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Mourik, Greg van --- "Research - Measuring effectiveness" [2007] MonashBusRw 55; (2007) 3(3) Monash Business Review 8

Research
Measuring effectiveness

Assessing organisational effectiveness is like wearing the emperor’s new clothes – we know it’s flawed but we keep doing it, writes Greg van Mourik.

For starters, defining ‘effectiveness’ itself is an issue. Is it, for example, about achieving goals, using resources efficiently, or satisfying stakeholders? Different models shed light on different aspects of what it means to be effective at the organisational level. For example, an organisation with clearly defined, measurable goals is best assessed using the rational goal model, while an organisation with more ambiguous goals could be assessed by other methods.

Much of the controversy around organisational effectiveness research is due to the fact that a lot of the research assumes that organisational effectiveness is a single variable. More recent approaches have seen an increasing use of multi-dimensional conceptions.

Another issue is whether organisational effectiveness is objective or socially constructed. If it is socially constructed, then it is determined by stakeholder judgements formed in an ongoing process of sense-making and implicit negotiation. This raises issues as to the comparability and reliability of effectiveness measures of different organisations and the degree to which repeated measurement gives similar values.

Empirical issues

Determining suitable empirical criteria to measure a particular theoretical conception of effectiveness can be problematic. With goal achievement, for example, the best criteria may not be to measure the extent to which an organisation achieves its official goals, but the extent to which it achieves its defining goals.

It can also be argued that the combination of criterion is a value judgement, since there is no algorithm or higher order truth to which we can appeal. The result is that, as the research is repeated, different results arise according to whatever value judgements were originally made.

In the past, researchers have measured overall effectiveness by weighting each set criteria values and then adding them up so that a criterion increment results in the appropriate organisational effectiveness increment. In practice, organisations select the strategic goals from a fairly limited set of criteria, like profit, efficiency and job satisfaction. While this criteria is not fully representative, it is still of great value at these lower levels.

Other noteworthy issues relate to criterion stability, time perspective, measurement precision and level of analysis. Criterion stability recognises change, while time perspective questions how short run should be considered in conjunction with long run indicators. Meanwhile, levels of analysis acknowledge the relationship between individual or departmental behaviour at the micro level and organisational effectiveness at the macro level.

Research opportunities

Integrated, multi-dimensional models recognise that overall effectiveness is about the interaction of many performance-related indicators and draws together goal orientation, internal process and systems, and stakeholder perspectives. They also use objective and perceptual measurements, thus mitigating the possibility that an objective measure may suggest one thing and a perceptual measure something else.

Meanwhile, hierarchical linear modelling is appropriate for nested data and can reveal variations at management and program levels, or individual and organisational levels, thereby avoiding bias research when data is aggregated or disaggregated.

It is also appropriate to recognise the differences in organisations. Cluster analysis identifies sets of organisations that share a common profile. Thus, analysis of effectiveness can proceed by comparing effectiveness within individual clusters and between clusters.

Finally, data envelopment analysis captures the complex interplay between multiple outputs and inputs, without resorting to an arbitrary weights or limiting assumptions. Because analytical process identifies organisations with similar profiles, performance can be compared relatively to enable comparisons based on productivity or efficiency.

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About the author

Greg van Mourik

Greg van Mourik is a Lecturer in the Department of Accounting and Finance, Faculty of Business and Economics, Monash University.