Organizational Effectiveness
can be improved with Strategic Planning

Organizational effectiveness in the Simply Strategic Planning approach involves a precise understanding of the role of the governing body.

All organizations exist to benefit someone

If one traces back into the history of any organization one would find that it was started by one or more people who believed that the formation of this organization would best serve their purpose. Their purpose may have been largely self-centred, as it is when investors of capital form a company; or when tennis players form a tennis club. In these cases the founders believed that they would make more money, or have access to better tennis facilities, than if they did not form their organization.

In contrast a founder’s purpose may be mainly altruistic, as when someone founds a charity to help homeless people, or when a government establishes a health service.

If for any reason beneficiaries are not satisfied with the level of organizational benefits they receive, the organization could be regarded as ineffective, and fade away and perhaps be wound up. On the other hand if it does deliver enough organizational benefits to satisfy the intended beneficiaries, then it may grow.

The purpose of any organization can therefore only be adequately stated if both the proposed benefit and the Intended Beneficiaries are accurately identified.

Only then can the beneficiaries, the management or anyone else say whether the organization is effectively fulfilling its purpose.

Taking the case we referred to above of a charitable organization founded to help homeless people. The purpose of this charity should be defined in terms of finding ‘homes’, the 'benefit', for the people who are ‘homeless’, the 'beneficiaries'. If this organization failed to find them homes we would rightly regard the organization as failing in its purpose.

In the same way, if a business repeatedly failed to generate benefits, in the form of returns on the capital they had invested, the investors or shareholders - the beneficiaries - would consider the organization to be ineffective. If a company is to be effective it is therefore vital for it to have a current and accurate picture of investor expectations.

There are still people who want to debate the purpose of a business enterprise. Is it to provide goods and services to society or to make a profit for the shareholders? The same question is even more difficult when one asks it of government business enterprises. What is the nature of the benefit they are supposed to generate and to whom is it due?

These questions on organizational effectiveness are not just for academic debate. Being unclear about the true purpose of the organization and putting everything in place to achieve this purpose, is necessary to avoid organizational failure.

Corporate governance is the function of safeguarding the interests of the Intended Beneficiaries in any organization

The 'Intended Beneficiaries' are people for whom any organization exists. Ultimately organizational effectiveness must be defined in relation to these beneficiaries. In most organizations of any significance, the governing body has the responsibility to represent the interests of the beneficiaries in this way.

Given this the board role in strategic planning needs to be clearly understood and respected, as does the relationship between management and governance.

Organizations do not exist to benefit everyone

We have stated above that all organizations exist to benefit someone. There is an alternative view called the stakeholder theory. This is a view about organizational management that tries to identify the groups of people who have a ‘stake’ in the enterprise, and attempts to prescribe means by which management can give due regard to the interests of those groups. By contrast I see organizations as having just one specific group occupying the position of beneficiaries, and all others as being interest groups that should not be harmed by the activities of the organization.

Governing bodies need to measure Organizational Effectiveness

When real clarity of purpose is achieved then it is possible for the governing body to evaluate overall corporate performance, or organizational effectiveness, by the extent to which beneficiaries are receiving a satisfactory benefit from the organization. If the purpose of the organization is not defined with clarity it will not be possible to judge the effectiveness of any organization. We see good governance as setting standards of corporate performance and of corporate conduct, and ensuring that these are attained.

Organizational effectiveness also depends on readiness to change and a sound strategic plan for navigating the changing world.

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