What Is Effective Organisation? (Plus Step-By-Step Guide)

By Indeed Editorial Team

Published 5 July 2022

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.

Effectiveness refers to the ability to produce an intended outcome. This effectiveness can lead to success in terms of profitability and competition. Understanding ways to maximise a company's effectiveness can help increase employee engagement and enhance management communication. In this article, we define the concept of effective organisation, discuss its importance, explain the different models to measure it and provide a step-by-step guide for realising organisational effectiveness.

What Is Effective Organisation?

Effective organisation refers to the ability of a company to achieve the goals it has set for itself. These goals may be external, such as achieving a particular amount of market share, or internal, such as improving communication across its departments. The effectiveness of an organisation depends on various factors, such as:

  • Overall mission: a company's primary reason for existing and its overarching goal

  • Short- and long-term objectives: the milestones achieved by an organisation

  • Priorities: the relative importance of each objective, ordered from highest to lowest

  • Efficiency of employees or business processes: the degree to which an organisation can complete its activities by maximising value and minimising inputs

Different organisations may have different ideas of what makes them effective. A private company, for example, is likely to have dissimilar goals to a nonprofit organisation. The former may want to maximise its market share, while the latter may aim to make a positive social difference. The metrics that one uses to determine its effectiveness may not necessarily be the same as those of the other.

Related: What Is A Non-profit Organisation? Definition And Key Features

The Importance Of Effective Organisation

Organisation is important because it can help companies to stay focused on their goals, operate more smoothly and flourish over the long term. It can also help organisations to realise improvements in the following areas:

Employee engagement and productivity

The outcomes that an organisation can achieve often affect the morale of its workforce. For example, when a company consistently meets its desired production goals, the employees responsible for this effect are likelier to feel that they are having a positive impact on the organisation. Such positive feelings can lead to a stronger connection to their work, which may promote greater performance. A better-performing workforce also is likely to be more effective, creating a cycle of effectiveness.

Related: Q&A: What Is Employee Engagement? (And How To Improve It)

Management

An effective orientation may function as a guide, directing an organisation's leaders towards shared, well-aligned objectives. Knowing exactly what results to aim for, an organisation's managers can better determine what actions are necessary to meet their targets. A likely additional advantage in this regard is better communication between managers and the employees who work under them, as a smooth flow of information is usually facilitative of effectiveness.

Costs and profits

Because organisational goals commonly include achieving wide profit margins, an efficient organisation is usually a successful one as well. It is likely to have discovered and implemented strategies for minimising expenses and maximising revenue. Often, this correlates with the elimination of waste and improved efficiency regarding its processes, technologies and employees. For example, for a manufacturer to be effective, it may be imperative that it removes obsolete functions and updates workflows. Such measures abolish components that can require money to maintain and introduce opportunities to increase production. Both factors can increase the margin of the company's profits.

Related: What Is Lean Manufacturing? (With Objectives, Pros And Cons)

Customer value

Most organisations aim to appeal to a particular audience, and it is in a company's interest to optimise its relationship with the people whom it targets. Therefore, to be effective means also to engage with consumers and increase customer value. When a well-engaged customer base believes that an organisation's products or services are worthwhile, they are more likely to support the organisation and further improve its performance.

Models Of Organisational Effectiveness

An organisational effectiveness model is a perspective or a particular way of understanding what effectiveness means. The following are common types of such models:

Abundance model

According to the abundance model, effectiveness relates to the potential of an organisation's human systems. To companies using this approach, effectiveness means flourishing and virtuousness. The abundance model relies on the juxtaposition of positive and negative factors, with the understanding that an entity cannot flourish unless it encounters challenges. Thus, an organisation is effective if it can overcome negative values to produce positive ones.

Competing values model

The competing values model states that an organisation's effectiveness depends on its ability to promote and balance ostensibly contradictory pursuits. For example, on the spectrum of workplace cultures, one end might represent an environment built on trust and cooperation, while the other is one that relies on a strict hierarchy. According to the competing values model, the key to becoming effective is to get such values to correspond with each other in a way that facilitates the organisation's success.

Goal model

The goal model is the most straightforward, as it measures effectiveness in terms of how effectively an organisation has met its goals. To apply the goal model, it is essential for an organisation to be clear about its goals. It is also important that the goals the organisation sets for itself are specific, measurable, attainable, relevant and time-based. This model looks strictly at an organisation's outputs but does not consider the inputs or contexts that relate to achievement.

Related: SMART Goals: Definition And Examples

Internal process model

Rather than looking at an organisation's outputs, the internal process model focuses on the operations that take place within it. It primarily assesses the various internal processes and asks how smoothly these processes take place. In this respect, effectiveness and efficiency are closely related concepts.

Resource-based model

The resource-based model focuses on the inputs that go towards an organisation's processes and achievements. The premise of the model is that valuable resources, particularly those that are rare or inimitable, help to establish a competitive advantage, so it is essential to acquire these resources and use them appropriately. A company that can do that is an efficient organisation.

Stakeholder model

A stakeholder is anyone who plays a role, whether big or small, in the success of an organisation. Stakeholders exist both within an organisation, such as employees and executives, and outside of it, such as the community and the relations of employees. The stakeholder model considers all the stakeholders associated with an organisation and measures how effectively the organisation accommodates their needs and wants.

Strategic constituency model

The strategic constituency model is similar to the stakeholder model because it measures effectiveness according to an organisation's ability to satisfy its stakeholders. The difference is that the strategic constituency model focuses on those whose stake is more closely business-related and might have a negative impact on an organisation. Besides managers, employees and customers, these include government agencies and businesses, such as vendors and suppliers. An efficient organisation is one that can identify and meet the various expectations of the constituents.

How To Plan Organisation Effectively

Follow these steps to maximise a company's organisational effectiveness:

1. Set a goal

To create an efficient organisation, first, identify what area of the business you want to improve. This may allow you to set clear objectives to achieve. An example of a goal for a company is improving the customer experience. Once you set your goal, make sure all team members are aware of it so that they can work to help achieve it.

2. Make effective decisions

Since decision-making helps to ensure a company experiences efficient organisation, it is important to make the right choices. When making decisions, make sure they align with the organisation's goals. Create an effective communication system that allows you to share these decisions with your team members. In the example of an organisation wanting to improve their customer experience, this would involve brainstorming ways to enhance a customer's experience with their company.

3. Develop strategies

Create effective strategies that help the organisation experience positive results. This involves finding the right steps to reach your goals. Evaluate where the organisation currently is and where it wants to go. For instance, a company looking to improve its customer experience may decide to implement a rewards program for loyal customers to encourage brand loyalty.

4. Consider your needs

At this stage in your organisational planning, you can identify the organisational needs to meet your objectives. Determine what type of employees the company requires to fulfil the strategies. Once you know the needs, you can hire the right people and train existing employees. To create effective strategies for enhancing the customer experience, a company may consider hiring someone with experience as a customer experience specialist.

5. Measure your effectiveness

Assess how successful the company was at reaching its objectives. One way to measure the effectiveness is by using a scorecard to determine if the organisation met its goals or key performance indicators (KPIs). Regularly track your progress so that you can identify areas for improvement and see what went well. Using the previous example, the company may notice that hiring a customer experience specialist helped provide them with the insight they would not have considered on their own and helped create more loyal consumers.

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