Organizational effectiveness

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Organizational effectiveness is a concept organizations use to gauge how effective they are at reaching intended outcomes. [1] Organizational effectiveness is both a powerful and problematic term. It may be used to critically evaluate and improve organizational activities; this is one of its strengths. However, the term has been noted as problematic as it means various things to different individuals. Furthermore, there are alternative methods for measuring organizational performance. [2] Organizational effectiveness embodies the degree to which firms achieve the goals they have decided upon, a question that draws on several different factors. [3] Among those are talent management, leadership development, organization design and structure, design of measurements and scorecards, implementation of change and transformation, deploying smart processes and smart technology to manage the firm's human capital and the formulation of the broader Human Resources agenda.

Contents

Economic Models of Organizational Effectiveness

In economics, organizational effectiveness is defined in terms of profitability and the minimisation of problems related to high employee turnover and absenteeism. [4] As the market for competent employees is subject to supply and demand pressures, firms must offer incentives that are not too low to discourage applicants from applying, and not too unnecessarily high as to detract from the firm's profit maximization capability. [4]

As organizational effectiveness translates across a broad array of organizational functions, several different models have been developed to achieve flexibility among organizations with different functions and objectives.

  1. The Goal-Attainment Approach determines organizational effectiveness by determining the degree to which a firm achieves the goals it has established. This model has a broad scope and calls for a quantitative evaluation of a firm's profit and productivity maximization, its shareholder value and its social and environmental impact. [3] This approach is subject to an assumption that organizations are rational, deliberate and goal-driven, and prioritize the result over the means of achieving organizational effectiveness. [5] Many researchers, nevertheless, contend that this paradigm is flawed since it merely presupposes that organisations are effective to the degree that they fulfil their objectives. Objectives, for example, may be seen as subjective and political since they represent the values and priorities of consultation. Furthermore, defining objectives can be difficult, which can impede measurement, and disparities in measuring methods can make comparing organisations difficult. Finally, organisations may be unable to undertake thorough impact evaluations capable of establishing causal attribution. [6]
  2. The Systems Resource Approach views the organization as an interrelation of subsystems that function together to affect an organization's desired outcomes. [7] Consequentially, if anyone sub-system performs poorly perform its role, the performance of the entire system is negatively affected. [8] Using this approach, organizational effectiveness is measured with reference to an organization's environmental inputs, the inter-relations among its constituent divisions, the degree of flexibility a firm has to respond to changes in the market, and the level of efficiency an organization has when delivering output. [9]
  3. The Strategic Constituencies Approach establishes that organizational effectiveness is determined by reference to its ability to satisfy the demands imposed by its major shareholders - or "constituents", from which it requires continued support to remain in existence. [10] This model assumes that an organization is composed of several political arenas with vested interests that compete for control over limited resources. [8] As the firm must satisfy the needs of these constituent parts to continue its existence, effectiveness is obtained by ensuring the needs and expectations of the strategic constituencies are fulfilled. [11] This model also accounts for changes in the surrounding environment, whereby an organization must strategically prioritize which constituencies are the most fundamental to its ongoing survival to operate effectively. [12]

Major approaches to Effectiveness

Multidimensional approaches

The multidimensional technique measures efficacy in several dimensions at the same time. It is frequently used in conjunction with the goal realisation approach and the system resource method. [13] The Competitive Value Framework is a version on the multidimensional method that covers the three value dimensions that are at the heart of most legitimate definitions. They are as follows: organisational focus, organisational structure, organisational means, and organisational goals. [14] In different situations, these multidimensional methods merely reflect an increasing realisation that, in the words of Starbuck and Nystrom, "organisations contain ambiguous, partially incomparable, and incongruous goals." [15]

Reputational approach

The reputational method combines validity requirements with voter satisfaction. The effectiveness of reputation measures is often measured based on the self-reported perceptions of consumers, workers, or outside professionals. [16]

Social Science Disciplines

Rapid advances in social sciences and technology aided by clever experimentation and observation are bringing several truths to the light of society. There are several disciplines of social sciences that help the OE Practitioner be successful.

Four of them are outlined below:

Application

The broader idea of organizational effectiveness is applied to non-profit organizations in making funding decisions. Foundations and other sources of grants and other types of funds are interested in the organizational effectiveness of those people who seek funds from the foundations. Foundations always have more requests for funds or funding proposals and treat funding as an investment using the same care as a venture capitalist would in picking a company in which to invest.

According to Richard et al. (2009) organizational effectiveness captures organizational performance plus the myriad internal performance outcomes normally associated with more efficient or effective operations and other external measures that relate to considerations that are broader than those simply associated with economic valuation (either by shareholders, managers, or customers), such as corporate social responsibility. [17]

Multiple dimensions

Scholars of nonprofit organizational effectiveness acknowledge that the concept has multiple dimensions [18] and multiple definitions. [19] For example, while most nonprofit leaders define organizational effectiveness as 'outcome accountability,' or the extent to which an organization achieves specified levels of progress toward its own goals, a minority of nonprofit leaders define effectiveness as 'overhead minimization,' or the minimization of fundraising and administrative costs.

Organizational effectiveness is evaluated within nonprofit organizations using logic models. Logic models are a management tool widely used in the nonprofit sector in program evaluation. Logic models are created for specific programs to link specific, measurable inputs to specific, measurable impacts. [20] Typically, logic models specify how program inputs production activities and outputs, such as services delivered, which in turn lead to impacts, such as improved beneficiary health.

See also

Related Research Articles

Industrial and organizational psychology "focuses the lens of psychological science on a key aspect of human life, namely, their work lives. In general, the goals of I-O psychology are to better understand and optimize the effectiveness, health, and well-being of both individuals and organizations." It is an applied discipline within psychology and is an international profession. I-O psychology is also known as occupational psychology in the United Kingdom, organisational psychology in Australia and New Zealand, and work and organizational (WO) psychology throughout Europe and Brazil. Industrial, work, and organizational (IWO) psychology is the broader, more global term for the science and profession.

ISO 14000 is a family of standards by the International Organization for Standardization (ISO) related to environmental management that exists to help organizations (a) minimize how their operations negatively affect the environment ; (b) comply with applicable laws, regulations, and other environmentally oriented requirements; and (c) continually improve in the above.

Strategic planning is an organization's process of defining its strategy or direction, and making decisions on allocating its resources to attain strategic goals.

<span class="mw-page-title-main">Business performance management</span> Processes to bring output into alignment with goals

Business performance management (BPM) is a management approach which encompasses a set of processes and analytical tools to ensure that an organization's activities and output are aligned with its goals. BMP is associated with business process management, a larger framework managing organizational processes.

Policy is a deliberate system of guidelines to guide decisions and achieve rational outcomes. A policy is a statement of intent and is implemented as a procedure or protocol. Policies are generally adopted by a governance body within an organization. Policies can assist in both subjective and objective decision making. Policies used in subjective decision-making usually assist senior management with decisions that must be based on the relative merits of a number of factors, and as a result, are often hard to test objectively, e.g. work–life balance policy. Moreover, Governments and other institutions have policies in the form of laws, regulations, procedures, administrative actions, incentives and voluntary practices. Frequently, resource allocations mirror policy decisions.

A balanced scorecard is a strategy performance management tool – a well-structured report used to keep track of the execution of activities by staff and to monitor the consequences arising from these actions.

Program evaluation is a systematic method for collecting, analyzing, and using information to answer questions about projects, policies and programs, particularly about their effectiveness and efficiency.

Policy analysis or public policy analysis is a technique used in the public administration sub-field of political science to enable civil servants, nonprofit organizations, and others to examine and evaluate the available options to implement the goals of laws and elected officials. People who regularly use policy analysis skills and techniques on the job, particularly those who use it as a major part of their job duties are generally known by the title policy analyst. The process is also used in the administration of large organizations with complex policies. It has been defined as the process of "determining which of various policies will achieve a given set of goals in light of the relations between the policies and the goals."

<span class="mw-page-title-main">Performance indicator</span> Measurement that evaluates the success of an organization

A performance indicator or key performance indicator (KPI) is a type of performance measurement. KPIs evaluate the success of an organization or of a particular activity in which it engages. KPIs provide a focus for strategic and operational improvement, create an analytical basis for decision making and help focus attention on what matters most.

<span class="mw-page-title-main">Capacity building</span> Process by which individuals or organizations improve their capability to produce, perform or deploy

Capacity building is the improvement in an individual's or organization's facility "to produce, perform or deploy". The terms capacity building and capacity development have often been used interchangeably, although a publication by OECD-DAC stated in 2006 that capacity development was the preferable term. Since the 1950s, international organizations, governments, non-governmental organizations (NGOs) and communities use the concept of capacity building as part of "social and economic development" in national and subnational plans. The United Nations Development Programme defines itself by "capacity development" in the sense of "'how UNDP works" to fulfill its mission. The UN system applies it in almost every sector, including several of the Sustainable Development Goals to be achieved by 2030. For example, the Sustainable Development Goal 17 advocates for enhanced international support for capacity building in developing countries to support national plans to implement the 2030 Agenda. 

Marketisation or marketization is a restructuring process that enables state enterprises to operate as market-oriented firms by changing the legal environment in which they operate.

The following outline is provided as an overview of and topical guide to business management:

<span class="mw-page-title-main">Logic model</span> Method of depicting causal relationships

Logic models are hypothesized descriptions of the chain of causes and effects leading to an outcome of interest. While they can be in a narrative form, logic model usually take form in a graphical depiction of the "if-then" (causal) relationships between the various elements leading to the outcome. However, the logic model is more than the graphical depiction: it is also the theories, scientific evidences, assumptions and beliefs that support it and the various processes behind it.

<span class="mw-page-title-main">Hybrid organization</span>

A hybrid organization is an organization that mixes elements, value systems and action logics of various sectors of society, i.e. the public sector, the private sector and the voluntary sector. A more general notion of hybridity can be found in Hybrid institutions and governance.

<span class="mw-page-title-main">Theory of Change</span> Methodology for social impact

Theory of Change (ToC) is a methodology or a criterion for planning, participation, adaptive management, and evaluation that is used in companies, philanthropy, not-for-profit, international development, research, and government sectors to promote social change. A Theory of Change of a social program defines its long-term goals and then maps backward to identify necessary preconditions.

In organizational theory, organizational analysis or industrial analysis is the process of reviewing the development, work environment, personnel, and operation of a business or another type of association. This review is often performed in response to crisis, but may also be carried out as part of a demonstration project, in the process of taking a program to scale, or in the course of regular operations. Conducting a periodic detailed organizational analysis can be a useful way for management to identify problems or inefficiencies that have arisen in the organization but have yet to be addressed, and develop strategies for resolving them.

Opportunity management (OM) has been defined as "a process to identify business and community development opportunities that could be implemented to sustain or improve the local economy".

Collaborative partnerships are agreements and actions made by consenting organizations to share resources to accomplish a mutual goal. Collaborative partnerships rely on participation by at least two parties who agree to share resources, such as finances, knowledge, and people. Organizations in a collaborative partnership share common goals. The essence of collaborative partnership is for all parties to mutually benefit from working together.

Constituent Voice is a performance management and measurement method designed as a continual improvement process developed by Keystone Accountability to enable organisations addressing social issues to improve their results by improving relationships with their constituents. Like customer satisfaction measurement, which it draws from, Constituent Voice treats measurement as an aspect of an intervention that not only provides metrics but contributes directly to outcomes by increasing the engagement of intended beneficiaries.

Charity assessment is the process of analysis of the goodness of a non-profit organization in financial terms. Historically, charity evaluators have focused on the question of how much of contributed funds are used for the purpose(s) claimed by the charity, while more recently some evaluators have placed an emphasis on the cost effectiveness of charities.

References

  1. ↑ Etzioni, Amitia. (1964). Modern Organizations. Englewood Cliffs, NJ: Prentice-Hall.
  2. ↑ Forbes, Daniel P. (June 1998). "Measuring the Unmeasurable: Empirical Studies of Nonprofit Organization Effectiveness from 1977 to 1997". Nonprofit and Voluntary Sector Quarterly. 27 (2): 183–202. doi:10.1177/0899764098272005. S2CID   145657794.
  3. 1 2 "A Practitioner's Guide to Organizational Effectiveness". AIHR. 2020-12-07. Retrieved 2022-03-27.
  4. 1 2 Oluleye, Francis (19 November 2010). "Reward economics and organisation: The issue of effectiveness". African Journal of Business Management. 5: 1115.
  5. ↑ Perrow, Charles (1961). "The Analysis of Goals in Complex Organizations". American Sociological Review. 26 (6): 854–866. doi:10.2307/2090570. ISSN   0003-1224. JSTOR   2090570.
  6. ↑ Mitchell, George E. (April 2013). "The Construct of Organizational Effectiveness: Perspectives From Leaders of International Nonprofits in the United States". Nonprofit and Voluntary Sector Quarterly. 42 (2): 324–345. doi:10.1177/0899764011434589. S2CID   145649629.
  7. ↑ Kast, Fremont Ellsworth; Kast, Fremont; Rosenzweig, James Erwin (1985). Organization and Management: A Systems and Contingency Approach. McGraw-Hill. ISBN   978-0-07-033443-4.
  8. 1 2 Love, Peter E. D.; Skitmore, Martin (1996). "Approaches to Organisational Effectiveness and Their Application to Construction Organisations". 12th Annual Conference and Annual General Meeting, the Association of Researchers in Construction Management.
  9. ↑ Robbins, Stephen P. (1990). Organization theory: structure, design, and applications (3rd ed.). Englewood Cliffs, N.J: Prentice Hall. ISBN   978-0-13-642471-0. OL   2216352M.
  10. ↑ Pfeffer, Jeffrey; Salancik, Gerald R. (2003). The External Control of Organizations: A Resource Dependence Perspective. Stanford University Press. ISBN   978-0-8047-4789-9.
  11. ↑ Keeley, Michael (1978). "A Social-Justice Approach to Organizational Evaluation". Administrative Science Quarterly. 23 (2): 272–292. doi:10.2307/2392565. ISSN   0001-8392. JSTOR   2392565. PMID   10307893.
  12. ↑ Hitt, Michael; Harrison, Jeffrey; Ireland, R. Duane; Best, Aleta (June 1998). "Attributes of Successful and Unsuccessful Acquisitions of US Firms". British Journal of Management. 9 (2): 91–114. doi:10.1111/1467-8551.00077. ISSN   1045-3172.
  13. ↑ Cameron, K. (1 March 1982). "The Relationship Between Faculty Unionism and Organizational Effectiveness". Academy of Management Journal. 25 (1): 6–24. doi:10.5465/256021.
  14. ↑ Forbes, Daniel P. (June 1998). "Measuring the Unmeasurable: Empirical Studies of Nonprofit Organization Effectiveness from 1977 to 1997". Nonprofit and Voluntary Sector Quarterly. 27 (2): 183–202. doi:10.1177/0899764098272005. S2CID   145657794.
  15. ↑ Starbuck, William H.; Nystrom, Paul C. (1983). "Pursuing Organizational Effectiveness That Is Ambiguously Specified". Organizational Effectiveness: 135–161. doi:10.1016/b978-0-12-157180-1.50011-2. ISBN   9780121571801.
  16. ↑ Jobson, J. D.; Schneck, R. (1 March 1982). "Constituent Views of Organizational Effectiveness: Evidence from Police Organizations". Academy of Management Journal. 25 (1): 25–46. doi:10.5465/256022.
  17. ↑ Richard et al. (2009): Measuring Organizational Performance: Towards Methodological Best Practice. Journal of Management.
  18. ↑ Herman, Robert D., & Renz, David O. (2008). Advancing Nonprofit Organizational Effectiveness Research and Theory: Nine Theses. Nonprofit Management & Leadership, 18(4), 399-415.
  19. ↑ Mitchell, George E. (2012). The Construct of Organizational Effectiveness: Perspectives from Leaders of International Nonprofits in the United States. Nonprofit and Voluntary Sector Quarterly. http://nvs.sagepub.com/content/early/2012/02/01/0899764011434589.abstract
  20. ↑ McLaughlin, John A., & Jordan, Gretchen B. (2010). Using Logic Models. In Joseph S. Wholey, Harry P. Hatry & Kathryn E. Newcomer (Eds.), Handbook of Practical Program Evaluation (3rd ed.). San Francisco, CA: Jossey-Bass.
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