Organizational Effectiveness

Fundamentals

The earliest models of organizational effectiveness emphasized “ideal types,” that is, forms of organization that maximized certain attributes. Max Weber’s characterization of bureaucracies is the most obvious and well-known example. This “rational-legal” form of organization was based on rules, equal treatment of all employees, separation of position from person, staffing and promotion based on skills and expertise, specific work standards, and documented work performance. These principles were translated into dimensions of bureaucracy, including formalization of procedures, specialization of work, standardized practices, and centralization of decision making. Early applications of the bureaucratic model to the topic of effectiveness proposed that efficiency was the appropriate measure of performance—that is, avoidance of uncoordinated, wasteful, ambiguous activities. Thus, the more nearly an organization approached the ideal bureaucratic characteristics, the more effective (i.e., efficient) it was. The more specialized, formalized, standardized, and centralized, the better.

Subsequent scholars challenged the assumptions of ideal-type advocates, however, suggesting that the most effective organizations are actually non-bureaucratic. Chester Barnard for example, argued that organizations are cooperative systems at their core. An effective organization, therefore, channels and directs cooperative processes to accomplish productive outcomes, primarily through institutionalized goals and decision-making processes. Barnard’s work led to three additional ideal-type approaches to organization—Philip Selznick’s institutional school, Herbert Simon’s decision-making school, and Roethlisberger and Dickson’s human relations school. Each of these schools of thought represents an ideal to which organizations should aspire—such as shared goals and values, systematic decision processes, collaborative practices, or profitability. Whereas devotees disagreed over what the ideal benchmark must be for judging effectiveness, all agreed that effectiveness should be measured against an ideal standard represented by the criteria.

Mounting frustration over the conflicting claims of ideal-type advocates gave rise, however, to a “contingency model” of organizational effectiveness. This perspective argued that effectiveness is not a function of the extent to which an organization reflects qualities of an ideal profile but, instead, depends on the match between an organization’s attributes and its environmental conditions. The differentiation between organic and mechanistic organizational types represents an early bridge from ideal type to contingency models. Contingency theorists argued that mechanistic organizations (e.g., those reflecting Weber’s bureaucratic dimensions) are best suited to highly stable and relatively simple environments. In contrast, organic organizations (e.g., those reflecting Barnard’s cooperative dimensions) are better suited to rapidly changing, highly complex situations. Complex and changing environments give rise to different appropriate effectiveness criteria than do stable and undemanding environments.

A third shift occurred in the conception of organizations as economists and organizational theorists became interested in accounting for transactions across organizational boundaries and their interactions with multiple constituencies. This emphasis highlighted the relevance of multiple stakeholders in accounting for an organization’s performance. Effective organizations were viewed as those which had accurate information about the demands and [Page 554]expectations of strategically critical stakeholders and, as a result, adapted internal organizational activities, goals, and strategies to match those demands and expectations. This viewpoint held that organizations are elastic entities operating in a dynamic force field which pulls the organization’s shape and practices in different directions—that is, molding the organization to the demands of powerful interest groups, including stockholders, unions, regulators, competitors, customers, and so forth. Effectiveness, therefore, is a function of qualities such as learning, adaptability, strategic intent, competitive positioning, and responsiveness.

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