Understanding organizational effectiveness by its growth and development indicators

By Neha and Priya Chetty on August 17, 2021

Organizational effectiveness is often equated with organizational success and worth. It can be defined as the extent to which an organization can attain its goals (Oghojafor, Muo and Aduloju, 2012). An organization is a complex entity with many dynamics that contribute to making it efficient and sustainable. These dynamics can run an organization smoothly even during the challenging times of various transitions like recession and pandemics etc. The article aims at identifying the components or indicators of organizational effectiveness that enable its growth and development.

Components or indicators of organizational effectiveness can be internal or external to the organization. Traditionally factors such as profit, land acquisition, increase in fixed assets, and return on investment were considered as indicators of organizational effectiveness. However, with globalization and intensifying competition, markets are becoming dynamic. This is causing the modification of the scope of organizational effectiveness. Some of the indicators of organizational effectiveness today are as follows.

Employee retention is a key to organizational effectiveness

Retention of employees in an organization is one of the most imperative components that drive the organization towards its vision and mission (Sandhya and Kumar, 2011). It is becoming increasingly challenging for organizations to retain their key talent due to remote working culture. Additionally, creating a sense of belongingness and motivation is becoming difficult while handling them remotely. When employees are retained in an organization for the long term they work for the growth and long term goals which in turn increases the profitability of organizations (Tahsildari and Shahnaei, 2015). A high attrition rate and low esteem of employees can downgrade overall employee productivity, thereby affecting the performance of the organization. Therefore employees play a key role in the efficiency and effectiveness of organizations in the competitive environment that is prevailing nowadays.

Competitive advantage can indicate an organization’s effective performance

Organizational effectiveness can be majorly understood with the help of its competitive position in the market (Twin, 2021). This refers to the performance in the external environment where other competitors are also operating. The competitive advantage of an organization over its competitors reflects in the profit earned the stock price of their organization, customer attractiveness and many other parameters, the actual position of the organization (Abston and Stout, 2006). Therefore it acts as an effective indicator of organizational effectiveness.

Organizational effectiveness is not measured only by the maximization of profits. It also depends on the role it plays in the environment where it is operating. The organization’s sustainability and value-based development give the organizational effectiveness (Bharadwaj, Varadarajan and Fahy, 1993). An organization can be considered to be effectively growing if it has fulfilled its corporate social responsibilities and it has sustainability in its core values. Organizations should focus on the optimization of profit by being sensitive towards the environment, maintaining social responsibilities by opening various schools, hospitals, old age homes etc or doing other social work towards the people of the society (Franco and Mário, 2019). Organizational effectiveness is thus largely indicated by the sustained growth of organizations.

Adaptability and technological advancement are indicators of organizational effectiveness

One of the critical indicators of organizational effectiveness is the adaptability of the organization to the dynamism in the society or environment where it is operating. In an intensely competitive market strategic management, technological advancement and change management lead to organizational success (M. and Willburn, 2018). Employees show resistance to the changes that the organization tries to bring in their system and work procedures. These resistances can be from lower, middle to higher-level management and they act as very strong hurdles in the development and adaptability in changing environments. Therefore adaptability to the newly developed culture or up-gradation of technology is an important indicator of organizational effectiveness.

Financial gains, return on investment and turnover

With time, various parameters of measuring organizational effectiveness have changed and evolved but there are some core components that very radically indicate the effectiveness of an organization in the market. The financial condition that indicator that can never be replaced. The financial returns of an organization are very important to fulfil other parameters like employee satisfaction, customer satisfaction, use of technology etc. Return on the investment done is very important for an organization to fulfil its role in the market. Turnover indicates their well being and development (Sheffield, 2021). The key component in understanding organizational effectiveness is the financial viability in the market.

Employees and technology are instrumental in longevity

Thus, there are many indicators of organizational effectiveness that help analyze and review the performance of an organization in the local, national or international market. An organization can be considered as developing or efficiently growing when its employees act in tandem with organizational goals. When employees are satisfied, retained and associated for the long term it provides a strong performance boost as major hurdles like absenteeism, favouritism, groups, complaints etc can be avoided.

Apart from this, technological advancement has also been considered as an important parameter for understanding organizational effectiveness because the market is evolving and to cope up with the transition of the external environment technological advancement and adaptability is very important. Sustainability has also been considered as an important indicator, an organization needs to be sensitive enough towards the environment, energy consumption, pollution control, industrial waste disposal, use of plastic etc. Financial gains and competitive advantage over other competitors also act as strong components in understanding the sustainability and long term growth of an organization in an effective manner. Thus we can say that different components have different dynamics and they come together to critically evaluate the effectiveness of organizations in the competitive environment.

References

  • Abston, K. A. and Stout, V. J. (2006) Organizational Effectiveness: Exploring What It Means in Human Resource Development.
  • Bharadwaj, S. G., Varadarajan, R. and Fahy, J. (1993) ‘Sustainable Competitive Advantage in Service Industries: A Conceptual Model and Research Propositions, Journal of Marketing, 57(4), pp. 83–99.
  • Franco, M. and Mário, R. (2019) ‘The Corporate Sustainability Strategy in Organisations: A Systematic Review and Future Directions’, Sustainability, 11(22).
  • M., K. and Willburn, R. (2018) ‘The impact of technology on business and society, Global journal of business research, 12(1), pp. 23–39.
  • Oghojafor, B., Muo, F. and Aduloju, S. (2012) ‘Organisational Effectiveness: Whom and What Do We Believe?’, Advances in Management & Applied Economics, 2(4), p. 810108.
  • Sandhya, K. and Kumar, P. (2011) ‘Employee retention by motivation’, Indian Journal of Science and Technology, 4(12), pp. 1778–1782.
  • Sheffield, L. (2021) What is organizational efficiency and why is it important for long term success, Guide Spark.
  • Tahsildari, A. and Shahnaei, S. (2015) ‘Enhancing Organizational Effectiveness by Performance Appraisal, Training, Employee Participation, and Job Definition’, European Journal of Business and Management, 7(12), pp. 56–63.
  • Twin, A. (2021) Competitive Advantage, Investopedia. Available at: https://www.investopedia.com/terms/c/competitive_advantage.asp#:~:text=Competitive advantage refers to factors, compared to its market rivals. (Accessed: 1 June 2021).
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