Contemporary Effectiveness Approach

The contemporary effectiveness approach acknowledges that organizations do many things and have many outcomes. These approaches combine several indicators of effectiveness into a single framework.

The contemporary effectiveness approach proposes that an effective organization is one that satisfies the demand of those constituencies in its environment from which it requires support for its continued existence.

This approach combines several indicators of effectiveness into a single framework. The contemporary effectiveness approach includes:

  1. The Stakeholders Approach or Constituency Approach.
  2. The Competing Value Approach.

The Stakeholders Approach or Constituency Approach

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

Each stakeholder will have a different criterion of effectiveness because they have a different interest in the organization. The table below shows the different effectiveness criteria.

Different Stakeholders and their Criterion of Effectiveness
StakeholdersEffectiveness
1. Shareholders/OwnersFinancial return, dividend declared.
2. EmployeesPay, supervisory climate, employee satisfaction, security of employment.
3. CustomersQuality of goods and services, dependability of product.
4. CreditorsTimely repayment of loan, credit worthiness.
5. CommunityContribution to community projects, less pollution to the environment.
6. SuppliersPrompt payment, continues and large orders, satisfactory terms and conditions.
7. GovernmentFollowing laws, non-avoidance of taxes, responsible corporate citizen.

As shown from the table above, each stakeholder will have a different criterion of effectiveness. In the stakeholder approach, the satisfaction of each stakeholder can be assessed as an indicator to organization’s performance. It therefore becomes necessary to survey each stakeholder group and understand whether the organization performs well from its viewpoint.

Competing Values Approach

The competing value approach combine the diverse indicators of performance used by managers and prepare a comprehensive list of performance indicators.

A panel of experts then rate the indicators for similarity. The analysis then produce underlying dimensions of effectiveness criteria that represent competing management values in organizations.

The competing values approach was developed by Robert Quinn and John Rohrbaugh by combining the diverse indicators of performance used by managers and researchers.

Performance indicators in this model are described below:

  1. The first value dimension pertains to focus. Internal focus reflects management concern for the well-being and efficiency of employees and external focus represents an emphasis on the well-being of the organization in respect of the environment.
  2. The second value dimension pertains to organization structure (stability vs flexibility). Stability reflects management value for top-down control and flexibility represents value of change and adaptation.

Figure 1 presents the value dimensions of structure and focus as illustrated by Quinn and Rohrbaugh. In the figure, the combination of dimensions provides four models of organizational effectiveness, which, though seemingly different, are closely related.

Each model reflects a different management emphasis with respect to structure and focus.

Figure 1. Four Models of Effectiveness Values
Source: Robert E Quinn and John Rohrbaug, (1983), “A Spatial Model of Effectiveness Criteria: Towards a Competing Values Approach to Organizational Analysis”, Management Science 29, Page 363 – 77.

1.     Human Relations Model

In the human relations model, management is concerned with the development of human resources. Management works towards the sub-goals of cohesion, morale, and training opportunities. Here, management is concerned with the development of human resources. The implication of this model is that management is more concerned with employees than with the environment.

2.    Internal Process Model

In the internal process model, management is concerned with the primary outcome of a stable organizational setting that maintains itself in an orderly way.

Organizations that are well-established in the environment and maintain their position in the environment. The sub goals of this model are efficient communication, information management and decision making.

3.     Open Systems Model

This model reflects a combination of external focus and flexible structure. The primary goals of this model are growth and resource acquisition. The sub-goals include flexibility, readiness and a positive external evaluation.

4.     Rational Goal Model

The rational goal model represents management values of structural control and external focus. The primary goals of this model are productivity, efficiency and profit. It is therefore imperative that management have total control on the organization to achieve these goals. The sub goals of this model are internal planning and goal setting.

The four models of effectiveness values represent opposing organizational values. Each model reflects a different management emphasis with respect to structure and focus.

In real organizations, these competing values can and often do exist together. Managers must decide which goal values will take priority in their organizations. The competing values approach makes two contributions:

  1. It integrates diverse concepts of effectiveness into a single perspective.
  2. The model calls attention to effectiveness criteria as management values and shows how opposing values exist at the same time.

Competing values acknowledge that multiple criteria and conflicting interests underlie any effort at assessing organizational effectiveness. By reducing a large number of effectiveness criteria into four conceptually clear organizational models, the competing value approach can guide the manager in identifying the appropriate criteria depending on the situation the firm is.