“An ounce of performance is worth pounds of promises.” – Mae West
“Do more with less.” Are you tired of hearing that adage? I believe this saying can be true; however, at times, I get frustrated by the expectation that more happens with less by someone just saying it. In reality, this type of efficiency requires focus and accurate measurement. How do we know that we are actually doing more with less? How do we know that our organizational performance is better than it was last year? There are five key steps to measuring organizational performance.
“The emphasis should be on why we do a job.” –Edwards Deming
Steps to effectively measure organizational performance:
1. Be clear on the direction
There are many ways to measure organizational performance and determining the appropriate tool to use for your organization or department comes from first understanding “why” your department or organization exists. An organization’s vision, mission, values, and strategic plan can be helpful in understanding the purpose of the organization. Ask yourself: What is the purpose of our organization or department? What are we really trying to accomplish? Drill it down to a few words. The key to organizational performance is to first be crystal clear on where you are trying to go.
“If you don’t know where you are going, you’ll end up someplace else.” – Yogi Berra
2. Set SMART goals
Once you know where you are going, it’s time to set some goals to strive to achieve in order to meet the purpose of the organization. At some point in your career, you probably learned about SMART goals, so this is a quick reminder. Goals should be set to assure they meet these five basic criteria:
Specific Measurable Actionable Relevant Timely
3. Determine what is critical to measure.
For each of these SMART goals, be clear you have a measure available to assess performance or create a meaningful measure for this purpose. Without these critical measures, you will have no idea if you are
better off this year than you were last year or whether those “improvements” you made actually improved performance. Also, don’t make the big mistake to over-measure. Many organizations spend loads of time measuring everything possible. All the employee’s efforts and leadership’s time is spent trying to understand all the measurement instead of working on improving the baseline performance. Measure the critical determinants to get to the desired destination and nothing else.
“It is not enough to take steps which may some day lead to a goal; each step must be itself a goal and a step likewise.” – Johann Wolfgang von Goethe
4. Implement changes and measure outcomes.
Once you know where you are going, have SMART goals to get you there, and clearly know how to measure this performance, it is time to determine what you need to do to achieve these goals. This is the fun part! What are the changes you can make (measuring as you go) to improve performance in the organization – to achieve that ultimate organizational purpose and direction? When the appropriate measurement components are in place, you can move quickly with finding changes that work because you can assess the performance each step of the way (via the measurement tools) and make rapid adjustments to the changes to improve performance.
“Who aims at excellence will be above mediocrity; who aims at mediocrity will be far short of it.” – Unknown
5. Ensure everything that is measured ties back to the overarching organizational goals. Adjust measures as needed.
Just because a measure worked for you last year, does not mean it is the right measure or goal this year. Measures should be looked at regularly and adjusted as appropriate. As the direction of the organization and the goals change, the measures should also. As the organizational performance improves, some measures may become obsolete and others become important. Continue to use a critical eye to ensure that the goals, and therefore measures, tie to the overall purpose of the organization. When they don’t, throw them out and start fresh.
What not to do:
- Measure everything for measurement
- Get bogged down in how to measure or how often to measure instead of actually implementing the innovation or changes that will lead to improvement. Measurement is important, but it’s not everything.
FAQs
One of the most useful indicators of organizational effectiveness is how well an organization meets its goals. Measuring organizational performance can be accomplished by: Comparing actual achievements against set goals. Comparing the projected aims, such as profit and innovation, against actual results.
How would you measure the organizational performance? ›
The balanced scorecard recommends that managers gain an overview of the organization's performance by tracking a small number of key measures that collectively reflect four dimensions: (1) financial, (2) customer, (3) internal business process, and (4) learning and growth (Kaplan & Norton, 1992).
What are the measurements of organizational effectiveness? ›
The measure of organizational effectiveness in a company is usually expressed in terms of its net profit compared with its desired profit. Other measures might include growth data and the results of customer satisfaction surveys.
How do you evaluate the effectiveness of an organizational structure? ›
To do this, you will need to consider the company's goals and objectives, as well as the specific industry in which it operates. You will also need to look at how well the different elements of the organizational structure work together to support the company's goals.
What are the 4 perspectives of organizational effectiveness? ›
There are four perspectives of organizational effectiveness: economic, political, legal, and social. Each perspective can be further divided into subcategories that affect how an organization functions. The economic perspective includes factors such as the cost of goods, the market, and competition.
Why is measuring organization effectiveness important? ›
There are multiple benefits to achieving organizational effectiveness, such as increased efficiency in reaching goals and saving costs. Your business has the potential to become more attractive to employees, customers, and other stakeholders.
What is the most popular way to measure performance in organizations? ›
One of the fundamental methods for measuring employee performance is through goal setting. Setting clear and measurable goals helps employees understand what is expected of them and provides a benchmark for evaluating their performance.
What are key performance indicators for organizational performance? ›
Key performance indicators (KPIs) measure a company's success vs. a set of targets, objectives, or industry peers. KPIs can be financial, including net profit (or the bottom line, net income), revenues minus certain expenses, or the current ratio (liquidity and cash availability).
What are the four types of organizational performance? ›
Dyer and Reeves (1995), proposed four possible types of measurement for organizational performance in small and medium-sized manufacturing firms: 1) Human resource outcomes (job satisfaction, absenteeism, turnover), 2) Organizational outcomes (quality, productivity, service), 3) Financial accounting outcomes (return on ...
What are the three approaches to measuring organizational effectiveness? ›
Organizational effectiveness scale Goal attainment approach (Etzioni, 1960), system resource approach (Cunningham, 1977) , system constituency approach (Keeley, 1978) and competing value approach (Price, 1968) were employed in measuring organizational effectiveness.
For example, a tech company might focus on developing products that meet customer needs, provide good working conditions for employees, maintain strong relationships with suppliers, and ensure good returns for investors. If all these groups are satisfied, the company is effective by this model's standards.
What is the factor of organizational effectiveness? ›
Therefore, we can say that organizational effectiveness encompasses various factors such as clear vision and goals, strong leadership, strategic planning, efficient resource management, effective communication, talent management, performance measurement, adaptability, and stakeholder engagement.
What is organizational effectiveness? ›
At the most elemental level, organizational effectiveness is a concept that measures how thoroughly and efficiently a company achieves its business goals. An effective organization runs like a well-designed, well-oiled machine.
What is the definition of organizational effectiveness? ›
Organizational effectiveness is a critical aspect of any successful business. It refers to an organization's ability to achieve its goals and objectives while generating value for its stakeholders. This value may come in the form of financial stability, customer satisfaction, social impact, etc.
What is meant by organizational effectiveness? ›
Updated February 3, 2023. Organizational effectiveness is a concept businesses use to determine their success in reaching their desired outcomes. Professionals can implement a variety of models to help them measure their productivity.
