Organizational Performance

The definition of management includes the attainment of organizational  goals in an effi- cient and effective manner. Management is important because organizations  are impor- tant. In an industrialized  society where complex technologies dominate, organizations bring together knowledge, people, and raw materials to perform tasks no individual could do alone. Without organizations, how could technology be provided that enables us to share information  around the world in an instant; or electricity  be produced from huge dams and nuclear power plants; or thousands of videogames, compact discs, and DVDs be made available for our entertainment?

Organizations pervade our society. Most college students will work in an organization— perhaps Cingular Wireless, Toronto General Hospital, Office Depot, or Hollywood  Video. College  students already are members of several organizations,  such as a university  or a junior college, YMCA, church, fraternity, or sorority. College students also deal with or- ganizations every day—to renew a driver’s license, be treated in a hospital  emergency room, buy food from a supermarket,  eat in a restaurant,  or purchase new clothes. Managers are responsible for these organizations  and for seeing that resources are used wisely to attain organizational goals.

Our formal definition of an organization is a social entity  that is goal-directed and de-liberately structured. Social entity means being made up of two or more people. Goal-directed means designed to achieve some outcome, such as to make a profit (for example, Old Navy, Starbucks), to win pay increases for members (AFL-CIO), to meet spiritual needs (say, the United Methodist Church), or provide social satisfaction (a college sorority, for instance).

Deliberately structured means that tasks are divided and responsibility for their performance is assigned to organization members. This definition applies to all organizations, including both profit and nonprofit.  Small, offbeat, and nonprofit organizations are more numerous than large, visible corporations—and just as important to society.

Based on our definition of management, the manager’s responsibility  is to coordinate resources in an effective and efficient manner to accomplish the organization’s  goals. Organizational effectiveness is the extent to which the organization achieves a stated goal, or succeeds in accomplishing what it tries to do. Organizational effectiveness means pro- viding a product or service that customers value.

Organizational efficiency refers to the amount of resources used to achieve an organi- zational goal. It is based on how  much raw material,  money,  and people are necessary for producing  a given volume  of output. Efficiency  can be calculated as the amount of re- sources used to produce a product  or service.

Efficiency and effectiveness can both be at high levels in the same organization. During the tough economy of the early 2000s, companies such as Eaton Corporation, which makes hydraulic  and electrical devices, struggled to wring as much production  as it could from scaled-back factories and a reduced workforce.  Managers initiated  process improvements, outsourced some work to companies that could do it cheaper, streamlined ordering and shipping  procedures, and shifted work to the most efficient assembly lines. At Eaton, these adjustments enabled the company to cut costs and hold the line on prices  as well as meet its quality and output goals.9

Sometimes, however, managers’ efforts to improve  efficiency can hurt organizational effectiveness, especially in relation to severe cost-cutting. Some years ago, a former  CEO at Delta Airlines dramatically increased cost efficiency by cutting spending on personnel, food, cleaning, and maintenance. These moves temporarily rescued the company from  a fi- nancial tailspin, but they also precluded Delta from meeting its effectiveness goals. The airline fell to last place among major carriers in on-time performance, the morale of em- ployees sank, and customer complaints  about dirty planes and long lines at ticket counters increased by more than 75 percent.10

The ultimate responsibility of managers is to achieve high performance. This means the attainment of organizational   goals by using resources  in an efficient and effective manner.

Source: Daft Richard L., Marcic Dorothy (2009), Understanding Management, South-Western College Pub; 8th edition.