CHAPTER 1

Determining Effectiveness
Human productivity is one of the most important issues facing the applied behavioral sciences—
the quality and quantity of work. It concerns both effectiveness (the attainment of goals) and
efficiency (resource costs, including those human resource costs affecting the quality of life.)
“Effectiveness is the foundation of success—efficiency is a minimum condition for survival
after success has been achieved. Efficiency is concerned with doing things right. Effectiveness
is doing the right things.” -Peter Drucker, a founding father of management theory
What is Organizational Effectiveness
•According to S.P. Robins “ An organizational is said to be effective if it is able to achieve its
goals.
•Morgan and Paolillo stated that “ Effectiveness is commonly referred to the degree to which
predetermined goals are achieved.
•Efficiency is determined by the level of output an organization acheives with ts limited
resources.
•Whereas, the extent to which it is successful in doing what it is set out to do determines its
effectiveness.
•Therefore it is often found that an organization might be highly efficient but ineffective or
effective but highly inefficient.
•It is easy to measure efficiency but hard to derive effectiveness as it is multidimensional.
•Effectiveness consists of certain factors such as level of technology, knowledge base of the
employee, financial strength, variety in skills, employee satisfaction level, customer
satisfaction, meeting social obligations, protecting investors’ interests, profitability, growth,
market position, process and system upgradation, quality control techniques.
 Organizational efficiency Vs
Organizational effectiveness
Organizational Efficiency Organizational Effectiveness
It is an input output ratio and can be measured. It is a multidimensional concept and therefore cannot
be measured by a single criteria.
Efficiency measures include output per hour of labour, It is a very broad concept and considers the survival
profit per rupee of sales and consumption of input prospects of the organization which is not
per unit. determined.
It is preliminary a criteria of the internal life of the It includes factors such as organizational structure,
organization and is considered with economic and philosophy, leadership style, policies, processes and
technical aspects. systems, skills and abilities of employees,
organizational citizenship etc and thereby the
development of synergy aimed at survival and growth
in the competitive world.
It is a narrow concept and a sub part of organizational It is a very broad concept and also includes
effectiveness. organizational efficiency.
It is actual and therefore deals with current It is planned and futuristic in nature.
phenomenon.
It refers to the manner in which goal oriented It commonly refers to the degree to which
operations are carried out. predetermined goals are achieved.
Management Effectiveness versus Leadership Effectiveness
Management is thought of as a special kind of leadership in which the accomplishment
of organizational goals is paramount.
Leadership is an attempt to influence people, individually and in groups, for whatever
reason.
Effectiveness is actually determined by whatever the manager and the organization decide
are their goals and objectives. They should remember that effectiveness is a function of:
Output variables (productivity/performance)
Intervening variables ( the condition of the human resources)
Short-range goals
Long-range goals
Approaches to Organizational Effectiveness
1. Goal Approach
It is also called rational-goal or goal-attainment approach,
It has its origins in the mechanistic view of the organization.
This approach assumes that organizations are planned, logical, goal-seeking entities and
they are meant to accomplish one or more predetermined goals.
Goal approach is worried with the output side and whether or not the organization attains
its goals with respect to preferred levels of output.
 Goal Approach
• It sees effectiveness with respect to its internal organizational objectives and performance.
• Typical goal-attainment factors include profit and efficiency maximization.
• The key constraint of this approach pertains to the content comparability of organizational
goals.
• The dependable identification of comparable and practically appropriate goals within groups
of organizations is thus a serious problem.
• What a company declares as its formal goals don’t always echo the organizations actual goals.
• Therefore, an organizations formal goals are typically dependent upon its standards of social
desirability.
• As goals are dynamic, hence they will probably change as time passes, simply because of the
political make-up of an organisation.
• An organisations short-term goals are usually not the same as their long term goals.
• The utilization of goals as a standard for assessing Organizational Effectiveness is challenging.
• The goal approach presumes consensus on goals.
• Considering the fact that there are numerous goals and varied interests inside an organisation,
consensus, is probably not possible.
 System Resource Approach
• This approach to Organizational Effectiveness was developed in response to
the goal approach.
• The System Resource Approach sees an organization as an open system.
• The organization obtains inputs, participates in transformation processes, and
generates outputs.
• This approach emphasizes inputs over output.
• It sees most organizations as entities which function in order to survive,
• At the same time rivaling for scarce and valued resources.
• It assumes that the organization consists of interrelated subsystems.
• If any sub-system functions inefficiently, it is going to influence the
performance of the whole system.
• The disadvantages of this approach relate to its measurement of means.
• An issue with this approach is that a higher amount of obtained resources is
not going to promise effective usage.
• In addition, it is tough to define an ideal degree of resource acquisition across
distinct organizations.
 Internal-Process Approach
• This approach has been developed in response to a fixed output view
of the goal approach.
• It looks at the internal activities.
• Organizational effectiveness is assessed as internal organizational
health and effectiveness.
• According to Internal-Process Approach effectiveness is the capability
to get better at internal efficiency, co-ordination, commitment and
staff satisfaction.
• This approach assesses effort as opposed to the attained effect.
• Some experts have criticized the internal-process approach, like the
system-resource approach, cannot lead to legitimate indicators of
organizational effectiveness itself.
• Rather, it is accepted as an approach for studying its assumed
predictors.
• Similar to the system-resource approach, the internal-process
approach could possibly be applied only where comparable
organizational outcomes can hardly be assessed accurately.
 Strategic Constituencies Approach
• It is ideal for organizations which rely highly on response to demands.
• The Strategic-constituencies approach takes explicitly into consideration that
organizations fulfill multiple goals: each kind of organizational constituency
(like proprietors, workers, consumers, the local community, etc.)
• It is supposed to have distinct interests vis-à-vis the corporation and will thus
use different evaluation criteria.
• However, the job of isolating the strategic constituencies from their
environment within which they function is a challenging and tricky task.
• Because the environment swiftly changes, what was a crucial goal today
might not be so tomorrow.
• Individual constituents may create significantly diverse ratings of an
organizations effectiveness.
• These constituents may use diverse factors or weight the same criteria in a
different way.
• There is little agreement either theoretically or empirically, in regards to what
makes up organizational effectiveness and what is the best way to measure it.
 Integration of Goals and Effectiveness
• There are two groups that make up most organizations
– 1) Management
– 2) Employees
• The respective goals of these two groups result in the attainment of goals for the
organization
Behavioural Approach
•According to the behavioral approach, the extent to which individual and organizational
goals are integrated, affects the degree of organizational goals.
•Since individuals achieve the organizational goals, it is necessary that the goals of the
two be properly integrated.
•According to Mc Gragor, when managers and individuals share organization oals, it is
called integration of goals.
•When organization and individuals goals are properly integrated, there will be a high
degree of effectiveness.
•In this case, the Individuals will put their maximum effort and cooperate to the
maximum for the accomplishment of organizational goals.
•This is an ideal situation which seldom occurs due to the very nature of human beings.
 Degrees of Goal Attainment

Management

Organization

Degree of Attainment

Employees

Figure 6-6
 Degrees of Goal Attainment

Management

Degree of
Attainment
Organization

Figure 6-7
Employees
 Degrees of Goal Attainment

Management
Organization

Employees
Degree of
Attainment
Figure 6-8
 Participation and Effectiveness
• Shared decision making can have positive outcomes in achieving goals and objectives
• Cultural differences must be considered when determining the proper amount of mutual
decision making as some cultures do not benefit from such interaction
•Coch and French studied an American factory and found shared decision making in regard to
the introduction of new technology and methods increased productivity and resistance to
change while a similar study in Norway found no benefits.
Criteria of determining Organizational Effectiveness
1. Direction: setting objective, planning for long and short term, entrepreneurship and sound
investment, devising appropriate organizational structure, maintaining a favorable image of
the enterprise.
2. Delegation
3. Accountability
4. Control
5. Efficiency
6. Coordination
7. Adaption
8. Social systems and personal effectiveness
What Determines Organizational Effectiveness?
Rensis Likert identified three variables—causal, intervening, and end result—that are useful
in discussing effectiveness over time.
 Causal Variables
 Those factors that influence the course of developments within an organization and its
results or accomplishments.
 They can be altered by the organization or its management, but not beyond the control
of the organization.
Examples: Leadership strategies, skills, behavior, managements’ decisions, policies, and
organizational structure
Intervening Variables
Intervening variables represent the current condition of the internal state of the
organization.
Causal variables affect the human resources, or intervening variables, within an
organization.
They are reflected in the commitment to objectives, motivation, and morale of members
and their skills in leadership, communications, conflict resolution, decision making, and
problem solving.
Output, or End Result, Variables
These are the dependent variables that reflect the achievements of the organization.
Perhaps more than 90% of managers in organizations look at measures of output
alone.
The effectiveness of managers is often determined by net profits.
 Causal Variables Intervening Variable Output Variables

Leadership Commitment to Production (output)

Figure 6-4 Relationship among Likert’s Causal, Intervening, and Output Variables