Monday, 22 October 2012

Organisational Effectiveness: Why It Should Be Taken Very Seriously







I started a discussion in the Harvard Business Review (HBR) group on LinkedIn about two months ago on organisational effectiveness (LinkedIn is quickly becoming my preferred social media platform for the exchange of ideas, for gaining insights from diverse groups of professionals and for imparting knowledge).





I was surprised to learn that organisational effectiveness, the second theme about which this blog seeks to explore, is a very significant topic for a lot of professionals. These specialists spanned different sectors and worked in different organisations such as large profitable companies, non-profit organisations, small businesses etc. Most, despite busy schedules, were very enthusiastic about the topic and someone actually commented that the discussion was becoming addictive!





Even more interesting was the fact that Chevron Nigeria Ltd. a subsidiary of the U.S oil giant, Chevron Corporation, launched its '2012 Diversity Week' which featured 'Organisational Effectiveness in Diversity',  as well as three other pillars for analysis, ('Culinary in Diversity'; 'Safety in Diversity'; and 'Culture in Diversity'), during the week 3rd-7th September. Now given that I am not employed by the company, I unfortunately was not opportune to attend any of its programmes. However, I thought it was very 'relevant' that the oil major incorporated such a crucial theme in its diversity initiative. This just illustrates the far-reaching impact organisational effectiveness has on the business strategy of any organisation.









Before delving further, it  is  necessary  to define just what it is. In my opinion, organisational effectiveness, (OE), is the desired state whereby resources, (humans, technology, assets, knowledge/expertise etc.), are aligned with the culture, objectives and goals of the organisation, to produce favourable outcomes and wellness across the organisation.





Now I realise that my definition might appear vague but there is a rationale for this. OE is relevant to all organisations but might vary from one organisation to another, even within the same sector. This is because what an organisation may deem necessary to measure as an indicator of 'effectiveness' may be different from its competitors. 





For example, an innovative 'green' company may place more emphasis on reducing its carbon footprint and may measure its 'effectiveness' on how well it has achieved the goal of becoming 30% greener at the end of X period by switching to relevant technology. 






By contrast, one of its competitors may measure its 'effectiveness' by the number of its energy-saving appliances it sold worldwide, which indirectly reduced unhealthy emissions, at the end of the same period. 






Yet  another  organisation, a non-profit entity, may consider its 'effectiveness' yardstick to be based on how successfully/quickly it was able to garner funds to provide free healthcare for families who were rendered homeless as a result of a devastating natural disaster.






So in a nutshell, OE is relative.








Difference between ‘efficiency’ and ‘effectiveness’



At this point, it is necessary to clarify the difference between 'efficiency' and 'effectiveness', given that the two terms are often used interchangeably.





'Efficiency' involves generating superior outputs/outcomes with the available resources. With efficiency, markers are easy - either employees achieve X% increase in production or not, by using whatever resources available. So in an environment where every employee is efficient and the focus is on the number of superior widgets they produce for example, what you get is an army of robots and over-achievers; a development which is actually detrimental to the organisation in the long run as each employee seeks success for his own glory.






When you talk about 'effectiveness' however, you consider the total package, (not just the superior outputs/outcomes) - people, processes, systems, aspirations, culture, vision, good leadership, engagement, goals, objectives etc. All these facets should work together to produce a continuous stream which optimises business performance.





The late Peter F. Drucker, (1909-2005), according to various sources, was one of the best-known and most influential writers on the subject of management theory and practice. He was considered by many to be the father of modern management and was credited for the widely-famous quote:





"Efficiency is doing things right. Effectiveness is doing the right things".





Now I may be no Drucker but in a battle for relevance, as regards to the broader impact it would have on the organisation, I believe that 'effectiveness' is a more significant theme to which organisations should aspire.









The importance of organisational effectiveness



OE is a 'hot' theme at the moment but I think it is more than a fad.  I think every organisation seeks better effectiveness even though each might term it differently.  It is relevant to:




 
1) Management and employees inside the organisation










For management, good indicators of OE among other things, ensure healthy profits, smooth and efficient operations, good corporate reputation, effective leadership, (and acceptance thereof), and for those non-profit organisations, achievement of measurable goals.






For the employees, a steady stream of OE increases job satisfaction, heightens levels of perceived organisational support and encourages the ‘emotional attachment’ to the organisation; all which increase motivation levels. Depending on character traits, some employees may be proud of being part of something ‘special’. Many, empowered by the supportive, learning culture and innovative leadership, become enthusiastic cheerleaders for the organisation, thereby fuelling higher levels of OE.








2) External stakeholder groups such as:




A) Customers/clients and suppliers



For the customers/clients – OE plays an important role in customer/client loyalty and retention. Satisfied customers or clients are powerful advocates for the organisation’s products and services. Their free endorsements are ‘dividends’ from the continuous process and are of immeasurable value to the organisation. 





Suppliers also regularly monitor changing patterns in the organisation to ensure that their distribution networks are not adversely affected by payment delays caused by organisational upheavals. Consistently favourable indicators of OE would not only ensure the steady supply of products and services, but would also promote loyalty from the suppliers. Depending on how crisis communications are utilised as part of the OE strategy, suppliers who over the years have enjoyed a good relationship with the organisation, (based on mutual professional respect), might not suspend their services following an organisational crisis. They might actually offer support during the difficult time. However, such a development would not be possible if the organisation is perceived to be ineffective in the running of its operations.






B) Shareholders and investors








Shareholders’ trust is inevitably tied to the reputation and operations of the organisation which, when favourable, translate to higher profits.




Investors are primarily interested in healthy returns on their investments.




OE leads to both but must be consistently and proactively sought








C) Regulatory authorities


Depending on the sector in which the organisation operates, regulatory authorities may not interfere with its operations. However, scandals/crises occasioned by human errors, or linked to negligence and/or unethical practices, are likely to elicit the full wrath of governmental intervention. OE which also covers leadership, communications, processes, (and accountability for them), helps to minimise or even prevent backlash from this group.







D) The media – traditional and ‘new’ media (such as digital and social networks and other online platforms)



We live in an era whereby the media could be a strong ally or a dangerous foe as regards to the image of the organisation.




Traditional media avenues such as print newspaper/magazines, television, (and to some extent), radio channels, have been joined by the digital and social media platforms. 





A writer for
Ethical Corporation in  a  post  about  social media, stated that from an activist perspective, the role of social media in galvanising social and corporate change was, (at the very least), apparent. For example, Greenpeace was named to be a notable user of social networks to mock, name and shame companies into a change of policy. This development could mean either twice the positive public ratings or double the woes. A corporate reputation could be ruined very rapidly by social media  during a crisis, especially in developed countries with technological advancements.





In such a scenario, effective communications, geared at damage control or contingency plans, must be placed in high gear. If OE facilitators neglected to conceptualise and integrate this crucial "Crisis-Mode Plan" component in its overall strategy, the organisation might struggle to recover, depending on the scope of the crisis. 






Some never do.









Measurement of Organisational Effectiveness




During my discussion in the HBR group, a lot of emphasis was placed on the measurement of organisational effectiveness. In fact, many professionals tended to define OE by how it could be measured, and according to X variables. Many cited qualitative and quantitative methods. Once again, depending on how 'effectiveness' is perceived, different variables could be used. 






Below is a table with some suggestions for measuring OE. The list is in no way exhaustive but may be helpful as a guide  to  formulating  organisation-specific  methods:









SuggestedMethod/Tool

Brief Description

Name  of Source

Balanced Scorecard (BSC).

A strategic performance management framework that allows organisations to manage and measure the delivery of their strategy.

Advanced Performance Institute.
 http://www.ap-institute.com/Balanced%20Scorecard.html  

Baldrige Criteria for Performance Excellence.

Provides a systems perspective for understanding performance management. Also used by businesses and non-profit organisations.

National Institute of Standards and Technology (USA).
http://www.nist.gov/baldrige/publications/business_nonprofit_criteria.cfm 

Organisational Excellence Framework.

Indicators for best practices and performance  measures in seven key areas including - resource management, governance, and leadership - from micro to large organisations.

Organisational Excellence Specialists.
http://www.organizationalexcellencespecialists.ca/index.html

Investors In People (Specialised services).


Framework which specialises in transforming business performance through people.




Investors in People. 100+ case studies featured on website such  as  those  of - BBC, McDonalds, Fujitsu Services etc.
 http://www.investorsinpeople.co.uk/Pages/Home.aspx













 





























As regards to the measurement of OE, I believe that its markers should be defined by the organisation itself. This move would pave the way for choosing appropriate OE metrics from a wide variety available on the web or recommended by experts in the field.






As I stated in the HBR Group, a learning environment should also help increase OE perceptions. This is because it is quite sensible to use tried and tested formulas which had previously worked in the organisation for 'similar' issues. However, if such systems could be flexible and thus upgraded or revised to fit specific scenarios, (as no two challenges would be exactly the same because of the human element), that would help to increase positive indicators of OE.







Conclusion






I am aware that the term 'organisational effectiveness' is not new. However, I believe that it should be taken very seriously because it impacts so many facets and links to other constructs and methodology such as Lean, Six Sigma, Total Quality Management etc.





A novel approach which I have advocated elsewhere, is the communications-organisational effectiveness link. This connection is not immediately evident in management circles but could prove very useful with regards to how communications could be used as a strategic tool to drive organisational effectiveness. I could however explore this at a later date...






I am also very honoured that the organisational effectiveness discussion provided so many insights in the HBR Group on LinkedIn  with  453+ comments and  90+  'likes'  logged.





So I simply must ask – and please post your comments so that we could continue this dialogue - how seriously are you considering organisational effectiveness?







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N.B-  Images courtesy of freedigitalphotos.net. Table format provided by author.