Organizational Analysis and Effectiveness

Organizational Effectiveness

Michael Simmons

ORG/581

June 16, 2014

Sara Garski

Organizational Effectiveness

Companies are constantly seeking ways to increase their profits and performance in today’s constantly changing and increasingly competitive markets.  In order for a company to be successful in increasing their performance, the factors determine the effectiveness of the company must first be realized and tools put in place to measure them.  “Because managers are responsible for utilizing organizational resources in a way that maximizes an organization’s ability to create value, it is important to understand how they evaluate organizational performance” (Jones, 2010).  Three different methods will be discussed in this paper that allow managers to perform the task of assessing the organizational effectiveness of a company; the external resource approach, the internal resource approach, and the technical approach.  Additionally, an example of how to implement one of these approaches will be discussed in detail to aid in the understanding of the process.

Measuring Organizational Effectiveness

External Resource Approach

“The external resource approach allows managers to evaluate how effectively an organization manages and controls its external environment” (Jones, 2010).  A company that has the ability to sway stakeholders and influence their perceptions to get higher evaluation results is a direct result of company manages their external resources.  Managers may use several different tools to determine the effectiveness of the company in this area; costs of inputs, inputs of raw materials and employees, market share, stock price, and support of stakeholders such as government or environmentalists.  This is not the only metric that should be used by managers when determining the company’s effectiveness; taking a strictly external resource approach could lead to too much focus on stock price and market share, and lead to inefficiencies and missed market opportunities that would have been discovered using a technical or internal systems approach.  External control approach goals might be to reach a market share of 30%, or reducing material costs by 10% for the year.

Internal Systems Approach

“Internal process approach looks at the internal activities.  Organizational effectiveness is measured as internal organizational health and efficiency” (Business Management, Ideas about Entrepreneurship, Innovation, & Leadership, 2014).   The internal approach allows managers to assess how effectively their company’s culture, structure, and policies align to allow the correct and timely response of their employees to different situations.  Some of the items that management may asses while doing the internal approach would be; decision-making time, rate of product innovation, coordination and motivation of employees, conflict, and time to market.  An internal systems goal might be to bring a new product to market every 6 months, or to reduce the number of people required to make a major decision.  With a constantly changing workforce environment, it is crucial that managers actively seek to increase the skills of their employees and enhance processes / procedures.  “Improvements to internal systems that influence employee coordination or motivation have a direct impact on an organization’s ability to respond to its environment” (Jones, 2010).

Technical Approach

“The technical approach allows managers to evaluate how efficiently an organization can convert some fixed amount of organizational skills and resources into finished goods and services” (Jones, 2010).   Not only does this approach help to define the organizations effectiveness; it is also used to help determine the organizations efficiency.  This approach can easily be seen when evaluating an assembly line using job order costing.  If changes can be modified to the process that will allow for a higher output without having to make a change to labor or cost, then the output would go up increasing the efficiency of the process; this could be as simple as moving items closer together or doing steps in a different order.  Managers typically use some of the following items when making their assessment using the technical approach; product quality, number of defects, production costs, customer service, and delivery time to customers.  A technical goal could be to increase the number of widgets made per day to 50, or to increase client satisfaction by 5%.