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Organizational effectiveness is a concept organizations use to gauge how effective they are at reaching intended outcomes.[1] Organisational effectiveness embodies the degree to which firms achieve the goals they have decided upon, a question that draws on a number of different factors.[2] Among those are talent management, leadership development, organization design and structure, design of measurements and scorecards, implementation of change and transformation, deploying smart processes and smart technology to manage the firms' human capital and the formulation of the broader Human Resources agenda.

Economic Models of Organisational Effectiveness

In economics, organisation effectiveness is defined in terms of profitability. In order for managers to optimise the profitability of their organisation, they must avoid problems arising from high employee turnover and absenteeism.[3]As, the market for competent employees is subject to supply and demand pressures, firms must offer incentives that are not too low to discourage applicants from applying, and not too unnecessarily high as to detract from the firm's profit maximisation capability.[3]

As organisational effectiveness translates across a broad array of organisational functions, a number of different models have been developed in order to achieve flexibility among organisations with different functions and objectives.

  1. The Goal-Attainment Approach determines organisational effectiveness by determining the degree to which a firm achieves the goals it has established. This model has a broad scope and calls for a quantitative evaluation of a firm's profit and productivity maximisation, its shareholder value and its social and environmental impact.[4] This approach is subject to an assumption that organisations are rational, deliberate and goal-driven, and prioritise the end result over the means of achieving organisational effectiveness.[5]
  2. The Systems Resource Approach views the organisation as an interrelation of subsystems that function together in order to effect an organisation's desired outcomes.[6] Consequentially, if any one sub-system performs its role in an inadequate manner, the performance of the entire system is negatively affected.[7] Using this approach, organisational effectiveness is measured with reference to an organisation's environmental inputs, the inter-relations among its consituent divisions, the degree of flexibility a firm has to respond to changes in the market, and the level of efficiency an organisation has when delivering output.[8]
  3. The Strategic Constituencies Approach establishes that organisational effectiveness is determined by reference to its ability to satisfy the demands imposed by its major shareholders - or "constituents", from which it requires continued support to remain in existence.[9] This model assumes that an organisation is composed of a number of political arenas with vested interests who compete for control over limited resources.[10] As the firm must satisfy the needs of these constituent parts to continue its existence, effectiveness is obtained by ensuring the needs and expectations of the strategic constituencies are fulfilled.[11] This model also accounts for changes in the surrounding environment, whereby an organisation must strategically prioritise which constituencies are the most fundamental to its ongoing survival in order to operate effectively.[12]

Social Science Disciplines

Rapid advances in social sciences and technology aided by clever experimentation and observation is bringing several truths to the light of society. There are several disciplines of social sciences that help the OE Practitioner be successful.

Four of them are outlined below


The broader idea of organizational effectiveness is applied for non-profit organizations towards making funding decisions. Foundations and other sources of grants and other types of funds are interested in organizational effectiveness of those people who seek funds from the foundations. Foundations always have more requests for funds or funding proposals and treat funding as an investment using the same care as a venture capitalist would in picking a company in which to invest.

According to Richard et al. (2009) organizational effectiveness captures organizational performance plus the myriad internal performance outcomes normally associated with more efficient or effective operations and other external measures that relate to considerations that are broader than those simply associated with economic valuation (either by shareholders, managers, or customers), such as corporate social responsibility.[13]

Multiple dimensions

Scholars of nonprofit organizational effectiveness acknowledge that the concept has multiple dimensions [14] and multiple definitions.[15] For example, while most nonprofit leaders define organizational effectiveness as 'outcome accountability,' or the extent to which an organization achieves specified levels of progress toward its own goals, a minority of nonprofit leaders define effectiveness as 'overhead minimization,' or the minimization of fundraising and administrative costs.

Hence, Organizational effectiveness is typically evaluated within nonprofit organizations using logic models. Logic models are a management tool widely used in the nonprofit sector in program evaluation. Logic models are created for specific programs to link specific, measurable inputs to specific, measurable impacts.[16] Typically, logic models specify how program inputs, such as money and staff time, produce activities and outputs, such as services delivered, which in turn lead to impacts, such as improved beneficiary health.

See also


  1. ^ Etzioni, Amitia. (1964). Modern Organizations. Englewood Cliffs, NJ: Prentice-Hall.
  2. ^ "A Practitioner's Guide to Organizational Effectiveness". AIHR. 2020-12-07. Retrieved 2022-03-27.
  3. ^ a b Oluleye, Francis (19 November 2010). "Reward economics and organisation: The issue of effectiveness". African Journal of Business Management. 5: 1115.
  4. ^ "A Practitioner's Guide to Organizational Effectiveness". AIHR. 2020-12-07. Retrieved 2022-03-27.
  5. ^ Perrow, Charles (1961). "The Analysis of Goals in Complex Organizations". American Sociological Review. 26 (6): 854–866. doi:10.2307/2090570. ISSN 0003-1224. JSTOR 2090570.
  6. ^ Kast, Fremont Ellsworth; Kast, Fremont; Rosenzweig, James Erwin (1985). Organization and Management: A Systems and Contingency Approach. McGraw-Hill. ISBN 978-0-07-033443-4.
  7. ^ Love, Peter E. D.; Skitmore, Martin (1996). "Approaches to Organisational Effectiveness and Their Application to Construction Organisations". 12th Annual Conference and Annual General Meeting, the Association of Researchers in Construction Management.
  8. ^ Robbins, Stephen P. (1990). Organization theory: structure, design, and applications (3rd ed.). Englewood Cliffs, N.J: Prentice Hall. ISBN 978-0-13-642471-0. OL 2216352M.
  9. ^ Pfeffer, Jeffrey; Salancik, Gerald R. (2003). The External Control of Organizations: A Resource Dependence Perspective. Stanford University Press. ISBN 978-0-8047-4789-9.
  10. ^ Love, Peter E. D.; Skitmore, Martin (1996). "Approaches to Organisational Effectiveness and Their Application to Construction Organisations". 12th Annual Conference and Annual General Meeting, the Association of Researchers in Construction Management.
  11. ^ Keeley, Michael (1978). "A Social-Justice Approach to Organizational Evaluation". Administrative Science Quarterly. 23 (2): 272–292. doi:10.2307/2392565. ISSN 0001-8392. JSTOR 2392565. PMID 10307893.
  12. ^ Hitt, Michael; Harrison, Jeffrey; Ireland, R. Duane; Best, Aleta (June 1998). "Attributes of Successful and Unsuccessful Acquisitions of US Firms". British Journal of Management. 9 (2): 91–114. doi:10.1111/1467-8551.00077. ISSN 1045-3172.
  13. ^ Richard et al. (2009): Measuring Organizational Performance: Towards Methodological Best Practice. Journal of Management.
  14. ^ Herman, Robert D., & Renz, David O. (2008). Advancing Nonprofit Organizational Effectiveness Research and Theory: Nine Theses. Nonprofit Management & Leadership, 18(4), 399-415.
  15. ^ Mitchell, George E. (2012). The Construct of Organizational Effectiveness: Perspectives from Leaders of International Nonprofits in the United States. Nonprofit and Voluntary Sector Quarterly.
  16. ^ McLaughlin, John A., & Jordan, Gretchen B. (2010). Using Logic Models. In Joseph S. Wholey, Harry P. Hatry & Kathryn E. Newcomer (Eds.), Handbook of Practical Program Evaluation (3rd ed.). San Francisco, CA: Jossey-Bass.