Effectiveness and EfficiencyTop of Form Effectiveness and Efficiency Efficiency and effectiveness were originally industrial engineering concepts that came of age in the early twentieth century. Management theorists like Frederick Taylor and Frank and Lillian Gilbreth designed time and motion studies primarily to improve efficiency. Work simplification efforts again focused primarily on questions like "How fast can we do this task?" Work simplification also led to terminology like streamlined processes and efficiency experts, but the emphasis was still on time and motion. The concept of effectiveness, which takes into consideration creating value and pleasing the customer, became popular in the United States in the early 1980s when Americans perceived Japanese products such as cars and electronics to offer greater value and quality. The words efficiency and effectiveness are often considered synonyms, along with terms like competency, productivity, and proficiency. However, in more formal management discussions, the words efficiency and effectiveness take on very different meanings. In the context of process reengineering, Lon Roberts (1994: 19) defines efficiency as "to the degree of economy with which the process consumes resources-especially time and money," while he distinguishes effectiveness as "how well the process actually accomplishes its intended purpose, here again from the customer's point of view." Another way to look at it is this: efficiency is doing things right, and effectiveness is doing the right things. For example, think of a company that was successfully making buggy whips as automobiles became the mode of transportation. Assume that the processes used to make buggy whips were perfect. The relationships of internal and external suppliers and customers were perfect. The suppliers and customers teamed together to make perfect buggy whips. The buggy whips were delivered on or ahead of schedule at the lowest possible cost. This company was very efficient. However, the company and its strategists were not very effective. The company was doing the wrong things efficiently. If they had been effective, they would have anticipated the impending changes and gotten into a different market. Let's consider a surgery example. A surgeon is very skilled, perhaps the best in the country. The impending job is to operate on the patient's left knee. However, the surgeon doesn't perform all the steps of the process leading up to the surgery. Someone else marks the right knee for surgery. However skilled this surgeon is, however fast he performs the surgery (i.e., however efficient he is), this process will not be effective. When the patient awakens from the surgery, he will not be a happy camper. And what about the HMO? Who will pay for a surgery performed on the wrong knee? Efficiency and effectiveness can both improve speed, on-time delivery, and various other process baselines. A travel application which has six signatures (as opposed to two) causes the travel application process to be inefficient and ineffective. Many of the people who sign the application are not effective in their job because they waste their time on things that don't add value for any of the stakeholders. They are not doing the right things. They are also inefficient because they are participating in a process that takes too long and therefore costs too much. Eliminating some of the signatures would make the process (and the signers) more efficient and more effective. People who sign all those travel applications might justify it by saying, "These people have to be here anyway. It does not cost us anything extra for them to be signing the travel applications." There's something terribly wrong with that type of thinking! A process can also be inefficient and ineffective because the steps of the process are completed serially instead of simultaneously. Assume that a university curriculum/course approval process takes an average of two to three years. The steps of the serial process are identified as follows: 1. A professor suggests to the department chairman that a quality management course be added to the curriculum. 2. The department chairman reviews the course, agrees, and submits the suggestion to all the colleagues in the department. 3. The colleagues review the course, agree, and submit their recommendation to the department chairman. 4. The department chairman reviews their recommendation and submits it, along with all materials, to the dean of the business school. 5. The dean reviews the materials and recommendations, agrees, and submits them to all the department chairmen in the school. 6. The chairmen all agree, and submit the recommendations and materials back to the dean with their recommendation. 7. The dean submits the materials and recommendations to the entire faculty in the business school. 8. The faculty reviews all materials and sends recommendations back to the dean. 9. The dean submits all materials and recommendations to the associate vice president for academic affairs. 10. The associate vice president agrees and submits everything to the vice president. 11. The vice president agrees and submits everything back to the associate. 12. The associate submits everything to the faculty senate. 13. The faculty senate agrees and submits everything, with its recommendation, back to the vice president. 14. The vice president submits everything to the president. 15. The president signs the materials and submits them back to the associate vice president. 16. The associate vice president submits the recommendation for course approval to the coordinating board. 17. The coordinating board approves and submits the materials back to the associate vice president. If the material were put in a shared computer file, the first 14 steps (or, at least steps 4 through 14) of this process could occur simultaneously. The first 14 steps of this process could be done in less than six weeks. Does the reader wonder why any person would ever recommend curriculum changes and get involved in such an inefficient and ineffective process? Professors and administrators don't want to do this work. They would prefer conducting research projects, writing articles, developing innovative teaching techniques, implementing improvement initiatives, working on strategic plans, and helping students. Instead, they are involved in meaningless work that does not add value for themselves or other stakeholders. Students and taxpayers would not want to pay for the extra time that it takes to do work serially instead of simultaneously. Measures of efficiency, effectiveness, and capability for rapid adaptation are of great interest to all stakeholders: process owners, internal and external customers and suppliers, and who. and so on. when. and the concepts of efficiency and effectiveness. or process step. resource utilization. labor) expended per unit of output. all industries. They don't do what they are supposed to do. and the capability to respond to product changes versus process changes. Some process efficiency measures are: • cycle time per unit. the average time it takes to respond to special customer requests compared to routine requests. Processes that are not capable of rapid adaptation (flexibility and innovation) are costly because they are not capable of rapidly responding to customers' needs in terms of customization and rapid decision making. transaction. • • • • • • Some effectiveness measures are: • • • By contrast. queue time per unit. apply to all processes. why do it at all? Many steps exist simply because of organizational inertia ("We have always done it that way"). The greatest risk is that stakeholder loyalty will diminish. decreased market share.executives. cost of poor quality per unit of output. why do we do it this way? Then you might consider questions like these: What is being done? What should be done? What can be done? When should it happen? and so forth. percent of time items were out of stock when needed. In order to make processes more efficient. all jobs. how well the output of the process meets the requirements of the end user or customer. all types of organizations. or labor cost. measures of ineffectiveness include: • • • • • Some measures of adaptability are: • • • • . and inventory turns. the percent of time special customer requests are denied compared to the denial of routine requests. high warranty costs. where. and how questions. and more capable of rapid adaptations. rework. percent on-time delivery. waste. Inefficient processes are costly in terms of dollars. defective products. people should ask themselves what. and percent of activities that customers perceive to be non-value-added. These questions. transaction. and how well the inputs from the external suppliers meet the requirements of the process. delays. Perhaps the first question about a process is. how well the output of the sub process meets the requirements of the next phase in the process (internal customers). The second question might be. where. more effective. customer complaints. Ineffective processes are costly as well because they are not reliable. the percent of special customer requests that have to be escalated to higher levels of management compared to the escalation of routine requests. resources (dollars. and flexible. Hammer. effective. and sub-processes that do not meet the needs of internal customers. while effectiveness is doing the right things. items which do not add value (like too many signatures. and adaptability metrics. In some respects. In this case. what. who should do it. Mildred Golden Pryor Revised by Deborah Hausler "Efficiency or Effectiveness?" Hindu (20 January 2000). many activities in a process will be eliminated because they do not add value. Then they should benchmark best-in-class or world-class organizations and set aggressive goals or targets for improvement. trend charts. Sometimes. which is flexibility or the capability to respond fast. By their very nature. and flexible unless they choose and use the right metrics. management and non-management employees have not had experience with the concepts and tools that will help them evaluate the processes which they own. 1996. In addition to process concepts and tools. If these questions are answered truthfully. management processes can positively or negatively impact other work processes because they quite often deal with approvals (signature cycles) including requisitions for the purchase of essential equipment. New York: HarperBusiness. entire processes will be eliminated. etc. Employees need to learn about and use various concepts and tools which will help them and their processes to be more efficient. effective. Michael. Organizational leaders can't comprehend the extent to which their organizations and processes are efficient. Beyond Reengineering. flow-charting the curriculum process mentioned above would have highlighted the need to replace serial subprocesses with sub-processes that were simultaneous and the need to eliminate duplications of effort and long waiting times. when.Organizations should establish baselines for efficiency. Efficiency and effectiveness are often considered synonyms. workers should learn interpersonal and leadership skills in order to be able to refine relationships as well as processes and organizations. and how the work should be done. Efficiency is doing things right. the results of those measurements should be fed back to the process owners so that they can improve the organization and the processes. which depict measurements compared to each other. long queues. Examples of concepts and tools are: • • • • statistical process control. and how questions can be used to determine if the work should be done at all. where and when it should be done. where. which measure performance over time. unnecessary travel and handling. This includes management processes as well as lower-level work processes. Of course. In addition. effectiveness. . Answers to who. For example. they should determine their current performance levels. they should determine root causes of problems and eliminate them or minimize their impact. which measures variability in a process. Generally. which allow staff to quickly identify serial versus simultaneous processes. A third related concept is adaptability. it is this capability for an organization to reinvent itself that ensures its long-term survival and success. but they mean different things when applied to process management. people should learn interrelationship concepts such as team-work and communication as well as leadership skills in order to streamline relationships as well as processes and organizations. Finally. In other words.). process flow charts. training and opportunities to apply the concepts and tools should be provided. pie charts. Mildred Golden. common efficiency measures across the areas of the digital marketing activities of the RACE framework are: Reach • Cost of acquisition (CPA) . Timothy. Houston. 1998. What is the difference between efficiency and effectiveness marketing measures? by Dave Chaffey on January 24. Allen. Toombs. It’s fine to say the difference doesn’t matter especially. We need this measure for marketing activities and business processes since it helps us see when we are minimising resources or time needed to complete a process. think again. and Leslie A. 2011 Efficiency and effectiveness definition & explanation I think many would think efficiency and effectiveness are similar terms for measures. Definition of efficiency The simple. for example. definition of efficiency is (“doing the thing right“). In digital marketing. efficiency involves increasing conversion rates and reducing costs of acquisition. "Address Call of Effectiveness not Efficiency.e. Chris White. Within digital marketing." Precision Marketing (17 October 2003): 18. Strategic Quality Management: A Strategic Systems Approach to Quality.Pryor. often used. but I think that understanding the difference helps you create a better set of measures! I hope to show you that here where I’ll give a brief definition of each and show examples of efficiency and effectiveness measures applied to digital marketing. since you really need both types of measures when identifying the most suitable goals and measures to assess your marketing or business effectiveness. If so. J. i. TX: Dame Publications. we are keeping our costs low. An example of efficiency and effectiveness measures I’ve create this example based on the balanced scorecard. subscribers or followers Customer lifetime value Customer satisfaction experience across whole site You can see that sometimes it’s not possible to definitively state which is which. In digital marketing. examples of effectiveness measures are: Reach • • • Act • • Average order value Number of items per order Revenue or goal value per visit Audience share compared to competitors gap analysis of total search demand Convert • • Margin Customer satisfaction with site experience Engage • • • Hurdle rate of percentage active online customers. but for the main thing is to review that you have a good coverage of each.• Act • • Clickthrough rates on Ads or Adwords Bounce rate Pages per visit Convert • • Conversion rate to lead or sale Checkout conversion rate Engage • • Repeat conversion rate Activity of customers on email lists or followers on social sites Definition of Effectiveness The simple definition of effectiveness is (“doing the right thing“). Across the digital marketing activities of the RACE framework. . effectiveness involves supporting broader marketing objectives and often indicates the contribution of the online channel. popularised in a Harvard Business Review article by Kaplan and Norton (1993). assessing whether the strategy and its implementation are successful. through measurement. customer satisfaction and employee development. . the balanced scorecard uses operational measures such as customer satisfaction. as indicated by innovation. efficiency of internal processes and also the organisation’s innovation and improvement activities including staff development. Balanced scorecard Efficiency sector Financial results (Business value)? • • Channel costs? Channel profitability Effectiveness • • • Online contribution (direct) Online contribution (indirect)? Profit contributed Sales and sales per customer New customers Online market share Customer satisfaction ratings Customer loyalty index Fulfilment times Support response times Customer value • Online reach (unique visitors as % of potential visitors) Cost of acquisition or cost per sale (CPA/CPS) Customer propensity Conversion rates Average order value List size and quality E-mail active % Conversion rates Average order value List size and quality E-mail active % • • • • • • • • • Operational processes • • • • Operational processes • • • • • • Fulfilment times Support response times The balanced scorecard combines efficiency and effectiveness measures and was a response to over-reliance on financial metrics such as turnover and profitability and the tendency for these measures to be retrospective rather than looking at future potential. In addition to financial data.It is still used in many large organisations and can still be used to today to help translate vision and strategy into objectives and then. Specialization requires a high degree of coordination. but the enduring kind where people deliberately try to get organized to accomplish something. (2000) Strategic management of electronic commerce: an adaptation of the balanced scorecard. H. and channels of communication. We also don't know much about how managers are supposed to obtain accountability for the tasks and adherence to the rules. Kaplan. but what do we really know about them? Not the social kind.S. tasks. most organizations have the following components: FOUNDATIONS OF ORGANIZATIONAL THEORY MISSION | GOALS | OBJECTIVES | BEHAVIOR The mission is the organization's reason for existence. D. Clearly there is much that is different about these kinds of organizations (Blau & Scott 1962)." an organization must have a mission statement. H. Specialization can enhance effectiveness and efficiency. R. and Norton. span of control. how is authority to be delegated? Can responsibility even be delegated? There is further the problem of size. We know that such organizations traditionally form along lines of a pyramid shaped hierarchy based on a military model. . References Hasan.P. and Tibbits. and it's the component held up to the outside world or external environment which makes the organization relevant to social order or societal progress. What we don't know is why and how informal organizations develop inside of formal organizations. unity of command. Goals are those general purposes or functional divisions of the organization which are specific enough to enable stakeholders (people economically impacted) and clientele (people served) to relate to the organization.Summary It is useful to identify efficiency and effectiveness measures separately. where people simply get together to do whatever comes to mind. since online marketing and web analytics often tend to focus on efficiency. Internet Research. specialized or not." an organization will be able to depict their membership in some kind of chart and there will be principles or rules such as a chain of command. 10(5). Hasan and Tibbits (2000) note that the internal process measures in particular are concerned with the efficiency and the customer and business value perspectives are indicated with effectiveness. objectives. For example. the units within them tend to become more specialized. and coordination is critical for any organization. We further know that in order to be "rational. September–October. as well as a roster of personnel or members. We also know that in order to be "formal. 134–42. As organizations become larger. Harvard Business Review. "Management is the science of which organizations are but experiments" (John Constable) Everyone belongs to organizations. large or small. 439–50. By design. but these measures can be applied across all four areas as we have shown. but overspecialization can seriously impede the mission. goals. (1993) Putting the balanced scorecard to work. An informal organization almost always develops and can either help or hinder mission accomplishment. what managers do is synonymous with management (the act of getting people together to accomplish desired goals via planning. future focus. managers are supposed to have authority and power. Administration is always a headquarters function. alignment by purpose. there are controversies over definitions and conceptual approaches. coordinated. At all levels. and modern (participative) management theories have focused on teams. conceptual skills and people skills. Objectives are usually the most doable things in organizations. which implies the ability to coerce compliance by making subordinates carry out orders. budgeting. In the end. and the discipline of key employees. by design. high communication. which involve characteristics such as shared responsibility. and of behavior to goals an oversight function. and the following is offered along those lines: Distinguishing Key Concepts of Management The universal process of efficiently organizing people and directing their activities toward common goals and objectives. measurable outcomes related to goals. "property" being broadly defined here as anything the administrator deems valuable for the organization to pursue as a matter of social policy. these being the five functions of management according to Fayol 1949). and controlling. It is primarily concerned with stewardship of any property that the ADMINISTRATION organization has already accumulated and long-range planning for the acquisition of more property. Behavior refers to the ordinary task productivity of employees. whereas leaders focus on people. some people think that management is not a function of "office" but a responsibility that permeates the . Management is frequently defined as the process by which elements of a group are integrated. Classic theories about leadership have involved the study of traits which make a good leader. and for this reason. Communication channels normally exist between behavior and goals in most organizational designs. Accountability of behavior to objectives is a personnel function. they concentrate on a limited number of functions in a systematic way to achieve coherent goals and objectives. However. creative talent. leading. At the top levels of management are found the administrators or executives who typically carry out the responsibilities of planning. The basic difference between managers and leaders is that managers focus on tasks. administrative skills. A leader in the purest sense of the term is one who influences others by example. and rapid response. such as a 30% improvement or reduction in something. Basic management skills include technical skills. MANAGEMENT Sometimes seen as a subtype of administrative responsibility associated with the day-to-day operations of various elements within the organization. and utilized so as to effectively and efficiently achieve organizational objectives (Carlisle 1976). coordinating. organizing. At the lower and middle levels of management are normally found the leaders who typically motivate other employees to accomplish organizational goals. public relations.Objectives are specific. but often used synonymously with administration in profit-seeking organizations. and they are usually time-specific. but more importantly are designed to be what employees can relate to. but few people know what they really do or are expected to do. task focus. Organizations can accomplish amazing wonders when. All organizations have managers. There must be stable arrangements for assessing the ability of people to carry out their responsibilities and ensure they have jobs appropriate to their abilities. complexity versus routine. The word "goals" usually implies something that cannot be accomplished by individuals working at it alone or in separate ways. Of course. multiple job titles and responsibilities. and nobody would really want to work harder for bigger and better things. An organization always has three characteristics: structure. such as the organization's vision. Supervision. subcultural rituals. No new markets would expand. but its principles of work are the most common. mainly economic rules. how to do it. like management (and organizations as well). work inherently provides us with rules. so in this sense. "work" or "job" may be the most difficult phenomena to study because of all the judgmental difficulties in assessing status and wages. The ability to make money by working within organizations is not a principle. and the weight of work. purpose. but they are also carriers of the cultural "code. and engages in activities related to some complex set of goals. and neither is the subjective perception of unpleasantness or pleasantness. Also called leadership. then people would only buy and sell what they needed for survival. and activity (Stojkovic. The history of economic rules (and hence the history of organizational management) is connected to the history of "secondary" institutions as they are called in capitalism (Williamson 1985). In short. Kalinich & Klofas 1998). and formal and informal rites of passage." values. Work is therefore best defined as something which needs to be done (Auerbach 1996). usually implying a one-on-one relationship. capitalism isn't the only economic system around. organization. job change over time. quantity versus quality. which merits a brief discussion of that dismal science of economics.entire organization. or whether the organization acts in ways beyond the mere sum total of activities by its members. A "secondary" capitalist institution in economics is one which provides alternatives to the limitations of a totally free marketplace. in fact. The coordination of groups or entities consisting of two or more persons (a collectivity) which has an identifiable boundary. It is often assumed that principles exist to facilitate something called "work. Understanding this is basic Economics 101. and if you grasp that administration. You see. Status and payment disputes are never-ending in organizations. like "leadership" is always a tribal function (Dupree 1989) which means that it accomplishes its purpose (to motivate and inspire) through SUPERVISION manipulation of cultural symbols. the whole basis of economic life. and when to do it. ORGANIZATION and the most interesting question one can ask about organizations regards synergy. and management exist to orchestrate bigger and better things than mere . nothing would change." but indeed. Supervisors are often seen as by necessity the most futuristic individuals in an organization. is what we tolerate as necessary to tell us what to do. to name a few conceptual complications (Elliott 2001). Work. goals require synergy and synergy requires organization. beliefs. and internal structure (offices). and attitudes for the organization. most economists assume that if everybody just bought and sold what they wanted in an unregulated marketplace. supervision involves day-to-day direction over the activities of employees. It is. C. greedy. Morgans. Rockefellers. Carnegies. all practiced ruthless monopolization and antilabor policies while pursuing other management initiatives. etc). the Chinese (~1100 B. experimented with decentralized government and a form of participatory management ("get it off your chest").D. and invented merit exams. and the ever-popular "wine breaks" 5 or 6 times a day for workers. irrigation). theory X and Y . created job descriptions. Niccolo Machiavelli (1525 A. Schwabs. and debated over the traits of good leaders.) put supervisor responsibility(vicarious responsibility) into Hammurabi's Code.S. that leaders need to be shrewd. daring. metal. and developed laissez-faire (hands off) principles of management. quantitative management . 20th The 1950s saw: computerization . Robert Owen (1810) practiced leadership through moral persuasion along with cross-training (job INDUSTRIAL rotation). the "Robber Barons" or tycoons. the accumulation of resources (bullion). employee evaluations (each March & September). Mercantilism expressed economic self-protection. held famous debates over generic vs.invented the piecework (incentive) system. for leaders to set the moral climate of organizations.C. Armours.) engineered vast projects (pyramids. and management by objectives .) became shipbuilders to the world. PERIOD Charles Babbage (1832) invented the computer. and Fords. had a division of labor (based on superstitions about mixing wood.) had Moses' father-in-law.C.) organized the world's largest empire.C. Thomas Jefferson and Eli Whitney (1785) came up with idea of interchangeable parts (one size fits all).) argued in his book. then you have grasped an important insight into what capitalism and the Industrial Revolution were all about.) invented job rotation. Edisons. and created the staff principle (adjutants or aide-de-camps). Utopia. Capitalism (1765-present) instituted a free market system of production and distribution with principles based on the idea of profit and reinvestment. James Stewart (1766) .D. numerous fads and fashions have existed before and after the Industrial Revolution. Henry Poor (1855) created information communication systems (switching data banks) for the U. calculating. foreshadowed scientific management (specialization). and a concern for esprit-decorps of workers. distinct management styles in the dialogue between Socrates and Xenophon. Feudalism (600-1500 A. the Babylonians (~1800 B.computers and associated gobblygook CENTURY were the prophets of progress. and taxes. as the following table illustrates: The History of Organizational Management The Sumerians (circa 5000 B. Charles Dupin (1831) focused on integrity and honor among managers. the Hebrews (~1500 B. Sir Thomas More (1500 A. and of unscrupulous character. such as the Vanderbilts. the Egyptians (~2000 B.C.McGregor's theory of participatory management. and brought back the ancient idea of using colors for efficiency. work to tempo of music. quotas and rates for workers.survival. Richard Arkwright (1776) created the 8-hour work shift. designing.) argued in his book. PERIOD invented the assembly-line technique.D.) invented "script" (first money) and recordkeeping. and Nebuchadnezzr experimented with color as coding system and with wage incentives. The Prince. railway system.Peter Drucker's idea of . Andrew Ure (1835) had the idea of putting ventilating fans in factories. established system of grading workers into classes.) glorified militarism.C. Physiocracy expressed the idea that land (real estate) is the MEDIEVAL greatest wealth. Jethro who ANCIENT invented the Scalar Principle (hierarchy principle.D. the Romans (~200 B. Daniel McCallum (1856) created the way we still do organization charts (tree design). Of course.) concerned itself with the traits of a good leader and established the delegation principle (the lending of land to vassals in return for share of the crops) ("what can be delegated can be taken away"). engineered vast projects. that all organizations ought to be pyramidial) and the Exception Principle (only bring big matters to your TIMES administrator).the trust in numbers and cybernetic modeling. James Watt (1765) invented the steam engine and established employee Christmas parties and end-of-year bonuses. practical. the Venetians (~1400 A.C. managing colonies and a spirit of trade. the Greeks (~400 B. James Mill (1820) was an early originator of human motion and time studies. adoption of Japanese management techniques. or approval processes that affect the performance of public servants. These alternative theories include: (1) the humanist approach which focuses on the life of individual workers within the organization. paperwork requirements. matrix management ." What it usually involves is a method with no basis in theory.streamlining.removing one or more of the layers of management between the head and the front or operational lines. It's in the nature of goals that any sizeable organization with have complex. and the experience curve . and (4) the formal approach to model-building which views bureaucracies as networks of contracts. Often. An additional structural approach is systems theory which sees structure as not so much an anatomical thing.strategically identifying and refocusing the core mission.people reporting to different superiors according to task. (2) the pluralist approach which focuses on how interest groups can shape an organization. adding. Structure is the basis of every large administration. the functions always constitute the structure. regulations. but can also involve upsizing (increasing the workforce) in certain areas considered vitally important. and rules. cultural climate . and redesigning policies. restructuring sweeping out old practices and taking on new debt. or in other words. If there are none.sensitivity groups/encounter seminars to teach interpersonal skills. which usually justifies hierarchical arrangements or at least a way to tweak them into becoming more efficient or humane. rethinking . and sometimes conflicting goals. to better serve the customer. Probably the number one rule in such an amorphous environment is that the organization should try to meet all its goals. The structural approach is not limited to large organizations but can be used to describe systems of all kinds. shrinking. downsizing . In an approach known as structural-functionalism. built around systems of hierarchy and authority. The 1980s saw: theory Z .the idea of starting all over again from scratch each fiscal year. theories. and management by walking around .trimming the workforce and demoting managers. multiple.an instrument for determining a manager's concern for people as opposed to a concern for task.clearing away rules. then you have a situation that administrative science calls "muddling through" which is another term for "flying by the seat of one's pants. (3) the third-party approach which maintains that with more organizational contracting-out. usually with technology.leaving the office to visit the workers. or eliminating organizational units. demassing . there are parameters in the external environment (laws. or laying off a number of personnel. Almost all the well-known theories in organizational science (such as Max Weber's bureaucratic model) are examples of the structural approach. tightening. The 1990s saw: reorganization/restructuring . client. THE STRUCTURE OF SYSTEMS It is considered conventional wisdom that the more executive functions of an organization should operate according to principles. and the managerial grid .reorganization that changes lines of authority or restructuring that involves moving. The 1960s saw: T-groups . and the structural approach tends to concentrate on topdown delegation of authority. but the patterned. purposive ways people act inside organizations.reducing the workforce. Structure (how something is held together via the relationships between its parts) is perhaps the most important concept in organizational theory. there are four contenders to the dominance of the structural approach in organizational theory. for instance) that place . rightsizing .using past experience to cut prices and gain market share. or citizen.attending to the moral examples set by top management. The 1970s saw: zero-based budgeting .changing the way work is carried out. reengineering . According to Kettl & Fesler (2005). with structure being the same as the functions people carry out. delayering .management by negotiation. and deregulation . How this can best be accomplished is the subject of many theories. expenses. the less it fits structural models and so new ways of integrating third parties are necessary. . power and authority are always a function of office. It reaches out. which requires more and more raw materials as well as operates in a rich tariff or fluctuating currency environment would need a different set of rules than one operating in a more stable environment. All systems are both subsystems of larger systems and composed of subsystems at the same time. An open-system organization is not passive. but any system taken in a large enough context can be considered a closed system. and the goals just keep getting more and more complex and unattainable. Open-system theory consists of the idea that some organizations are constantly interacting with their environments.limitations on goal accomplishment. Managers have to find the right balance between structuring an open and closed organization. as opposed to a CLOSED organization which prioritizes the needs and interests of employees in hopes of achieving internal harmony. and tries to shape the environment. for example. draws energy from the environment.throughput -. the approach has been around since the 1920's and 30's. It may seem strange to present open systems theory as the first truly scientific theory. organizational pursuit of a goal seems to create more trouble than it's worth. and change is only implemented when it improves harmony in the socioeconomic dimensions of the organization. Some aspects of scientific management. another organizational theory.output. which is to say that every system is a subsystem of some larger system. A business. More importantly. of course. Another common occurrence is when the internal environments (the employee subcultures or informal organization) interfere with goal attainment. closed-system organizations tend to "have their act together" in terms of having all the elements of the organization well-connected. but yet at times. Sometimes. Rules and principles typically found in this kind of organization include intensive training of recruits and stringent selection of employees. and there exist certain subsystems for which it is unnecessary to understand their linkages to the environment. because of complex goals. one which places priority toward external market forces. It's unfortunate that many people oversimplify open-system theory to just mean customer service because the theory is much more than that. hold that many industrial-type organizations are fairly self-contained entities and have no need to constantly interact with their environment because the environment is usually stable or presents such constants (no surprises) that it can be taken for granted (Taylor 1947). communication flow in a closed-system always follows the lines of hierarchy. The dichotomy of open-closed can also be used to examine organizational culture and leadership (Schein 1987). the dichotomy of open-closed gives rise to the first truly scientific theory of organizations -. but as Munro (1974) points out. with special emphasis on throughput (how to change the inputs or alter and use the energy imported) and output (recurrent cycles of quality service to consumers). and most organizations are a mix of the two types. successful goal accomplishment often means that any organization worth its salt will change employees before employees are successful at changing the organization.OPEN SYSTEMS THEORY. Criteria for measuring goal attainment might be different than expected. Katz and Kahn (1978) suggest that open-system organizations usually follow a simple cybernetic model of input -. is at the mercy of the environment. Decisionmaking might weigh some factors as more important than others. Job descriptions might be very detailed. This is a primary characteristic of an OPEN organization. As a general executive principle. and discipline might be harsh. Open and closed organizations differ significantly in the way they deal with internal and external affairs. parasitic organizations which essentially subsist off other organizations. A closed system is one that does not need to interact with its environment to maintain its existence. Examples include overly bureaucratic regulatory and monitoring organizations as well as. For example. There is no closed-system theory. In this view. a separate field of study called organizational science exists. .SCIENCE.e. primarily money.fiscal planning. and behavior is such organizations is seen in terms of security and insecurity. participation. but it is also a craft because administrators are not judged by their education or training. as below: • • • Autocratic . Examples of the Art and Science of Administration ART: Nine Normative Principles: 1. and control MODERN ORGANIZATIONAL SCIENCE Today. Administrators never feel guilty about their (higher) salaries ("it's my value to the organization"). Be creative. via reports. and recognition.make decisions. so the choice comes down to whether administration is an art or science. accounting.and MBAeducated administrators on this matter.This is a model which focuses upon leadership. research. Administrators usually believe their skills are GENERIC (transferable across organizations). Some craft characteristics include the fact that administrators come to enjoy their authority and power. but by their performance on the job. dependence.interrelate the parts of the organization Reporting . The study of organizational behavior tends. craft is the same as art.advance determination of objectives and methods for achieving them Organizing . maintaining favorable working conditions Directing .keep those above you informed. and behavior in such organizations is seen in terms of status. records. and inspections Budgeting .. Custodial . and behavior in such organizations is seen in terms of obedience. Administrators also often "satisfice" rather than try to be efficient or effective. for the most part.This is a model based on the structure and reactions to managerial power and authority. but there is a debate between MPA. ART OR CRAFT? Administration is both an art and a science (albeit an inexact and soft science.recruiting. Identify reward paths for employee performance 5. Punish nonperformers 8. "power will not corrupt"). There are four models of organizational behavior (OB) which have evolved over time with no one being the "best" model. State clear objectives 2. Align individual & organizational interests 3. to be characterized by the study of how people act and make decisions in organizations. satisficing being a term that abbreviates and combines the words satisfactory and sufficient. issues orders & directives. disobedience. Reward performers 7. individualizing rewards paths 6.This is a model based on the distribution of economic resources. and independence. cooperation and non-cooperation. having no fear of it (i. In the end. and theoretical work in that field often takes place not in organizational theory proper but in two analytical areas: organizational behavior and organizational development (Golembiewski 1998). Act as final arbitrar (the buck stops here) 4. Set an example for moral conduct and climate SCIENCE: The POSDCORB Functions: Planning . Take risks & make reasonably risky decisions 9. Supportive .establish a structure of authority through which work gets done Staffing . hiring & training workers. primarily in terms of how supportive management is. aka leadership COordinating . and it is typically accomplished thru job rotation. like unpredictability. and values can be changed to help an organization adapt to a fast-paced environment. In other words. behaviors. inputs are determined once and constant. to be characterized by normative (or moral) concerns for the quality of work-life. No independent part can ever constitute a system. the systemic interaction is toward some goal or end state.This model entails adding more variety to the job so it does not become monotonous. the parts of something are believed to operate quite differently when viewed in isolation or independently. but anything which gives a job more "breadth" is also said to work. In a closed system. with behavior in such organizations seen in terms of self-discipline and self-actualization. In the typical intervention which is organizational development (OD). The first phase (unfreezing) involves awareness of a need to change. All systems have inputs and outputs. Besides the above theoretical models. and it is typically accomplished by tweaking the control. additional inputs are admitted from the environment. there's no escaping the fact that organizational science (or theory) tends to be quite heavily informed by systems thinking. in an open system.This is a model based on partnership and teamwork. the adaptability or flexibility of organizations. or the notion that any problem tends to be best understood when its component parts are analyzed in relation to the whole.This model entails adding more motivators while keeping job tasks the same. and the ways that attitudes. and when they operate together. making this an organizational development (OD) model. responsibility. facilitate. The following chart should help illustrate systems thinking: The systems model above incorporates Lewin's (1958) three phases of change. The study of organizational development (OD) tends. but these. There is no way for students in public management to avoid dealing with the . for the most part. Also typical are attempts to redesign jobs. and there are two models for job redesign which have generated the most theoretical interest. and coordinate change. Noise (entropy) and specialization (differentiation) can exist in a system. can all be regulated by feedback mechanisms (some portion of an output signal is passed back to the input).• Collegial . Notice the double feedback loops because they are there to achieve what systems theorists call "negative entropy" or the ability of a system not to lose energy to do work. and the third phase (refreezing) involves applying the new behavior if it is evaluated well. and discretion aspects of the job. or a model for what Lewin called it action research. change agents are either brought in or created to help stimulate. as below: • • Job Enlargement . Job Enrichment . the second phase (changing) involves the exploration and testing of new ways of doing things. All systems have interdependent parts. the news media. the focus is on choices that . Employees differ in their tolerance for risk and ambiguity. and stability. Organizations can be attacked by elected officials. According to Katz and Kahn (1978). Edgar Schein (1928-). Hence. and for the most part. and an adaptive subsystem. survival. Other theorists have focused their attention on other components. systems theory is still far from fully exploited in organizational science. but management must also protect the core of the organization. These are problems that the bureaucratic and scientific management approaches have a hard time dealing with. managerial systems require four subsystems to work properly: a support subsystem. For instance. Stephen Covey (1932-). Further. The core of any organization is typically a technical (or technological) core (that is what gives organizations their high performance). and its own workers. and this core needs shielded as much as possible from uncertainty by setting up separate components which interface with the outside world instead of this core. a maintenance subsystem. Jay Forrester (1918-). Kenneth Boulding (1910-1993). three factors influence the manner in which these subsystems work: the authority structure. In contingency theory. It depends upon threats and attacks. Expectancy Theory In what is called "expectancy theory" (Vroom 1964). the technical core of an organization should always be structured in a closed-loop fashion. individuals. It can also be said that Katz & Kahn (1978) represent the most influential work in systems theory. a production subsystem. Thompson (2003) claimed that most organizations are a mix of open and closed types.academics of systems theory eventually. many management consultants like Peter Drucker (1909-2005). and many others. Not only did Katz & Kahn (1978) emphasize negative entropy in order for organizations to survive. Russell Ackoff (1919-). but they also emphasized "equifinality" (the achievement of various goals by a variety of approaches) in order for organizations to grow. the ideology. Talcott Parsons (1902-1979). Threats to an organization can come from both inside and outside the organization. ORGANIZATIONAL THEORIES AND PRINCIPLES Systems Theory It has been said systems theory is the dominant paradigm in administrative science (Harmon & Mayer 1986). Katz & Kahn (1978) focused primarily on the pattern of formal role behavior because they wanted to develop a social psychology of organizations based on the relatively fruitless idea of looking at organizational ideology as a set of norms tied in with role expectations. and often have goals that are unclear or conflicting. so they never really developed their social psychology. Management must deal with these attacks in order for the organization to achieve rationality. Systems thinking (or the systems framework) extensively permeates the whole field of organizational science via many influential thinkers. and the pattern of formal roles. uncertainty determines structure. Other notable contingency theorists include Fiedler (1967) who explored the relevance of one's Least Preferred Coworker to one's management style and Lawrence & Lorsch (1967) who pioneered the field of human resource management by showing how the principle of "unity of effort" requires not just unity of command (integration) but managing the time orientation of workers in different subunits or subsystems (differentiation). uncertainties being variables the organization can neither control nor predict. and Peter Senge (1947-) have made profitable livings out of turning academic systems thinking into digestible products for business applications. like Ludwig von Bertalanffy (1901-1972). Contingency Theory What is called "contingency theory" rests upon an understanding of uncertainties an organization faces in its environment. Further. interest groups. Tom Peters (1942-). Organizations are believed to run on the principle that the desire to satisfy the need will always make the effort worthwhile.5 can then be plotted on the grid using horizontal and vertical axes. although some academics regard it as a human relations theory since it is based largely on McGregor's (1960) Theory X and Theory Y. Expectancy theory. Style 9. realistic expectations rather than unrealistic aspirations. but little productive work gets done. i. Most systems thinkers. Numerical indications. such as 9. Using a specially designed testing instrument. In any event.1 or 9.5 or the middle of the road style produces suitable or satificing performance only. however.1 or 5. Sometimes it's the desire to perform a behaviour rather than the need to perform a behavior that matters. and it is assumed that all workers expect a positive correlation between performance and reward. it can be useful for a number of purposes.9 or 1. however. Style 5. Blake & Mouton developed a theory known as the "Managerial Grid" which can be classified as a kind of expectancy theory.. Clearly. The grid includes five possible leadership styles based on concern for task or concern for people. and in its simplest form looks as follows: Blake and Mouton's Managerial Grid The model identifies five different leadership styles based on the concern for people and the concern for production. The Managerial Grid In 1964. would say it's outcomes which matter. Style 1. Expectancy theory is very similar to another theory. Motivation is the product of three components: valence (how emotional people are toward rewards).9 or 1. Style 9. Hersey & Blanchard (1993) extended the model by expanding upon the leadership implications of the relationship and task dimensions and adding a readiness dimension. people can be assigned a numerical score depicting their concern for each variable.9 or the team style is the best style and is generally synonymous with Theory Y (most employees want to . tends to be measured at the level of need while equity theory tends to be measured at the level of want. It is based on two variables: focus on task (production) and focus on relationships (people). the managerial grid was extremely popular for many years. most particularly when it comes to organizational design or the study of organizational conflict. Although their work is frequently classified as a leadership theory. other social exchange psychologists and strain criminologists.1 is dictatorial management or Theory X (employees always need to be told what to do). and instrumentality (perceptions one will get what they deserve). with Vroom (1964) one can see how the study of personality factors makes inroads into organizational science.1 or the impoverished style where a manager simply tries to hide out and not be noticed.individuals make.9 or the country club style makes for a comfortable place to work. called "equity theory" as developed by Homans.e. and the worst style is 1. expectancy (expectations or levels of confidence in one's abilities). In other words. . the result consists of nine possible compliance relationships. otherwise alienation sets in among workers who are highly motivated but not driven by rewards and those driven by coercion tend to despise those driven by rewards. Organizing. and power within organizations can be coercive (threat driven). Compliance. higher-level officials supervise lower-level officials inside the organization. Gulick and Urwick (1937) were big believers in division of labor. Etzioni (1975) has also characterized the orientations of workers toward power as one of three kinds: alienative (intensely negative). Therefore. Directing. This superior coordinates the activities of his or her subordinates. or normative (symbolic reward driven).do well and there is an untapped pool of creativity in every workforce). the system usually fails. when interorganizational subsystems are put together into one system. He argued that organizations are distinguishable on the basis of "compliance mechanisms" they rely upon to control workers. daily tasks of a manager. the different kinds of power tend to neutralize each other. as follows: • • Hierarchy -. the larger system will likewise fail. Further. Unity of Command -. the names of Gulick and Urwick (1937) stand out. this being a common theoretical explanation of interorganizational ineffectiveness in the literature. These are the pioneers who invented the acronym POSDCORB to describe the eight essential. Staffing. They are the eight things that a manager must exercise power and responsibility over. Coordinating. A key assumption of compliance analysis is that when organizations emphasize more than one type of power. remunerative (reward driven). along these lines. In this defined chain of command. Unity of command reduces employee uncertainty. and Budgeting. Reporting. calculative (low intensity). as illustrated below: The Nine Types of Compliance Relationships Coercive Remunerative Normative Alienative 1 4 7 Calculative 2 5 8 Moral 3 6 9 Gulick and Urwick Among those who advocated that management principles ought to be generic and have universal applicability. and financial rewards inside the organization. is synonymous with power. because he or she has no confusion or ambiguity about whose orders to obey. the allocation of skills. authority. When these three kinds of orientations are combined with the three kinds of power. and they are to be accomplished primarily by putting the right people in the right places of the organization. as well as many other principles which have become associated with administrative science since that time. Compliance Analysis Etzioni (1975) developed an analytical framework which has some utility for explaining when systems and subsystems don't work as well as designed. and moral (high positive intensity). when managers are forced to employ more than one kind of power. over the same time and over the same group.This refers to the principle that each employee must have one and only one immediate superior. and each subsystem relies on a different compliance mechanism. in addition. POSDCORB stands for Planning.This refers to a pyramid of control and a vertical ordering of superiorsubordinate relationships in a defined chain of command. This involves. Compliance structures should be congruent. direction is given to subordinates by a single individual at every level of the chain of command. Line-Staff Distinction -. Principle of Responsibility (Supervisors must be responsible for the work of their subordinates) 4. To help achieve this goal. The most appropriate span of control exists when a superior supervises the actions of a limited number of subordinates. and purchasing should be grouped together by function to facilitate having each component part of the organization contribute to the organization's overall objectives. Scalar Principle (Organizations must have a pyramidal-shaped organizational structure. but offered the following as generic organizational principles: • • • • Unity of Command -. unbroken line from the top of the organization's hierarchy to the bottom. Specialization of jobs and tasks would thus help to achieve this overall goal.• • • Functional Specialization -.By this is meant that the organization should be set up along the lines of purpose. For example. Principle of Specialization (Work should be limited to one function only for most workers) 7. Principle of Definition (There should always be clear job descriptions) Mooney and Reiley Another group of theorists who advocated general principles were Mooney and Reiley (1939) who studied the problem of how to make large organizations as efficient as small ones. and process. or hierarchy) 5. Staff employees perform secondary or support activities in support of the organization's core functions and assist line employees.conceived in the same way as Gulick & Urwick's formulation Functional Specialization -. if the purpose of an organization is law enforcement. the span of control should be as narrow as possible if the organization is to maximize efficiency and effectiveness in carrying out its predetermined goals. Principle of Correspondence (Organizations must have fairly coequal systems of authority and responsibility) 3. Thus. Principle of the Objective (Organizations must have a common purpose) 2. They mostly came to the same conclusions as Gulick and Urwick (1937). finance. Line employees perform the primary or core functions of the organization. and the process served would be protecting the public. Span of Control -.This means that various organizational subdivisions. they argued that the organization should be designed to maximize effective communication. such as personnel. Another list of all the management principles they advocated includes the following which is sometimes cited as a comprehensive set of organizational principles: 1. Managers should always . Principle of Coordination (Administrators should always look for ways to creatively realign the organization) 8.This refers to the vertical division of labor within an organization and the flow of authority and responsibility in a clear. the client served would be offenders specifically and the public more generally.This means that employees of an organization must be separated and classified on the basis of the jobs that they perform on behalf of the organization.This refers to the number of subordinates that are supervised by any one manager. Span of Control (The best span of control for most organizations should be about 5 or 6) 6. Rational Organizational Design -. client served. Gulick and Urwick (1937) provided no shortage of principles. there must be division of labor along the lines of subject matter specialization.conceived in the same way as Gulick & Wrwick's formulation Scalar Principle -. place. In addition. the place would be the city or county. a French business executive famous for turning companies around from the brink of bankruptcy Fayol's (1949) works were not translated into English until the 1940s. ranks of people in the middle of the organization acting as buffers for vertical (up & down) communication.Although Fayol did not sacrifice the Scalar Principle.keep this distinction in mind for the purpose of keeping personnel resources concentrated upon performing the primary or core functions of the organization. according to Fayol. even parents by virtue of having raised children would make good managers. and (4) establish lines of lateral communication. 2. to force or to otherwise see to it that all employees comply with the organization's formal rules and procedures. This created the problem of "middle management". for no reason at all but to shake things up a bit. Fayol concentrated on horizontal (lateral) communication. Here's a detailed analysis of these ideas: 1.Fayol started trade schools and college courses in the factories he supervised. but to bring management and labor together in the workplace of ideas. his principles amounted to essentially the same thing as Gulick and Urwick's (1937) POSDCORB except that Fayol added commanding and controlling. concentration upon the vision and long-term (10-year) goals of the organization. and in comparison to other theorists.it is the duty of the manager. Fayol even advocated periodically changing the organizational charts. Lateral (sideways or horizontal) communication -. He believed that no formal education or training was necessary for the generic skills of administration. Henri Fayol (18411945). He desired that managers should come from the ranks of workers rather than from an elite class in society.Fayol argued that managers must regulate the activities of employees so that these activities proceed towards accomplishing the ultimate goal of the organization. of course. which means that there must be structured opportunities (not usually present in organization charts) for people at the same ranks to talk to one another. which resulted in rather tall organizations. The Full List of Fayol's 14 Management Principles . 4. (3) eliminate as much red tape as possible in the organization. Henri Fayol The "grandfather" of all administrative science is. even if different departments are involved. (2) teach everybody in the organization management theories and administrative thought. Today's "Executive-for-a-day" programs are a Fayolian tradition. Eliminate red tape -. Fayol's (1949) suggestions for turning companies around also provided some interesting principles.Paperwork and mathematics were considered unnecessary by Fayol. controlling -. and the purpose of these debates and discussions was intended to increase morale and esprit-de-corps. including the Board of Directors. no more than 4. Regular line-staff conferences and meetings were held periodically in the organization to discuss the ideas of management thinkers. Teach everybody management theory -. 3. His advice in this regard was to: (1) start at the top and reorganize the upper management echelons. • • commanding -. inventing the now-famous gang-plank principle. he advocated a rather narrow span of control. not so much to afford workers a chance to move up. 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