Organizational Effectiveness MG345 Organizations & Environment Tony Buono

Universal & Centurion Len Semp’s Centurion Jack Harris’ Universal $750 m sales 550 employees Profitability through: Efficiency Process Standardization Detailed org charts Narrowly defined jobs & functional responsibility Control through command / compliance Jack Harris’ Universal $600 m sales 480 employees Profitability through: Effectiveness Employee Satisfaction No organization charts Cross-training & inter-departmental collaboration Control through commitment / mutual adjustment

Management Control & Organizational Effectiveness Type of Work Programmable Non-programmable High EFFECTIVENESS Low Command/ Compliance Commitment/ Mutual Adjustment MANAGEMENT CONTROL ORIENTATION

Perspectives on Organizational Effectiveness Organizations as Input-Process-Output Systems Output Input Conversion Process Goal Resource-based (System Resources) Internal Process Excellence & Competency Efficiency Strategic Constituencies (Stakeholder Model)

Goal Approach Official goals: Formally stated, abstract goals that are often difficult to measure Operative goals: reflect the activities the organization is actually performing Examples: profitability  growth  market share product quality  efficiency  diversification employee welfare  financial stability  R&D social responsibility  management development Limitations: multiple goals identification of operative goals subjective indicators of goal attainment

Perspectives on Organizational Effectiveness Organizations as Input-Process-Output Systems Output Input Conversion Process Goal Resource-based (System Resources) Internal Process Excellence & Competency Efficiency Strategic Constituencies (Stakeholder Model)

Strategic Constituencies Approach (Stakeholder Model) Organizational effectiveness as the extent to which key stakeholders are satisfied with the firm’s performance. Stakeholder Owners/investors Employees Customers Creditors Local community Suppliers Government Example Effectiveness Criteria Financial return, shareholder value Job satisfaction, compensation Quality and cost of goods/services Creditworthiness, company rating Contribution to community affairs Satisfactory transactions Adherence to laws, regulations

The Balanced Scorecard: Integrating Goals & Stakeholders Process-Centric Organization Results Investor Results Internal Focus External Focus Customer & Other Relevant Stakeholder Results Employee Results People-Centric Source: Adapted from Ulrich, et al, Results-Based Leadership (2000)

Perspectives on Organizational Effectiveness Organizations as Input-Process-Output Systems Output Input Conversion Process Goal Strategic Constituencies (Stakeholder Model) Internal Process Excellence & Competency Efficiency Resource-based (System Resources)

Resource-based Approach Key assumption: to be effective organizations must obtain scarce and valued resources from its environment Indicators: Bargaining position ~ ability of an organization to capture critical resources at a fair price Ability to accurately perceive and interpret the external environment Ability of the organization to respond to changes in its Limitations: Focus on acquisition of resources ~ use? To what end?

Perspectives on Organizational Effectiveness Organizations as Input-Process-Output Systems Output Input Conversion Process Internal Process Excellence & Competency Efficiency Goal Strategic Constituencies (Stakeholder Model) Resource-based (System Resources)

Internal Process Approach Focus is on internal organizational health (harmony, competency, excellence) and efficiency (use of resources) Indicators:  Use of time, money, people  Team spirit, group loyalty, teamwork  Employee-management trust  Open communication and information sharing  Interdepartmental cooperation and collaboration Limitations: (1) Total output not evaluated (2) Closed system orientation (3) Measurement can be highly subjective

Perspectives on Organizational Effectiveness Organizations as Input-Process-Output Systems Output Input Conversion Process Goal Accomplishment Strategic Constituencies (Stakeholder Model) Resource-based (System Resources) Internal Process Excellence & Competency Efficiency

Competing Values Approach to Organizational Effectiveness STRUCTURE MEANS: Adaptability Flexibility Flexibility ENDS: Valued HRs Skilled Work Force Open-System Model Human Relations Model ENDS: Resource Acquisition External Support MEANS: Morale Cohesive Work Force Internal External FOCUS ENDS: Productivity Efficiency MEANS: Communication Availability of Information Rational-Goal Model Internal-Process Model ENDS: Stability Control MEANS: Planning Goal Setting Control

Universal & Centurion Len Semp’s Centurion Jack Harris’ Universal $750 m sales 550 employees Profitability through: Efficiency Process Standardization Detailed org charts Narrowly defined jobs & functional responsibility Control through command / compliance Jack Harris’ Universal $600 m sales 480 employees Profitability through: Effectiveness Employee Satisfaction No organization charts Cross-training & inter-departmental collaboration Control through commitment / mutual adjustment

Mapping Organizational Effectiveness STRUCTURE Flexibility Open-System Model Human Relations Model Universal Internal External FOCUS Centurion Rational-Goal Model Internal-Process Model Control

Factors Influencing Organizational Effectiveness Criteria Top Management Influence Value Judgments & Leader Choices Organizational Culture & Structure Goal Measurability Routine internal tasks  measurable efficiency goals Non-routine internal tasks  output goal criteria (e.g., quality, growth) & internal processes (e.g., satisfaction, collaboration) Environmental Conditions Uncertainty & Resource Scarcity  focus on resource-based (input) & internal efficiency criteria Turbulence & Change  emphasis on stakeholder satisfaction & internal processes (e.g., competency, adaptability)