What is effective organisation? (With definition and models)
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Organisational effectiveness means being able to maximise productivity and build long-term results. For an organisation or business to succeed, it's essential that it can demonstrate fundamental strength in five key areas, which are leadership, structure, people and decision-making, work systems and culture. By building on the foundations, a business develops organisational effectiveness that delivers over the long term. In this article, we define effective organisation, illustrate why it's important, list the key models of organisational effectiveness and detail how to use them.
What is effective organisation?
Effective organisation is a concept that explores how successful a business is at achieving both short-term and long-term objectives. These goals typically revolve around a range of different factors, both internal and external. An organisation that's effective may be able to sell or produce more of a specific product or improve the internal communications between departments.
The factors that make up organisational effectiveness are broad and can range from improving employee efficiency to optimising a specific workflow. For example, if a business has a goal of selling 30% more products in a year, they might evaluate business effectiveness by identifying sales over a set period in the past and how changes to processes impact top-level numbers. Any changes they make as part of an effectiveness strategy are measurable, providing the opportunity to expand the strategy further or identify new opportunities.
Why is organisational effectiveness important?
For a business to develop over the long term, it's necessary to understand organisational effectiveness and how to implement it. This concept allows a business to stay focused on milestone goals while also improving short-term effectiveness. Organisational effectiveness techniques cover various applications that all interlock to create a more optimised business strategy. The main benefits of organisational effectiveness are:
better communication between management and employees
a more productive workforce engaged in achieving long-term goals
higher customer value and better customer retention
potential financial savings
opportunities to improve waste areas or unoptimised processes
identifying opportunities to improve technology and workflows
What are the different models of effective organisation?
The effectiveness of any organisation depends on the wider objectives it wants to achieve. Since this is such a broad concept, it's vital that a business uses the model that best supports them in their efforts to optimise effectiveness. There are several different models available, all of which provide specific benefits depending on the business goals in place:
Internal organisation model
This type of organisation model focuses on how a business creates organisational effectiveness internally. It may focus on internal communications or workflows to ensure that everything's running as smoothly as possible while also highlighting potential areas of wasted resources. The different ways of improving internal organisation also include the administration of the business, such as improving the standard of documentation and how information circulates between departments.
Resource-based organisation model
A resource-based organisation model determines the effectiveness of a business by identifying the assets and input already available. This model follows the idea that a business can improve its effectiveness by gathering the right resources to deliver a better performance than its competitors. In a crowded sector, a business may achieve this by using rare or valuable resources that offer an advantage over similar businesses. For example, a marketing company may use proprietary technology or deep learning techniques to differentiate itself from competitors.
Goal-based organisation model
This type of organisation model is entirely based on achieving long-term business goals. A business may set a range of goals covering both short-term and long-term milestones that directly result in increased effectiveness. This gives them a solid framework to work towards at each touchpoint of the business. While this goal model is less focused on creating actionable insights, it's ideal for measuring the output resulting from any process changes.
Abundance organisation model
This organisational model explores how effective an organisation is by exploring the people and human systems that make up its wider structure. An abundance model measures both beneficial and negative values for employees to motivate higher levels of productivity and unlock potential. This is useful if a company wants to identify growth opportunities, as employee development eases the difficulty of certain tasks.
Constituency organisation model
This model relies on an organisation to identify its key constituencies, whose needs are to be met if the organisation wishes to succeed. A constituency may include employees, customers, suppliers, other business owners or even the government, depending on the field the business operates in. By using this model, an organisation identifies the right groups that relate to its products or services and sets out any expectations that need fulfilling.
Value organisation model
In this type of model, an organisation measures its effectiveness by identifying its ability to deliver competing values. This creates a framework that a business can use to optimise across four key areas, these being how the company operates on a day-to-day basis, how the company collaborates, how a business controls consumer behaviour and how the business competes alongside others in the same space. These values ensure a tangible end goal and a clear way of measuring success during their efforts.
Stakeholder organisation model
Another common type of organisation model is the stakeholder model. This is where a business focuses its efforts entirely on meeting the needs of key stakeholders. Stakeholders include employee family members, local community members or investors in the company. While this is similar to the strategic constituency model, it's more focused on stakeholders than external constituents.
How to improve organisational effectiveness
Improving organisational effectiveness involves taking several steps in planning and establishing goals. These include:
1. Establish goals
The first step in achieving organisational effectiveness is setting the right goals. This requires a business to identify the different areas of the organisation they want to improve. Having this information in mind allows a company to set individual milestones. Once all the goals are in place, the senior management team is more likely to be aware of the work necessary to achieve them. The other decisions throughout this process all stem from the objectives you establish at the very start.
2. Make informed decisions
A primary part of developing organisational effectiveness is making the right choices at the right time. It's vital that your decisions align with the long-term goals set out in the first step. This helps a company build effective lines of communication between employees and senior leaders. An example of this is an organisation trying to improve sales and revenue. This may involve a brainstorming session between employees on product niches that then leads to an increased market share and further sales.
3. Build strategies into your planning
Ensure you have smaller strategies that make up the wider business strategy. These are sometimes referred to as ‘tactics' or tactical decisions. Building out tactics involves developing the steps to reach a goal, including the necessary resources, time and skills required. A business achieves this by identifying where it currently is and where it wants to be. These tactics then combine to achieve a larger strategy and may impact different areas of the business.
4. Identify business needs
One of the most important elements of organisational effectiveness is understanding what the business requires to achieve its objectives. This may be as simple as understanding how many employees a business needs to fulfil its wider strategy. Once you have a good idea of the needs of your business and what you require to achieve your long-term goals, you can begin building your team and obtaining the necessary resources. For example, a marketing agency may decide to offer a new discipline to clients, which requires multiple new employees, new software and consistent training.
5. Measure organisation effectiveness
This step involves evaluating your efforts so far. A business may use a scorecard or specific metrics to identify whether they've met its performance targets. Ideally, the business regularly audits its progress to analyse the progress that's been made and which areas require further improvement. Tracking your organisational effectiveness at each milestone provides a continuous stream of data that's ideal for establishing new growth strategies.
6. Make changes based on organisation effectiveness
The final step is to make the necessary changes to achieve your objectives. It's not always possible to hit long-term milestones the first time, which demonstrates the importance of regularly reviewing progress and spotting opportunities to improve your efforts. This may involve tweaking a workflow or process based on employee feedback, ensuring that it's running smoothly. Use both past data and future forecasting to create actionable, measurable changes to sustain organisation effectiveness.
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