An Empirical Investigation of Various Dimensions which Collectively Lead to Organizational Effectiveness

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1 52 An Empirical Investigation of Various Dimensions which Collectively Lead to Organizational Effectiveness Dr. Shaju George, Assistant Professor, Department of Management & Marketing, College of Business Administration, University of Bahrain, Kingdom of Bahrain ABSTRACT Organizational Effectiveness is very important to all the organizations. Hence many far-sighted organizations have targeted organizational effectiveness as one of their crucial goals. Organizational effectiveness can be termed as the degree to which all forms of returns to the organization can be maximized. There are many factors or dimensions that directly impact organizational effectiveness. Effective organizations exhibit strength across all the dimensions that collectively contribute to organizational effectiveness. The study attempts to highlight various perspectives of organizational effectiveness. This study focusses on various dimensions which collectively lead to organizational effectiveness with special reference to different levels of employees. It also aims to compare the perceived level of organizational effectiveness in service and manufacturing sector organizations. The study is conducted basically through collection of primary data from various organizations. The data was further analyzed using relevant statistical tools. The findings of the study indicates that manufacturing sector is more conscious of organizational effectiveness and the employees of manufacturing sector are more committed to achieve organizational effectiveness. Key words: Organizational Effectiveness, Efficiency, Productivity. INTRODUCTION Organizational effectiveness: The concept of organizational effectiveness is a widely used phenomenon in the study of organisations. Its importance is undisputed by mangers at all levels in an organizations. However there is a considerable gap between theoritical and empirical approaches (Georgopoulos & Tannenbaum, 1957). According to Katz & Kahn (1978) Organizational effectiveness can be viewed as the degree to which all forms of energetic returns to organization are maximized. In order to achieve greater effectiveness in an organization, the managers and the management ensure that the desired objectives are met and that can be possible if the management can coordinate effectively all the managerial activities of the organization. Highly effective organizations exhibit strengths across five areas: leadership, decision making and structure, people, work processes and systems, and culture. When these areas are explored in depth, it provides useful resources for leaders looking to improve the effectiveness of their organizations ( 2014). There are no specific parameters for organizational effectiveness and it follows no definitive mathematical formula. Each organization creates its own method of measuring effectiveness. Measuring effectiveness can help organizations without the ability to absorb ineffective processes modify its approach to achieve desired returns and remain focused (Gish, 2014). To substantially improve organizational effectiveness, successful companies create sustainable competitive advantage by aligning their talent and business strategies. Fundamental organizational change through mergers or acquisitions, restructurings or shifts in business strategy is likely to bring focus and restore the organization s capability to function effectively. The available methods to bring about organizational effectiveness are appropriate strategy implementation, Strategic workforce alignment and change management ( capabilities/organizational-effectiveness/, 2014). REVIEW OF LITERATURE Organizational Effectiveness Defined Georgopoulos & Tannenbaum (1957) defines Organization Effectiveness as the extent to which an organization as a social system, given certain resources and means, fulfills its objectives without incapacitating its means and resources and without causing undue strain upon its members. The conception of effectiveness subsumes the following criteria: 1. Organizational Productivity. 2. Flexibility. 3. Absence of Strain or Tension within the organization. Katz & Kahn (1978) defines effectiveness in terms of maximization of return to the organization by all possible means. This would mean that such maximization by economic and technical means has to do with efficiency of

2 53 organization, maximization by non-economic or political means. Organizational Effectiveness can be defined as the efficiency with which an organization is able to meet its goals or objectives. The main measure of organizational effectiveness for a business will generally be expressed in terms of how well its actual net profitability compares with its target profitability. Other measures can also include growth data and the results of customer satisfaction surveys (BusinessDictionary.com, 2014). Organizational effectiveness has a very broad and often vague definition, so much so that most sources consider it appropriate to explain the concept by example rather than definition. The effectiveness of a business constitutes its ability to perform a function with optimal levels of input and output. Companies use organizational effectiveness to measure various aspects, from the relationship between employee performance and company profits to the correlation between manufacturing processes and production volume ( 2014). Gish (2014) is of the view that effectiveness of a business organization essentially is its ability to perform a function with optimal levels of input and output. Companies use organizational effectiveness to measure various important variables like the relationship between employee performance and company profits to the correlation between manufacturing processes and production volume. Every employee in a company contributes to organizational effectiveness. Taking into account skills, experience, motivation and rank, some employees play a bigger role than others. These are the people who mainly contribute to the development of organization There are three main historical concepts about the organizational effectiveness: of F W Taylor (March 1856 March 1915); of Henri Fayol (July 1841 November 1925); and of George Elton Mayo (December 1880 September 1949).The five main approaches in measuring organizational effectiveness are goal approach, internal process approach, system resource approach, constituencies approach and internal processes approach ( 2014). ORGANIZATIONAL PERSPECTIVES EFFECTIVENESS Thorndike (1949) states that the ultimate criteria of organization s success are the following: 1. Organizational Productivity. 2. Net profit of the organization. 3. The extent to which the organization accomplishes its mission and 4. The success of an organization in maintaining or expanding itself. Other criteria of effectiveness also include morale, commitment, employee turnover & absenteeism and employee satisfaction. The concept of organizational effectiveness is normally used to refer to goal-attainment or achievement of strategic objectives. Hence it may be more appropriate to view organizational effectiveness as a function rather than a structural concept. Moreover, it is mostly useful in comparative organizational research, i.e, in relational rather than absolute terms, but the concept could also be used developmentally to study the effectiveness of the same organization over a period of time. Organizational Effectiveness has been traditionally viewed and operationalized mainly with respect to productivity of an organization. With the exception of organizational productivity, all variables used as criteria of organizational effectiveness have been found inadequate and unsatisfactory. Hence organizational productivity can be considered as the single most important variable to measure organizational effectiveness (Georgopoulos & Tannenbaum, 1957). Basically an organization needs to be efficient in doing the right things, in the optimum use of their resources and in the ratio of outputs to inputs. However organizations also need to be effective in doing the right things and in their outputs related to some specific purpose, objective or task. Organizational performance must be related to such factors as increasing profitability, improved service delivery or obtaining the best results in important areas of organizations activities (Mullins, 2010). There are more than 60 factors or variables which directly affects organizational effectiveness. Some of the broad important factors are leadership, individuals, group relations, system and structures, motivation to work, ability, environment etc (Handy, 1993). In order to create an effective organization, an organization must identify those practices or elements within the current organizational capabilities that are obstructing the ability to fulfill organization s mission. With these gaps identified, organization can develop a plan to build the necessary capabilities. This may appear to be easy or simple; however it can challenge the common approach that organizations typically take when pursuing an improvement effort ( 2014). Araujo (2014) prescribes eight steps to organizational effectiveness, they are identifying or defining organization s mission, Identify gaps: people, Identify gaps: Management, Identify gaps: knowledge, Identify gaps: organization, Identify gaps: process, Identify gaps: technology, establish a framework to build those capabilities and drive organizational effectiveness.

3 54 Organizational effectiveness measures the overall performance of a business, across a broad range of criteria like financial performance, long-term planning, internal structure, and adherence to core values (Pedraza, 2014). The organizational effectiveness refers to effective, prudent and strategic use of all the organizational resources, like, People, Financial and Technological resources for creating competitive advantage. The organizational effectiveness also calls for creating sustainable growth and development by meeting the expectations of all stake holders (Dattagupta, 2014). OBJECTIVES OF THE STUDY: 1. To study various perspectives of organizational effectiveness. 2. To examine various factors or dimensions which collectively lead to organizational effectiveness. 3. To evaluate various factors or dimensions of organizational effectiveness with reference to different levels of employees. 4. To evaluate the perceived level of organizational effectiveness in service sector and manufacturing sector organizations. METHODOLOGY Tools of data collection: Organizational effectiveness scale: This scale was developed by Babu Thomas and Festus M. Ezebuike (2001). The format of the questionnaire consists of 19 items covering 10 dimensions proposed for the present study, they are as shown below. The distribution of items among various dimensions is as follows: Sr.No. Dimensions No. of Items 1 Adaptability 2 2 Stratification 2 3 Motivation 2 4 Efficiency 2 5 Quality 1 6 Absenteeism 2 7 Participative Management 2 8 Innovation 2 9 Conflicts 2 10 Productivity 2 Total 19 Units and sample for the study (Primary Data): The data was collected from 4 organizations of manufacturing sector and 4 organizations of the service sector. These organizations are from Mumbai and Pune in India. The sample constitutes lower, middle and higher level managers covering 141 samples from manufacturing sector and 140 samples from service sector. The sample constituted 10% of the universe of the sample in each unit. The samples were identified on the basis of convenience. Design of Research and Statistical Analysis: 2 x 3 factorial design was used to analyze the data, 2 represents the two sectors i.e. Service and Manufacturing sectors. 3 represents the three levels of management i.e. lower, Middle and Higher level managers. 1%, 5% & 10% level of significance has been considered. DATA ANALYSIS AND INTERPRETATION: Source Table No. 1 ANOVA related to Motivation aspect of organizational effectiveness of Sum of Squares Degree of Mean value Significance of freedom Square Structure Sector Two Way Residual Total None of the obtained values are significant.

4 55 Table No. 2 ANOVA related to Participative Management aspect of organizational effectiveness Source of Sum of Squares Degree of Mean value Significance of freedom Square Structure Sector Two Way Residual Total None of the obtained values are significant. Source Table No. 3 ANOVA related to Efficiency aspect of organizational effectiveness of Sum of Squares Degree of Mean value Significance of freedom Square Structure Sector Two Way Residual Total None of the obtained values are significant. Table No. 4 ANOVA related to Conflict aspect of organizational effectiveness Source of Sum of Degree of Mean value Significance of Squares freedom Square Structure * Sector Two Way Residual Total * P< 0.10 The above table shows out rightly that the responses towards the dimension conflict very much depend on the kind of structure and not on sector. This indicates that the conflict dimensions of organizational effectiveness differs between the three levels of structure i.e. Lower Level, Middle Level and Higher Level. The result of table indicates that the dimension conflict depends largely on structure and less on sector. Conflict can be described as a situation where Members of the Organization could not like one another or work together and communicate fully and openly. We further investigate whether manufacturing sector or service sector has more conflict. Table No. 4.1 relates to Conflict in manufacturing and service sector organizations.

5 56 Table No.4.1 Structure wise analysis of Conflict Structure Manufacturing Service Mean Difference Cases Mean S.D. Cases Mean S.D. Lower Level Middle Level Higher Level This indicates that the Middle Level Employees are not in a position to communicate fully and openly or work together with the other members of the organizations in comparison with the Lower Level and Higher Level Employees. Similarly in the service sector the middle level employees are not in position to get along well with their colleagues in comparison to Lower and Higher Level employees. It is noticed that the Lower Level Employees of Manufacturing Sector are in a better position to communicate fully and openly with their colleagues. Further it also indicates that the Middle Level Employees of Manufacturing Sector are in a better position to get along with their colleagues than their counterparts in Service Sector. Similar trend continues in the Higher Level Employees also. Source Table No. 5 ANOVA related to Adaptability aspect of organizational effectiveness of Sum of Squares Degree of Mean value Significance of freedom Square Structure * Sector * Two Way Residual Total *P < 0.05 The result of table indicates that the dimension adaptability depends more on sector and less on structure. Adaptability means the willingness to respond to and accept changes especially to environmental demands. We further investigate whether manufacturing sector or service sector has more capability of adaptability. Table No. 5.1 relates to Adaptability in manufacturing and service sector organizations. Table No. 5.1 Sector wise analysis of Adaptability Sector No. of cases Mean Standard Deviation Mean Difference Manufacturing Service The above table indicates sectorial analysis of Adaptability dimension of Organizational Effectiveness. This indicates that employees of Manufacturing Sector are in a better position to make themselves comfortable with the changing environmental demands than Service Sector employees. It also means that they are more prepared to face the challenges of the ever changing technology and different styles of functioning of an organization.

6 57 Table No.6 ANOVA related to Innovation aspect of organizational effectiveness Source of Sum of Degree of Mean value Significance of Squares freedom Square Structure Sector Two Way Residual Total None of the obtained values are significant. Source Table No. 7 ANOVA related to Satisfaction aspect of organizational effectiveness of Sum of Squares Degree of Mean value Significance of freedom Square Structure Sector Two Way * Residual Total *P < 0.10 The obtained `f' value at the structure level is.168; it is not at a significant level, whereas the value of sector is.288. It is also not at a significant level. The value of two way interaction is which is at a significant level at 10%. Satisfaction is the degree of feeling of contentment, felt by a person towards the organizational role or job. The feeling of contentment is because of the reward system of the Organization. This feeling makes the employees more willing to perform better and contribute the best to the organization. Table No. 7.1 relates to Satisfaction in manufacturing and service sector organizations. Table No. 7.1 Analysis of two way interaction of Satisfaction between sector and structures. SECTOR LOWER MIDDLE HIGHER TOTAL ` Mean S.D. Mean S.D. Mean S.D. Mean S.D. Manufacturing , Service , This indicates that the Lower Level Employees have a greater level of contentment, felt towards the Organizational role or job than the Middle Level employees and the Higher level employees. This means the highest level of satisfaction is felt by the Lower Level Employees in the Manufacturing Sector. In the Service Sector Organizations it is noticed that the Level of satisfaction and the feeling of contentment goes on increasing with the increase in every level of structure. This means that Middle level employees enjoy more level of satisfaction and contentment than the Lower level employees. Similarly the Higher Level employees feel more satisfied with their jobs than the Lower level and Middle Level Employees. When a comparison is made between and manufacturing service sector employees, it is noticed that the service sector Employees have more feeding of contentment towards of Organizational Role or

7 58 job and also there is a Higher Degree of feeling that they are equitably rewarded than the Manufacturing Sector. However when the total mean of Manufacturing and Service Sector is considered vis-a-vis all the structures i.e. Lower Level, Middle Level and Higher Level and it is noticed that the Manufacturing Sector employees put together at all levels have greater degree of satisfaction than the Service Sector employees. Table No. 8 ANOVA related to Quality aspects of organizational effectiveness Source of Sum of Degree of Mean value Significance of Squares freedom Square Structure * Sector Two Way Residual Total *P < 0.05 The above table shows that responses towards dimension quality very much depend on the kind of structure and not on sector. The obtained value at the structure level is 3.195; it is at a significant level at 5% whereas the value of sector is.203 it is not at significant level. It is observed that the value of structure is far significantly greater than that of the values of sector. The result of the table indicates that the dimension quality depends largely on structure and less on sector. Table No. 8.1 Structure wise analysis of Quality Structure Manufacturing Service Mean Difference Cases Mean S.D. Cases Mean S.D. Lower Level Middle Level Higher Level It indicates that the middle level employees are more quality conscious than the lower level and the Higher level employees. However, the Higher level employees are found to be marginally more quality conscious than the Lower Level employees. In the Service Sector it is clear from the above Table that the quality consciousness increases with every level of Structure. A comparison of Source of Structures between Manufacturing and Service Sector indicates that the Lower Level and Middle Level employees of Manufacturing Sector are more Quality conscious than the Lower Level, Middle Level Employees of Service Sector. However the Higher Level Employees of Service Sector demonstrates better quality consciousness than Manufacturing Sector. Table No. 9 ANOVA related to Productivity aspect of organizational effectiveness Sum of Degree of Mean Squares freedom Square value Significance of Structure * Sector * Two Way Residual Total * P< 0.05

8 59 The result of table indicates that the dimension productivity depends more on structure and less on sector. It also shows that the productivity dimension of organizational effectiveness differs between Manufacturing and Service Sector and also at different levels of Structure. We further investigate whether manufacturing sector or service sector has more capability of Productivity. Table No. 9.1 Table No. 9.1 relates to Productivity in manufacturing and service sector organizations. Sector No. of Mean Standard Mean Difference cases Deviation Manufacturing Service This indicates that the Employees of Service Sector Organizations put in more efforts to increase the quantity or volume of Product or Services of the organizations. Table No. 9.2 Structure wise analysis of Productivity Structure Manufacturing Service Mean Differen ce Cases Mean S.D. Cases Mean S.D. Lower Level Middle Level Higher Level In the Manufacturing Sector the above Table indicates a positive trend of Productivity as the level of Structure increases. In case of Service Sector also a similar positive trend is noticed as the Level of Structure increases. However when a comparison is made between Manufacturing and Service Sector it is noticed that the employees at all the levels of Service Sector contributes more to the volume of products and services that the organization provides. Table No. 10 ANOVA related to Absenteeism aspect of organizational effectiveness Source of Sum of Degree of Mean value Significance of Squares freedom Square Structure * Sector Two Way Residual Total * P < 0.05 The result of table indicates that the dimension absenteeism depends more on structure and less on sector. and at what level of structure is the absenteeism found to be more. We further investigate whether Manufacturing Sector or service sector employees are more prone to absenteeism Table No relates to Absenteeism in manufacturing and service sector organizations.

9 60 Table No Structure wise analysis of absenteeism Structure Manufacturing Service Mean Difference Cases Mean S.D. Cases Mean S.D. Lower Level Middle Level Higher Level The rate of absenteeism is more with the Middle Level employees than the Lower Level employees. Similarly the absenteeism is found to be more in Higher Level Employees than Middle Level employees. In the Service Sector also a similar trend is noticed. The absenteeism increases with the increase in level of structure. However when the Manufacturing and the Service sectors are compared it is noticed that at the Lower Level the Employees of Manufacturing Sector are more prone to absenteeism than Service Sector. However in middle level and Higher Level the frequency of occasions of personnel being absent from duty is found to be more in Service Sector than employees of Manufacturing Sector. Table No. 11 ANOVA related to organizational effectiveness Source of Sum of Degree of Mean value Significance of Squares freedom Square Structure Sector * Two Way Residual Total *P < 0.05 The result of table indicates that the organizational effectiveness depends more on sector and less on structure. It also indicates that the Organizational Effectiveness differs between Manufacturing and Service Sector. Organizational Effectiveness is the result of the sum total of the efforts of all the employees of the organization. It depends on the Productivity, Innovation, Adaptability, Quality etc. of the organization. Organizational Effectiveness is the Degree to which operative and operational goals have been attained. We further investigate whether manufacturing sector or service sector has more effective as an Organization. Table No relates to Organizational Effectiveness in manufacturing and service sector organizations. Table No Sector wise analysis of organizational effectiveness Sector No. of Mean Standard Mean Difference cases Deviation Manufacturing Service This indicates that the employees of Manufacturing Sector Organizations achieve greater operative goals than the Service Sector Organizations i.e. the employees of Manufacturing Sector are in a better position to achieve the targets given to them as far as Productivity, Quality, Regularity etc. are concerned. This also means that there is less of Conflict and Absenteeism in the Manufacturing Sector and hence the efficiency of the employees is higher. It can also be concluded the participative management and satisfaction among the employees are found in greater extent in Manufacturing Sector employees.

10 61 Table No Sector wise analysis of organizational effectiveness Sr.No. Dimensions Manufacturing Sector Service Sector Mean Standard Deviation Mean 1. Quality 3, Conflict Absenteeism Productivity Satisfaction Motivation Innovation Adaptability Efficiency Participative Management Organizational Effectiveness Standard Deviation The above table clearly shows that the mean value of manufacturing sector is significantly higher than the mean value of service sector. This indicates that manufacturing sector is more conscious about organizational effectiveness. RESEARCH FINDINGS AND THEORETICAL IMPLICATIONS: Conflict The Lower Level Employees of Manufacturing Sector are in a better position to communicate fully and openly with their colleagues. Further it also indicates that the Middle Level Employees of Manufacturing Sector are in a better position to get along with their colleagues than their counterparts in Service Sector. Similar trend continues in the Higher Level Employees also. Adaptability Employees of Manufacturing Sector are in a better position to make themselves comfortable with the changing environmental demands than Service Sector employees. Satisfaction The highest level of satisfaction is felt by the Lower Level Employees in the Manufacturing Sector. In the Service Sector Organizations it is noticed that the Level of satisfaction and the feeling of contentment goes on increasing with the increase in every level of structure. The service sectors Employees have more feeling of contentment towards their Organizational Role or job and also there is a higher degree of feeling that they are equitably rewarded than the Manufacturing Sector. It is also noticed that the Manufacturing Sector employees put together at all levels have greater degree of satisfaction than the Service Sector employees. Quality The middle level employees are more quality conscious than the lower level and the Higher level employees. However, the Higher level employees are found to be marginally more quality conscious than the Lower Level employees. In the Service Sector it is clear that the quality consciousness increases with every level of Structure. The Lower Level and Middle Level employees of Manufacturing Sector are more Quality conscious than the Lower Level, Middle Level Employees of Service Sector. However the Higher Level Employees of Service Sector demonstrates better quality consciousness than Manufacturing Sector. Productivity The Employees of Service Sector Organizations put in more efforts to increase the quantity or volume of Product or Services of the organizations. A positive trend of Productivity as the level of Structure increases is also found. In the Manufacturing Sector also a positive trend of Productivity as the level of Structure increases is noticed. However when a comparison is made between Manufacturing and Service Sector it is noticed that the employees at all the levels of Service Sector contributes more to the volume of products and services that the organization provides. Absenteeism In the Manufacturing Sector the rate of absenteeism is more with the Middle Level employees than the Lower Level employees. Similarly the absenteeism is found to be more in Higher Level Employees than Middle Level employees. In the Service Sector also a similar trend is noticed. The absenteeism increases with the increase in level of structure. However when the Manufacturing and the Service sectors are compared it is noticed that at the Lower Level the Employees of Manufacturing Sector are

11 62 more prone to absenteeism than Service Sector. However in middle level and Higher Level the frequency of occasions of personnel being absent from duty is found to be more in Service Sector than employees of Manufacturing Sector. Overall Organizational effectiveness The employees of Manufacturing Sector Organizations achieve greater operative goals than the Service Sector Organizations i.e. the employees of Manufacturing Sector are in a better position to achieve the targets given to them as far as Productivity, Quality, Regularity etc. are concerned. This also means that there is less of Conflict and Absenteeism in the Manufacturing Sector and hence the efficiency of the employees is higher. It can also be concluded the participative management and satisfaction among the employees are found in greater extent in Manufacturing Sector employees. This indicates that manufacturing sector is more conscious about organizational effectiveness. REFERENCES [1] Araujo, C. (2014, October 12). Retrieved October 12, 2014, from [2] BusinessDictionary.com. (2014, June 19). Retrieved June 19, 2014, from BusinessDictionary.com: nizational-effectiveness.html [3] Dattagupta, J. (2014, May 7). Retrieved October 12, 2014, from [4] Georgopoulos, B. S., & Tannenbaum, A. S. (1957). A Study of Organizational Effectiveness. American Sociological Review, [5] Gish, W. (2014, September 8). effectiveness-vs-organizational-efficiency html. Retrieved September 8, 2014, from Houston Chronicle: organizational-effectiveness-vs-organizationalefficiency html [6] Handy, C. B. (1993). Understanding Organizations. London: Penguin Books. [7] ( 2014, June 19). Retrieved June 19, 2014, from effectiveness-vs-organizational-efficiency html [8] (2014, June 19). Retrieved June 19, 2014, from Tools/Organizational-Effectiveness.aspx [9] (2014, October 12). Retrieved October 12, 2014, from [10] (2014, October 12). Retrieved October 12, 2014, from [11] (2014, October 12). Retrieved October 12, 2014, from [12] Katz, D., & Kahn, R. L. (1978). The Social Psychology of Organizations. West Sussex: John Wiley & Sons. [13] Mullins, L. J. (2010). Management & Organizational Behaviour. Harlow, England: Financial Times Prentice Hall. [14] Pedraza, J. M. (2014, May 6). Retrieved October 12, 2014, from [15] Thorndike, R. L. (1949). Personnel Selection: Test and Measurement Techniques. New York: John Wiley & Sons.