Organizational Performance

The other part of our definition of management is the attainment of organizational goals in an efficient and effective manner. Management is so important because organizations are so important. In an industrialized society where complex technologies dominate, organizations bring together knowledge, people and raw materials to perform tasks no individual could do alone. Without organizations, how could technology be provided that enables us to share information around the world in instant, electricity be produced from huge dams and nuclear power plants, and thousands of DVDs be made available for our entertainment? Organizations pervade our society. Most college students will work in an organization – perhaps Sun Microsystems, Toronto General Hospital, Cinergy, or Hollywood Video. College students already are members of several organizations, such as a university junior college, YMCA church fraternity or sorority. College students also deal with organizations every day to renew a supermarket eat in a restaurant or but new clothes. Managers are responsible for these organizations and for seeing that resources are used wisely to attain organizational goals.

Our formal definition of an organization is a social entity that is goal directed deliberately structured. Social entity means being made up of two or more people. Goal directed means designed to achieve some outcome, such as make a profit (Old Navy Verizon) win pay increases for members (AFL-CIO) meet spiritual needs (Methodist church) or provide social satisfaction (college sorority) Deliberately structured to organization members. This definition applies to all organizations including both profit numerous than large, visible corporations – and just as important to society.

Based on our definition of management the manager’s responsibility is to coordinate resources in an effective and efficient manner to accomplish the organization’s goals. Organizational effectiveness is the degree to which the organization achieves a stated goal, or succeeds in accomplishing what it tires to do. Organizational effectiveness means providing a product or services that customers’ value. Organizational efficiency refers to the amount of resources used to achieve an organizational goal. It is based on how much raw materials, money, and people are necessary for producing a given volume of output. Efficiency can be calculated as the amount of resources used to produce a product or service.

Efficiency and effectiveness can both be high in the same organization. For example, during the tough economy of the early 2000s, companies like Eaton Corporation makes hydraulic and electrical devices, struggle to wring in as much production as they could from scaled back factories and a reduced work force. Managers initiated process improvements outsourced some work to companies that could do it cheaper streamlined ordering and shipping procedures and shifted work to the most efficient assembly lines. At Eaton these adjustments enabled the company to cut costs and hold the line on prices as well as meet its quality and output goals.

Sometimes however, managers’ efforts to improve efficiency can hurt organizational effectiveness. This is especially true in relation to severe cost cutting. At Delta Airlines former CEO Robert W Allen dramatically increased cost efficiency by cutting spending on personnel, food cleaning and maintenance. Allen believed the moves were needed to rescue the company forma financial tailspin but Delta fell to last place among major carriers in on time performance, the morale of employees sank and customer complaints about dirty planes and long lines at ticket counters increased by more than 75 per cent. Current CEO Leo Mullin came in a goal to maintain the efficiencies instituted by Allen, but also improve organizational effectiveness.

The ultimate responsibility of managers is to achieve high performance which is the attainment of organizational goals by using resources in an efficient and effective manner.