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What Is Organizational Effectiveness?
HR’s Guide

An infographic shows a circle titled 'Four Approaches To Organizational Effectiveness' and four circles and text boxes.
Hacking HR Team

Posted on July 02, 2024

Organizational effectiveness is a pillar of a successful, thriving business. In a post-pandemic world, there is a lot of uncertainty, especially around the future of work. From the evolution of AI to economic factors, there’s no telling what’s in store in the coming months or years. 

So how can an organization stay resilient amidst so much change? The answer is organizational effectiveness and efficiency which can help build up resiliency, preparing an organization and its leaders for whatever the future may bring. 

But building organizational effectiveness isn’t as simple as a 1-2-3 guide. There are different strategies and approaches to organizational effectiveness and which one is right for your organization will depend on organizational and workforce needs. 

If you want to keep your organization thriving no matter what, check out this guide to organizational effectiveness.

What Is Organizational Effectiveness In HR?

To some, organizational effectiveness can sound vague and ambiguous – and there are indeed a lot of different moving parts that make it hard to define. But at its core, organizational effectiveness is about reaching goals. 

Put simply, it refers to how thoroughly and successfully an organization achieves its internal or external goals, and how well the necessary resources to achieve those goals are managed. 

Other pillars and indicators of organizational effectiveness include: 

  • Adaptability: How well the organization is able to adapt to external or internal changes without major disruptions

  • Organizational values: How well organizational goals and desired results are tied back to the organization’s overall mission

  • Innovation: How well the organization is able to innovate on existing offerings and stand out from competitors

  • Financial health: How well the organization is performing financially, such as financial stability and profitability

  • Employee and customer loyalty: How satisfied customers and employees are with the organization – both from a product perspective and as a wider organization

An infographic titled '4 Pillars of Organizational Effectiveness' shows a notebook with decorative images and four sections: 1️⃣Adaptability: How well the organization is able to adapt to external or internal changes without major disruptions  2️⃣ Organizational values: How well organizational goals and desired results are tied back to the organization’s overall mission  3️⃣ Innovation: How well the organization is able to innovate on existing offerings and stand out from competitors  4️⃣ Financial health: How well the organization is performing financially, such as financial stability and profitability.

HR’s Impact

HR’s role in achieving organizational effectiveness cannot be understated. HR’s main function – to manage the organization’s people – directly relates to how well an organization can reach its goals and how well resources to reach those goals can be managed. 

Some functions of HR that can influence organizational effectiveness include:

  • Talent acquisition and development

  • Performance management

  • Employee engagement

  • Organizational culture

  • Change management

An infographic shows the image split in two colors: on one is the title "Organizational Effectiveness' and a line connecting to the text: "How well organizations can reach their goals and deliver results with the resources available."; on the other side is the title "Organizational Efficiency" with a line connecting to the text: How well organizations can   optimize and manage resources to reach desired goals without wasting excess effort, money, or time." At the bottom center is a circle with the Hacking HR logo."

Organizational Effectiveness vs. Organizational Efficiency

Although very similar, organizational effectiveness and organizational efficiency are separate concepts with different end goals and influences.

  • Organizational effectiveness refers to how well organizations can reach their goals and deliver results that are tied to the organization’s mission with the resources available. 

  • Organizational efficiency is about the optimization and management of resources to reach desired goals and keep organizations productive without wasting excess effort, money, or time.  

While the concepts are different, they are deeply connected to one another. Achieving both organizational effectiveness and organizational efficiency ensures that the business can reach its desired goals without wasting resources. 

Why Organizational Effectiveness Matters

Organizational effectiveness is directly tied to organizational success because it ensures that organizational goals are reached and ensures desired outcomes for the organization. 

It can help ensure that both short- and long-term goals are realized and achieved, and at the same time helps set the organization up for sustained success. In general, organizational effectiveness improves the overall workflow and management of an organization.

Organizational effectiveness ensures that an organization can thrive and meet its shared goals, regardless of outside factors. It can have a positive influence on many factors of organizational success, like:

  • Organizational resiliency

  • Stakeholder or customer confidence 

  • Organizational growth and innovation

  • Risk management

  • Employee engagement

4 Approaches To Organizational Effectiveness

There is no “one size fits all” when it comes to organizational effectiveness. In fact, there are several approaches to organizational effectiveness that organizations can use to measure and achieve effectiveness. 

The one that’s right for your organization will depend on organizational goals and workforce needs. Here are the most popular approaches to assessing and achieving organizational effectiveness.

Goal Approach

The goal approach, or goal-attainment approach, is a goal-based model to organizational effectiveness that focuses on achieving all of the organization’s defined goals. The goal approach is measured based on how successfully the organization has accomplished stated goals, taking into account the timeframe goals were completed in and resources that were used.

In this context, organizational goals could include external achievements, such as profit or production goals, or internal ones, such as shareholder value or productivity. No matter what type of goals are set, they should be closely aligned with the organization’s mission and values. 

Resource-based Approach

In this organizational effectiveness model, effectiveness is assessed based on input. 

It emphasizes how efficiently and effectively resources are used to achieve goals and desired outcomes. It’s closely tied to organizational efficiency and focuses on how resources are managed, allocated, and optimized. 

For a resource-based approach, organizations focus on utilizing resources that are rare, unique or especially valuable for high performance, which can help organizations stand out from competitors. 

Internal Process Approach

An internal process approach is more focused on what is happening inside the organization than what is happening outside of it. It considers how well the organization is functioning, including procedures and processes. 

The organization’s effectiveness is evaluated based on the optimization of internal operations and workflows, such as the process of information management and documentation. 

Strategic Constituency Approach

The strategic constituency approach measures effectiveness through the satisfactgion of stakeholders. In this context, stakeholders can include employees, shareholders, or customers. 

In this approach, an organization’s effectiveness is assessed based on the needs of stakeholders and how well the organization can meet these needs.

Although these are the most popular approaches, they aren’t the only ones. Other approaches to organizational effectiveness include the balanced scorecard approach and organizational life cycle approach.

An infographic shows a circle titled 'Four Approaches To Organizational Effectiveness' and four circles: Goal Attainment; Strategic Constituency; Internal Process; and Resource-Based. Each circle connects to a text box explaining the focus of each approach.

Measuring Organizational Effectiveness

Organizational effectiveness is an integral part of a thriving organization. However, without a sound way to measure organizational effectiveness, its effects may be wasted, and it can be hard to iterate upon. 

That’s why the ability to measure organizational effectiveness is so important. However, the process of measuring effectiveness can be hard, due to organizational effectiveness factors that are difficult to quantify and analyze, and the various approaches that need to be measured differently. 

For example, if you’re using the goal-attainment approach, measuring organizational effectiveness might start by defining objectives and goals that have clear parameters, and then measuring how efficiently and effectively those goals were achieved through benchmarking and KPIs. 

Here are some other popular ways to measure organizational effectiveness for various approaches:

  • Data collection and data analysis

  • Stakeholder feedback, such as feedback from customers or shareholders

  • Strategic alignment assessment

How To Improve Organizational Effectiveness

According to a study from Bain & Company, there are five critical areas that can help improve organizational efficiency and effectiveness:

  • Strategy: Adopting effectiveness and efficiency as core values

  • Metrics: Not just measuring results, but being mindful about what is being measured and how it is being measured (i.e., data analytics vs. human judgment)

  • Commitment: Clearly and authentically committing to effectiveness efforts 

  • Behaviors: Reinforcing positive behavior and helping reduce negative behavior to foster a positive, thriving environment

  • Culture: Focusing on company culture to keep employees engaged and motivated to sustain organizational effectiveness

Organizations that continue to sustain and invest in efforts to improve these areas will be able to achieve organizational effectiveness more easily and see better results.

It’s up to HR and organizational leaders to enhance and improve processes related to organizational effectiveness. Although not everything will work for every organization, here are some strategies to help foster a culture that supports organizational effectiveness within your business.

  • Clearly define and understand the organization’s mission: Organizational effectiveness can be measured by how aligned goals or outcomes are with the organization’s larger mission. So, clearly defining organizational goals and values can help get the ball rolling on measuring and improving effectiveness. 

  • Continuously iterate on and improve workflows and processes: Effectiveness is tied to efficiency, so the more streamlined workflows are, the better the results will be. This might include consolidating operations, eliminating unnecessary steps, or improving communication to help improve processes. 

  • Invest in employee development: Organizational effectiveness is dependent upon your workforce and requires a shared effort among the entire organization to improve results. When you focus on training and developing employees, this not only helps make them into stronger contributors but also helps revalidate your commitment to the workforce and can improve satisfaction.

  • Break down silos: Unnecessary silos in the organization can hinder organizational effectiveness because it can cause miscommunications among teams, discourage collaboration, and hinder innovation – which are all elements that are imperative to organizational effectiveness.

  • Keep mission and values at the forefront of operations: As employees go through their day-to-day work, the overarching mission and values of the organization can be forgotten or given less focus. However, this is essential to organizational effectiveness, so it’s important to keep the goals and desired outcomes you’re working toward at the forefront of all work being done.

Final Thoughts

Organizational effectiveness is an overarching term that describes how well an organization reaches its goals with its given resources. There are many different approaches to organizational effectiveness, and different approaches can help different organizations depending on desired outcomes and workforce needs. 

Depending on the type of organizational effectiveness approach an organization chooses to use, there may be different metrics to measure organizational effectiveness, including goal achievements, operational efficiency, stakeholder value, and more. 

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