Organizational Effectiveness

ORGANIZATIONAL EFFECTIVENESS

An organization is a value-creating tool that can be used simultaneously by different groups of stakeholders to accomplish a variety of goals– Gareth Jones.

WHAT IS O.E.?  Organizational

Goals= reasons for existence

org’s and the outcomes it seeks to achieve.  Organizational Effectiveness=degree to which an org. realizes its goals.  Organizational Efficiency=amount of resources used to produce a unit of output.

CONTINGENCY EFFECTIVENESS APPROACHES    

Goal Approach Resource-based Approach Internal process Approach Balanced Effectiveness Approaches  

Stakeholder Approach Competing Values Approach

GOAL ATTAINMENT APPROACH    

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Org’s effectiveness must be appraised in terms of accomplishment of ends rather than means. Profit maximization is a popular criteria. Orgs must have ultimate goals that are tangible, measurable, verifiable.(TMV) MBO most explicitly uses goal approach. Problems:Whose goals will be the ultimate goals? Official goals may be different from actual goals. Short-term goals are different from long-term, so which will be used to measure effectiveness. Due to multiple goals there may be zero consensus. Goals may not direct behaviour in some orgs.

RESOURCE-BASED APPROACH 

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Effectiveness of org. is defined as its ability to obtain scarce and valued resources, successfully integrate and manage them. Indicators of effectiveness are:    

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Bargaining position—org’s ability to obtain from environment scarce and valued resources. Ability of decision makers in org to correctly interpret external environment. Ability of managers to use resources to achieve superior performance. Ability of org to respond to changes in environment.

Usefulness –valuable approach when other performance indicators are difficult to obtain( as in social welfare and not for profit orgs.) Disadvantages –vaguely considers customers in external environment.

INTERNAL PROCESS APPROACH 

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Effectiveness is measured as internal organizational health and efficiency. This does not consider the external environment Indicators of effective org are:       

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Strong corporate culture, positive work climate Team spirit Confidence, trust, communication between workers and management. Decision making near sources of information Undistorted horizontal & vertical communication Rewards to mgrs for performance, growth, subordinate development Conflicts resolved in interest of organization

Usefulness—orgs believe happy, committed, actively involved employees and positive corporate culture are good measures of effectiveness. Disadvantage—output and org-environment relation are not evaluated.

STAKEHOLDER/CONSTITUENCY APPROACH  

Stakeholder is any group that has a stake in the org’s performance. Indicators :        

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Stakeholder Owners Employees supervision Customers Creditors Community Suppliers Government

effectiveness criteria financial return worker satisfaction, pay, quality of goods & services creditworthiness contribution to community affairs satisfactory transactions obedience to laws, regulations

Usefulness –takes broad view of effectiveness, includes social responsibility in its approach, includes multiple criteria.

COMPETING VALUES APPROACH Developed by Robert Quinn & John Rohrbaugh  A comprehensive list of performance indicators was found to represent competing management values in organizations.  Indicators : 

 Organizational

focus dimension— internal/external Human Relations Systems Model  Organizational structureOpen ’’ --stability/flexibility Model Focus  Structure Internal Process model

Rational Goal Model

OPEN SYSTEMS MODEL External focus & flexible structure  Primary goals- growth and resource acquisition.  Sub-goals- flexibility, readiness, positive external evaluation  Dominant value- good relationship with environment to acquire resources and grow. 

RATIONAL GOAL MODEL External focus & structural control  Primary goals- productivity, growth,profit  Sub-goals – internal planning, goal setting  Similar to goal-based approach 

INTERNAL PROCESS MODEL Reflects values of internal focus & structural control.  Primary goal – stable organizational setting  Sub-goals- efficient communication, information management, decision making. 

HUMAN RELATIONS MODEL Incorporates values of internal focus &flexible structure.  Primary goals – human resource development  Sub-goals--cohesion, morale, training 

USEFULNESS OF COMPETING VALUES APPROACH Integrates diverse concepts of effectiveness into a single perspective.  Opposing values are shown to be existing at same time, but all do not get equal priority.  Dominant values change with new environmental demands/ new top leadership.  Young org—emphasis on flexibility, innovation, resource acquisition, satisfaction of external constituencies. Stability not imp.  Established org—values are productivity ,profits 