Definition

According 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.
This 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.

In 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.

Long ago, organizational effectiveness was defined as the extent to

which an organization achieved its stated goals.The goal-attainment
view is no longer accepted, however, because a company can be
considered effective simply by establishing easily achievable goals.
Also, some goals—such as social responsibility to the
community—are so abstract that it is difficult to know how well the
organization has achieved them. A third flaw with the goal-attainment
definition is that a company's stated objectives might threaten its
long-term survival. For example, some corporate leaders receive
incentives (such as stock options) to maximize short-term profits.
Some accomplish this objective by slashing expenditures, including
funds for marketing and product development. The result is often a
lack of new products and deterioration in the company's brand value
in the long run. In extreme cases, the company achieves its short-term
profitability targets but eventually goes out of business.

How is organizational effectiveness defined today? The answer is

that there are several perspectives of effectiveness: 1). Organizations
are considered effective when they have a good fit with their external
environment, b).when their internal subsystems are efficient and
effective (i.e. high-performance work practices), 3) when they are
learning organizations and when they satisfy the needs of key
stakeholders.

1). The goal approach gauges effectiveness by measuring to what

degree the organization reaches the goals it set out to achieve. This is
the most traditional way of measuring organizational effectiveness.
Goals can include product or service quality and quantity, financial
goals, shareholder value, societal impact, or all of these. The goal
approach is less actionable as it measures output but does not
provide information about the input or the process.
2).The internal process model looks not at the outcome but at what
happens inside of the organization. This approach assesses
effectiveness through the smooth functioning of organizational
operations. This is achieved through information management,
documentation, and continuous consolidation.
The best-known example is the lean process approach, focused on
continuous improvement and efficiency. The drawback is that the
focus is often more on efficiency than on effectiveness and that the
focus is more on inward processes than on outward opportunities.
3). The resource-based model looks at the input as a measure of
effectiveness. According to the Resource-Based View (RBV), firms
achieve a competitive advantage by exploiting resources that are
valuable, rare, and hard to imitate or copy.
Examples of such resources include proprietary software like
Instagram or Microsoft’s Windows, advanced technology, like Apple’s
iPhone, or a strong company brand or reputation like Apple, Coca
Cola, or McKinsey. Bundling these resources helps the advantages
become more profound. Take, for example, Apple’s technology in
combination with the strong Apple brand. Organizations become
effective by securing the supply of these resources.

4). The strategic constituency model assesses effectiveness by

measuring the degree to which it satisfies those in the environment
who can threaten the organization’s survival – i.e., its strategic
constituencies or interest groups. Each constituency has a degree of
power and pursues different goals.
Constituencies can include owners, management, employees,
customers, suppliers, government, and customer groups. Here, it is
key to identify the relevant strategic constituencies, identify their
expectations, and the way to meet these expectations.
5). The stakeholder approach. This includes strategic constituencies
but also those who are indirectly affected by the organization but may
not have power over it (e.g., families of workers, activists, and
communities).
6). The competing values model is based on Cameron and Quinn’s
competing values framework. This approach measures effectiveness
by the ability of an organization to simultaneously promote competing
values.
For example, an organization may want to satisfy customers and
maximize profits while also taking care of employees, promote internal
structure and coordination while also promoting innovation and novel
initiatives, and have a clear direction while also providing autonomy to
people to help the organization get there. The ability of an
organization to reconcile these competing values is key to being
effective.
7). The abundance model proposes that effectiveness equates to
unleashing the highest potential of human systems. This is about
bringing forward positive values and virtuousness. To do this
effectively, there has to be a balance between positive and negative
values. For example, excellence and flourishing cannot exist without
difficult challenges and struggle. Both positive and negative elements
and emotions are required to push the potential of human systems.
Factors Affecting Organizational Effectiveness
Likert has classified the factors affecting organizational effectiveness
into following three variables:

1. Causal Variables: Causal variables are those independent

variables that determine the course of developments within an
organization and the objectives achieved by an organization.
These causal variables include only those independent
variables, which can be altered by organization and its
management. Causal variables include organization and
 management’s policies, decisions, business and leadership
strategies, skills and behavior.
2. Intervening Variables: Intervening variables according to Likert
are those variables that reflect the internal state and health of an
organization. For example, loyalties, attitudes, motivations,
performance goals and perceptions of all the members and their
collective capacity for effective interaction, communication and
decision-making.
3. End-Result Variables: End-Result variables are the dependent
variables that reflect achievements of an organization such as its
productivity, costs, loss and earnings.
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Inter-Relationship of Variables
The three variables such as causal, intervening and end-result are
interrelated. The inter-relationship may be visualized as a
psychological process where stimuli or causal variables acting upon
the organism or intervening variables create certain responses or
end-result variables. The causal, intervening and end-result variables
comprise a complex network with many interdependent relationships.
The causal variables are the key to organizational effectiveness.
Hence, to make organization effective, attempts should be made to
improve the causal variables, while other variables will be corrected or
improved automatically because of causal variables.

The organizational effectiveness model can be presented in a more

complex way i.e. at three different levels such as the individual, group
and organizational levels in order to make the organization more
effective. The effective organization is built of effective individuals
who work collectively in groups. The extent to which individual and
organizational goals are integrated, affects the degree of
organizational effectiveness, i.e., each individual tries to satisfy his
goal by working in an organization and simultaneously satisfying
organizational goals. He may see his goal satisfaction in satisfying
organizational goals. If there is no perfect integration of individual and
organizational goals then organizational effectiveness is affected
adversely. However, organizational effectiveness is not a result of
integration between individual and organizational goals only but there
are other causal variables affecting it.