Organizational Behaviour
Lecture 6, 7
Chapter 2: Assessing Effectiveness (pg. 70-80)
Effectiveness: the degree to which an organization realizes its goals
 Jennifer: the degree to which an organization realizes stakeholder goals
 Jennifer: the degree to organizational components (goals, strategy, structure, culture) ae aligned with one
another and with the environment
 Difficult to measure – organizations are large, diverse and fragmented
Efficiency: the amount of resources used to produce a unit of output. The ratio of inputs to outputs
Assessing Effectiveness
 Contingency Perspective:
o
o

There are different approaches for different parts of the organization
Resource Based: ability of the organization to obtain scarce and valued resources. Indicators:
 Bargaining position (ability to obtain scarce resources – financial, raw, human, etc.)
 Understanding of external environment
 Use of resources to achieve superior performance
 Organization responds to environment
 **valuable when other indicators of performance are difficult to obtain (non-profit
organizations)
 Critics: approach assumes stability in the marketplace and fails to consider the changing
value of resource as the competitive environment and customer needs change
o Internal Process: internal health and efficiency – strong HR focus. Indicators:
 Culture/climate
 Team spirit/teamwork
 Confidence/trust in management
 Decision making near information sources
 Undistorted communication
 Rewards for managements development of the subordinates
 Conflict resolved in the interest of the organization
 Critics: total output/organizations relationship with the external environment not
evaluated and the evaluations of internal health are subjective because many are
quantifiable
o Goal: performance and output. Indicators:
 Performance assessed against organizational goals
Competing Values Model: balances concern with various parts of the organization rather than focusing on
one model
o
o

Integrates diverse concepts of effectiveness into a single perspective
Calls attention to effectiveness criteria as management values and shows how opposing values
exist at the same time
o **Dominant values often change over time as organizations experience new environmental
demands or new top leadership
Balanced Scorecard: balances traditional financial measures with operational measures relating to an
organization’s critical success factors

Integrated Reporting
o Global Reporting Initiative
o One Report
o Integrated Reporting
Choosing Effectiveness Indicators - many possible choices:
 Company goals
 Stakeholder goals
 Contingency perspective approaches (resource-based, internal process or goal)
 Values in the competing values model (human relations, open-systems, internal process and rational goal
approaches)
 Balanced scorecard metrics
 Integrated reporting standards
Chapter 4: Assessing the Environment (pg. 138-151)
Organizational Environment: all elements outside the boundary of the organization that have the potential to
affect the organization
 Looks at the green environment only indirectly
Environmental Sectors: subdivisions of the environment that group similar elements


Organizational Domain: the organization’s niche within the environment
Task Environment: “core” environment; direct impact on ability to achieve goals
o Red: task sectors  most important
 General Environment: everything else; indirect impact
o Green: general environment  could/(not) impact the organization (SWOT)
 *changes could impact the red first, then the green
 SWOT: internal characteristics
Integrated Reporting: organizations helping others assemble reports to give to stakeholders
*environment influences organizations though the need for information about the environment and the need for
resources from the environment
Environmental Uncertainty
 Applies mainly to sectors that the organization deal by on a day-to-day basis

Assessment Tools
o Simple-Complex Dimension: concerns environmental complexity  the number of external
elements relevant to an organization’s operations
 Count the number of factors deemed relevant for decision making
o Stable-Unstable Dimension: whether elements in the environment are dynamic
 Assess how predictable each one is (1-7 scale), rate of change
The Principle of Fit & Effectiveness
 Greater fit between the organization’s design and the environment should lead to greater effectiveness
 Greater fit between the goals, strategy, culture and structure of an organization should lead to greater
effectiveness
Adapting to Uncertainty
 Adding positions and departments
 Buffering: absorb uncertainty from the environment – surround the technical core and exchange
materials, resources and money between the environment and the organization and boundary-spanning
roles: link and coordinate an organization with key elements in the external environment – 1) detect and
bring into the organization information about changes in the environment 2) send information into the
environment that presents the organization in a favourable light
 Differentiation: differences in orientations among managers in different functional departments, and the
difference in formal structure among these departments and Integration: quality of collaboration among
departments (between departments)
o Organizations perform better when the levels of differentiation and integration match the level
of uncertainty in the environment (organizations that perform better in uncertain environments
have higher levels of both differentiation and integration)
 Mechanistic: (in a stable environment) internal organization characterized by rules, procedures and a
clear hierarchy of authority, organizations formalized and centralized vs. Organic Management: (in rapidly
changing environment) internal organization loose, free-flowing and adaptive; rules not written down,
people found their own way, hierarchy not clear (efficiency vs. learning)
 Planning, forecasting and responsiveness
o Planning can soften the adverse impact of external shifts
Addressing Environmental Uncertainty
Resource Dependence
 Organizations are open systems – dependent on environment for resources
 Control over resources minimizes dependence – reduces environmental uncertainty
 Organizations can team up to share scarce resources – create formal interorganizational relationships
 The more dependent organizations are – the more vulnerable they are
Addressing Resource Dependence
 Controlling Resources (inter-organizational linkages)
1) Establish favourable linkages with key elements in the environment
2) Shape the environmental domain
o Ownership: companies use this to establish linkages whey they buy a part of or a controlling
interest in another company – acquisitions & mergers
o Strategic alliances
o Cooptation: leaders from important sectors of the environment are made part of an organization
(made part of the BOD), interlocking directorates: formal linkage that occurs when a member of
the BOD of one company sits on the BOD of another company
 Direct Interlock: one individual is the link between 2 companies
 Indirect Interlock: director of company A and director of company B are both directors
of company C – do not have direct influence over their respective companies
 As a firm’s financial fortunes decline, direct interlocks with financial institutions increase
o Executive Recruitment
o Advertising & PR
 Controlling the Environment
o Change Domain: find a domain where there is little competition, no gov’t regulations, abundant
suppliers, affluent customers and barriers to keep competitors out
 Acquisitions and divestment
o Political Lobbying: techniques to influence government legislation and regulation – can be used
to make regulatory barriers against new competitors or to quash unfavourable legislation
o Trade Association: organizations with similar interests pool resources together to pay people to
carry out activities such as lobbying legislators, influencing new regulations, developing public
relations campaigns and making campaign contributions
o Illegitimate Activities: attempt to cope with resource scarcity