2. After studying this chapter, you should be able to:
– Define four approaches to organizational effectiveness
– List the assumptions of each OE approach
– Describe how managers can operationalize each approach
– Identify key problems with each approach
– Explain the value of each approach to practicing managers
– Compare the conditions under which each is useful for mangers
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3. Importance of Organizational EffectivenessImportance of Organizational Effectiveness
Every discipline in the administrative sciences contributes in
some way to helping managers make organizations more
effective.
• Marketing – Expanding revenues
• Production and operations – Designing efficient processes
• Accounting – Information to enhance quality of decision
• Organization Theory – As a discipline, it clarifies which
organization structure will lead to or improve organizational
effectiveness.
The effectiveness of an organization depends on its
structure.
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4. • Organizational
effectiveness
• Productivity
• Efficiency
• Profit
• Quality
• Accidents
• Growth
• Absenteeism
• Turnover
• Job satisfaction
• Motivation
• Morale
• Control
• Conflict
• Flexibility
• Planning
• Goal consensus
• Internalization of org
goals
• Role and norm
• Managerial
• Interpersonal skills
• Managerial task skills
• Information mgt
• Readiness
• Environment utilization
• External evaluation
• Stability
• Value of human resources
• Participation
• Shared influence
• Training and development
• Achievement
Organizational Effectiveness CriteriaOrganizational Effectiveness Criteria
The 1960’s and early 1970’s saw a proliferation of OE studies. A review
of these studies identified thirty different criteria, all purporting to
measure “organizational effectiveness”.
5. The Goal Attainment ApproachThe Goal Attainment Approach
The goal attainment approach states that an organization’s effectiveness
must be appraised in terms of the accomplishment of ends rather than
Means.
Popular goal attainment criteria include profit maximization, bringing the
enemy to surrender.
Assumptions
The goal attainment approach assumes that organizations are de liberate,
rational, goal-seeking entities.
– Organizations must have ultimate goals.
– These goals must be identified and defined well enough to be understood.
– These goals must be few enough to be manageable.
– There must be general consensus or agreement on these goals.
– Progress toward these goals must be measurable.
6. Making Goals Operative
The goal-attainment approach is probably most explicit in management by
objectives (MBO)
Problems
The goal-attainment approach is fraught with a number of problems that make its
exclusive use highly questionable. And these are related directly to the assumptions.
It is one thing to talk about goals in general, but when you operationalize the goal
attainment approach you have to ask:
• Whose goals?
• Top management’s?
• If so, who is included ?
• Who is excluded?
7. The validity of the identified goals can probably be increased
significantly by:
Ensuring that input is received from all those having a major
influence on formulating the
official goals, even if they are not part of senior
management
Including actual goals obtained by observing the behavior
of organization members;
Recognizing that organizations pursue both short- and long-
term goals;
Insisting on tangible, verifiable, and measurable goals rather
than relying on vague
statements that merely mirror societal expectations
Viewing goals as dynamic entities that change over time
rather than as rigid or fixed statements of purpose.
Value to Managers
8. Organizations acquire inputs, engage in transformation processes, and generate
outputs.
In the systems approach, end goals are not ignored; but they are only one element
in a more complex set of criteria.
Systems models emphasize criteria that will increase the long-term survival of the
organization—such as the organization’s ability to acquire resources, maintain itself
internally as a social organism, and interact successfully with its external
environment
Assumptions:
A systems approach to OE implies that organizations are made up of interrelated
subparts. If anyone of these subparts performs poorly, it will negatively affect the
performance of the whole sys tem.
The Systems Approach
9. Making Systems Operative
The systems view looks at factors such as relations with the environment to
assure continued receipt of inputs and favorable acceptance of outputs,
flexibility of response to environmental changes, the efficiency with which
the organization transforms inputs to outputs, the clarity of internal
communications, the level of conflict among groups, and the degree of
employee job satisfaction.
The systems approach focuses on the means necessary to assure the
organization’s continued survival
It has been suggested that the critical systems interrelationships can be
converted into OE variables or ratios.22
These could include output/input
(O/I), transformations/input (T/I), transformations/output (T/O), changes in
input/input (AI/I), and so on
10. Examples of Effective Measures of Systems for
Different Types of Organizations
System
Variables
O/I
T/I
T/O
I/I
Business Firms
Return on
Investment
Inventory turnover
Sales volumes
Change in working
capital
Hospital
Total Patients treated
Capital investment in
Medical tech
Total Patients treated
Change in number of
Patients treated
College
Faculty
Publications
Cost of inf system
Students graduated
Change in student
enrolment
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11. Problems:
The problem is that, while the terms may carry a layperson’s meaning,
the development of valid and reliable measures for tapping their
quantity or intensity may not be possible.
Value to Managers
Managers who use a systems approach to OE are less prone to look for
immediate results
12. THE STRATEGIC-CONSTITUENCIES APPROACH
The strategic-constituencies approach—proposes that an effective organization is
one that satisfies the demands of those constituencies in its environment from whom
it requires support for its continued existence.
It seeks to appease only those in the environment who can threaten the
organization’s survival
Assumptions
The goal-attainment approach views organizations as deliberate, rational, and goal-
seeking entities. The strategic-constituencies approach views organizations very
differently. They are assumed to be political arenas where vested interests compete
for control over resources
The strategic-constituencies approach assumes that managers pursue a number of
goals and that the goals selected represent a response to those interest groups that
control the re sources necessary for the organization to survive
13. The manager wishing to apply this perspective might begin by asking members of
the dominant coalition to identify the constituencies they consider to be critical to
the organization’s survival. This input can be combined and synthesized to arrive at
a list of strategic constituencies.
Problems
The task of separating the strategic constituencies from the larger environment is
easy to say but difficult to do in practice.
Because the environment changes rapidly, what was critical to the organization
yesterday may not be so today
Making Strategic Constituencies Operative
14. Competing-values approach is that the criteria you value and use in assessing an
organization’s effectiveness—return on investment, market share, new-
product innovation, job security—depend on who you are and the interests you
represent
Assumptions
There is neither a single goal that everyone can agree upon nor a consensus on
which goals take precedence over others.
Therefore, the concept of OE, itself, is subjective, and the goals that an evaluator
chooses are based on his or her personal values, preferences, and interests.
Making Competing Values operative:
The first set is flexibility versus control
The second set deals with whether emphasis should be placed on the well-being and
development of the people in the organization or the well-being and development of
the organization itself.
The third set of values relates to organizational means versus ends; the former
stressing internal processes and the long term, the latter emphasizing final outcomes
and the short term
THE COMPETING-VALUES APPROACH
15. Eight OE Criteria Cells
Cells Description Definition
OFM Flexibility Able to adjust well to shifts in external conditions & demands
OFE Acquisition of
Resource
Increase external support and expand size
OCM Planning Goals are clear and well understood
OCE Productivity &
Efficiency
Volume of output is high; ratio of output to input is high
PCM Availability of
Information
Channels of communication facilitate informing people about
things that affect their work
PCE Stability Sense of order, continuity & smooth operations
PEM
PPE
Cohesive
workforce
Skilled work force
Employee trust, respect and work well with each other
Employee have the training skills & capacity to do their work
properly
16. Making Competing Values Operative
• The human-relations model would define OE in terms of a
cohesive (as means) and skilled (as ends) work force.
• The open systems model encompasses the OFM and OFE
cells. Effectiveness in this model is defined in terms
of flexibility (as means) and the ability to acquire
resources (as ends).
• The rational-goal model includes the OCM and OCE cells.
The existence of specific plans and goals (as means) and
high productivity and efficiency (as ends) is used as
evidence of effectiveness.
• Finally, the PCM and PCE cells form the internal-process
model
17. Problems
The competing-values model encompasses both ends and means, it overcomes the
problems of using merely the goal-attainment or systems approaches.
Competing values include strategic constituencies but do nothing to alleviate the
problems we pointed out with this approach.
Value to Managers:
By reducing a large number of effectiveness criteria into four conceptually clear
organizational models, the competing-values approach can guide the manager in
identifying the appropriateness of different criteria to different constituencies and in
different life-cycle stages.
18. OE is conceptually complex, and, therefore, so must
its definition.
Organizational ef-fectiveness can be defined as the
degree to which an organization attains its short
(ends) and longterm (means) goals, the selection of
which reflects strategic constituencies, the self
interest of the evaluator, and the life stage of the
organization.
