ASSESSING ORGANIZATIONAL EFFECTIVENESS

Understanding organizational goals and strategies, as well as the concept of fitting design to various contingencies, is a first step toward understanding organizational effectiveness. Organizational goals represent the reason for an organization’s existence and the outcomes it seeks to achieve. The next few sections of the chapter explore the topic of effectiveness and how effectiveness is measured in organizations.

     Organizational effectiveness is the degree to which an organization realizes its goals.48 Effectiveness is a broad concept. It implicitly takes into consideration a range of variables at both the organizational and departmental levels. Effectiveness evaluates the extent to which multiple goals—whether official or operative—are attained.

     Efficiency is a more limited concept that pertains to the internal workings of the organization. Organizational efficiency is the amount of resources used to produce a unit of output. It can be measured as the ratio of inputs to outputs. If one organization can achieve a given production level with fewer resources than another organization, it would be described as more efficient.

     Sometimes efficiency leads to effectiveness, but in other organizations, efficiency and effectiveness are not related. An organization may be highly efficient but fail to achieve its goals because it makes a product for which there is no demand. Likewise, an organization may achieve its profit goals but be inefficient. Efforts to increase efficiency, particularly through severe cost cutting, can also sometimes make the organization less effective. One regional fast food chain wanting to cut costs decided to reduce food waste by not cooking any food until it was ordered. The move reduced the chain’s costs, but it also led to delayed service, irritated customers, and lower sales.

     Overall effectiveness is difficult to measure in organizations. Organizations are large, diverse, and fragmented. They perform many activities simultaneously, pursue multiple goals, and generate many outcomes, some intended and some unintended. Managers determine what indicators to measure in order to gauge the effectiveness of their organizations. Studies and surveys have found that many managers have a difficult time with the concept of evaluating effectiveness based on characteristics that are not subject to hard, quantitative measurement. However, top executives at some of today’s leading companies are finding new ways to measure effectiveness, including the use of such “soft” indications as customer loyalty and employee engagement.

REFERENCE

Daft, R. L. (2010). Understanding the Theory and Design of Organizations. 10, 118. South-Western. Cengage Learning.

ORGANİZATİONAL ECOSYSTEMS

 

 Interorganizational relationships are the relatively enduring resource transactions, flows, and linkages that occur among two or more organizations. Traditionally, these transactions and relationships have been seen as a necessary evil to obtain what an organization needs. The presumption has been that the world is composed of distinct businesses that thrive on autonomy and compete for supremacy. A company may be forced into interorganizational relationships depending on its needs and the instability and complexity of the environment.

     A new view described by James Moore argues that organizations are now evolving into business ecosystems. An organizational ecosystem is a system formed by the interaction of a community of organizations and their environment. An ecosystem cuts across traditional industry lines. A company can create its own ecosystem. Apple, for instance, travels in several major industries, including consumer electronics, Internet services, mobile phones, personal computers, and entertainment. Its ecosystem also includes hundreds of suppliers and millions of customers across many markets. Google is getting into the entertainment business as well, rolling out dozens of short cartoons by “Family Guy” creator Seth McFarlane and building a role as “middleman to Hollywood talent coming online.” Cable television companies are offering new forms of phone service, and telephone companies are getting into the television business. Today, successful companies develop relationships with numerous other organizations cutting across traditional business boundaries.

REFERENCE:Reference: Daft, R. L. (2010). 148. Understanding the Theory and Design of Organizations.SOUTH-WESTERN. Cengage Learning.

The Private Enterprise System

      No business operates in a vacuum. All operate within a larger economic system that determines how goods and services are produced, distributed, and consumed in a society. The type of economic system employed in a society also determines patterns of resource use. Some economic systems, such as communism, feature strict controls on business ownership, profits, and resources to accomplish government goals.

     In the United States, businesses function within the private enterprise system, an economic system that rewards firms for their ability to identify and serve the needs and demands of customers. The private enterprise system minimizes government interference in economic activity. Businesses that are adept at satisfying customers gain access to necessary factors of production and earn profits.

     Another name for the private enterprise system is capitalism. Adam Smith, often identified as the father of capitalism, first described the concept in his book The Wealth of Nations, published in 1776. Smith believed that an economy is best regulated by the “invisible hand” of competition, the battle among businesses for consumer acceptance. Smith thought that competition among firms would lead to consumers’ receiving the best possible products and prices because less efficient producers would gradually be driven from the marketplace.

     The “invisible hand” concept is a basic premise of the private enterprise system. In the United States, competition regulates much of economic life. To compete successfully, each firm must find a basis for competitive differentiation, the unique combination of organizational abilities, products, and approaches that sets a company apart from competitors in the minds of customers. Businesses operating in a private enterprise system face a critical task of keeping up with changing marketplace conditions. Firms that fail to adjust to shifts in consumer preferences or ignore the actions of competitors leave themselves open to failure. Google, for instance, continues to challenge Microsoft’s dominance in the market for business word-processing and spreadsheet software. It is expected to enable its Marketing Solutions Web site to sell third-party software to Google Apps customers. In the short time since it began its expansion into enterprise business applications, Google reports adding almost 2 million organizations for Gmail and Google Docs, an aggressive launch to which Microsoft must respond. 

Reference: Boone, L. ve Kurtz, D. (2011). Çağdaş İş, 14, 10.  Asya: John Wiley & Sons

Individual versus Organizational Power

           In popular literature, power is often described as a personal characteristic, and a frequent topic is how one person can influence or dominate another person. Managers have five sources of personal power.

        Legitimate power is the authority granted by the organization to the formal management position a manager holds. Reward power stems from the ability to bestow rewards—a promotion, raise, or pat on the back—to other people. The authority to punish or recommend punishment is called coercive power. Expert power derives from a person’s greater skill or knowledge about the tasks being performed. The last, referent power, is derived from personal characteristics: people admire the manager and want to be like or identify with the manager out of respect and admiration. Each of these sources may be used by individuals within organizations.

    Power in organizations, however, is often the result of structural characteristics.Organizations are large, complex systems that may contain hundreds, even thousands, of people. These systems have a formal hierarchy in which some tasks are more important regardless of who performs them. In addition, some positions have access to more information and greater resources, or their contribution to the organization is more critical. Thus, the important power processes in organizations reflect larger organizational relationships, both horizontal and vertical.

           Reference: Daft, R. L. (2010). Understanding the Theory and Design of Organizations.SOUTH-WESTERN. Cengage Learning.