Chapter Five

Organizational Effectiveness

Organizational Theory
PGDBM Term II 4-1
Workshop
Activity

Business Goals in Five Countries

Business Goals Australia India Japan Korea U.S.

High Productivity

Industry Leadership

Employee Welfare

Organizational Stability

Profit Maximization

Organizational
Efficiency
Social Welfare

Organizational Growth
Organizational Theory
PGDBM Term II 4-2
Workshop
Activity

Business Goals in Five Countries

Business Goals Australia India Japan Korea U.S.

High Productivity
2 2 1 1 2
Industry Leadership
4 6 6 6 5
Employee Welfare
3 5 7 7 7
Organizational Stability
5 3 5 3 6
Profit Maximization
6 7 4 4 3
Organizational
Efficiency
1 1 3 5 1
Social Welfare
8 8 8 8 8
Organizational Growth
7Organizational4Theory 2 2 4
PGDBM Term II 4-3
Contingency Approaches to the
Measurement of Organizational
Effectiveness

External Environment

Organization
Product and
Resource Internal
activities Service
Inputs
and Outputs
processes

Resource-based Internal Goal

approach process approach
approach
Organizational Theory
PGDBM Term II 4-4
 Goal Approach
 Identify org. output goals and assess how well the
organization has attained those goals
 Indicators: use operative goals (official goals tend to
be more abstract & difficult to measure)
 Usefulness: readily measurable (profitability, growth,
market share, ROI)
 Problems:
1. Multiple &/or conflicting goals: trade offs; dept vs overall
goals
2. How to identify operative goals & how to measure goal
attainment
 Easy for certain goals- profit, growth
 Difficult for other goals – employee welfare, social responsibility
– subjective assessment may be needed

Organizational Theory
PGDBM Term II 4-5
Reported Goals
of U.S. Corporations
Goal % Corporations
Profitability 89
Growth 82
Market Share 66
Social Responsibility 65
Employee welfare 62
Product quality and service 60
Research and development 54
Diversification 51
Efficiency 50
Financial stability 49
Resource conservation 39
Management development 35
Organizational Theory
PGDBM Term II 4-6
Resource-Based Approach
 Input side
 OE: ability of the organization, in either
absolute or relative terms, to obtain
scarce and valued resources and
successfully integrate and manage
them.

Organizational Theory
PGDBM Term II 4-7
Resource-Based Approach
 Indicators:
 Bargaining Position
 Perceive & interpret real properties of
external environment
 Use tangible (eg. people) & intangible (eg.
culture) resources to achieve superior
performance
 Ability to respond to changes in
environment
Organizational Theory
PGDBM Term II 4-8
Resource-Based Approach
 Usefulness:
 When other performance indicators are difficult to
obtain (eg. Not-for-profit or social welfare
organizations)
 Some for-profits: ex. Mathsoft – analytiical
software – how many top-rate Ph.Ds it can recruit
 Problems:
 Link with customers?
 Changing value of resources in a dynamic
environment

Organizational Theory
PGDBM Term II 4-9
Internal Process Approach
 Effectiveness is measured as internal
organizational health and efficiency.
 An effective organization has a smooth,
well-oiled internal process.
 Employees happy & satisfied.
 Does not consider external environment.

Organizational Theory
PGDBM Term II 4-10
Internal Process Approach
 Possible Indicators:
 Economic Efficiency
 Human Relations Approach
1. Strong corporate culture, positive work climate
2. Team spirit, group loyalty, teamwork
3. Confidence between workers & mgmt
4. Sharing of facts & feelings
5. Rewards for performance, subordinate development
6. Interaction between organization & its parts, with
conflicts resolved in interest of the organization

Organizational Theory
PGDBM Term II 4-11
Internal Process Approach
 Usefulness:
 Most managers believe that happy,
committed employees & positive culture
are important measures of effectiveness
 Problems:
 Total output & org. relationship with
external environment are not evaluated
 Evaluations of internal health and
functioning are often subjective
Organizational Theory
PGDBM Term II 4-12
Integrated Effectiveness Model:
THE COMPETING VALUES MODEL
 Balance a concern with various parts
 Developed by Robert Quinn & John
Rohrbaugh

Organizational Theory
PGDBM Term II 4-13
Indicators or Dimensions
 Organizational Focus:
 Internal – mgmt’s concern for well-being &
efficiency of employees.
 External – emphasis on well-being of
organization with respect to environment
 Organizational Structure:
 Stability – mgmt value for efficiency & top-
down control
 Flexibility – value for learning & change
Organizational Theory
PGDBM Term II 4-14
Four Approaches to Effectiveness
Values
STRUCTURE
Flexibility

Human Relations Emphasis Open Systems Emphasis

Primary Goal: human resource Primary Goal: growth,

development resource acquisition
F Subgoals: cohesion, morale, training Subgoals: flexibility, readiness,
external evaluation
O Internal External
C
Internal Process Emphasis Rational Goal Emphasis
U
S Primary Goal: stability, equilibrium Primary Goal: productivity, efficiency,
profit
Subgoals: information management, Subgoals: planning, goal setting
communication

Control

Organizational Theory
PGDBM Term II 4-15
Effectiveness Values
for Two Organizations
STRUCTURE
FLEXIBILITY
Human Relations Open Systems
Emphasis Emphasis

F ORGANIZATION
A
O
INTERNAL EXTERNAL
C
U
S ORGANIZATION
B
Internal Process Rational Goal
Emphasis Emphasis
CONTROL

Organizational Theory
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