Organizational Effectiveness

Chapter 13 Organizational Effectiveness

Organizational Effectiveness “An organization is not the sum of its parts or functions. It is possible to assess the effectiveness of a program or the use of service volunteers in an organization; however, such assessments do not necessarily reveal much about overall organizational effectiveness.” —Herman & Renz, 1999, p. 108

Effectiveness vs. Efficiency Effectiveness is the extent to which operative goals can be attained. Efficiency is the cost/benefit ratio incurred in the pursuit of those goals. —Steers & Black, 1994, p. 330

Effectiveness and Efficiency in Organizations

How Do You View It? Which, in your opinion, is more important for an organization— efficiency or effectiveness?

Models of Organizational Effectiveness Goals model System resource model Process model Multiple constituency model Competing values approach

Illustration of Models of Organizational Effectiveness

Goals Model Effectiveness is the degree to which an organization has achieved its goals Two conditions for this model: – Goal must be identifiable – Organizational performance must be clearly measurable

Conditions may not be valid for all types of organizations

Meaningfulness of Goals Model The model is meaningful in organizations where goals are clearly articulated, where they are stable, and where organizational performance can be objectively measured. The model is not meaningful for organizations that do not possess clearly defined goals or whose goal attainment cannot be objectively measured.

System Resource Model Effectiveness is the degree to which an organization is able to exploit its environment in the acquisition of scarce and valued resources. The model quantifies one element (i.e., inputs, or resources) and uses it as a substitute measure for another element (i.e., outputs, or goal attainment) that is less easily quantifiable.

Different Forms of Capital Physical capital Human capital Organizational capital Financial capital

How Do You View It? Which form of capital do you think is most important for the organization? Could the organization survive without any one of them?

Applicability of the System Resource Model Applicable for professional/human service organizations whose output cannot be objectively measured Applicable for volunteer, nonprofit organizations because the degree to which they attract financial support is a measure of effectiveness Less applicable for public-sector and thirdsector organizations, whose inputs are underwritten by a superior authority

Process Model Effectiveness is the degree to which an organization’s processes are internally logical, consistent, and without friction. The organization is doing what is rational in the context of its goals and environment.

Potential Problem with the Process Model Danger lies in treating a process as the one best way to do something, thus making it an end in itself.

Multidimensionality of Organizational Effectiveness To appraise the effectiveness of an organization completely, it may be necessary to use all three models. Different programs within an organization may be evaluated with different models.

How Do You View It? Do you believe sport organizations, such as the NCAA, NFL, NBA, or International Olympic Committee, are effective?

Multiple-Constituency Model Different constituents of an organization have different goals and processes. Multiple perspectives and multidimensionality of effectiveness.

Constituents Owners Managers Employees Clients Suppliers Other stakeholders

Illustration of the Multiple-Constituency Model

Competing Values Model Multiple perspectives and subjective goals mean that issues surrounding effectiveness can be framed as a set of competing values: – Internal vs. external – Flexibility vs. stability – Ends vs. means

Emphasis of Three Dimensions of Competing Values Attention orientation—is orientation internal or external? Structural preferences—are preferences for flexibility or control; for centralization or decentralization? Means–ends dichotomy

Four Models of Effectiveness Human relations model: – Flexibility and internal focus

Internal process model: – Control and internal focus

Open system model: – Flexibility and external focus

Rational goal model: – Control and external focus

Illustration of the Competing Values Model

Competing Values Model Defined “It is not so much a theory of organizational effectiveness but more an account of where managers put their major emphasis in conducting the affairs of an organization, which by implication tells us something about how they evaluate its effectiveness.” —Rollinson, 2002, p. 474

Paradoxical Nature of Organizational Effectiveness Organizational paradox An effective organization addresses the different perspectives of its various constituents and engages in contradictory activities

Primacy Among Multiple Perspectives Relativistic perspective Power perspective Social justice perspective Evolutionary perspective

Prime Beneficiary Approach When debating the primacy of multiple perspectives and multiple constituencies, focus on the prime beneficiary of the organization. An effective organization attempts to satisfy contradictory expectations only with a view to increase payoffs to its prime beneficiary.

Overview of Organizational Effectiveness In choosing the criteria of effectiveness for their organization, managers should focus on closeness to the final payoff. A criterion that is more closely related to the goal should be selected over those more remotely connected.