Organizational Change Christopher SmithDecember 2, 2019

What Is the Importance of Organizational Effectiveness?

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What Is the Importance of Organizational Effectiveness?

The importance of organizational effectiveness cannot be understated.

As we will see below, effective organizations perform better, earn more, and are more competitive.

Below, we will look at some of the biggest benefits of an effective organization.

But first, we should look at what organizational effectiveness actually means.

What Is Organizational Effectiveness?

A short answer to this question would be: “How effective an organization is at achieving its goals.”

However, this definition doesn’t help us very much – it’s too concise.

Organizational effectiveness can refer to the efficiency and effectiveness a variety of business areas.

For instance:

  • How well employees perform. Are employees motivated and productive? Or do they just do the bare minimum? Performance can depend on the effectiveness of employee training, the work environment, tools, management, among other factors. 
  • The effectiveness of leadership. How well do your leaders lead? Leadership quality impacts employee performance, productivity, the corporate climate, and many other business areas. 
  • Business processes. The efficiency of business processes also affects organizational effectiveness. Processes that are faster, leaner, and more cost-effective, for instance, will improve organizational effectiveness and efficiency.
  • Organizational structure and design. The organizational structure can also impact an organization’s performance. For example, is the organization a top-down, autocratic hierarchy? Or is it more democratic, composed of autonomous teams and individuals? 
  • Overall alignment between various business areas. Leadership, management, culture, and other factors contribute to how well business functions work together. That efficiency, in turn, translates into better organizational results.
  • Organizational behavior. Like culture, organizational behavior affects the performance of a company. How employees behave contributes to their job performance, productivity, engagement, motivation, satisfaction, and so forth. All of which affects how much their efforts contribute to the organization.

Factors such as these, taken together, contribute to an organization’s effectiveness … or lack thereof.

The Importance of Organizational Effectiveness

Ultimately, factors such as the above have significant impacts on many business functions.

The benefits of effectiveness in an organization can include improved:

  • Employee engagement and performance. Employee productivity is directly tied to the outcomes and performance of individual business units. This, in turn, affects the organization’s performance.
  • Better management. Improved management can mean better manager training, increased communication between managers and frontline employees, updated managerial policies and procedures, among other things.
  • Decreased costs. Efficiency in any business unit can decrease costs. Those savings can come from any area that is causing waste – outdated processes, obsolete technology, ineffective workflows, and so forth.
  • Improved customer engagement and value. A main goal of any business is to maximize customer value. By improving the effectiveness of customer-related departments – such as customer care or the customer experience – businesses can enhance relationships and boost customer value.
  • More efficient use of technology. Today, all organizations use digital technology. But they don’t always use it well. Effective digital adoption efforts can improve digital workflows, data insights, business processes, employee training, and many other business areas.
  • Better organizational outcomes. It should be apparent that a more effective organization will be better at achieving its goals and strategic priorities. And the better it can achieve its goals and meet its aims, the more profitable it will be.

The derived benefit for any organization will, of course, depend on the business function in question.

For business professionals, the main concern around organizational effectiveness isn’t just “What is the importance of organizational effectiveness?”

It should be: “How do we improve organizational effectiveness?”

How to Maximize Organizational Effectiveness

The first goal is to choose which area of business to improve.

Setting clear, achievable objectives will help you create a strategy to help you improve the organization.

Examples include:

  • Improving the organizational culture. Learning cultures, data cultures, customer experience cultures, and similar mindsets can improve teamwork and employee productivity.
  • Improving the employee experience. As mentioned, the employee experience affects employee performance, productivity, and output. Improving that experience is yet another way to improve organizational effectiveness.
  • Increasing business process efficiency. The right experts – or even frontline employees – can identify areas of improvement in business systems. Improving these processes will result in improved organizational effectiveness.
  • Getting better tools and technology. Modern tools and technology can offer a significant competitive advantage. This is why digital adoption and digital transformation initiatives are becoming more common every day.

There are certainly other ways to enhance organizational effectiveness.

Regardless of which area needs improvement, the best way to achieve change is through structured change management.

How Change Management Can Improve Your Organization

Organizational change management – or simply change management – is a management discipline designed to execute, manage, and optimize organizational changes.

The right change management approach involves:

  • Assessing risks, rewards, and roadblocks
  • Designing a change management strategy to achieve those aims
  • Working with employees to build motivation, maintain momentum, and reduce resistance
  • Analyzing and optimizing projects as necessary
  • Reinforcing change to ensure that it sticks
  • Reviewing and learning from project results

Change management is not easy. 

However, structured change management is essential if you want to maximize your chances of success.

To learn more about how to improve organizational effectiveness through change management, feel free to browse other articles on our change management blog.

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