Organizations and

Organizational Effectiveness
BY
Dr.Adeeba Khan
 Learning Objectives

Organizations exist in uncertain, changing environments and continually confront new challenges
and problems. Managers must find solutions to these challenges and problems if organizations are
to survive, prosper, and perform effectively.
After studying this chapter you should be able to:
1. Explain why organizations exist and the purposes they serve.
2. Describe the relationship between organizational theory and organizational design and
change and differentiate between organizational structure and culture.
3. Understand how managers can utilize the principles of organizational theory to design
and change their organizations to increase organizational effectiveness.
4. Identify the three principal ways in which managers assess and measure organizational
effectiveness.
5. Appreciate the way in which several contingency factors influence the design of
organizations.
 What is an Organization

• A tool people use to coordinate their actions to obtain

something they desire or value that is, to achieve their
goals.
• People who value security create an organization
called a police force, an army, or a bank. People who
value entertainment create organizations such as the
Walt Disney Company, CBS, or a local club. People who
desire spiritual or emotional support create churches,
social service organizations, or charities. An
organization is a response to and a means of satisfying
some human need.
 Entrepreneurship

• The process by which people recognize

opportunities to satisfy needs and then gather
and use resources to meet those needs.
 How Does an Organization Create
Value?
Organizational environment
The set of forces and conditions that operate
beyond an organization’s boundaries but affect
its ability to acquire and use resources to
create value.
 How an Organization Creates Value
Organizations inputs Organization’s Conversion Process

Organization obtains inputs from its

environment
Organization transforms inputs
Raw materials
and adds value to them
Money and capital
Machinery
Human resources
Computers
Information and knowledge
Human skills and abilities
Customers of service organizations

Organization’s Environment Organization’s Outputs

Sales of outputs allow organization Organization releases outputs to
to obtain new supplies of inputs its environment
Customers
Finished goods
Shareholders
Suppliers Services
Distributors Dividends
Government Salaries
Competitors
Value for stakeholders
 Why Do Organizations Exist?
The production of goods and services most often takes
place in an organizational setting because people
working together to produce goods and services
usually can create more value than people working
separately.
To Increase Specialization and the Division of Labor
To Use Large-Scale Technology
To Manage the Organizational Environment
To Economize on Transaction Costs
To Exert Power and Control
 Organizational theory
• The study of how organizations function and
how they affect and are affected by the
environment in which they operate.

Organizational structure
The formal system of task and authority
relationships that control how people
coordinate their actions and use resources to
achieve organizational goals.
 The Relationship among Organizational Theory and
Organizational Structure, Culture, and Design, and
Change
The study of how organizations function and how they affect and are affected by the
environment in which they operate.

The formal system of task and Organizational Design and Organizational Culture
authority relationships that Change. The process by which The set of shared values and
controls how people are to managers select and manage norms that controls
cooperate and use resources to various dimensions and organizational members’
achieve the organization’s goals. components of organizational interactions with each other and
Controls coordination and structure and culture so that with people outside the
motivation; shapes behavior of an organization can control the organization. Controls
people and the organization. Is a activities necessary to achieve coordination and motivation;
response to contingencies its goals. Balances the need of shapes behavior of people and
involving environment, the organization to manage the organization. Is shaped by
technology, and human external and internal pressures people, ethics, and
resources. Evolves as so that it can survive in the organizational structure. Evolves
organization grows and long run. Allows the as organization grows and
differentiates. Can be managed organization to continually differentiates. Can be managed
and changed through the process redesign and and changed through the
of organizational design. transform its structure and process of organizational
culture to respond to a design.
changing global environment.
 Organizational Culture
• The set of shared values and norms that controls
organizational members’ interactions with each
other and with suppliers, customers, and other
people outside the organization.
Organizational design
The process by which managers select and manage
aspects of structure and culture so that an
organization can control the activities necessary
to achieve its goals.
 Organizational change
• The process by which organizations redesign
their structures and cultures to move from
their present state to some desired future
state to increase their effectiveness.
 The Importance of Organizational
Design and Change
• Dealing with Contingencies
• Gaining Competitive Advantage
The ability of one company to outperform another because its
managers are able to create more value from the resources
at their disposal.
Core competences
• Managers’ skills and abilities in value-creating activities.
Strategy
• The specific pattern of decisions and actions that managers
take to use core competences to achieve a competitive
advantage and outperform competitors.
 Managing Diversity
• PROMOTING EFFICIENCY, SPEED, AND
INNOVATION
The Consequences of Poor Organizational
Design
How Do Managers Measure Organizational
Effectiveness?
 How Do Managers Measure
Organizational Effectiveness?
Approaches to Measuring Organizational Effectiveness

Approach Description Goals to Set to Measure

Effectiveness
External resource Evaluates the organization’s ability to Lower costs of inputs
approach secure, manage, and control scarce and Obtain high-quality inputs of raw
valued skills and resources materials and employees
Increase market share
Internal systems Evaluates the organization’s ability to
Increase stock price
approach be innovative and function quickly and
Gain support of stakeholders such as
responsively
government
Technical Evaluates the organization’s ability to Cut decision-making time
approach convert skills and resources into goods Increase rate of product
and services efficiently innovation
Increase coordination and
motivation of employees
Reduce conflict
Reduce time to market