Organizational Effectiveness

Efficiency is doing things right; effectiveness is doing the right things.

Peter Drucker

Organizational Effectiveness

by

Charles Lamson

Organizational effectiveness, the ultimate aim of organizational design, is a measure of an organization's success in achieving its goals and objectives. Goals and objectives might include targets pertaining to profitability, market share, growth, product quality, efficiency, stability or other similar outcomes. An organization that fails to accomplish its goals is ineffective because it is not fulfilling its purpose.

A successful organization must satisfy the demands of the various constituency groups that provide it with resources it needs to survive. For example, if a company satisfies customers' demands for desirable goods or services, it will probably continue to enjoy its customers' patronage. If it satisfies its supplier's demands for payment in a timely manner, the suppliers will probably continue to provide it with needed raw materials. If it satisfies the employees' demands for fair pay and satisfying work it will probably be able to retain its workers and recruit new employees. If it satisfies stockholder demands for profitability, it will probably have continued access to equity funding. If a firm fails to satisfy any one of these demands, its effectiveness will be weakened because the potential loss of needed resources, such as customers or employees, threatens its survival. 

Effectiveness differs from organizational productivity. The concept of productivity does not take into account whether a firm is producing the right goods or services. A modern company producing more glass milk bottles than ever before is certainly productive but it is also ineffective because most milk companies sell their products in plastic jugs. Effectiveness differs from efficiency. Organizational efficiency means minimizing the raw materials and energy consumed by the production of goods and services. It is usually measured as the ratio of inputs consumed to units of output produced---for instance, the number of labor hours required to manufacture a bicycle. Efficiency means doing the job right---producing what ought to be produced in light of the goals, objectives, and constituency demands that influence a company's performance.

Structural Alternatives

The extent to which an organization is effective is strongly influenced by its structure. For each firm, only one type of structure will have the greatest possible effect on its ability to attain goals. To clarify the fundamental differences among the various types of structures, alternatives are sometimes classified along a dimension whose values range from mechanistic to organic.

At one extreme, purely mechanistic structures are machine-like. They permit workers to complete routine, narrowly-defined tasks designed according to the dictates of the efficiency perspective in an economical manner, but they lack flexibility. Extremely mechanistic structures are centralized and have tall hierarchies. They are also characterized by large amounts of formalization, standardization and specialization.

In contrast, purely organic structures are like living organisms in that they are flexible and able to adapt to changing external conditions. In such structures, the empowerment and quality perspectives on job design have greater influence on the way tasks are developed and performed, allowing employees more control over their work and affording the organization increased adaptability. However, because of their flexibility, organic structures lack the single-minded focus required to perform routine work efficiently.

The different parts of extremely organic structures are connected together by decentralized networks in flat hierarchies. The emphasis placed on horizontal relationships means a reduction in the number of vertical layers required to process information and manage activities. In addition organizations with organic structures typically rely more on mutual adjustment than on formaliziation, standardization and specialization. For this reason, computerized information networks take on importance as tools enabling coordination and communication among interdependent tasks.

A particular structure may be mechanistic in some respects and organic in others. The more mechanistic  the structure, the more efficient but less flexible it will be. The more organic the structure, the more flexible but less efficient it is. These differences in efficiency and flexibility can be traced partly to the mechanisms used to coordinate work activities. Standardization incorporates low long-term costs and is thus the basis of mechanistic efficiency. Mutual adjustment on the other hand is quite flexible and is therefore the source of organic flexibility.

Differences in the efficiency and flexibility of mechanistic and organic structures are also attributable to differences in centralization, a characteristic that varies independently of the degree to which a structure is bureaucratic. On the one hand, the greater centralization of mechanistic structures encourages efficient specialization, with centralized decision-makers gaining ever-growing expertise in decision making. On the other hand the greater decentralization of organic structures facilitates adaptive responses, because decentralized decision makers located throughout an organization can lead its parts in several different directions at once. IBM's move to decentralize back in the 80s and 90s illustrates this point. IBM was so centralized that decisions about the design manufacture and sales of personal computers were made by the same headquarters managers who made decisions about larger mainframe computers and midsize mini-computers. 

Comparison of Mechanistic and Organic Structure

Mechanistic Structures

Organic Structures

Tasks are highly specialized. It is often not clear to members how their tasks contribute to accomplishing organizational objectives Tasks remain rigidly defined, unless formally altered by top management Specific roles, rights, duties, and technical methods are defined for each member Control and authority relationships are structured in a vertical hierarchy Communication is primarily vertical between superiors and subordinates Communication is mainly in the form of instructions and decisions issued by superiors, performance feedback and requests for decisions sent by subordinates Loyalty to the organization and obedience to supervisors are insisted upon

Tasks are broad and interdependent. The relation of task performance to attainment for organizational objectives is emphasized Tasks are continually modified and redefined by means of mutual adjustment on the part of task holders Generalized roles (acceptance of the responsibility for overall task accomplishment) are defined for each member Control and authority relationships are structured in a network of both vertical and horizontal connections Communication is both vertical and horizontal, depending on where needed information resides Communication takes the form of information and advice Commitment to organizational goals is more highly valued than is loyalty or obedience

end

Mechanistic Structures

Organic Structures

• Tasks are highly specialized. It is often not clear to members how their tasks contribute to accomplishing organizational objectives
• Tasks remain rigidly defined, unless formally altered by top management
• Specific roles, rights, duties, and technical methods are defined for each member
• Control and authority relationships are structured in a vertical hierarchy
• Communication is primarily vertical between superiors and subordinates
• Communication is mainly in the form of instructions and decisions issued by superiors, performance feedback and requests for decisions sent by subordinates
• Loyalty to the organization and obedience to supervisors are insisted upon

            

• Tasks are broad and interdependent. The relation of task performance to attainment for organizational objectives is emphasized
• Tasks are continually modified and redefined by means of mutual adjustment on the part of task holders
• Generalized roles (acceptance of the responsibility for overall task accomplishment) are defined for each member
• Control and authority relationships are structured in a network of both vertical and horizontal connections
• Communication is both vertical and horizontal, depending on where needed information resides
• Communication takes the form of information and advice
• Commitment to organizational goals is more highly valued than is loyalty or obedience

Mechanistic Structures

Organic Structures

• Tasks are highly specialized. It is often not clear to members how their tasks contribute to accomplishing organizational objectives
• Tasks remain rigidly defined, unless formally altered by top management
• Specific roles, rights, duties, and technical methods are defined for each member
• Control and authority relationships are structured in a vertical hierarchy
• Communication is primarily vertical between superiors and subordinates
• Communication is mainly in the form of instructions and decisions issued by superiors, performance feedback and requests for decisions sent by subordinates
• Loyalty to the organization and obedience to supervisors are insisted upon

            

• Tasks are broad and interdependent. The relation of task performance to attainment for organizational objectives is emphasized
• Tasks are continually modified and redefined by means of mutual adjustment on the part of task holders
• Generalized roles (acceptance of the responsibility for overall task accomplishment) are defined for each member
• Control and authority relationships are structured in a network of both vertical and horizontal connections
• Communication is both vertical and horizontal, depending on where needed information resides
• Communication takes the form of information and advice
• Commitment to organizational goals is more highly valued than is loyalty or obedience