Performance Outcomes

Performance Efficiency and Effectiveness Outcomes

The whole point of understanding structural dimensionsOpens in new window and contingency factorsOpens in new window is to design the organization in such a way as to achieve high performance and effectiveness.

Managers adjust various aspects of the organization to most efficiently and effectively transform inputs into outputs and provide value.

Efficiency refers to the amount of resources used to achieve the organization’s goals.

It is based on the quantity of raw materials, money, and employees necessary to produce a given level of output.

Effectiveness is a broader term, meaning the degree to which an organization achieves its goals.

Defining goals and measuring the organization’s progress toward attaining them is the most common way managers assess effectiveness. For example, at GEOpens in new window, Jeff ImmeltOpens in new window set new goals for sustainability, as well as goals in other areas, such as innovation and global growth.

A small hardware store might set weekly sales goals. In a manufacturing company, managers might set specific targets in areas such as conformity-to-specializations quality, flexibility (both product mix and volume), and speed and timeliness of delivery.

To be effective, all organizations need clear, focused goals and appropriate strategies for achieving them. The concept of effectivenessOpens in new window, including goals and strategies and various approaches to measuring effectiveness are elaborated hereOpens in new window.

An alternative approach to measuring effectivenessOpens in new window, the stakeholder approach, assess diverse organizational activities by looking at what various organizational stakeholders want from the organization, and the satisfaction level of each.

A stakeholder is any group within or outside of the organization that has a stake in the organization’s outcomes.

Examples of stakeholders include:

  • Customers, who want high quality products and services provided in a timely manner at a reasonable price.
  • Employees, who want adequately pay and benefits, good working conditions, and appropriate supervision.
  • Stockholders, who want a good financial return on their investment.

Managers carefully balance the needs and interests of various stakeholders in a setting goals and striving for effectivenessOpens in new window.

The satisfaction level of each group can be assessed as an indication of the organization’s performance. The stakeholder approach will be discussed elsewhere.

Remember This
  • Managers strive to design organizations to achieve both efficiency and effectiveness.
  • Defining clear goals and measuring progress toward achieving them is the most common approach to measuring effectiveness.
    Research data for this work have been adapted from the manual:
  1. Managerial Accounting: Tools for Business Decision Making By Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso