Chapter 15



Chapter 15

Organisational Goals and Effectiveness

What the Chapter Covers

This chapter marks a break with those that come earlier in the book. With the exception of chapters 1 and 2, all of the preceding chapters deal with matters at the micro level of organisation; that is, with individuals or groups. This chapter is the first one that deals solely with matters at the level of the whole organisation and because goals and their achievement can be fundamental to an organisation’s continued existence, the chapter has strong connections with all those that follow. The chapter covers:

• the distinction between goals and other related concepts

• the distinction between official and operative goals

• the benefits of having goals

• the key results areas for which goals should desirably be set

• the goal setting process in theory and practice

• goal adaptation and change

• the significance of organisational effectiveness and the distinction between effectiveness and efficiency

• the goal approach to organisational effectiveness

• the system resource approach to organisational effectiveness

• the multiple-constituency approach to organisational effectiveness

• the competing values model of effectiveness

• the relationship between goals and effectiveness

The chapter closes with an overview section that pulls together its contents.

New Concepts Introduced in Chapter

Bottom-up goal setting: people set their own goals which are then agreed with their immediate superiors

Coalition: an alliance of groups and/or individuals who perceive that something they value can be obtained by collaboration

Competing Values Model (of effectiveness): an explanation of how manager values influence criteria used to evaluate an organisation’s effectiveness

Efficiency: a measure of resource usage, ususlly expressed as a ratio of inputs used to produce a given level of outputs

Espoused Theory: the theory of action officially espoused by an organisation

Goal: a desired state of affairs, which an organisation attempts to achieve

Goal Approach (to effectiveness): evaluation of organisational effectiveness against the criterion of the extent to which an organisation achieves its goals

Goal Displacement: an organisation or one of its sub-units substitutes a goal fro which the organisation was not created, or for which resources were not allocated, for its legitimate goal(s)

Goal Succession: the goal(s) for an organisation is deliberately replaced with another one because the original goal(s) has been achieved or has become outdated

Interactive goal-setting: goals are initially set for a particular organisational level by its head, but are then negotiated to consensus with subordinates at that level

Key Result Area: areas of activity vital to an organisation’s existence

Means-ends Hierarchy: goals at one level in an organisation are le means of achieving the goals of the level immediately above

Means-ends Inversion: the method of doing something becomes a goal in its own right, which displaces the end stste (goal) that the method was supposed to achieve

Mission: a statement of an organisation’s fundamental reason for its existence

Multiple-constituency approach (to effectiveness): an evaluation of effectiveness against the criterion of the extent to which an organisation satisfies the interests of its internal and external stakeholders

Number magic: the tendecy to replace an important and necessary goal with another one that can be measured, simply because it can be measured

Objectives: specific, short-term statements of results that should be achieved

Official Goals: ideal states that an organisation would like to achieve

Operative Goals: the actual goals persued by an organisation

Organisational Slack: the difference between the total resources available to an organisation and those necessary to make side payments to ensure contributions from stakeholders

Policy: rules to guide future decision making, if and when certain contingencies arise

Side payments: inducements that are paid for cooperation or collaboration

Strategy: a plan or design to achieve aims, goals or objectives

Suboptimisation: sub-unit goals are accorded greater importance (by people in sub-units) than the goals of the organisation as a whole

Systems Resource (or Resource Dependency) Approach (to effectiveness): evaluation of organisational effectiveness against the criterion of whether the organisation maximnises its bargaining position vis-à-vis the environment in order to acquire an optimal level of scarce and valued resources

Theory in Use: the theory of action actually implemented by an organisation

Top-down goal setting: goals for a particular organisational level can be imposed from above

Time Out Exercises: Hints for Completing

Exercise on page 453: Official Goals for an Organisation

If you have difficulty in starting this exercise, you could try consulting an organisation’s annual report. In terms of classifying goals into the types given in Table 15.1, the goals for a conventional business organisation are usually more straightforward than those of an educational institution. Perhaps the easiest way to classify them is to look at the column headed ‘Function of Goal’ in Table 15.1, and then to re-phrase what appears as questions. For example, for Societal Goals you could ask yourself ‘what is it that the organisation does in terms of meeting a need of part of its environment’?

Exercise on page 464: Organisational Stakeholders

This exercise flows from the previous one on page 453.

Question 1

If you have difficulty in identifying stakeholders, re-examine the definition of stakeholder given in Chapter 2. That is: ‘people with an interest in the activities and outcomes of an organisation, whether or not the organisation has an interest in them’. Here the task is to identify only those groups in which the organisation is interested, because it recognises that these groups could have an impact on its behaviour.

Question 2

If you have difficulty with this question try asking yourself ‘what is it that the organisation has to provide (or promise to provide) in order to gain the stakeholder’s cooperation’? This is pretty obvious in most cases, for example: dividends and capital growth for shareholders.

Question 3

Here it is worth remembering that if organisations are to remain in existence, pretty well all of them have to accumulate slack of some sort. For example, a surplus of funds over and above that necessary to pay dividends in order to finance future activities and developments.

Exercise on page 472: The System Resource View of Effectiveness

The questions in this exercise are all fairly straightforward and the more interesting case is probably that of a university or college.

Question 1

If you have difficulty in getting started, try to identify resources that are absolutely vital to the continued existence of the organisation in both short and long run, an example of which is students who are capable of undertaking and benefiting from a course.

Questions 2 and 3

A wide variety of answers are possible here, but the important thing is to try to go beyond the obvious when answering question 3. For example, well qualified entrants not only make a course viable now, they probably have a better chance of not dropping out and emerging with good degrees. In the long-run this can do much to enhance the reputation of the institution, which enables it to attract future populations of well qualified applicants.

Exercise on page 474: Stakeholder Expectations

If you completed the exercise on page 464, you will already have identified stakeholders and have a clear idea of their expectations. If do as is asked, you should find that stakeholders with the highest potential influence on the organisation are those who receive the highest priority in terms of satisfying their interests. Usually the two groups that head the list are shareholders and customers.

Supplementary Illustrative Materials

In addition to the OB in Action features in this chapter of the book, given below are two more that you might find useful. The first is associated with the material on page 456 of the book. It illustrates some of the important benefits that can be derived from setting goals in an organisation ..

OB in Action: Goals in a Changing World

These days many organisations operate in a world that is in a constant state of flux, and this situation prompts the question of whether it worthwhile setting goals and attempting to plan ahead in the face of so much uncertainty. To Sir Brian Pitman, the chairman of the banking giant Lloyds TSB, the answer is a resounding yes. He points out that while most organisations will continue to be confronted with uncertainty, and that the key to handling the significant changes associated with the future is to try to anticipate what actions will be needed. Moreover he argues that while this obviously involves the risk of being wrong, the risks associated with doing nothing and just being overtaken by events are even greater. As such goals of some sort are a vital necessity and without them, an organisation will lack a sense of direction. Viewed this way the question is not so much whether it is worthwhile setting goals, but rather whether any business that intends to be around in the future can afford not to.

Pitman argues against the currently fashionable trend of letting people lower down set their own goals and suggests that the current situation calls for top-down goal setting, because this results in goals that are more challenging and ambitious. He reasons that the ambiguity associated with the future will require people to develop innovative and creative solutions problems if they are to deliver increases in the performance of businesses. This, he suggests, will only happen if people abandon the status quo and suggest something new, which is much more likely if they are confronted with ambitious and challenging goals to achieve.

SOURCE Pitman, (Sir) Brian (2000) In my opinion, Management Today June; 14

The second OB in Action feature is concerned mission statements and their importance in a system of organisational goals, which is addressed on pages 464-465 of the chapter.

OB in Action: Mission Statements

Although most large organisations seem to be compelled to have them, mission statements are often viewed cynically, because they have a bad name for being trite, impractical and expressing little more than pious hopes that are seldom realised. Ideally a mission statement should set out for stakeholders what an organisation does and what it hopes to achieve. Moreover it should do this in an explicit, but very succinct way. Unfortunately what often results is a statement that is so convoluted and obscure, that it is hard for anyone to understand the meaning it tries to convey. This being the case, it is pertinent to ask two questions: are mission statements always necessary, and where they are, what should they contain?

Some experts argue that mission statements are unnecessary in many organisations. For example, in a small firm where people at all levels interact on a regular and frequent basis, it is likely that all interested parties have a shared understanding of what the organisation does and what it hopes to achieve. Similarly, in a very large and highly diversified organisation that operates in many different business areas and in geographically dispersed locations, it could be near impossible to find something that embraces them all, and each one could need its own statement.

In terms of what the statement it is usually recommended that it should be kept short, snappy and to the point by confining it to expressing ‘the essence of the organisation’. Examples of good practice here are said to be: ‘to produce cars and trucks that people will want to buy, will enjoy driving and want to buy again’; The Chrysler Corporation of America: ‘to be the most valued by those who value brands’: the advertising agency Ogilvy and Mather.

One word of caution though. No mater how good the statement in conveying the essence of the organisation, it will not, on its own, ensure that the mission is shared by everyone in the organisation. As such, optimistic and ambitious statements (and most of them are) need to be followed-up with policies and actions designed to enthuse people to deliver what they promise.

SOURCES: Rigby, R (1998) Mission statements, Management Today, March; 56-58

Perren, L and I Tavakoli (1997), Mission impossible without commitment, Professional Manager, July; 14-15

Useful Sources of Additional Material

For those who enjoy exploring study materials on the internet, given below are a number of potentially useful websites that give further information on the topics and issues covered in the chapter.



Reprint of a paper by Leann Cardani, which explores the importance of mission statements and gives many useful hints on what they should contain and how they should be drawn-up.



Summary points drawn from a paper by R Meshanko on the potentially difficult task of constructing mission statements for nonprofit organisations.



A useful paper dealing with the potential for goal displacement in bureaucratically structured organisations.



Reprint of a paper by Lena Lindgren dealing with the ways that goal displacement can occur in nonprofit organisations.



Homepage of the Organisational Effectiveness Group (OEG), giving access to a number of resources on this topic.



Reprint of an article from the BT house magazine dealing with what the expression ‘organisational effectiveness’ can be taken to mean.



Reprint of an extensive bibliography entitled Redefining the Corporation – A Stakeholder Theory Bibliography. Particularly useful for further exploration of goal setting and the multiple constituency model of organisational effectiveness.

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