Executive summary

Organizational Effectiveness

History

Efficiency and effectiveness were originally coined as concepts in industrial engineering. These concepts eventually came of age during the twentieth century and have since become an important requirement for organizations and the corporate world. Management theorists like Frank and Lillian Gilberth and Frederick Taylor have all designed studies and techniques to improve efficiency in the workplace and come up with ways to prioritize effective business operations.

Work simplification efforts gathered pace during the recent wave for efficient processes and it was during this time that streamlined processes started to pop up in organizations. The concept of effectiveness takes into consideration value creation and customer satisfaction. This concept first became popular in the United States late into the 20th Century. Americans perceived Japanese products, including their electronics and cars, as carrying great value and quality, and hence replicated the efficient processes that the Japanese had introduced to improve effectiveness.

Both words, efficiency and effectiveness, are often treated as synonyms, with certain entrepreneurs thinking of effectiveness as an extension of efficiency. The same goes for words like productivity, proficiency and competency. From a layperson’s perspective, all of these business terms appear to be the same. However, there are certain intricate differences that pop up in more formal managerial discussions.

The words efficiency and effectiveness can take on different meanings as well during formal discussions. In process engineering, guru Lon Roberts defined efficiency to be “the degree of economy with which the process consumes resources-especially time and money”. He distinguished effectiveness as “how well the process actually accomplishes its intended purpose, here again from the customer’s point of view.”

A simpler way to look at both these metrics is by defining efficiency as the effort put toward doing things right, while effectiveness can be described as doing the right things on a consistent basis. A company can do wrong things efficiently, without much reward, because both of these concepts are fully utilized when you do the right thing consistently.

Some process efficiency measures are:

• Cycle time per unit, transaction, or labor cost
• Queue time per unit, transaction, or process step
• Percent on-time delivery
• Inventory turns
• Cost of poor quality per unit of output
• Percent of time items were out of stock when needed
• Resources (dollars, labor) expended per unit of output

Some measures for effectiveness are:

• How well the process and its output meet the requirements of the end user or customer
• How well the inputs from the external suppliers meet the requirements of the process
• How well the output of the sub process meets the requirements of the next phase in the process (internal customers)

The concepts of efficiency and effectiveness have become even clearer with the passage of time. Both of these concepts now play an important role in business operations and are considered significant in the journey toward success. Businesses realized late in the 20th century that success in the modern would come through effectiveness and the general effort to do things right consistently.

Current Position

In today’s developing world, organizational effectiveness relates to the efficiency of numerous business areas under the umbrella of a single management. Organizations have developed contingency plans to minimize the impact of disruptions on their processes and prioritized efficiency and consistency over volatility.

Businesses in the current world implement and measure effectiveness based on the following metrics:

• Employee performance: Are employees within your organization productive and motivated enough to perform? Do they just perform their bare minimum without putting in the extra effort? Performance usually depends on the effectiveness of employee training in any organization, the tools, management and work environment among other factors.

• Leadership Style: The leadership style in the firm can also impact the overall effectiveness of the organization. How well do the leaders in your firm manage their responsibilities? Leadership quality can significantly impact employee performance, productivity, corporate climate and a number of other business areas.

• Organizational Structure: The next factor to consider here is the structure of your organization. The organizational structure also has a significant impact on the performance of an organization. Most organizations have a democratic, top-down, autocratic or laissez-faire style of leadership or hierarchy. A more democratic organization might have better efficiency due to the autonomy provided to employees.

• Organizational Culture: Organizational culture and behavior are two things that walk hand in hand. Organizational culture is one thing that significantly affects the performance of all members in an organization. A toxic work culture promotes disputes and might not be conducive to growth and effectiveness.

Organizations are leaving a lot of beliefs from the past behind to achieve organizational effectiveness. While effectiveness and efficiency were previously only connected to cutting costs and saving time, they now include a broader discussion on improving responsiveness as well. Organizations are now expected to be responsive, in addition to just being efficient. As a result, the traditional concepts of efficiency are left behind for a more inclusive measure of organizational effectiveness through the addition of responsiveness. Organizations want to be responsive to meet customer expectations in time and give them the kind of service standard they require in the time they require.

Future Outlook

The future of organizational effectiveness in complex organizations with intricate hierarchies and complex customer expectations would be based on the systems of organizational effectiveness. These systems include:

Leadership

To achieve better results and sustain efficiency within the organization, managers should take the role of leaders and define/redefine key processes within the organization. Execution should be prioritized as well and should be translated into a better understanding of the vision and mission of the organization. For efficiency to be prioritized, leaders should translate vision and values into objectives and strategies, processes and practices into accountability and performance.

Leaders will be required to address three questions here:

1. What unique value do you bring to customers through your vision/value? The unique value is your competitive advantage and helps separate you from the rest.

2. What is distinct about the way you fulfill and satisfy the needs of your stakeholders and customers? Does your strategy support your vision in achieving organizational effectiveness and competitive advantage?

3. Are the elements of your organization designed to help achieve your vision and improve effectiveness?

The answers to these questions can determine future measures toward effectiveness.

Communication

Efficiency is often the end result of improved communication. Every exchange is a potential step toward success. Organizations today realize the importance of strategic communication and are coming up with ways to strategize and implement these steps in an even broader manner. The leadership team should communicate objectives, set plans and align strategies across teams and hierarchies in a clear manner. With better tech advances on the cards, this is bound to become even better over time.

Accountability

Leaders are responsible for translating their strategies and vision into goals and objectives for every employee within the firm. Management by objectives is a popular leadership style to set strategies and is bound to become a norm in organizations over time. Leaders need to add discipline into their processes and ensure that every employee understands their role in organizational effectiveness and is held accountable for lapses.

Delivery

Organizations of the future will develop processes that are locally responsive, internally efficient and globally adaptive. Complexity in delivery processes is a thing of the past as organizations today prioritize simplicity in delivery patterns with an adaptable approach that prioritizes both, responsiveness and efficiency. Operations need to use the most effective techniques in support of major objectives and initiatives.

Performance Assessment

Performance assessment systems of the future will be designed to attract, train, develop and retain the most hardworking and talented employees within your organization. The idea is to achieve organizational effectiveness by attracting the right talent, helping them develop over time and retaining them through a positive culture, leadership style and perks. Organizational effectiveness is only achieved through consistency in employee performance and retention.

Measurement

The measurement processes should develop a positive system of course-correction whenever organizational effectiveness is compromised. Organizations will soon implement concrete measures to facilitate consistent performance, predictable results and quality control. Predictability might sound far-fetched, but is definitely a part of the future of organizational effectiveness.

This framework for the future will help managers of tomorrow view just how they can prioritize and improve their organizational effectiveness.