Effective organizations run like a well-designed, well-oiled machine; every part integrates to successfully produce the outcomes the organization sets out to achieve, wasting as little time and resources as possible. Organizational effectiveness is the modern way to measure and guide organizations to reach their goals.
Table of Contents:
- Introduction
- Why is Organizational Effectiveness Important?
- Factors that Impact Organizational Effectiveness
- 7 Ways to Improve Work Performance
Organizational effectiveness is defined as a concept to measure the efficiency of an organization in meeting its objectives with the help of given resources without putting undue strain on its employees. It is about how the company can produce the target quota of products and/or services, how efficient its process is, and how much waste is produced.
We know that performance always improves when leadership is at its best. Leadership plays a great role in setting teams’ direction, the creation of strategies and implementing them in an effective way to achieve goals, efficient communication, alignment of goals across the organization, development of the employees, accountability, and best resource management.
So, to bullet point it, organizational effectiveness refers to how an organization has achieved full self-awareness due in part to:
- Leaders setting well-defined goals for employees and outlining ways to efficiently execute those goals.
- Management implementing clear decision-making processes and communication pipelines.
- Engaged employees—who are carefully selected and fairly compensated—produce work that prioritizes results.
Why is Organizational Effectiveness Important?
When we think of organization effectiveness, we probably think of examples of successful people like Mark Zuckerberg or Steve Jobs; but in an organizational context, effectiveness becomes significantly harder to define. It's one thing is to have a successful company, but whether it is effective or not is different.
You can be very successful but if you were also effective, your success would increase significantly. The more effective an organization is, the more chances it has to survive and flourish throughout the years. You need to know that implementing organizational processes to become more effective is something that needs to be learned and practiced on a daily basis, it is a commitment that has to be revised and assessed every certain amount of time to see how it’s working and tweak the areas that need improvement to keep a competitive advantage.
A study by Bain & Company makes an interesting comparison between an ongoing commitment to organizational effectiveness and a series of one-time initiatives that might just help cut costs. The first one is comparable to a healthy routine of eating good food and getting regular exercise, while the second one is similar to extreme dieting. Although the latter might work in the short term and gets immediate results, it doesn’t “build the muscles to sustain long-term change.”
Keep in mind that committing to improving organizational performance and effectiveness, should not neglect company health.
The benefits of organizational effectiveness can include:
- Improved Employee Engagement and Performance - Employee productivity is directly tied to the outcomes and performance of individuals. This, in turn, affects the organization’s performance.
- Better Management - This can mean better manager training, increased communication between managers and employees, updated policies and standard operating procedures (SOP), among other things.
- Decreased Costs - Effectiveness in any business can decrease costs. Those savings can come from any area that is causing waste – outdated processes, obsolete technology, ineffective workflows, and so on.
- Improved Customer Engagement & Value - One of the main goals 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. Using an online client portal is a great way to manage all customer communication and provide clients with a great experience.
- Better Use of Technology - Nowadays, all organizations use digital software solutions to improve productivity, but they don’t always use them well. Effective digital adoption efforts can improve digital workflows, data insights, business processes, employee training, and many other business areas.
- Outstanding 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, the more profitable it will be.
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 performance and effectiveness?”
Factors that Impact Organizational Effectiveness:
- Casual Variables - Independent variables that can be altered by the organization itself, like policies, required skills and behaviors, business strategies, and leadership strategies. Casual variables can determine the course of development within an organization.
- Intervening Variables - These are motivation, performance goals, attitude, loyalty, and perception of the employees and their capacity for efficient decision-making, communication, and interaction. The intervening variables show the health of an organization.
- End-result Variables - These are loss, costs, earnings, and productivity. The end-result variables reflect the achievements of an organization.
7 Ways to Improve Work Performance
In order to achieve a better performance, here are the key areas you need to focus on to improve organizational efficiency:
- Leadership - Developing leadership within the company is a critical aspect to improve performance. Good leaders are the ones that create a clear vision for the organization and its teams, they define and execute strategies and processes and lead by example and accountability.
- Strategy - A successful strategy involves switching an organization’s identity to include efficiency and effectiveness as core values. As your company becomes more known for its effectiveness by your employees and the market, the more these important values will be intrinsically involved in every goal.
Organizational effectiveness should simplify and clarify objectives for a company. The clearer the objectives are outlined at a strategic level, the easier it is to align them across the other departments.
- Communication - It is well known that every organization needs effective communication so that every piece of information is smoothly and correctly communicated to other people in a precise manner. Every little thing that happens in a company happens because of the exchange of messages within it, and this is why an effective and strategic communication is crucial.
Good communication reassures that the impact of the message is in alignment with the established strategies so that everything is completely understood. As you communicate, keep track of your words and make sure that your statements are clear. A transparent communication will keep the focus on the main goals and avoid mishaps, late completion of tasks, and excuses.
- Accountability - In order to improve work performance, it’s important to realize that organizational effectiveness is greatly dependent on accountability. Every organization should build an environment where every individual is accountable for the objectives and tasks they’re involved in.
Accountability determines how effective employees perform their tasks, so an organization should have effective accountability systems to maintain clear expectations aligned throughout the organization.
- Performance & Metrics - Yes, the HR department is responsible for bringing the best talent and fit to the company, and for training them well to fulfill expectations. But how employees perform doesn't depend just on their skills, their leaders are also responsible for keeping their performance on the right track. The best way to do so is by using proper metrics that will motivate and encourage employees while keeping them accountable. Choosing the right metrics to measure is extremely important, you can get some help by asking the following questions:
- What are the concrete goals my team members are moving towards?
- Are they clearly outlined by team leaders?
- How and by what interval will progress be assessed?
It is leaders who establish and maintain the measurement system to track progress and review status regularly. Check out our article “Reaping the Benefits of Performance Management” to learn more on this matter.
- Behavior - Recurring behavior, either good or bad, is where efforts to achieve organizational effectiveness are most likely to go downhill or uphill, depending on the said behavior. To build a healthy organization where positive behavior stands out, you need to identify specific groundbreaking moments in your daily operation of the company, speak out the ways employees should be changing their behavior in certain moments, and implement systems to reinforce those behaviors and incentivize good choices.
- Culture - The level of employee engagement plays an important part to achieve effectiveness and better organizational performance. With an internal knowledge base, you are able to outline the company’s culture and responsibilities to the employees. Motivated employees usually perform way better, so creating a culture that broadly values effectiveness is key. Countless studies have underlined the correlation between employee engagement and overall organizational performance. Employee engagement should always be at the top of your priority list in order to improve organizational performance.
As you can see, each point stated has something to do with the previous one. We sincerely hope that these organizational strategies help you in your quest on achieving organizational effectiveness and improve work performance to reach your organizational goals. Remember Hirebook is here to help you leverage OKRs, KPIs, check-ins, and 1-on-1s so you can start seeing the benefits of performance management in your company.
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