Organizational effectiveness is a tool manager’s use to measure how effective they; and their organizations are at achieving outcomes and creating value. Organizational effectiveness can be very difficult to measure in an organization. Why? The answer is because organizations can be diverse and very large. Also one organization can have multiple goals and perform many activities at the same time. Managers must decide which indicators they want to measure in order to determine the effectiveness of their organization. There are three approaches managers can use in evaluating effectiveness. They are the external resource approach (Control); the internal systems approach (Innovation); and the technical approach (Efficiency). Each approach
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The technical approach allows managers to evaluate how efficiently an organization can convert some fixed amount of organizational skills into finished goods and services. Technical effectiveness is measured by the ratio of outputs to inputs. For example, if Methodist Hospital began to have an increase in outpatient services and continue to operate using the same amount of staff this would be a gain in productivity. Another example using an organization that produces goods not services would be if Abbott Laboratories began to produce twice the amounts of medications due to a decrease in wasted materials and fewer errors there would be a huge increase in productivity. Sometimes efficiency does lead to effectiveness. In other organizations, effectiveness and efficiency are not related. For example if a medical supply company produced a new glucose monitor and there was no demand for glucose monitors this organization could be an effective one but fail to meet its goal because there was no demand for the product. Likewise there could be a medical supply company producing pacemakers and achieving its goals due to a demand for the device but is an inefficient organization. There are also barriers with using this approach one is access to data. Data is sometimes required from various sources and may not always be available.