In the day to day modern life, man has become moiré or
less dependent on various types of organizations for the satisfaction of his needs, the need satisfaction is dependent upon the organizational effectiveness. Higher the effectiveness, higher will be the satisfaction of needs derived by the man from the organization. Thus, this concept is very important from the point of view of the society at large. Organizational effectiveness has also gained importance because it provides a valuable focal point for theoretical integration of the emerging but highly diversified field of organization theory. MEANING OF ORGANIZATIONAL EFFECTIVENESS
Organizational effectiveness is the extent to which an
organization achieves its goals with the given resources and means. Thus, organizational effectiveness reflects how well the organization is equipped to: Survive in the modern competitive business world by successful coping and Grow and develop in future through creative adaptation strategies. EFFECTIVENESS AND EFFICIENCY
Effectiveness and efficiency are generally used very
closely or interchangeably, although both these terms have very clear and separate meanings. The difference in these two terms can be explained with the help of the following points: 1. Organizational effectiveness is commonly referred to as the degree to which predetermined operational and operative goals are achieved. Whereas the concept of efficiency represents the cost/benefit rate incurred in the pursuit of these goals, or in other words efficiency is something like the input-output ratio. It whose how much inputs are used to produce certain amount of outputs. 2. Effectiveness is a multidimensional concept which can’t be measured by a single criterion. But efficiency can be measured by the input output ration. This distinction is very important to explain why some organizations are effective but highly inefficient or highly efficient but ineffective.
1. Efficiency is primarily a criterion of the internal life of the
organization and it is concerned with the economic and technical aspects of the organization.
But effectiveness is a very broad concept as it considers
the survival prospects of the organization which are not determined solely by the efficiency of the internal system. 4. Effectiveness considers organization-environment interface and also takes care of the human side of the organization. Efficiency, on the other hand, concentrates on the technological aspects of the organization.
5. An effective organization is not necessarily efficient and
an efficient organization is not necessarily effective, it is, however, desirable that an effective organization is also an efficient one. Efficiency may help an organization in becoming effective by increasing the possibilities of energy storage and by helping in long run growth and survival, but it is only an aspect of organizational effectiveness. APPROACHES TO EFFECTIVENESS The goal approach is the traditional new of the concept of effectiveness and widely used by organizational theorists. 1. Goal attainment approach (i) The complex organizations have an ultimate goal towards which they are striving and (ii) That the ultimate goal can be identified empirically and progress toward it can be measured. It has noted a general tendency on the part of personal and industrial psychologists to accept as ultimate criterion of organizational success of the following: 1. Organizational productivity 2. Net profit. 3. The extent to which the organization accomplishes its various missions. 4. Success of the organization in maintaining or expanding itself. It has suggested the following variables for measuring the organizational effectiveness: 1. Quality 2. Productivity 3. Readiness 4. Efficiencies 5. Profit or return 6. Utilization of environment 7. Stability 8. Turnover or retention 9. Accidents 10. Morale 11. Motivation 12. Satisfaction 13. Internationalization of organizational goals 14. Conflict-cohesion 15. Flexibility adaptation 16. Evaluation by external entities. The activities in which an organization must engage to help in determining what the organizational goal might be, therefore, what performance must be and therefore, effectiveness. These activities are: 1. Procurement of resources 2. Making efficient use of inputs relative to output 3. Producing services or goods 4. Performing technical and administrative tasks rationally 5. Investing in the organization. 6. Conforming to ethical codes of behaviour 7. Satisfying the varying interests of different groups with whom the organization has interactions. System resource approach
The system resource approach leads us to different way of
thinking which suggests the analysis of relationship between the organization and its environment. It includes the following points in it: 1. The first criteria is the adaptability of the organization to the system. How able is the organization in solving its problems and reacting with the flexibility to changes is a very important consideration in determining the organization’s effectiveness. 2. The next criteria is that whether the employees of the organization have a sense of identify. The employees can identify with the organization if they have knowledge or insight about the goals of the organization. It is also very important to know how the outsiders perceive them. 3. The organizational effectiveness will also depend upon the capacity of organization to test reality. This implies ability to search out, accurately perceive and correctly interpret properties of the environment. 4. The last criteria for determining organizational effectiveness is to check the state of integration among the subparts of the total organization such that various parts are not working at cross purposes. An organization should follow the following points in order to be effective. 1. The organization should have favourable relations with the environment to ensure continued availability of inputs and positive acceptance of outputs. 2. This approach also emphasizes flexibility of response of the organization to changing environment; the efficiency with which the transformation takes place in the organization, the level of employee job satisfaction and the clarity of communication etc. 3. Managers have responsibility to understand the nature of the environment and to set the realistic goals accordingly. 4. The organization should be able to successfully adapt structure, technologies and policies with the changing environment to facilitate the achievement of organizational goals. Strategic constituency approach In strategic constituency approach it is the control of the critical constituencies which will automatically bring about effectiveness in the organization. Owner Managers Employees Customers Suppliers Government This approach integrates both the goal approach and systems approach to effectiveness. In the strategic or the multiple constituency approach, the objectives of all the relevant constituencies are stated and compared with the actual attainment, just like in the case of goal approach. Just like the systems approach, the objectives of the constituencies that supply the necessary organizational resources (customers, suppliers, Government etc.) are dealt with in this approach also. Maximization or optimization approach
Maximization and optimization approaches help us to
find out to what extent an organization can become effective. MAXIMIZATION OR THE ECONOMIC MAN The classical theory of human behaviour evolved the concept of economic man. They assumed that the economic man was completely rational and tried to maximize returns by his efforts. The decision which the economic man takes are based on the following conditions: 1. The economic man makes his decisions in terms of MEANS-ENDS relationships. His decisions are completely rational as he always identifies clearly the ends of which he wants to reach and the means which are available for this purpose. 2. A complete and consistent system of preferences is their which allows the economic man to make a choice among alternatives. 3. He has full information and knowledge about the alternatives out of which he has to choose. 4. An unlimited number of computations can be performed to determine the best alternatives. In business organizations the decisions of the economic man will be directed towards goal achievement which is, generally, profit maximization. The situation of maximization is not always possible because of two basic problems in maximization of organizational effectiveness. These problems are: Maximization of effectiveness, even if possible, is not in the best interests of the organization rather it will be destructive from long run point of view. If the organization goes beyond the optimum point it will endanger itself because of the depletion of its resource producing environment, or the devaluation of resources or because or generation of strong organized opposition force in the environment which will weaken the organization’s bargaining position. Thus, a short term gain may result into long run losses. OPTIMIZATION OR ADMINISTRATIVE MAN APPROACH
Administrative man approach is in contrast to the economic
man approach. In contrast to perfect rationality or economic man. This approach emphasizes optimization in decision making which satisfies the administrative man. That is why, he tries for satisfactory alternatives only. 1. In choosing among different alternatives, the administrative man attempts to look for the one which is satisfactory or good enough. Examples of satisfying criteria can be market share, adequate profits and/or fair price. 2. He recognizes the fact that the world he conceives is a drastically simplified model of the world. He is but, content with this simplification because he believes that the world is mostly empty. 3. Because he satisfies rather than maximizes, he can make his choices without first determining all possible alternatives and without ascertaining that these are in fact all the alternatives. 4. Because he treats the world as rather empty. He is able to make decisions with relatively simple rules of thumb or tricks of the trade or from forces of habit. These techniques do not make impossible demands upon his capacity for thought. Optimization, thus, represents the real situation of decision making behaviour as against the maximization which represents very hypothetical position to assists in the analysis of economic theory. Because of this reason, people have emphasized this approach both in economic theory as well as in organization theory. Behavioural approach
Behavioural approach assumes that the extent
to which individual and organizational goals are integrated affects the degree of effectiveness. The different types of situations based on the degree of compatibility of individual and group goals may be: 1. Low Degree of Integration. 2. High Degree of Integration. 3. No Integration INEFFECTIVE ORGANIZATION
Such an organization will be termed as effective
organization as its members do not work for organization's goals. The behavioural approach establishes a direct relationship between integration of organizational and individual goals and organizational effectiveness. It should, however, be noted that organizational effectiveness is not the result only of integration of two goals, rather are a lot of other variables affecting it. But still we can say, that as human factor is one of them important and the only active factor integrating other factors in the organization. This analysis holds good from management of organization point of view. FACTORS AFFECTING ORGANIZATIONAL EFFECTIVENESS
The above mentioned approaches adopt different
criterion for measuring organizational effectiveness. That is way, a very important and difficult task for the manager, who is analyzing the organization, is to identify the factors underlying organizational effectiveness. The major set of factors or variables that potentially have their influence on effectiveness are: 1. Organizational characteristics 2. Environmental characteristics 3. Employee characteristics 4. Managerial policies and practices Organizational Characteristics
Organizational characteristics which
affect the effectiveness are of two types: 1. Organizational structure and 2. Technology Organizational Structure
Organizational structure influences the effectiveness
in the following ways: Structure in terms of functional specialization, size centralization of decision making and even formalization is likely to increase productivity and efficiency. Job satisfaction of the employees is also related to the organizational structure, equitable division of work and delegation or authority and responsibility and proper direction are likely to generate the feeling of satisfaction among people at work. Technology
Technology and organizational structure are interrelated.
The type of technology determines the nature and structure of organization. Change of technology will require a lot of changes in the organization in the form of: a. Change in operation e.g. from labor-intensive to capital intensive b. Shifting of employees to either different departments within the same factory or to some other factory of the organization. c. Change in span of control d. Creating of new and winding up of the few departments. e. Change in them materials which are used f. Retraining and provision of more knowledge about the latest technology to the workers. If the organization fails to change the structure according to needs of technology, it will never prove to be effective. Environmental Characteristic
Management should have experts who will
suggest adjustments which are to be made in the organizational set up to comply with environmental changes. 1. External environment 2. Internal environment Employee Characteristics
Human factor is the most important factor which
influences the goal achievement of organizations. If there is a close integration among the individual and organizational goals, the organizational will be highly effective as explained in the behavioural approach to the effectiveness. If the organization, without compromising with its fundamental programmes and policies, could readjust to accommodate legitimate aspirations of the employees, it should do so the achieve effectiveness. In case there is a conflict between the individual and the group goals and the issued relate to the very existence of the organization, the organization will have to take a firm stand to deal with the situation. To help in achieving the effectiveness of the organization, the employees should have the following characteristics: a. They should be attracted towards and satisfied with the organization. b. They should be committed to the organization. c. Their motives, goals and needs should not be in conflict with the organizational goals. d. The employees should be able and knowledgeable. e. They should have their role clarity. f. The job turnover should be very low, if any. Managerial Policies and Practices
1. Strategic Goal Setting
2. Resource Acquisition and Utilization. 3. Leadership and Decision Making 4. Performance Environment Causal Variables Intervening Variables End Result (or Output) Variables EFFECTIVENESS THROUGH ADAPTIVE COPING STYLE
1. Sensing of Change. The first basic stage in the cycle is
the sensing of change in some part of the internal and external environment. Failure to perceive changes in the environment or incorrectly perceiving the changes is the major factor for the failure of the organization to cope with environment. The organizations should have effective Management Information System for effectively coping with the environment. 2. Importing the Relevant Information. The second stage in the cycle is the import of relevant information about ht e change into those parts of the organization that can act upon it. However, it is very difficult to decide which imputes are to be taken from the envi9ronment and organizations often fail to perceive the relevant inputs, particularly the information. 3. Changing Conversation Process. Inputs are taken by the organization from the environment for further processing, this is known as the conversion process. The conversion process should be modified according to environmental requirements as indicated by the information. 4. Stabilizing Internal Changes. The fourth stage of the cycle is to stabilize the internal changes while taking care of undesired changes in related systems which have resulted from the desired changes. This is necessary because each sub system in the organization is dependent upon others and change in one may affect others also but this effect may be positive or negative. 5. Exporting New Outputs. When the internal change is established, the organization becomes in a position to export new outputs which are in accordance with the environmental requirements. Some different and additional attempts may be required for exporting the new outputs. If the organization fails to adopt the new methods, it may become ineffective. 6. Obtaining Feedback. The last stage in the cycle is the obtaining of feedback on the outcome of the changes for further sensing of the state of the external environment and the degree of integration of the internal environment. This stage is very much related with the first stage because the process of sensing may be the same. Failure at any of these stages may result into ineffectiveness. A successful coping suggests that all of the stages must be successfully negotiated. Following are the major organizational conditions for effective coping: 1. The Organization must have a proper communication system through which reliable and valid information may be passed. 2. Enough internal flexibility should be there so that changes can be brought absorbed by the organization. 3. Successful coping requires integration and commitment to the organizational goals which provides willingness for change. There should be supportive internal climate which can support good communication, reduction in inflexibility and stimulation of self protection.