Effective Organization: Definition, Benefits and Models

By Indeed Editorial Team

Updated October 11, 2022

Published August 4, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Organizational effectiveness is a concept businesses use to determine their success in reaching their desired outcomes. Professionals can implement a variety of models to help them measure their productivity. Understanding ways to maximize a company's effectiveness can help increase employee engagement and enhance management communication if you're in a leadership role.

In this article, we review what an effective organization is and why it's beneficial to work for one, share some models for measuring effectiveness and how to use them, discuss topics to reflect on when making an organization more effective and offer some tips for improving the efficacy of an organization.

What is an effective organization?

An effective organization is a company that successfully meets its goals. These goals may be external, such as producing a certain quality product, or internal, such as improving communication within a company. An effective organization examines various factors in a company, like how well employees perform to the efficiency of a business process, and seeks opportunities to improve. For instance, if an organization defined its goal as reaching a 10% increase in subscribers, it could determine its effectiveness by looking at how many more subscribers it got in a set period.

Related: 6 Tips for Making Effective Business Decisions

Benefits of organizational effectiveness

Organizational effectiveness is important in helping companies flourish long term. It allows organizations to operate more smoothly by keeping them focused on their goals. Benefits of an effective organization include:

  • Increased productivity: Setting clear goals and monitoring progress may increase output.

  • Strengthened employee engagement: Employees who know their goals and why they're important may connect more with their work.

  • Enhanced management communication: Taking steps toward organizational effectiveness can help managers align.

  • Optimized budget: Organizational effectiveness typically helps you eliminate areas of waste.

  • Streamlined use of technology: A company may upgrade or improve its equipment by promoting efficiency.

  • Maximized customer value: More effective organizations may be more capable of meeting customers' needs.

Related: Careers in Organizational Development

6 types of organizational effectiveness models

An organization's effectiveness depends on what goal it set out to achieve. Several models help companies determine their effectiveness based on their key objectives. Here are some organizational effectiveness models businesses use:

1. Internal process model

In the internal process model, companies focus on internal processes and protocols to make the organization function. By optimizing processes, these companies may improve their operations and increase their productivity. Ways organizations can achieve this include having a thorough process for documentation and suitable equipment to enable functions.

Related: 16 Process Metrics To Track

2. Goal model

A goal model focuses on accomplishing an organization's objectives. This is a traditional model used to measure an organization's effectiveness. An organization may set various goals, ranging from reaching a financial target to creating a particular societal impact. The goal model might be less actionable than other models, as it focuses on measuring outputs and has little information about the inputs or processes.

Related: Operations Goals vs. Strategy Goals (With Definitions)

3. Resource-based model

Organizations using a resource-based model measure their effectiveness by looking at their inputs. This approach focuses on the idea that companies can become successful by obtaining an adequate supply of the resources required to perform well. To do this, organizations try to mine rare, valuable and unique resources to create a competitive advantage over other organizations. For example, a social media company may own proprietary software that is challenging to copy.

Related: Managing Resource Availability: A Definitive Guide

4. Strategic constituency model

A strategic constituency model is one in which companies evaluate their success by measuring their ability to meet the needs of their environment. Companies that use this approach aim to rise to the standards of parties that control their success. These constituencies can include business owners, employees, customers, suppliers or the government, as each of these groups can influence the organization's survival. To be successful in this approach, businesses identify their constituencies and their expectations so that they can fulfill them.

5. Abundance model

An abundance model measures an organization's effectiveness by examining its positive impact on humankind. To companies using this approach, effectiveness means prioritizing appropriate beliefs to maximize human capabilities. Abundance models use a combination of positive and negative values to embrace the full scope of human potential.

6. Competing values model

In a competing values model, organizations determine their effectiveness by their ability to create competing values. This approach focuses on different key values like Cameron and Quinn's competing values framework. For example, a company might aim to collaborate freely while competing in the marketplace and promoting a healthy work environment. This approach encourages teams to focus on all three goals to build a productive team.

Related: 11 Team Effectiveness Models (Plus Tips for Choosing One)

How to improve organizational effectiveness

Follow these steps to maximize a company's organizational effectiveness:

1. Set a goal

In create an effective organization, first, identify what area of the business you want to improve. This allows you to set clear objectives to achieve. An example of a goal for a company might be improving the customer experience. Once you set your goal, ensure all team members are aware of it so they can work to help achieve it.

Related: Complete Guide To Setting Strategic Goals (With Examples)

2. Make effective decisions

Since decision-making is a key component of organizational effectiveness, it's important for professionals at all levels in a company to make the right choices. When making decisions, ensure they align with the organization's goals and values. Create an effective communication system that allows you to share decisions with your team members and gather input. In the example of an organization wanting to improve their customer experience, this might involve collectively brainstorming ways to enhance a customer's experience with their company.

Related: Methodologies for Decision-Making (With Definitions and Examples)

3. Develop strategies

Strategy can help a team build an actionable plan to achieve goals. Evaluate where the organization currently is and what obstacles it can overcome to improve its position. It might be worthwhile to study other organizations to learn what strategies worked for them. For instance, a company looking to improve its customer experience may implement a rewards program for loyal customers to encourage brand loyalty and engage with customers authentically on social media to establish a digital community.

Related: What Is a Corporate-Level Strategy? (With Examples)

4. Consider your needs

At this stage in your effective organizational planning, you can identify what resources the organization requires to meet its objectives. Determine what type of employees might help the company fulfill the strategies. For example, if you want to track customer satisfaction data more effectively, it might be important to hire an experienced data analyst on the customer satisfaction team. The team can then hire the right people and train existing employees to fill skill gaps.

5. Measure your effectiveness

Finally, assess how successful the company was at reaching its objectives. One way to measure your effectiveness is using a scorecard to determine if the organization met its goals or key performance indicators (KPIs). Regularly track your progress to identify areas for improvement and see what went well. Using the previous example, the company may notice that hiring a data analyst helped provide them with meaningful insights and helped create more loyal consumers.

Related: 7 Types of Metrics To Measure Business Success

Topics to reflect on when building an effective organization

Here are some ideas that can be important to leaders when they're trying to improve organizational effectiveness:

Metrics

It's important to measure the right figures to evaluate your progress. Setting concrete goals and using numerical data to track organizational effectiveness can be beneficial. Qualitative data is also important, but quantitative data encourages transparency and accountability. Define the best KPIs for each team to track.

Company culture

A positive work environment might motivate employees, promote collaboration and increase productivity. It may be helpful for managers to describe the current company culture in their workplace and brainstorm small ways they can improve engagement and promote organizational values. For example, if the company values risk-taking, you might decide to host a company outing where you perform fun, safe challenges to encourage employees to embrace risks.

People

Knowing what people can make an organization effective can improve hiring and help you promote the right people to leadership positions. Think about the values, skills and character traits that make a productive member of your team. Each department may have its own unique answers, but they must align to create a collaborative and effective workforce.

Priorities

Collaborate with your colleagues to determine what's important to the organization. Rank your objectives to determine where you plan to dedicate most of the team's energy, time and resources. Priorities can shift as business needs change, so it might be beneficial to revisit this conversation periodically.

Related: Setting Business Priorities (With Definition and Steps)

Tips for creating organizational effectiveness

You can use this advice to help you create organizational effectiveness in the workplace:

  • Ask for feedback. For an organization to continue to improve and become more effective, it's helpful to be open to suggestions and feedback from others.

  • Train new hires well. Since people play an essential role in organizational effectiveness, it's important to consider how new employees can contribute to a company's goals.

  • Find the right tools. To maximize organizational effectiveness, be open to using tools, such as technology, to improve the workflow.


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