Organizational Effectiveness

Organizational effectiveness
• Organizational effectiveness can be defined as the efficiency
with which an association is able to meet its objectives.
• This means an organization that produces a desired effect or
an organization that is productive without waste.
• In other words organizational efficiency is the capacity of
an organization to produce the desired results with a
minimum expenditure of energy, time, money, and human
and material resources.
• The desired effect will depend on the goals of the
organization, which could be, for example, making a profit
by producing and selling a product.
• The main measure of organizational effectiveness for a
business will generally be expressed in terms of how
well its net profitability compares with its target
profitability.
• Additional measures might include growth data and
the results of customer satisfaction surveys.
• Highly effective organizations exhibit strengths across
five areas: leadership, decision making and structure,
people, work processes and systems, and culture.
• For an organization to achieve and sustain success, it
needs to adapt to its dynamic environment- Evaluating
and improving organizational effectiveness and
efficiency is one strategy used to help insure the
continued growth and development of an
organization.
• The organizational effectiveness points towards
effective , prudent and strategic use of all the
organizational resources, namely , Human,
Financial and Technological resources for creating
competitive advantage.
• The organizational effectiveness also calls for
creating sustainable growth and development by
taking care of not only the share holders'
expectations but also the expectations of other
stake holders.
• It also means that management takes the right
ethical decisions in the interest of all the stake
holders.
 Efficiency?
• Efficiency is the extent to which the organization minimizes
the cost of people and resources needed to carry out essential
operations.
• Business firms have many different types of costs, including
employee compensation, expenses for materials, supplies,
facilities, energy, inventories, shipping, marketing, and
services provided by vendors, subcontractors, and
consultants.
• Efficiency also depends on process reliability, which is the
extent to which work processes are conducted without
unnecessary delays, errors, or accidents.
• Key indicators of efficiency include the costs as a percentage
of revenues, costs relative to those of competing companies,
and employee productivity relative to labor costs.
 How to up Efficiency?
• There are many ways such as redesigning work processes, using
new technology, reducing the cost of energy or materials, reducing
excess inventory, and reducing the cost of labor or outsourcing jobs
to low wage countries.
• Efficiency is facilitated by relevant cultural values, including the
desirability of reliability, meeting deadlines, error-free performance,
adherence to rules and procedures, controlling costs, and
responsible use of resources (Miron, Erez, & Naveh, 2004).
• It is easier to improve efficiency when the organization's operations
are relatively stable for a considerable period of time rather than
constantly changing (Tushman & Romanelli, 1985).
• It is more difficult to improve efficiency if there are constraints on
the reduction of costs (e.g., mandated quality standards and safety
requirements, laws for minimum wages and benefits, requirements
for guaranteed employment, shortages of necessary inputs such as
materials or energy).
 Why do organizations need to or need
not be efficient?
• Cost Leadership Strategy- Efficiency is especially important when the
competitive strategy of the organization is to offer its products and services at
a lower price than competitors. This most common for generic products and
services that are viewed as commodities (e.g., chemicals, metals, paper,
cement, building materials, airlines, grocery stores, printing and duplicating,
fast food restaurants, consumer electronics).
• Efficiency is also very important for a firm with a few large customers who can
demand cost reductions.
• Efficiency is relatively less important when an organization is able to pass
along high costs to customers by increasing prices. Examples include
companies that have cost-plus contracts with a sole client such as the
government to provide a unique product or service, and organizations that are
the exclusive providers of a product or service that customers need regardless
of variations in the price.
• Likewise, an organization has less need to maintain a high level of efficiency if
it is highly subsidized by the government or a wealthy patron.
 Goal Approach
• The first extensively used approach in organizational
effectiveness is the goal approach.
• Its focus is on the output to figure out the essential operating
objectives like profit, innovation and finally product quality
• There are some basic assumptions for the goal approach.
a. One of them is that there should be a general agreement
on the specific goals and the people involved should feel
committed to fulfilling them.
b. The next assumption is that the number of goals is limited
c. Achieving them requires certain indispensable resources
(Robbins, 2003).
• The goal model is suitable only when these conditions are met.
 The System Resource Approach
• The second approach is named the system resource approach which pays
attention to the input of the figure.
• It explains the effectiveness from the point of view of the ability to obtain
necessary resources from the environments outside the organization
(Schermerhorn et. al., 2004).
• The application of system resource can be effective if a relation exists
between the resources which an organization receives and the goods or
services it produces
• This approach invites managers to consider the organization not only as a
whole but as a part of a larger group as well. The dominating attitude is
that any part of the activities of an organization has an effect on all other
parts (Mullins, 2008).
 The Process Approach
• The process approach which pays attention to the transformation
process and is dedicated to seeing to what extent the resources
are officially used to give services or produce goods
• By effectiveness, it is meant that the organization is internally
healthy and efficient and the internal processes and procedures in
that place are quite well-oiled.
• In an effective organization, there is no trace of stress and strain.
The members are completely part of the system and the system
itself works smoothly.
• The relationship between the members is based on trust,
honesty, and good will. Finally, the flow of information is on a
horizontal
• and vertical basis (Cameron, 1981)
• The collection of information and communication management is
of major importance here
 The Strategic Constituency Approach
• Based on this approach, effectiveness refers to the minimal
satisfaction of all of the strategic constituencies of the
organization.
• Strategic constituency involves all the people that are
somehow connected to the organization.
• These people may have different roles such as the users of
the services or products of the organization, the resource
providers, the facilitators of the organization’s output, the
main supporters and the dependents of the organization.
• This approach assumes an exhaustive attitude toward
effectiveness and evaluates the factors both in the
environment and within the organization