21512 Chap.4 Organisational Performance: Effectiveness and Efficiency
Organisational Performance: Effectiveness and Efficiency
Week 2 opens with organisational performance, the concept every later theory claims to improve. Performance means reaching organisational goals in a way that is both effective and efficient. Effectiveness asks whether the organisation is hitting its target; efficiency asks how it hits the target, by measuring how well it uses raw materials, money and people.
Crossing the two produces the lecture's matrix of four positions, from effective and efficient, with good profit, to ineffective and inefficient, with losses.
The chapter works a food bank through both measures, shows how the Week 2 tutorial builds measures of success at three points, resources, processes and outputs, and explains why different organisations need different measures.
It also links performance to structure, because organising is the management function that the next theory, structural contingency theory, puts at the centre.
What this chapter covers
- 01
Performance as goal attainment, done efficiently and effectively
- 02
Effectiveness: are we hitting the target?
- 03
Efficiency: how are we hitting the target?
- 04
The efficiency-effectiveness matrix
- 05
Measures at the input, process and output points
- 06
Why each organisation needs its own measures
- 07
Organising and structure as levers on performance
Worked example · free
Plan the food bank's move to the efficient corner
- 1Locate the gap: goal attainment is already above 100%, so the problem is resource use; cost per parcel must come down towards the 100% budget line.
- 1Find the cause: separate external causes such as food prices from internal ones such as manual packing, because only internal causes can be fixed by redesigning the work.
- 1Protect effectiveness: any saving must keep parcels reaching the people the food bank serves, or the move simply shifts it into the efficient but ineffective corner.
Key terms
- Organisational performance
- How well an organisation reaches its goals while making good use of its resources.
- Goal attainment
- The extent to which an organisation reaches the goals it has stated, the basis of effectiveness.
- Resource utilisation
- How well an organisation uses materials, money and people to produce its output, the basis of efficiency.
- Organisational structure
- A system that outlines how activities are directed in order to achieve an organisation's goals.
- Reputation capital
- Community trust, loyalty and ratings that an organisation builds over time and counts among its resources.
- Output measures
- Indicators of results such as revenue growth, profit margin, repeat customers, waste and staff turnover.
Organisational Performance: Effectiveness and Efficiency FAQ
What is the difference between effectiveness and efficiency?
Effectiveness concerns results, how far the organisation reaches the goal it set: are we hitting the target? Efficiency concerns means, how economically materials, money and people are turned into the output wanted: how are we hitting the target? An organisation performs well only when it does both at the same time.
What are the four positions on the performance matrix?
Effective and efficient organisations achieve goals with resources well used and earn good profit. Effective but inefficient ones achieve goals while wasting resources, so profit is marginal or negative. Efficient but ineffective ones waste nothing but miss their goals. Ineffective and inefficient organisations miss goals and waste resources, which produces losses.
How do you measure whether a small business is successful?
The Week 2 tutorial builds measures at three points. Resources include financial capital, staff skills and reputation. Processes include service speed, quality control, safety compliance and coordination. Outputs include revenue growth, profit margin, return on investment, repeat customers, lower waste, low staff turnover and long-term survival.
How does organisational structure relate to performance?
The lecture presents organising as a management function that produces an organisational structure, a system describing how activities are directed towards the organisation's goals. Structure and design therefore act as levers on efficiency and effectiveness, the link that structural contingency theory develops in the second half of Week 2.
Assessment move
Draw the matrix from memory with both axes labelled, then place three organisations you know in it and justify each position with one fact about goals and one about resources. Write the two questions, are we hitting the target and how are we hitting it, at the top of every case analysis so you never use the two words as synonyms.
When a case gives only words, translate them into the two questions anyway and note which evidence you would need to answer each one properly.
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