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
org’s existence
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
 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
 Effectiveness of org. is defined as its ability to
obtain scarce and valued resources, successfully
integrate and manage them.
 Indicators of effectiveness are:
 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
 Effectiveness is measured as internal organizational
health and efficiency. This does not consider the
external environment
 Indicators of effective org are:
 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 :
 Stakeholder effectiveness criteria
 Owners financial return
 Employees worker satisfaction, pay,
supervision
 Customers quality of goods & services
 Creditors creditworthiness
 Community contribution to community affairs
 Suppliers satisfactory transactions
 Government 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
 Organizational structureOpen Systems Model
’’ --stability/flexibility
Focus Model
 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