ORGANIZATIONAL EFFECTIVENESS

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.