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Org Design

Organizational Effectiveness - A Practitioner's Guide

Explore our comprehensive guide on organizational effectiveness. Learn ways to improve and monitor for effective organizational efficiency.

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In a study about organizational effectiveness, business leaders were asked to answer a deceptively simple question - Why do we exist? 

The startling results revealed that 60% of employees don’t understand what their organization stands for. This indicates that the business strategies of an organization are not synchronized. And are negatively impacting its ability to deliver the desired results. 

To achieve organizational effectiveness, organizations must identify and communicate their core purpose, and then identify the people, processes, and structure needed to fulfill that core purpose.

What is Organizational Effectiveness?

Organizational effectiveness provides direction for the workforce and leaders to identify not only what is needed but how to achieve it. It should ensure that everyone is on the same path and heading in the same direction. When planned thoroughly, the purpose also translates into the operating model and ensures that the correct structure is in place to support the objective. Learn more about operating models with strategies and real-world examples. 

Organizations need guidelines that illustrate the components of strong organizational strategies. The Harvard Business Review developed the following 10 Principles of Effective Organizations to help leaders understand how organizational effectiveness works. These principles provide the support needed to sustain it.

  1. Encourage cooperation: Building strong relationships fosters a truer sense of teamwork and common purpose that ultimately benefits teams as well as the organization.

  2. Organize for change: Leaders must be the champions of change and ensure that their teams have everything needed to implement and support it.

    • Build the case for change

    • Create a positive mindset for change

    • Convince others of the value and legitimacy of change efforts

    • Avoid inertia that will distract from the goal

    • Have confidence, conviction, and courage in the change efforts

  3. Anticipate the future: To thrive, rather than just survive, successful leaders view change as new opportunities to stay relevant and competitive and they surround themselves with like-minded team members.

  4. Remain flexible: HBR describes it as the ability to situationally morph by deploying resources when and where they’re most needed.

  5. Create distinctive spaces: Studies prove that a pleasant working environment and a variety of options contribute to workers’ overall well-being and satisfaction with their work.

  6. Diversify your workforce — and create an inclusive environment: Diversity and inclusion are critical to today’s business environment, but leaders must also ensure that diverse teams remain cohesive.

  7. Promote personal growth: Aligning workers’ interests and abilities with their roles results in more employee engagement, higher retention rates, and increased productivity.

  8. Empower people: Employee empowerment includes ensuring that there is a structure in place to support them. It requires communication, technology, shared decisions, training, collaboration, and trust. 

  9. Reward high performers: Well-designed merit-based pay-for-performance plans are generally very successful. They retain great employees and encourage a strong team ethic.

  10.  Foster leadership culture: Encouraging independent thinking translates into a workforce that can grow organically.

How to Achieve Effectiveness in an Organization?

7 Models of Organizational Effectiveness

Org Effectiveness
7 Models of Organizational Effectiveness

 

The most effective organizations still experience contradictions and incompatibility. The challenge is to identify which model will work best to address unique issues and further the business’ organizational goals. 

  1. Goal Model: It best fits an organization with goals that are clear, consensual, time-bound, and measurable. That doesn’t fit all organizations so it should be used by leaders with a clear idea about their desired end results. 

  2. System Resource Model: The focus of this model is on the most efficient utilization of organizational resources. 

  3. Internal Processes Model: Developed from the perspective of human resource development and organizational development, the focus is on the successful interaction of people within the organization. 

  4. Strategic Constituencies Model: In some types of organizations, the satisfaction of their constituencies is the primary concern. Constituencies can include owners, management, employees, customers, suppliers, government, and customer groups.

  5. Competing Values Model: The effectiveness of this model depends on the organization’s commitment and ability to reconcile competing values such as focusing on their workforce or satisfying their customers. 

  6.  Legitimacy Model: In order to remain relevant and prevent their business demise, some organizations may expend energy to achieve legitimacy with the public.

  7. Stakeholder Model: This can be viewed as a way to strengthen organizational effectiveness. Include a common purpose and include all stakeholders. Create a work environment where employees want to work. 

Improving Effectiveness in Organizations

  1. Strong Communication: Leaders need to foster a workplace that relies on open communication and trust.

  2. Setting micro-goals to achieve: Providing employees with the opportunity to have regular “wins” builds momentum toward tackling larger goals 

  3. Maintain a balanced Span of Control: It’s important for leaders to understand their workforce and their managers in order to determine the best ratio of management to workers. Here is an easy guide to calculate and optimize span of control.

  4. Performance incentives for employees: Offer the incentives that your employees will value, not what you believe they value. 

  5. Provide a good work environment: Tailor your work environment to the employees you want to attract and retain. 

  6. Cross-collaboration among teams: The benefits typically include an increase in efficiency and innovation as well as a breakdown of organizational “silos”. 

  7. Align strategies with org design: Developing the best strategy for your company must reflect how your organization is structured. 

  8. Monitor progress and fill gaps: Leaders need to know what’s working and what needs more resources. Be involved with your teams and provide the tools necessary for them to be successful.

How Does Agentnoon Help in Organizational Effectiveness?

  1. Monitor your progress through a wide range of analytics
  2. Analyze impact and changes and respond efficiently
  3. Achieve your business goals and milestones
  4. Create what-if scenarios to see what suits your organization

via Agentnoon's organizational design software

Measuring Success with Organizational Effectiveness

Stakeholders generally want to know the results of an organizational effectiveness plan so they can determine if it’s delivering the expected results. So, it’s critical to know what’s working and what needs to change. 

  1. Prompt decision-making: There should be a sense of urgency if something is not working. Gaps in the review of the plan can result in a loss of momentum, costs, and commitment from team members. 

  2. Compete with other organizations: Competitors may address any gaps that they’ve identified and gain a competitive advantage that will have financial and other considerations. 

  3. Achieve revenue goals: Quickly identifying and fixing these gaps helps an organization meet their revenue goals and maintain growth. 

  4. Maintain a good customer relationship: Customers have a vested interest in the effectiveness of your organization’s success. They want to be reassured that the company has responded quickly to identify any gaps that will affect them. 

Way to Monitor its Effectiveness

  1. Set concise goals. Goals need to be clear and brief enough for everyone to understand the objectives. 

  2. Analyze the company’s performance based on those goals. 

  3. Utilize frameworks like McKinsey's 7S framework, Weisbord's 6 box model, etc.

McKinsey’s 7S Framework

Mckinsey's 7S framework
Mckinsey's 7S Framework

 

This framework includes 7 factors contributing to org effectiveness. The design of this framework ensures that even after 30 years since it was introduced, it remains highly relevant. It’s based on factors that are dependent on one another for the success of the whole framework. It focuses on both tangible factors such as structure and systems as well as intangible factors such as skills and values. 

The 7S framework illustrates how success in one factor relies upon success in each of the other factors. 

  1. Structure: The structure comprises people and how they are organized to perform the work. 

  2. Strategy: The strategy is a plan of action implemented to increase the company’s competitive advantage. 

  3. Systems: The organization’s systems illustrate how the work is done. It defines the various processes in an organization and identifies how to improve them.

  4. Skills: This component focuses on individual skills in addition to the skills of the organization. A continually increasing need for specialization requires leaders to implement enhanced skill acquisition strategies. 

  5. Staff: In addition to how many staff members an organization has, it also includes the organization’s staffing strategy which might include temporary staff and outsourcing. 

  6. Styles: How does the style of management empower the workforce, foster innovation, and support change? 

  7.  Shared values: These are the core values of the organization that drive decision-making. They are at the center of the model because the organizational values connect to and impact each of the other components of the model. 

Weisbord’s 6-Box Model

Weisbord's Six Box Model
Weisbord's 6 Box Model

 

This framework includes 6 measurable impacts of organizational effectiveness. It is designed to help identify potential problem areas in an organization’s effectiveness plan that may not be obvious to senior management. 

  1.  Purpose: As the Gallup study suggested, an organization’s purpose can be determined by asking questions such as – “Why do we exist?” “Who are our stakeholders?.”

  2. StructureIn this framework, structure refers to the way the business operates and how that meets the business goals. 

  3. Relationships: A critical part of the framework references communication effectiveness, the presence of silos, and how relationship issues are managed.

  4. Rewards: The focus is on how well the organization motivates employees and how that relates to the overall goals of the business. 

  5.  Leadership: How does the leadership of the organization display the values and direction of the organization? 

  6. Helpful mechanism: These are the tools needed to implement the business strategy. 

Conclusion

Achieving or improving organizational effectiveness is critical to the overall success of an organization. It should inform the organization of what is needed now and what will be needed in the future. 

In 2024, organizations will need to review their structures and strategies to ensure that their organizational effectiveness plans align with the operating model. 

Contact us to learn how Agentnoon can help with your organizational effectiveness needs. 

Barirah Rehan

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