Organizational Effectiveness: What Makes An Organization Successful?

Effectiveness is often thought of as part of the “all good things” that a successful organization desires to possess.  Just like an individual wants to be “healthy, wealthy, and wise,” we describe how our organizations aspire to be efficient, effective, and productive.  However, I have found over the years that effectiveness means very different things to different people, even people in the same organization.  Part of the reason for the variation in conception is the confusion that exists between three related concepts: effectiveness, efficiency, and efficacy.  Peter Drucker defines effectiveness as producing the right things or getting the right things done.  Thus, an effective organization produces the things that its customers desire the most.  An efficient organization produces its goods and services in the most economical way while efficacy in an organization entails getting things done or accomplished.

Organizational effectiveness suffers from the same conceptual challenges.  Although it is a critical concept in management literature and practice, there is little consensus on the definition and even less on measurement.  In the simplest sense, an organization is effective when it meets its goals as defined by those that it serves.  There is more agreement on what makes an organization effective.  An examination of successful organizations reveals that there are common traits, but the traits exist in various combinations and levels.

A 2010 survey by HCS of 300 private organizations identified eight elements that make up organizational effectiveness.

  • Engagement
  • Culture
  • Innovation
  • Strategy
  • Performance
  • Leadership
  • Communication
  • Talent Management

Figure 1: Organizational Effectiveness Elements

Figure 1 summarizes the average self-assessed current level and need on each element.  Respondents rated performance as the most important factor in effectiveness followed by leadership and strategy.  Similarly, leaders rate both as the most important needs of an effective organization.  Two elements that received a lower current level average score yet were identified as strong needs include engagement and communication.   Meaning, effective organizations recognize the importance of communication and engagement.

Over the next several posts, we will explore organizational effectiveness in more detail and discuss how your organization can shift in the spectrum from being a static to a sustainable organization.

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