Organizational Effectiveness

Three Approaches to Measuring Organizational Effectiveness

(1) External Resource Approach

Inputs: personnel, capital, raw materials, resources

Evaluate the organization’s ability to secure, manage, and control scarce and valued skills and resources.

Goals (measurements) to Set: Lower input costs; Obtain high-quality inputs; Increase market share; Gain stakeholder support.

(2) Internal Systems Approach

Inputs: relations, interactions, communications

Evaluate the organization’s ability to be innovative and function quickly and responsively.

Goals (measurements) to Set: Cut decision-making time; Increase production rate; Increase coordination and motivation of employees; Reduce conflict; Reduce time to market.

(3) Technical Approach

Inputs: technology, people, skills, machinery, knowledge, conversion.

Evaluate the organization’s ability to efficiently convert skills and resources into goods and services.

Goals (measurements) to Set: Increase product quality; Reduce the number of defects; Reduce production costs; Improve customer service.

Building Blocks of Organizational Effectiveness

Two Ways to Strengthen Organizational Capacities

(1) Increase Resources: financing, human, technology, knowledge, and equipment.

(2) Improve How Resources are Used: processes, procedures, and functions. 

Three Areas of Attention for Increasing Organizational Effectiveness

(1) Results Orientation

Have a clear purpose and outcome;

Allocate resources;

Track results achieved;

Adjust approach or strategy, use indicators.

(2) Constructive Engagement

Enlist – Connect with stakeholders; Build shared vision; Motivate.

Empower – Develop capacities; Share authority; Share information; Facilitate decision-making.

Encourage – Support; Acknowledge contributions; Treat them as partners.

(3) Continuous Learning

Concrete learning processes and practices.

Supportive learning environment.

Leadership that supports learning.

Learning processes: Information collection and analysis; Education and training; Information sharing and transfer.

Supportive environment: Be open to new ideas; Appreciate differences; Encourage experimentation and psychological safety; Create time for reflection, After Action Reports.

Leadership that supports learning: Communicate desired purpose and outcomes; Invite inputs by asking probing questions; Listen attentively; Encourage multiple points of view; Provide time, resources, and venues for reflecting and improving past performance.

Challenges that prevent teams and organizations from learning: More focus on procedures than on results; Preoccupation with traditional operational and “firefighting” functions (that are urgent versus important); Reluctance to invest in training and staff development; “The leader is always right.”

Tool: Significant Intangible Measures

Intangible Assets often determine the market valuation of a company.

This tool lists various types of intangible assets, asks for specific measures, and possible linkages to individual board members. The ties to specific board members may have yet to be discovered, but it is useful to know, for example, that the two most influential board members are most concerned with brand credibility.

Information for this tool is usually gathered by having conversations with leaders, reading investor reports, and observing board meetings.

Its purpose is to ensure close alignment between HR activities and important business outcomes.

Category of Intangible Asset  (Specific Intangible Measures)  (Key Board Member)


Quality of Strategy

Execution of Strategy

Market Share

Product Quality


Leadership Readiness

Engagement Levels of the Workforce

Ability to Attract and Retain Talent

Workforce Skills and Capabilities

Quality of Partners

Quality of Customers

Meaningful Outcome Measures

Each organization must determine business outcome measures most critical to monitor regularly.

Outcomes ….. >>  Specific Measures ….  >>  Importance (1-2-3-4)

Innovation >>  Number of products, new patents, sales from new products

Quality >>  Rework rate, Wastage, Expert and Customer reviews

Productivity >>  Revenue per employee, Output per employee, Industry benchmarks

Customer loyalty & satisfaction >>  Net promoter score, %of repeat business, Customer surveys

Time to proficiency >>  Productivity measures, Peer-Manager ratings

Competitive Differentiation >>  Expand strengths, Improve weaknesses, Market share gains

Strategic Accomplishment >>  Meets objectives, Exceeds objectives

Cost savings >>  Reduce costs through elimination of tasks, more proficient processes

Efficiency >>  Reduce time to tasks, hand-off times

Effectiveness >>  Quality of development programs, Quality of hires

Revenue >>  Increased revenue, Increases by product, market segment and service area

Profit >>  Increased profit, Increases by product, market segment and service area

Tool: Manager Scorecard

Table with columns: Manager Name; Engagement Scores; Unwanted, Avoidable Turnover Rate; Number of Employees Promoted, Pipeline of Internal Moves/Transfers.

Good managers create a cycle of value and are critical levers to stronger engagement and productivity. Array relevant information so that good managers can be identified and leveraged.

The tool can also assist in coaching less effective managers.

One mark of an excellent manager is the number of employees who have been promoted, both internally and externally, to desired positions. The last column pertains to organizations that operate in an open talent marketplace where employees choose to move from one manager to another. As managers get the reputation of being good to work for, they become talent magnets that attract the best talent.

Tool: External Factors

A variety of external factors can impact the strategy and direction of the company.

While these cannot be controlled, they can be anticipated and understood.

This tool is useful in building business acumen, understanding the larger context that impacts the business, and escaping a siloed mentality.

Consider HR teams filling out this tool for the company and separate divisions.

Table with columns: 

External Factors …. >>  Impacts

Political Factors

Economic Conditions

Market Dynamics

Technology Innovation

Legal Policies and 

Government Actions

Social Patterns, Lifestyle

Environmental Impacts

Security Challenges

Demographic Factors

Competitive Threats