What is Organizational Effectiveness? (Pt.2)

Much of the research on organizational effectiveness in over the last two decades has revolved around one major concern: bringing products to market. Specifically, the ability to innovate, adapt, and stay ahead of changing market conditions form the foundation of the studies that I have recapped below. In these studies, organizational effectiveness can be seen as successfully meeting the goals of the organization, the efficient use of resources, performing well in the marketplace, and, ultimately, the ability to deliver more value to customers than rival organizations. Below is a brief recap of articles that lay out the current state of thinking as of 2018 on organizational effectiveness.

Hunt and Duhan, 2002

  • Hunt and Duhan see organizational effectiveness as the ability to deliver more value to customers.
  • This paper is not a work of empirical research, but rather an examination of competition, efficiency seeking, and effectiveness seeking.
  • Competition is now about becoming an effectiveness seeking enterprise.
  • Businesses will become more dependent on innovations that help firms deliver more value to customers.
  • An effective outcome is superior profits flowing to firms that innovate to deliver superior value while controlling costs.
  • This article looks at effectiveness through the lens of Resource Advantage theory, which views firms and resources as ‘heritable, durable units of evolutionary selection, with competition for comparative advantages in resources constituting the selection process.”
  • Firms seek positions of competitive advantage because those positions result in superior financial performance. Desire ultimately is to produce goods more efficiently with more value (more effective).
  • Organizational effectiveness is therefore seen as the result of producing most efficiently the goods with the highest value to consumers. 

Buganza and Verganti, 2006

  • B & V see organizational effectiveness as an outcome of processes and procedures that enhance an organization’s ability to tailor offerings to the needs of customers.
  • Italian online brokerages were chosen by the authors to form the basis of their research, because of the high level of turbulence in the industry. Environmental turbulence was identified as critical because developing products in a turbulent environment poses particular challenges to the organization: the market or technology may shift rapidly and unpredictably during the product development window, thus requiring sound developmental processes.
  • The purpose of the study was to examine Life-Cycle Flexability: the ability to adapt and redesign products or services according to changes in the market after the product is first released. The main components of the model are the frequency of adaptation, the rapidity of adaptation, and the quality of adaptation.
  •  Case study research was performed to identify the main research hypotheses, and then two surveys were designed to measure both practices and performance in the organizations examined.
  • Result of the research was validation of the LCF model and the identification of a methodology for investigating the model.

Gregory et al 2009

  • Uses the competing values framework (CVF) to understand the impact of employee attitudes on effectiveness.
  • CVF model consists of multiple domains (Group, Developmental, Rational, Hierarchical, and Balanced),each of which has some impact on organizational effectiveness. The most important of these here are Group, which is characterized by high flexibility and internal focus, and Balanced, in which the values of each of the domains are strongly held.
  • Surveys were sent to 677 hospital managers to measure these different domains.
  • Findings indicated that organizations that value teamwork, cohesion, and employee involvement will outperform organizations that do not. Findings also suggest that organizations with a balanced culture will possess a mix of values required to manage the mix of conditions that may be encountered.

Zheng et al 2010

  • In this article, the goal is to examine the relationship between knowledge management and organizational effectiveness, which is here understood to be the degree to which an organization realizes its goals. Zheng posits that knowledge management relates positively to organizational effectiveness, and that there is a relationship between organizational culture, knowledge management, and effectiveness.
  • Mail and web-based surveys were administered to HR professionals in 301 organizations in the service, manufacturing, and agricultural sectors.
  • Statistical analysis of the survey results supported multiple findings:
    • In addition evidence connecting knowledge management and organizational effectiveness, evidence places knowledge management as an intervening mechanism between organizational context and organizational effectiveness.
    • Organizational strategy has an impact on knowledge management.
    • Most importantly, knowledge management was found to mediate the influence of organizational culture on effectiveness. In other words, how well knowledge is managed is largely associated with how well cultural values are translated into value in the organization.
  • The implication for managers is that knowledge management can impact organizational effectiveness when it is in alignment with organizational culture, structure, and strategy. Focus on knowledge management practices can help transfer the impact of resources to the bottom line.

Zheng model

Figure 1: Zheng’s Model of Knowledge Management Effectiveness Mediation

Jimenez-Jimenez and Sanz-Valle 2011

  • The goal of this study was to understand the relationship between organizational learning, innovation, and performance.
  • Past research demonstrates that companies with the capacity to innovate will be able to respond to market challenges faster than less-innovative companies. Organizational learning, the process by which an organization develops the new knowledge and insights of associates, has also been demonstrated in studies to be a key variable in the enhancement of organizational performance. When associates share their learnings, the development, transformation, and exploitation of new knowledge can enhance and drive innovation.
  • Research was performed by conducting personal interviews of 451 employees chosen from 1600 Spanish firms from the manufacturing and service sectors.
  • Among the findings of this research:
    • Innovation has a positive and significant effect on performance, which supports the widely held understanding that innovation is a key driver of company success.
    • Organizational learning has a positive effect on both performance and innovation.
    • Because the impact of organizational learning is higher on innovation than on performance, the implication is that organizational learning influences performance by facilitating innovation.
  • The research therefore suggests that organizations hoping to drive performance through innovation should improve organizational learning processes.

Arnett et al 2018

  • This paper represents an extension of Buganza and Verganti’s research on life-cycle flexability, and multiple studies of the new product development process.  The authors posit that new product development (NPD) capability enables the improvement of organizational effectiveness by improving both product advantage and life-cycle flexability.
  • Telephone survey test data was gathered from 180 Norwegian hotels.
  • Study findings confirmed that NPD capability can improve both product advantage and life-cycle flexability. Therefore, to improve organizational effectiveness, managers should work to develop higher levels of NPD capability.

Arnett Model

Figure 2: Dual Effects of NPD capability on organizational effectiveness

References: 

Arnett, D. B., Sandvik, I. L., & Sandvik, K. (2018). Two paths to organizational effectiveness – Product advantage and life-cycle flexibility. Journal of Business Research, 84, 285–292. https://doi.org/10.1016/j.jbusres.2017.11.010

Buganza, T., & Verganti, R. (2006). Life-Cycle Flexibility: How to Measure and Improve the Innovative Capability in Turbulent Environments. Journal of Product Innovation Management, 23(5), 393–407. https://doi.org/10.1111/j.1540-5885.2006.00212.x

Gregory, B. T., Harris, S. G., Armenakis, A. A., & Shook, C. L. (2009). Organizational culture and effectiveness: A study of values, attitudes, and organizational outcomes. Journal of Business Research, 62(7), 673–679. https://doi.org/10.1016/j.jbusres.2008.05.021

Hunt, S. D., & Duhan, D. F. (2002). Competition in the third millennium: efficiency or effectiveness? Journal of Business Research, 55(2), 97–102. https://doi.org/10.1016/S0148-2963(00)00144-2

Jiménez-Jiménez, D., & Sanz-Valle, R. (2011). Innovation, organizational learning, and performance. Journal of Business Research, 64(4), 408–417. https://doi.org/10.1016/j.jbusres.2010.09.010

Zheng, W., Yang, B., & McLean, G. N. (2010). Linking organizational culture, structure, strategy, and organizational effectiveness: Mediating role of knowledge management. Journal of Business Research, 63(7), 763–771. https://doi.org/10.1016/j.jbusres.2009.06.005

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Masha Alexander

A blog about how we work, learn, and change.

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