Organization Effectiveness

Early Approach to Effectiveness (1950s) The degree to which organization realized its goals Definition ambiguous Who’s goals?...which stake holders Short term/long term The goal of survival…. Organizations don’t die They are reinvented by being merged, sold off, reorganized or totally moving in to new areas of endeavour

1960s-70s Identified 30 different criteria of OE (refer table 3-1,p 50) Criteria ranged from general measures (quality, efficiency, stability) to more specific measures (accident rate, T&D effectiveness, managerial task skills) Broad conclusions No single definition Criteria varied from sector to sector, interest of the evaluator OE requires multiple criteria of evaluation Different functions of the organization have to be evaluated differently OE must consider both means (process)& ends (outcomes)

In Search of Excellence-Peters & Waterman Studied 42 companies which were effective and well managed Made the following observations Had a bias for action and getting things accomplished Stayed close to the customers and understood their needs Allowed autonomy to employees and fostered entrepreneurial spirit Increased employee productivity through employee participation Employees actively handled problems at all levels Stayed close to business they knew Structure simple with minimal number of people in support systems Blended tight centralized controls in for protecting the companies core values with loose controls in other areas to foster risk taking and innovation

Goal Attainment Approach Organizations are there to achieve one or more specified goals Effectiveness is determined in terms of achievement of ends than means It is the bottom line that counts E.g. profit maximization, curing a patient, winning a war Most explicit in MBO Specific goals Jointly established by superiors and subordinates Actual performance measured and compared against the goals

Goal Attainment Approach- Problems Problem of operationalization E.g. whose goals? Which stake holder Short term goals different from long term goals Multiple goals can also compete with each other (high quality vs. low cost)

Systems Approach Input through put output Goal attainment is only a partial understanding of effectiveness Goals are only outputs and organizations are also inputs and through put

Examples of Goals Profitability Growth Market Share Social Responsibility Employee welfare Product quality and service Research and development Diversification Efficiency Financial stability Resource conservation Management development

Contingency Approaches to the Measurement of Organizational Effectiveness External Environment Resource Inputs Organization Internal activities and processes Product and Service Outputs Resource-based approach Internal process approach Goal approach

Input side of Systems Theory: Resource Based Approach Effectiveness is acquiring and managing scarce and valued resources Indicators of Effectiveness Bargaining position: to obtain financial, human, technological and knowledge The ability to use tangible (supplies, people) and intangible (knowledge, culture) resources in day to day organizational activities to obtain superior performance Ability to respond to changes in the environment for acquisition of resources

Transformation Side of Systems Theory: Internal Process Approach Effectiveness is measured as organizational health and efficiency Employees happy and satisfied Communication between depts. (horizontal and vertical) Strong corporate culture and work climate Team spirit and loyalty Reward for performance

Strategic Constituencies (Stakeholders) Approach Effective Organization is one that satisfies the demands of those constituencies in the environment from whom it requires continued support for existence Is different from systems view for it seeks to appease only those stake holders who can threaten the organization’s survival Organizations are political arenas where vested interests compete for control of resources Successful organizations are those who can satisfy the critical constituencies

Competing Values Approach The criteria used in assessing an organizations effectiveness depend on who you are and the interests you represent E.g.. Stock holders, employees, suppliers may view the same organization differently Assumption that there is no best criteria for measuring effectiveness Depends on ones values, preferences, and interests.

Competing Values Approach Based on three basic sets of competing values Flexibility (innovation, adaptation, change) vs. control (stability, order, predictability) People ( well-being and development of people or concern for people) vs. organization (development of organization or concern for productivity and task accomplishment) Means (stressing on internal processing, long term) vs. ends ( stressing on final outcomes and short comes)

Four Models of Effectiveness Values STRUCTURE Flexibility Human Relations Emphasis Primary Goal: human resource development Subgoals: cohesion, morale, training Open Systems Emphasis Primary Goal: growth, resource acquisition Subgoals: flexibility, readiness, external evaluation F O C U S Internal (people) External (organization) Internal Process Emphasis Primary Goal: stability, equilibrium Subgoals: information management, communication Rational Goal Emphasis Primary Goal: productivity, efficiency, profit Subgoals: planning, goal setting Control

Effectiveness Values for Two Organizations STRUCTURE FLEXIBILITY Human Relations Emphasis Open Systems Emphasis ORGANIZATION A ORGANIZATION B F O C U S INTERNAL (People) EXTERNAL (Organization) Internal Process Emphasis Rational Goal Emphasis CONTROL