Prepared by
Carolina Castillo
Scott Chapter 13
1. How has organizational effectiveness been defined?
Organizational Effectiveness has been defined through multiple criteria derived from:
 The rational, natural and open system perspectives.
 Time Perspective and Level of Analysis.
 The varying set of participants and constituents associated with organizations.
 The Total Quality Management Movement.
 Market and Nonmarket Organizations
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Criteria derived from the rational, natural and open systems:
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Rational Model: since organizations are viewed as instruments for the attainment of goals, the general
criteria has focused on the number and quality of outputs as well as the economies realized in
transforming inputs into outputs. For example, a company that bases its wages on piecework is relying
on the number and quality of units produced to measure effectiveness.
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Natural Systems: This perspective places importance on the existence of a set of support goals to the
output goals. The criteria usually used include measures of participants’ satisfaction and morale,
interpersonal skills of managers, and survival itself. Factors such as cooperation, communication with
co-workers are examples of this type of criteria.
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Open System perspective: Information acquisition and processing are viewed as especially critical since
an organization’s long-term well-being is dependent on its ability to detect and respond to subtle
changes in its environment. An example of such criteria can be profitability, considered as the excess of
returns over expenditures.
Time Perspective and Level of Analysis:
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Regarding to time considerations, the criteria employed may vary depending on the time frame adopted
or depending on the life cycle stage the company is at. Respect to the time frame adopted, financial
indicators like the quick-ratio to measure liquidity over current liabilities may be considered more
important than performance over annual budgets. Concerning the life cycle stage of the company,
factors such as initiatives to create a distinctive reputation for the company may be more important in
the first stage of the company than in a mature stage when the company already enjoys certain
recognition from the customers.
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The level of analysis has to do with the relative effectiveness of an organization viewed from the impact
on individual participants, on the organization itself, or on broader external systems. Taking this into
consideration we can assess how the effectiveness of a company has improved over the last years
comparing it with the average performance (benchmark) of similar companies in the industry.
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Another source of diversity of criteria for analyzing effectiveness is to be found in the varying set of
participants and constituents associated with organizations. According to this perspective we will find
little commonality in the criteria employed by the various parties who assess organizational
effectiveness. Customers will desire higher quality at lower costs, workers will prefer higher wages and
greater fringe benefits, and managers will seek higher profits and lower costs.
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The Total Quality Management Movement has had profound effects on making the concept of effectiveness
be focused on “quality”. Three values are considered as the most important: Customer focus, continuous
improvement, and teamwork.
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Customer focus emphasizes on directing each area of the company towards meeting customers’ needs.
Brainstorming, market surveys and enhancement of relationships with the channels of distributions are
some of the techniques employed to identify unmet needs and concerns.
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Continuous improvement is aimed to improve all products and services as well as the processes that
create them.
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Teamwork is used as a means to install more flexibility and responsiveness in dealing with the barriers
normally imposed by traditional bureaucracies.
Market and Nonmarket Organizations. According to this perspective the nature of the market has profound
effects in the type of strategies that will produce effective performance. For example fishing equipment is
more likely to be distributed through specialized channels of distribution than a mass-market product. Also,
the presence of foreign competition brings more differentiation among products. Nonmarket organizations
are particularly likely to lack clear output measures, because when the goals are to provide for an adequate
defense, to negotiate advantageous treaties with other countries, or to fight poverty, it is difficult to
determine how effective performances are.
2. What are some issues that must be considered when measuring effectiveness?
Assessing effectiveness involves three steps: (1) Selection of Criteria and Setting of Standards; (2) Selection of
the Samples; (3) Comparison between sample values and selected standards.
Setting of Standards: If the effectiveness of an individual or organization is to be judged as superior, excellent
or below normal, some notion of normal or average performance, which represents the standard, is required. The
methods used in assessing the setting of standards are classified into “absolute performance standards and
relative performance standards”.
Absolute Standards can be estimated using motion and time studies (introduced by Taylor) or by using past
performance. Motion Studies are concerned with estimating how long a particular activity should take; besides
engineers are often able to redesign the product or process to reduce the required time. Time studies employ a
wide variety of techniques for determining the duration a particular activity requires under certain conditions.
For example, work sampling involves selecting a large number of observations taken at random intervals and
observing how long workers take performing various components. For example, the assembly department of a
company could establish the standard of 40 units assembled per worker per day. This standard is absolute in the
sense that it is fixed and known before the worker exerts effort. However, motion and time studies suffer from
potential bias because employees may under perform during the study period to set lower quotas. Absolute
standards are also criticized because employees are evaluated in part on factors beyond their control. Consider
for example, a salesperson facing significant uncertainty from competitors and other economy-wide factors.
Past Performance involves the setting of next year goal based on past data, for example the setting of sales
quotas for next year based on a certain percentage increase over the sales of this year.
Relative Standards involves using the average performance in other similar firms as the reference group.
Selecting indicators: There are three general types of indicators: (1) Outcomes; (2) Processes; (3) Structures.
Outcomes indicators: focus on specific characteristics of materials or objects on which the organization has
performed some operation. Then, if the company we are analyzing is a consulting company rendering services to
improve a particular client’s process, the outcome indicators will be given by the changes obtained in the
process performance (e.g. amount of resources saved and the responsiveness the client has gained). In contrast,
if we are analyzing a manufacturing company, the outcome indicators will be given by the finished final product
to be marketed.
However, outcomes are never pure indicators of quality of performance, since they reflect not only the care and
accuracy with which work activities are carried out, but also the current state of the technology and the
characteristics of the organization’s input and output environments. The problem of inadequate knowledge of
cause-effect relations can be handled by the use of relative rather than absolute performance standards, so that
the performance of an organization is compared against others carrying on similar work. This approach
presumes that the organization assessed can or should participate in the same general knowledge pool. The use
of relative standards ensures that an organization is not penalized for lacking knowledge no one has.
Although it can be assumed that organizations have access to the same knowledge, they vary in their access to
clients and supply sources. Organizations will seek to acquire inputs that enhance their outcome. For example,
highly regarded teaching hospitals will focus primarily on the care of the very sick or on those whose problems
pose the greatest challenge to medical science.
Outcome measures are also affected by the features of output environments, for instance the sales volume of a
company reflects not only the organizational performance, but also the market conditions. The decision as to
how to treat input characteristics and output environments depends on whether we:
 Seek to concentrate simply on the organization’s throughput technical or core activities (e.g. to consider the
ability to build a solid market segment as an important component of the firm’s performance)
or to
 Include in our assessment the performance of the organization’s bridging units (input and output
components)
Processes Measures: focus on the quantity or quality of activities carried on by the organization. This type of
indicator represents an assessment of input and energy regardless of output. Some processes measures assess
work quantity and others work quality. Considering the registration process in a university, work quantity would
be the number of applications input in the system and work quality could be the proportion of applications input
without errors.
Process measures are more valid measures of the characteristics of organizational performance, because all
process measures evaluate efforts rather than achievements.
Performance quality and quantity are often regularly monitored, however, in some instances, inspections based
on observation of ongoing performances are both expensive and reactive (employees may strive work at their
best because they are being observed, or under perform).
Structures Indicators: assess the capacity of the organization for effective performance. These measures are
based on organizational features or participant characteristics presumed to have an impact on organizational
effectiveness. For example, universities can be assessed by the qualifications of the educational staff,
educational program content, variety and quality of facilities (library, sport facilities, computer labs, climate,
culture, etc).
Some have suggested that an emphasis on structural measures may have detrimental consequences for quality of
outcomes. For example, a person having a technical degree may perform a particular function better that another
person that possess a university degree, and being prevented from getting the job just for not having a university
degree.
Selecting Samples: In order to define the universe from which the sample is to be drawn, two approaches can be
considered:
 The first option deals with evaluating if the company is doing things right rather than questioning if the
company is doing the right things. This criterion is called micro-quality and will focus on the quality of
structures, processes or outcomes actually experienced by clients who were the recipients of the
organization’s services.
 In contrast, the second approach called macro-quality would seek to determine whether the appropriate
services were being provided or, whether the proper clients were receiving the services.
For example, from a micro-quality perspective a university might be assessed in terms of the quality of the
programs offered or from a macro-quality perspective by the offering of programs really relevant to the
community in which the university is located.
Participants, Constituents, and Measures.
Given the diversity of participant and constituency groups, there exist different preferences for some type of
measures over others. Generally, managers emphasize structural measures of effectiveness, in part because these
reflects factors that are more under their control than other types of indicators. Thus, we may expect managers to
have a great influence over the standards used in hiring personnel. Many companies use to have prospective
candidates for a particular position to be first interview by the manager of the area for which the candidate is
applying for, and then if the manager has a good feeling about the prospective candidate, he is then interview by
the human resources area.
By contrast, performers or rank-and-file participants are expected to emphasize process measures of
effectiveness. Since they have little or no discretion in the selection of their activities, they will prefer to be
evaluated on the basis of their conformity to their performance programs rather than on the basis of the efficacy
of these programs. Professional Personnel, who are granted discretion in their choice of activities, will also
usually prefer to be evaluated on the basis of process measures, since inadequacies in the knowledge base mean
that they lack full control over outcomes.
Clients are likely to focus primarily on outcome measures, evaluating the company’s product or services in
terms of the extent to which it has met their own needs and expectations.
While managers, employees and clients are likely to focus on micro-quality indicators of effectiveness, another
interest group consisting of the public at large, including some public regulatory parties will be more likely to
emphasize measures of macro-quality and consider issues regarding the benefits the community as a whole is
obtaining from the company’s operations.
3. Glean some insight from Morgan’s book on the subject of organizational effectiveness as discussed by
Scott?
Regarding the rational view, Morgan states a mechanical mode of organization can provide the basis for
effective operation only under conditions where machines work well: (a) when there is a straightforward task to
perform; (b) when the environment is stable enough to ensure that the products produced will be the appropriate
ones; (c) when one wishes to produce exactly the same product time and again; (d) when precision is at a
premium. He explains how McDonalds meeting the preceding conditions, has built a solid reputation for
excellent performance in the fast-food industry by mechanizing the organization of all its franchise outlets all
over the world so that each can produce an uniform product.
Morgan explains how natural systems to analyze workers’ performance took place and gave birth to a new
theory of organization that built on the idea that individuals and groups, like biological organisms, operate most
effectively only when their needs are satisfied. The design of work to increase productivity and job satisfaction
while improving work quality and reducing employee absenteeism and turnover became a great concern of the
Human Resource Management Movement, which focused its attention towards the need to integrate the human
and technical aspects of work as an important principle.
Concerning the open-system perspective Morgan explains how the contingency theory has had a major impact
over the development of corporate strategies that focusing on achieving an appropriate fit between the
organization and the environment have enable the companies to reach efficiency in their operations. While the
mechanistic approach for effectiveness has worked better in stable environments, the natural system has shown
to be more efficient to manage turbulent environments.
Finally, Morgan’s political metaphor makes us aware of the participants’ interest diversity. This diversity in
interests creates a goal attainment gain that is negotiated to achieve the organizational effectiveness.