What Is Organizational Effectiveness?

Organizational effectiveness is a measure of how well a business or foundation meets its organizational goals. Measuring organizational effectiveness can be an inexact science, since each individual entity will have a different list of criteria and priorities to weight and consider through self-assessment. Understanding a company's level of organizational effectiveness is important for several reasons: it serves as a check-in to see how well internal procedures are meeting an initial vision, it provides investors, donors, or employees with an idea of the company's strengths, and it highlights areas of ineffectiveness that can be the focus of improvements.

In many cases, a business' success or failure cannot be measured by financial performance as well. Even a company that is currently making a profit may be ineffective if it is failing to meet the core values of its mission statement, attract and retain talented workers, and plan for the next generation of projects. Organizational effectiveness measures the big-picture performance of a business, across a broad range of criteria. Financial performance, long-term planning, internal structure, and adherence to core values may all be critical components in understanding organizational effectiveness.

To get a clear idea of an organization's effectiveness, it is important to create a clear list of criteria to assess. No two organizations will have the same list of criteria, which is why many for-profit and non-profit groups measure effectiveness through self-assessment. Employees and company personnel are often in the best position to intimately understand the needs, goals, and performance of their company. Self-assessment of effectiveness can also help company personnel reconnect with the initial mission of an organization. By working creatively to invent new business strategies for areas of ineffectiveness, workers may develop a stronger sense of loyalty, purpose, and dedication to the job.

Since organizational effectiveness is difficult to express in a concrete formula, a company may choose to state the results of an assessment through specific goals achieved or desired. For instance, a local non-profit geared toward environmental clean-up might include a list of all projects completed thus far. If a coffee chain holds the creation of beneficial employee programs as one of its core values, it might list the scholarships or tuition assistance it has granted over the years, and even include success stories from employees who have benefited from these programs. Listing the ways in which an organization is effective may attract customers and donors, and renew a sense of employee morale.

Turning up areas of ineffectiveness can also be tremendously beneficial to an organization. Areas that need improvement give a company a concrete strategy for the future, and allow workers, shareholders, donors, or customers to get excited about the improvements coming down the pipeline. Treating current weaknesses as a road map for future changes is a great way to increase effectiveness.