Organizational effectiveness can be described, using the definition for the adjective "effective" by the Merriam-Webster Dictionary, as an organisation that produces a desired effect. Likewise, organizational efficiency can be described as an organisation that is productive without waste.
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The desired effect will depend on the goals of the organisation, which could be, for example, making a profit by producing and selling a product. An organisation, if it operates efficiently, will produce a product without waste. If the organisation has both organizational effectiveness and efficiency, it will achieve its goal of making a profit by producing and selling a product without waste. In economics and the business world, this may be referred to as maximising profits.
A late 19th century German sociologist, Max Weber, who studied and wrote about organizational analysis, said that organisations could develop unparalleled efficiency by having a system of explicit rules and a unique division of labour. Weber studied and conceived an ideal organizational model that was necessarily bureaucratic, impersonal and goal-oriented.
In contrast, Peter F. Drucker, a 20th century Austrian social scientist and author of many books on organizational management said that businesses should strive for effectiveness in contrast to mere efficiency. A quote from Drucker's book, The Effective Executive, says that "Efficiency is doing things right, effectiveness is doing the right things."
According to Paul Ferguson in Organizations: A Strategic Perspective, the organisation is an open system and heavily influenced by its environment. For an organisation to achieve and sustain success, it needs to adapt to its dynamic environment. Evaluating and improving organizational effectiveness and efficiency is one strategy used to help insure the continued growth and development of an organisation.
The Next Generation Business Handbook reminds us that organizational effectiveness is closely tied to organizational culture---particularly organisations that work toward building and maintaining an adaptive culture. The organisation that focuses on organizational change strategies will benefit in terms of both effectiveness and cost-effectiveness---or organizational effectiveness and efficiency.
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