Organizational Effectiveness and Stakeholder Management

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Organizational Effectiveness and Stakeholder
Management

• KMBA 540

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Definitions of Organizations

• Social entity, goal directed, deliberately
  structured, identifiable boundaries (Daft)
• Response to and means of creating value that
  satisfies human needs. Embodies collective
  knowledge, values, and vision (Jones)
• Integration of specialized knowledge bases into a
  common task (Drucker)

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Organizations

• Human creations whose operations and products are
  results of the ways we govern them and of the
  social, institutional, and political structures
  within which they operate (i.e., their
  environments)
• Organizations are both products of these
  structures and de-stabilizers of these structures

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Trends and Tensions in Contemporary Organizations

• What do you think are the most significant
  challenges organizations are facing today?

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Essential Features of Organizations

• Open system input, transformation, output
• Subsystems boundary spanning, production,
  maintenance, adaptation, management
• Domains range of products and services produced
  (functions) for serving markets and customers
• Environmental Transactions dealing with factors
  outside the organizational boundaries

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Open Systems View of Organization
ENVIRONMENT
Raw Materials Resources
Products Services
Output
Transformation
Input
Organization
Production Maintenance Adaptation Management
Boundary Spanning
Boundary Spanning
Subsystems
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Assessing Organizational Effectiveness

• Goals approach
• Achieving organizational goals is being effective
• Official Goals Mission (broad and long term)
  provide legitimacy to public
• Operative Goals specific goals that direct
  behavior in the short term (what organizations
  are really doing)
• Official and operative goals often differ (e.g.,
  higher education prisons Wal-Mart)

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What are the benefits of setting goals?

• Guidelines for action
• Serve as constraints on actions
• Source of legitimacy
• Serve as standards for performance
• Source of motivation
• Rationale for organizing

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Areas of Organizational Goal Setting

• Management Performance and Development
• Employee Performance and Development
• Social Responsibility

• Market goals
• Innovation
• Productivity
• Physical and Financial Resources
• Profitability

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Problems with Goal Approach

• Multiple goals are set that conflict
• Whose goals receive priority?
• When should goals change?
• Individuals set goals not organizations process
  is political
• Goals are set and pursued through complex
  processes of bargaining among powerful coalitions
  of individuals in organizations

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Assessing Organizational Effectiveness

• External resource approach
• Evaluation of a firms ability to manage and
  control external environment
• Obtaining scarce and valued inputs
• Measured by quality and costs of inputs stock
  price quality of products/ services ROI
• Example Software firm hires the best engineers
  with competitive compensation university
  acquiring research faculty

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Assessing Organizational Effectiveness

• Internal Systems Approach
• Innovation and quick response to changes
• Measured by decision making time, product
  innovation rate, time to get new products to
  market, reduction of conflict and motivation
  problems
• Example 3M 25 of sales must come from
  products less than 5 years old

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Assessing Organizational Effectiveness

• Technical efficiency approach
• Ability to convert skills and resources into
  goods and services efficiently
• Measured by rate of reduction of defects,
  reduction of product costs and delivery times,
  increases in customer service and product quality
• Example TQM processes at Stanley Engineering
  Six Sigma Process at Motorola and GE

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Balanced Scorecard
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Areas of Balanced Scorecard

• Financial
• Cash flow analysis, income statement, balance
  sheet, financial ratios, budgets, EVA analyses
• Customer
• Monitor customer service, defections, changes in
  quality of customer
• Quality
• TQM, business process re-engineering, Six Sigma,
  waste prevention/reduction
• Employee Performance
• Performance evaluation methods

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Assessing Organizational Effectiveness

• Stakeholder Approach
• Stakeholders are any individuals, groups, or
  organizations that have an interest in the firms
  activities and ultimate survival
• Internal stakeholders owners or shareholders,
  employees, and managers
• External stakeholders customers, suppliers,
  government, unions, local community, general
  public, natural environment

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Managing Stakeholders

• Inducements and contributions balance
• Inducements are what the firm provides for
  stakeholder (e.g., employees receive wages)
• Contributions are what the stakeholder provides
  for the firm (e.g., employees provide effort,
  knowledge, physical labor, etc.)
• Firms would like to provide as little inducement
  as possible for adequate levels of stakeholder
  contribution and vice versa

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Managing Stakeholders

• Assess importance of stakeholders
• Power, legitimate rights, and urgency
• Assess potential for threat vs. potential for
  cooperation
• Opportunity, capacity, and willingness
• Determine appropriate strategies for managing the
  stakeholder

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Potential for Threat
Low
High

Supportive Stakeholder Get Involvement
Mixed Blessing Stakeholder Collaborative
strategies
High
Potential for Cooperation
Non-supportive Stakeholder Defensive strategies
Marginal Stakeholder Monitor
Low
Fringe stakeholders?
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Managing Fringe Stakeholders

• Radical Transactiveness (RT)
• Dynamic capability of organizations to identify,
  explore, and integrate stakeholders on the
  fringe poor, isolated, weak, non-legitimate,
  and non-human
• Result competitive imagination
• Generate disruptive innovations and creative
  destruction for imagining new business
  possibilities
• Capabilities Fan out and Fan in

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Managing Stakeholders

• Managing multiple goals of stakeholders
• setting priorities or preference ordering
• sequential attention
• bargaining and compromise
• satisficing
• At least minimal satisfaction of all current
  stakeholders is organizational effectiveness.