETING VALUES Flexibility Open Systems Model Human Relations Model Participation, Conflict Resolution & Consensus Building Adaptation & Innovation People Organization Defining Responsibility, Measurement & Documentation Productivity & Profit Rational Goal Model Internal Process Model Control

31. Making it Operational: • Dominant Constituencies delineate the strategic constituencies • Importance of constituencies on 8 set of values • Amoebagrams: help management focus on the set of values where the strategic constituencies agree/disagree Strategic Constituencies and Organization's Life Cycle Stage OE: The degree to which an organization meets its’ goals (short term and long term), the selection of which reflects the strategic constituencies, the self interest of the evaluator and the life stage of the organization

32. Flexibility Open Systems Model Human Relations Model Ends: Skilled Work Force Means: Flexibility Means: Cohesive Work Force Ends: Acquisition of Resources Organization People Means: Availability of Information Ends: Efficiency & Productivity Means: Planning Ends: Stability Rational Goal Model Internal Processes Model Control

33. Organizational Design Options

34. Organizational Design Options Structure Elements of a Structure • Autonomy • Delegation • Differentiation • Integration • Professionalization • Span • Specialization • Standardization • Vertical Span • Complexity • Formalization • Centralization

35. Does a study of Ozal Structures give a pattern? Can we have a meaningful number of such patterns? Can we configure elements into these patterns? Is there a relationship amongst elements within each pattern? If, there exists, such manageable number of such patterns (configuration of elements) then, we have an approach to study organizational design, and, perhaps, suggest appropriate designs suited to an organization’s situation and circumstances

36. No universally accepted framework for classification of organizations Henry Minzberg’s Classification • Five Basic Parts to any Organization • The Operating Core • The Strategic Apex • The Middle Line • The Techno-Structure • The Support Staff

37. Strategic Apex Middle Line Support Staff Techno Structure Operating Core

38. Any of these 5 parts can dominate the organization Depending on which part is in control, a given structural configuration (design) is to be used Therefore, 5 distinct design configurations • Simple Structure • Machine Bureaucracy • Professional Bureaucracy • Divisional Structure • Adhocracy Each is a preferred design under certain conditions

39. The Simple Structure Strategic Apex Support Staff Middle Line Techno Structure Operating Core

40. The Simple Structure • Small entrepreneurships • SMEs • Structure not elaborated • Low Complexity • Little Formalization • Centralized Authority / Power • Flat with organic core • Informal decision making • Wide span of control

41. The Simple Structure • Simplicity • Fast, Flexible, Minimal Maintenance Cost • Clear Accountability • Goal Clarity • Limited Applicability (Die or Expand) • Vulnerable to abuse of authority • Small Organization • Simple and dynamic environment • Hostility or a crisis • Simple Environment (Easy to Comprehend by One Person) • Organic Core (Easy adaptation to dynamic environment)

42. The Machine Bureaucracy Strategic Apex Techno Structure Middle Line Support Staff Operating Core

43. The Machine Bureaucracy • Standardization • Routine Operating Tasks • Formalized Rules and Regulations • Tasks grouped in functional departments • Centralized Authority • Decision making through a chain of command • Sharp distinction between line and staff activities

44. The Machine Bureaucracy • Standardized activities with high efficiency • Economies of scale, avoid duplication of personnel • Low cost middle and low level manpower • Standardized operations and high formalization result in high centralization • Sub-Unit Conflicts • Rule Bound • Difficult to change • Large Organizations • Stable Environment • Routine Technology • Mass production firms • Service oriented organizations

45. Chairman of BOD & CEO Director (Projects) Director (HR) Director (Technical) Director (Finance) GM (Treasury) GM(IR) GM (Cost) GM(T&D) GM (Accounts) GM (Compensation) GM(OD) GM (Investments) Managing Director Managing Director GM (Finance) Functional Expertise

46. The Professional Bureaucracy Strategic Apex Middle Line Techno Structure Support Staff Operating Core

47. The Professional Bureaucracy • Operating Core consists of Professionals • Need for hiring highly trained specialists • Standardization with decentralization • Hospitals, Management Schools, Polyclinics, Consultancies • Social Specialization (possession of individual skills) vs Individual Socialization (division of labor) • Power with operating core • Operating core has critical skills that organization needs, therefore, autonomy, provided thru decentralization

48. Strengths & Weaknesses • Can perform specialized jobs with efficiency of Machine Bureaucracy • Autonomy • Sub-Unit Conflicts When Appropriate • Large size • Complex and Stable Environment • Routine Technology, internalized through professionalization

49. FORE School of Management Operating Core Director ACP (Marketing) ACP (Operations) ACP (Finance) ACP (HRM & OB) HRM1 Gen Finance HRM2 Cost OB1 General Fin OB2 MB Library Exam MDP CFA Support Staff

50. The Divisional Structure • Power lies with middle management • A set of autonomous units, each a m/c bureaucracy • Division Managers have greater control (Autonomous Units) • Autonomy within given parameters • The Divisions are organized into functional groups with high division of labor, high formalization and centralized authority in DM