Change Management WalkMe TeamOctober 3, 2019

Organizational Effectiveness: The Definitive, Complete Guide

4.8/5 - (5 votes)
Organizational Effectiveness: The Definitive, Complete Guide

In this complete guide to organizational effectiveness, you will learn everything you need to know about this topic – from step-by-step guides to FAQs.

You’ll learn:

  • The definition of organizational effectiveness
  • Frequently asked questions
  • Approaches, systems, and models of organizational effectiveness
  • How employee motivation is related to organizational effectiveness
  • Organizational effectiveness versus organizational efficiency, organizational development, organizational change management, and more

Just for starters.

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.

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?”

Systems and Models of Organizational Effectiveness

There are many ways to define and model organizational effectiveness.

Here are some of the most popular ones:

4 Models of Organizatonal Effectiveness

The Canadian Center of Science and Education conducted a review of four separate models of organizational effectiveness.

This study, which focused on organizational effectiveness within higher education, included:

  • The Goal Approach – Defining effectiveness based on organizational objectives such as profit, innovation, and profit quality.
  • The System Resource Approach – This model explains effectiveness based on an organization’s ability to obtain necessary resources.
  • The Process Approach – This approach focuses on the efficiency and effectiveness of the processes within an organization.
  • The Strategic Constituency Approach – Finally, this model defines effectiveness based on the interests of the stakeholders.

However, these four models just scratch the surface.

There are yet other models, such as:

The Outcome Accountability Model

The report by the Maxwell School, cited above, defined organizational effectiveness as “outcome accountability.” 

That is, accomplishing organizational results efficiently and cost-effectively.

Respondents to this report agreed that there were three parts to outcome accountability:

  • Defining goals and objectives as appropriate to the organization and its mission
  • Making progress towards achieving those objectives
  • Demonstrating that progress to stakeholders

What makes an organization successful, therefore, would depend on making measurable progress towards specific outcomes.

Production, Commitment, Leadership, and Interpersonal Relationships

Yet other models, per a paper by Dr. P. Venkataiah at Osmania University, focus on components in an organization such as:

  • Production. The flow of organizational output.
  • Commitment. How attached workers were to the organization.
  • Leadership. Personal ability and influence.
  • Interpersonal conflict. Perceived misunderstandings between supervisors and subordinates.

The models covered here are hardly exhaustive.

There are many more models of organizational effectiveness.

But the underlying theme is clear – efficiency, harmony, and effectiveness within various business areas contribute to overall organizational effectiveness.

And organizations that are more effective are more profitable, resilient, and competitive.

Decision-Making, Learning, Group Effectiveness, and Adaptive Systems

Other sources define this concept according to four criteria:

  • Decision-making. How people make decisions, the quality of that decision-making, improving decision-making by leveraging additional decisions.
  • Change and learning. The ways that people change, learn, and adopt new information and modes of operating.
  • Group effectiveness. How people work together as teams and how they leverage new ideas and innovations.
  • Self-organizing and adaptive systems. How business systems and processes evolve, self-organize, and improve the organization over time.

However, perhaps the best systems are practical systems. That is, systems meant to be applied.

The Six Systems of Organizational Effectiveness

According to The Leadership Circle, organizational effectiveness depends on leadership.

Specifically, it depends on six systems:

  • Leadership – Leaders must be able to translate vision into strategy, processes, and objectives. 
  • Communication – Communication should be strategic, consistent, and it should attain results.
  • Accountability – Maintaining accountability and discipline requires systems, with real consequences and real rewards.
  • Delivery – Operations must stay aligned with strategy, be continuously improved, and build future capabilities, among other things.
  • PerformanceEmployee performance should also be a methodical, systematic approach, designed to attract, develop, and retain top talent.
  • Measurement – To stay on track, a business should systematically apply metrics, reviews, and adjustments.

According to the authors, “Without a mature, highly evolved, and fully functioning Leadership System, transformation efforts will not succeed—PERIOD!”

HR, Employees, and Organizational Effectiveness

While the Leadership Circle emphasizes effective leadership as the axle around which organizational effectiveness revolves, others emphasize the role of employees.

The Role of Employee Motivation

Employee motivation is often cited as a key contributor to effective organizational performance.

Generally speaking, motivation is defined as the reasons for people’s:

  • Actions and behaviors
  • Willingness and enthusiasm
  • Goals and aims

In a workplace context, motivation is critical.

Employee motivation greatly contributes to many other critical employee metrics, such as:

  • Employee productivity
  • Employee engagement … or disengagement
  • Enthusiasm for their work
  • Output levels
  • Willingness and ability to learn
  • Longevity and retention
  • Loyalty to the company

Among other things.

In part, this is one reason why employee motivation receives such major attention by many business professionals.

The Employee Experience 

For this reason, the employee experience should receive special attention.

Improving these areas can help increase organizational effectiveness – regardless of the model you are using.

  • Each stage of the employee life cycle. The employee life cycle covers every interaction an employee has with a brand. This cycle begins with pre-recruitment contact and includes other stages of interaction, from onboarding through to post-exit surveys.
  • The employee experience. The employee experience includes the employee life cycle. But, depending on who you ask, it can also include the workplace environment, career development programs, interpersonal relationships, and any other aspect of a worker’s experience within the company.
  • Employee engagement. Employee engagement refers to how motivated and enthusiastic workers are at their jobs. The more engaged they are, the more productive and effective they are.
  • Career and skills development. Human resources has extended its role into change management, the employee experience, training, and career development. This shift in responsibility has also transformed it into a value-added business function – not just an administrative or managerial role.
  • Employee behavior. Employee behavior affects how individuals and teams interact. Expectations around behavior should be clear and goal-oriented. Appropriate workplace behavior contributes to team synergies, creating more efficient, effective, and productive business units.

However, above and beyond employee development, there are other ways to enhance organizational performance and effectiveness.

A Step-by-Step Method for Achieving Organizational Effectiveness

What is the best way to achieve organizational effectiveness?

Here is a step-by-step approach:

  • Choose an organizational effectiveness model. Defining organizational effectiveness is the very first step to successful improvement. Unless you understand how to view organizational success, you won’t be able to develop proper goals or processes.
  • Analyze the components of your model. Perform assessments on each component of your model. If you are using a goal-based approach, for instance, you would judge your business units, processes, employees, and strategies. Then discover weaknesses, strengths, and areas of potential growth.
  • Develop change management strategies to improve those elements. Change management is practice and discipline of executing organizational change. Achieving organizational effectiveness – regardless of your system – requires effective change management strategies. For more information on organizational change management, browse other articles on our change management blog.
  • Execute and manage your change plans. After setting goals and a change management strategy, execute your plan. As with any project, ensure that you use a sophisticated, structured management approach. The results of your project will depend greatly on how well you apply your change project.
  • Review and adjust as necessary. Continually review and analyze your project. Data, analytics, KPIs, and metrics can help you gauge progress. Then make adjustments in order to keep your project on track and successful.

Essentially, achieving organizational effectiveness requires organizational change management.

Let’s look at some strategies and secrets for successfully improving your organizational performance.

Organizational Effectiveness: Strategies and Secrets

No organization is perfect as it is – there is always room for improvement.

To improve effectiveness, organizational change management is often the only successful solution.

Organizational change programs can target many of the elements covered above. For instance:

  • Adopt and custom-tailor a system or framework. Systems, models, and frameworks are perhaps the most useful tool in your arsenal, as discussed. The Leadership Circle’s six systems, mentioned above, is one such system. For change management, good frameworks include Prosci’s ADKAR model, John Kotter’s 8-Step model, and the Lewin change model, to name a few.
  • Cultural changes can help align workplace culture with the organizational mission. The right culture, as mentioned earlier, can improve performance across business units. There are several ways to change culture – by focusing it on the customer experience, a digital-first mindset, learning, and so forth. But one of the best places to start is by ensuring that culture is aligned with the organization’s stated mission and philosophy.
  • Improved management training can decrease interpersonal conflict. Poor management has been cited by Gallup as a cause of poor performance. Gallup claims that in the United States, poor management and lost productivity causes employees to become un-engaged or actively disengaged. The cost: between $960 billion and $1.2 trillion per year.
  • Digital skills training can improve employee performance and longevity. Training should become an integral facet of your employee experience program. The right training program will do a few things: improve productivity, increase employee confidence, increase worker longevity, and enhance worker satisfaction. All of which contribute to a more effective organization.
  • Digital adoption can increase digital ROI. Digital adoption is a core component to digital transformation efforts. Whenever a company adopts a new product or software tool, software ROI depends on user productivity. Through a combination of usage analytics, employee training, automation, and proactive software optimization, digital adoption can improve the effectiveness and efficiency of technology.
  • Strategic changes can help align business functions with goals. One way to improve organizational effectiveness is to align business unit strategies with organizational strategies. Another is to realign organizational strategy with the market. “Effectiveness,” after all, can also refer to how an organization performs overall.

There is no single recipe for organizational success.

Instead, define or find a system that is appropriate for your business, then apply it methodically.

Organizational Effectiveness in Organizational Theory

Where does organizational effectiveness fit in with organizational theory?

Organizational theories tend to divide organization into:

  • Rational Systems – A business is a formalized set of processes to achieve certain goals.
  • The Division of Labor – The division of labor separates labor tasks into specialized roles.
  • Bureaucratic Theory – A hierarchical structure, often a meritocracy, with written rules of conduct and the division of labor.
  • Contingency Theory – The view that an organization is a construct that attempts to maximize performance while minimizing the effects of internal and external constraints.

To name just a few.

There are many more organizational theories that can offer insight and various perspectives on organizational effectiveness models.

For the serious business professional, further research into these theories can be very informative and useful.

After all, the deeper one dives into organizational theories, the better they will understand:

  • What organizational effectiveness is. And the better that you understand what organizational effectiveness is, the more you can clarify your goals, strategies, and action plans.
  • Which models are best suited to their organization. Not all organizational structures are alike. Some are autocratic, some are democratic, some are flat, and some are completely different. Models that are effective for one organization won’t necessarily be effective for other organizations.
  • How to initiate organizational change and development. With a deeper understanding of organizational theory and effectiveness, it will be easier to develop a change solution and strategy.

Among other things.

Organizational Development vs. Organizational Effectiveness

Organizational development is a long-term approach to evolving businesses and organizations.

Like change management, it seeks to improve various aspects of a business. 

However, organizational change management is designed to implement transformative changes. In some cases, over a very short time period.

Organizational development is sometimes used interchangeably with organizational change. In other cases, it may refer to ongoing, long-term change projects.

In practice, organizational development tends to focus on a few areas:

  • Organizational climate, or the mood, attitudes, beliefs, and “personality” of a company
  • Organizational strategy, the strategies used to evolve and grow the organization over time
  • Organizational success, or how well a company meets its goals
  • Organizational culture, which is based on the values, beliefs, and assumptions of a company

Clearly, organizational development has some overlap with organizational effectiveness.

The right organizational development program can help improve organizational performance and success.

The Role of Organizational Learning in Organizational Effectiveness

As we have covered, learning, training, and skill levels play a key role in employee motivation – among other employee metrics.

Organizational learning is another critical component to consider when improving organizational effectiveness.

That is, how an organization:

  • Creates or obtains knowledge
  • Gains experience over time, which is then transformed into knowledge
  • Transfers knowledge to new hires and future generations

Organizational learning can occur at several levels:

  • Individual – How individual employees gain skills, learn about an organization, gain experience, and so forth.
  • Group – How groups learn, share knowledge with one another, gain experience, and transfer knowledge within their own groups.
  • Organizational – At the organizational level, learning concerns culture, business functions, and how such knowledge is transferred and improved over time.
  • Inter-organizational – How different organizations transmit and communicate insights and knowledge to one another.

Improving any or all of these areas will yield positive results when it comes to improving the learning elements of organizational systems.

As mentioned elsewhere in this article, the best way to improve organizational learning is through a systematic approach.

For instance:

  • Research and gain an understanding of organizational learning. The model we explained above is just a brief description. A solid understanding of organizational learning should be a prerequisite for engaging in any project aimed at improving this area.
  • Assess and analyze your organization based on that model. Based on your understanding – or model – analyze your existing systems of learning. This assessment should reveal opportunities and weaknesses that can be improved upon.
  • Develop a strategy for achieving specific goals and overcoming obstacles. Identify specific goals that can help you achieve more effective organizational learning. Then create a strategy and an action plan for achieving those results. Also account for potential obstacles, such as employee resistance.
  • Execute, manage, and optimize that strategy. As with any organizational change initiative, your project should be managed carefully. A sophisticated, structured approach to change management will help you minimize risk, reduce costs, and improve project outcomes.

And, as with every other improvement process mentioned here, the ideal solution is the same: change management.

A strategic, structured change management approach can help you improve organizational learning. 

In turn, this will help you improve your overall organizational effectiveness.

Finding Organizational Effectiveness Research: PPTs, PDFs, and More

Those planning to improve their organizational effectiveness will certainly want to do more research.

Here are some tips for finding organizational effectiveness research, including reports, PDFs, PPTs, and more.

Research Tips for Finding the Best Organizational Effectiveness Content

Maybe you want to make the case for business transformation. 

Perhaps you want to diagnose inefficiencies in your own organization.

Or perhaps you just want to learn more about the subject.

Regardless of your aim, effective research can save you:

  • Time 
  • Money
  • And effort

So here are a few tips for finding the best, most informative content related to organizational effectiveness.

  • How to find the best organizational effectiveness PDFs, PPTs, slides, and more. Search engines are your best friend when it comes to finding the right type of content. Searching for “organizational effectiveness PDF” is a good start. But to really narrow your search results, use a search operator. “Organizational effectiveness filetype:PDF” will restrict results only to that filetype. Try this with different file formats.
  • Focus on the topics that matter. As we have seen, organizational effectiveness is a wide field. There are many models and many perspectives on the matter. Researching organizational effectiveness itself is certainly useful, but also focus on sub-topics that will help you get tangible results. Organizational learning, employee learning, the employee experience, change management, and other related topics are good examples.
  • Focus only on industry leaders. When performing research, thought leaders are the best sources of content. WalkMe, for instance, is an excellent resource for topics such as change management, the employee experience, digital transformation, employee training, and more.
  • Subscribe to blogs. Subscribe to blogs through email alerts. These email alerts will be delivered straight to your inbox. 
  • Use tags and filters inside your email software. To prevent information overload, use tags, folders, and filters to stay focused on the emails that matter most. Tagging email alerts with “organizational effectiveness” or other tags can automatically put those emails aside until you have the time.
  • Read books, when you have time. Not everyone has time to read full books. But if you can, read business books. They will provide you with much more in-depth information than you can find online. For instance, the “Six Systems of Organizational Effectiveness,” mentioned above, is covered more in depth in the book Mastering Leadership.
  • Use RSS readers. Feed readers allow you to collect various RSS feeds (blog updates and website updates) into a single dashboard. These tools are essential for staying up-to-date on a variety of topics. Also, they can be easily organized into folders and sub-folders, allowing for easy viewing of individual topics.
  • Use monitoring services to stay instantly updated. Google Alerts and Talkwalker’s email alerts can send you email digests whenever new web content is posted that matches a specific criteria. Social monitoring tools can do the same thing for social media networks.

Today, we are inundated with information … more information than we can filter.

Fortunately, along with this increase in information, we have also gained access to a number of tools that help us filter out the signal from the noise.

Make good use of the techniques covered here – they can save you a great deal of time and money.

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.

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.

Final Thoughts: Organizational Effectiveness from 0 to 100

Let’s recap some of the topics we’ve covered so far:

  • Perspectives on organizational effectiveness differ, but there is overlap. Some models emphasize access to resources, others emphasize process, and others focus on an organization’s ability to efficiently achieve its stated objectives. Regardless, though, there is overlap in many of the models.
  • Factors that impact organizational effectiveness tend to revolve around people. Leadership, employee productivity, teamwork, and the alignment of business units are a few examples. These human-driven factors all play a major role in organizational performance and effectiveness.
  • A systematic approach is key to successful improvement. A structured approach should include: a strategy, goals, and a methodical approach for achieving those goals.
  • Improving organizational effectiveness requires effective organizational change, development, and management. To improve organizational effectiveness, some form of change is required. Change management is the key to effective organizational change. 
  • Ongoing research into organizational effectiveness can only improve your results. Organizational effectiveness has many moving parts – and those parts vary depending on your sources. Research can help you develop your own conception of this field. And, as a result, your organizational change projects will produce better outcomes.

Clearly, organizational effectiveness is a complex field, with a variety of models and perspectives.

However, with a formal model, a change management strategy, and solid execution, it is possible to improve organizational performance and effectiveness.

Organizational Effectiveness FAQ

Below are some of the most commonly asked questions about organizational effectiveness.

Why Does Organizational Effectiveness Matter?

In short, the more effective an organization is, the more profitable it is.

Organizational effectiveness impacts:

  • The efficiency of business functions
  • Productivity and output
  • Profitability
  • The ability of a business to meet its goals
  • How well an organization meets the needs of its stakeholders

Among other things.

How Do Organizations Become More Effective?

Becoming more effective depends on a few things.

Your organizational effectiveness model, your organizational structure, and existing business efficiencies – among other things.

However, regardless of these factors, making a business more effective means:

  • Improving business processes. Better, more efficient processes result in decreased costs, faster turnarounds, greater process ROI, among other things.
  • Enhancing employee relationships. Employee relationships are a key determiner of successful business operations. Decreasing interpersonal conflict and improving teamwork can enhance results across an entire organization.
  • Building worker skills. The right skills are necessary for any employee to function effectively. This is especially true today, with the widening digital skills gap and the burgeoning necessity for digital literacy.
  • Improving the employee experience. Another way to increase employee productivity is to improve their experience. Better worker experiences can increase worker satisfaction, output, and motivation. All of which, in turn, will improve their effectiveness and the organization’s effectiveness.
  • Aligning business functions with organizational strategy. Misaligned business functions can achieve goals that are out of sync with the organization’s main goals. Such an approach is ineffective and wastes resources.
  • Creating the right employee culture and behavior. A culture defines what people believe and value. Corporate cultures attract certain types of talent, attitudes, and mindsets. The right culture can improve efficiency and effectiveness by improving behavior.

Among other things.

Who Helps Improve Organizational Effectiveness?

There are many factors that affect organizational effectiveness.

But employees lie at the heart of every organization.

For that reason – whether you are improving tools or adjust worker behavior – employees remain a central focus.

Roles that help improve organizational effectiveness often include:

  • Human resources professionals. Human resources directors, managers, and specialists are all intimately involved with the employee experience. As we progress into the digital age, they are becoming more and more responsible for improving employee well-being, motivation, productivity, and retention. All of which impact organizational effectiveness.
  • Employee experience managers. Employee experience managers are directly involved with managing, guiding, and influencing the employee experience. They have the ability to help improve employee motivation, increase worker productivity, and enhance the workplace itself. And all of this contributes to increasing the effectiveness of individual workers and teams.
  • Unit managers and business leaders. Any business leader can help initiate and improve the effectiveness of their domain. A department head, for instance, can help improve efficiency in their department, decrease costs, and make other positive changes. 
  • Change management professionals. Change managers play a crucial role in improving an organization. Every change project has the potential to enhance and evolve an organization. This is all the more reason to enlist the help of change management professionals, such as consultants, coaches, and trainers.

This list is certainly not comprehensive.

Essentially, anyone who can improve efficiency and effectiveness at their level is able to contribute to better performance at the organizational level.

How Do You Evaluate Organizational Effectiveness?

Evaluating organizational effectiveness depends greatly on the model that you use.

If you measure organizational effectiveness based on progress towards organizational goals, then evaluating effectiveness would revolve around those goals.

If your model measures a set of systems and business processes – such as leadership effectiveness and productivity – then your evaluations would focus on those areas.

See below for some different models of organizational effectiveness.

Is Organizational Effectiveness the Same as Organizational Efficiency?

The idea of efficiency is included within some organizational efficiency models. 

However, efficiency and effectiveness are two different concepts.

Effectiveness refers to how well a desired result is achieved.

Efficiency refers to the amount of waste, effort, and resources used in a process.

Achieving an outcome efficiently means minimizing waste, resource usage, effort, and so forth.

When an objective is achieved effectively, it means that the objective has been achieved successfully.

Below, we will look at how organizational efficiency can improve effectiveness.

But first, let’s examine a few models of organizational effectiveness.

If you liked this article, you may also like: