Organizational effectiveness measures how successful organizations are in reaching their goals. An effective organization runs smoothly and functions well. In this article, we will explain the building blocks needed to create an effective organization. Whether you are a leader or working in a more operational role, read on to learn how to make your organization function (even) better. Show We will start by explaining what organizational effectiveness is, go over seven organizational effectiveness models, explain how organizational effectiveness can be measured, and conclude by specifying how HR can contribute to organizational effectiveness. Contents What is Organizational Effectiveness? A DefinitionAccording to Merriam-Webster, effectiveness is ‘the power to produce a desired result’. J.F. Kennedy was an effective president, Jack Welch an effective CEO, and Greta Thunberg is an effective climate activist. In an organizational context, however, effectiveness is harder to define. Apple is considered a successful organization on many measures – but is it also effective? The effectiveness of an organization depends on its mission & goals, internal efficiency, strategic positioning, and many more factors. The picture above shows three organizations. Which organization would you qualify as more effective? Each of them makes a tangible positive impact, either on their shareholders, their users, their workers, or the environment. This makes each of them effective – in different ways.
Want to add Organizational Development skills to your HR toolkit? Download this concise introduction to OD. Written by HR, for HR. Download Cheat SheetThis shows that organizational effectiveness has no one definition and depends on the organizational context. It can revolve around the degree to which an organization accomplishes its goals, satisfies its stakeholders, has the resources it needs to operate, or creates societal or environmental impact. This brings us to our definition. We define organizational effectiveness as the degree to which an organization achieves the goals it set out to achieve. These goals can be a certain output (productivity or service quality), efficiency goals it set out for, but also the degree to which its internal processes are aligned, and the degree to which it has secured the resources required to create a competitive advantage. 7 Organizational Effectiveness ModelsIn the example earlier, you saw that three organizations that did widely different things, can be equally effective. That is because there are multiple angles to look at organizational effectiveness. The table below shows the seven most common perspectives on effectiveness (also known as effectiveness models) and what effectiveness means for each of these.
Let’s go over each of these and explain in a few sentences what they mean and how they can be applied to an organization.
sustain multiple competing values, they will be more effective.
Measuring organizational effectiveness is not a matter of either/or. Rather, it is about taking multiple perspectives and seeing if the organization is reaching the goals it set out to achieve, as well as its full potential. The organizational effectiveness models provide a perspective on assessing OE. If we want to measure it, we need to create a more detailed scorecard. This creates a systematic approach that can be used regularly to re-evaluate and track progress on how effective the organization really is and where we can make improvements.
Based on Cameron (2015), we have defined the following five questions that you can use to assess organizational effectiveness. As you will recognize, the activity domain and perspective form the effectiveness models we covered in the previous section.
These questions allow you to take a specific perspective on organizational effectiveness and make it measurable. We added a simplified example below. This scorecard shows constituency satisfaction in the organization on an aggregated level, measured annually for 2020 and 2021. The scorecard shows two key trends: Relations with labor unions and employees are low and deteriorating while shareholders and board satisfaction remains high. This may indicate a disconnect between senior management and the broader workforce, which is a danger to organizational effectiveness. Of course, this is a simplified example. There are many more ways to measure satisfaction – e.g., turnover rates for employees, the degree to which labor unions have made frustrations public (in the news), and shareholder value. There are also many other KPIs to track, like the degree to which the organization reaches its goals, its position compared to their industry, and how effective it is in maintaining its competitive advantage. However, the example shows the power of measuring organizational effectiveness, and how you can use internal benchmarking to make the organization more effective. How HR can contribute to organizational effectiveness?This brings us to our last question: how can HR contribute to organizational effectiveness? Having a deeper understanding of organizational effectiveness will help specify how HR can add value to the organization. First, organizational effectiveness is the main focus of the organizational development unit, which is often part of HR. The organizational development team runs organizational transformations and comes up with more specific interventions for workforce and organizational issues. For example, high turnover may result in interventions aimed to reduce turnover, ensure continuity of business, and drive efficiencies. Second, HR can contribute to organizational effectiveness through people processes and building workforce capabilities. This is displayed in the figure below.
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In conclusionWhether you are working in a leadership role or in a more operational capacity, understanding the drivers of organizational effectiveness will help you do a better job and help the organization advance in multiple ways. Effectiveness is, for example, about securing valuable resources and capabilities, optimizing processes, satisfying stakeholders, and ensuring that the organization reaches the goals it set out to achieve. Each of these perspectives can be used to measure and improve how effective the organization is – and create a well-oiled machine that positively impacts its employees, stakeholders, shareholders, and the broader community it operates in. FAQWhat is organizational effectiveness? Organizational effectiveness is the degree to which an organization achieves the goals it set out to achieve. These goals can be a certain output (productivity or service quality), efficiency goals it set out for, but also the degree to which its internal processes are aligned, and the degree to which it has secured the resources required to create a competitive advantage. What are some common organizational effectiveness models? There are 7 common organizational effectiveness models – goal model, internal process model, resource-based model, strategic constituency model, stakeholder model, competing values model, and abundance model. How do you measure organizational effectiveness? Measuring organizational effectiveness is about taking multiple perspectives and seeing if the organization is reaching the goals it set out to achieve, as well as its full potential. Creating a detailed scorecard based on your goals and KPIs creates a systematic approach that can be used regularly to re-evaluate and track progress on how effective the organization really is and where we can make improvements. |