Efficiency and Effectiveness Pursuit of Management

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Table of Contents

Introduction
Organisational Effectiveness
Organisations Efficiency
Conclusion
References

Introduction

Performance of organisations may be articulated to several factors. For an organisation to function to achieve the purposes for which it is established, various factors of production must be ploughed in at various proportions. From the human resource perspective, many organisations consider people as the most crucial resources to help in building sustainable relationships with customers (Sikula, Olmosk, Kim & Cupps 2001).

Having the capacity to establish good relationships with customers implies more sales and hence better financial performance of an organisation on a long-term basis. However, some business management scholars contend that organisations cannot gain optimal performance by only putting in strategies for getting people to accomplish their tasks better and in an effective way alone.

Instead, efficiency and effectiveness of an organisation are essential to develop the capability to pursue the low-cost strategy. The economic theories inform this contention. Comparing the two approaches to enhancing organisation’s performance, a dilemma is encountered whether an organisation should capitalise on improving the welfare of its people to enhance its performance or effectiveness and efficiency approaches advocated for by economic theories.

From this platform, this paper confirms the invalidity of the claims that management’s pursuit of efficiency and effectiveness has been at the expense of labour’s welfare.

Organisational Effectiveness

The concept of organisational effectiveness is articulated to the idea that organisations must operate in a manner that ensures that they are able to achieve their outcomes. Organisation’s effectiveness is very crucial to investors. Investors are interested in the capacity of organisation to deliver value in the form of returns to investments (Waddell, Jones, & George, 2011).

This means that organisations should operate in a manner that ensures that profits are maximised by reducing the costs of production as implied by macro-economic and microeconomic theories. Viewing employees in an organisation as one of the resources that can be utilised to achieve the desired outcomes, it means that all costs that an organisation encounters to ensure it is motivated and committed to its objectives and functions should be minimised to achieve optimal profitability.

Consequently, it is arguable that effectiveness in organisation is achieved by establishing compromises for various variables, which must be combined in the right proportion to achieve success. These variables include employees’ welfare benefits. While the argument that organisations should not principally focus on increasing effectiveness and efficiency at the expense of the welfare benefits and gains of its employee is valid, it is essential to note that such profits and gains are funded using financial resources.

Such resources would be increased by increasing an organisation’s profit levels. Consequently, the argument that management’s pursuit of efficiency and effectiveness have been at the expense of labour’s welfare remain invalid. Effectiveness of an organisation is important for optimal welfare gains.

Organisations Efficiency

Stakeholders subject organisations to pressures to ensure they conduct their business in the most efficient manner. Such pressures include putting in place policies that will ensure that spending is controlled to reduce incidences of fraud while also enhancing service delivery to customers and implementing various policy initiatives. The repercussion is paying enormous attention to improve organisational processes while using limited resources to curb the problem of overproduction of wastes and abuse of managerial power.

This way, financial resources are only spent in ways, which are productive to the organisation and aligned with the organisational objectives and goals including the provision of welfare needs of employees to ensure that they are motivated and committed to an organisation in effect that such a move will not be counterproductive to the organisation. In this regard, organisational efficiency is a measure of how well an organisation in question spends its financial resources.

For profit-making organisations, a higher efficiency implies a higher probability that the organisation will be profitable by delivering optimal benefits to all persons who have stakes in it, including employees. From the non-profit making perspective, efficiency is measured based on how organisations’ expenses measure up to the funds raised to run them.

For the case of corporations, which are traded publicly, efficiency is measured from the paradigms of the capacity to optimise profits from the context of the capital that is acquired in the perspective of debts and equities. Indeed, for publicly traded organisations, efficiency is best measured based on the returns on investment ratio.

Since efficiency and effectiveness imply more gains to all organisational stakeholders, management cannot negate from emphasising the two aspects if it has to build an organisation with the capacity to have a long-term performance. Failure to accomplish this role, organisations cannot deliver optimal welfare to its employees.

Relevance of efficiency and effectiveness to enhance the performance of organisations

The assumption of maximising profits through focusing on mechanisms that enhance efficiency and effectiveness of organisations as the main goal of an organisation rather than focussing on improving the welfare of its people is largely misplaced. The logic behind concentrating on efficiency and effectiveness of organisations in the effort to foster profit maximisation is that business strategies are formulated in accordance with the need to enhance better performance of a firm both in the short-term and in the long-term.

Modern scholars in the field of organisational performance deploy economic logic to determine how effective and efficient an organisation runs its affairs. The magnitude of profit is one of the most essential and ample parameters to measure business performance. In this context, neoclassical economics firms are mere entities of profit maximisation.

Such firms make products through deployment of cost analysis formulas that ensure that marginal revenues are equal to minimal costs, which is one of the ways of profit maximisation through promoting business effectiveness and efficiency. From the above argument, organisations need to focus on mechanisms of creating wealth, which can then be directed towards the improvement of welfare of employees.

According to Bowey, “people are always angered and frustrated by the perceived inequality in reward systems” (2005, p.17). This means that, if people are managed such that they are motivated through reward systems, it is possible for organisations to improve their performance. This suggests that a direct relationship exists between salaries and welfare benefits that are awarded to employees and their effectiveness and efficiency in executing organisational tasks, which help to improve profitability, and hence the performance of an organisation.

Consequently, based on this assertion, enhancing satisfaction of employees precedes efficiency and effectiveness. Indeed, organisations over emphasising welfare issues believe that when working environments are improved, with competitive salaries being provided together with free foods and other welfare goodies, performance and efficiency of the organisations would be enhanced.

Unfortunately, according to Bowey, “there is very little good evidence that satisfaction leads to productivity” (2005, p.17). It is far better to focus on increasing the productivity of an organisation than on enhancing satisfaction. Productive workers are far better rewarded than employees who have not shown the capacity to increase the outputs of an organisation.

From Taylor’s model of organisational management, improvising the working conditions and giving welfare rewards do not increase the performance of organisations. Taylor, a management scholar in the era of the rapid industrial revolution, suggested that it is possible to determine the effectiveness and efficiency of employees by accurately determining the time required in executing a given task and measuring the actual time in which an employee completes the task.

The statistical findings obtained from work-study are then used to set the reward systems in the efforts to ensure that the most productive employees are motivated. Taylor proposed a system of “minute division of labour, repetition of simple movement, predetermined methods of work, minimum training requested incentive of a merely monetary nature, and time optimisation for each operation” (Caldari 2007, p.57).

Through such a system, efficiency and effectiveness of employees are increased. This increase results in a working system with better wages and large profits. Such a system is beneficial to employees and owners since an organisation is capable of delivering value to the two.

Arguing about the purpose of focusing on efficiency and effectiveness management techniques in organisations this way invalidates the claim that management’s pursuit of efficiency and effectiveness have been at the expense of labour’s welfare. Literature on the roles of paying critical attention to the improvement of welfare of employees as a mechanism for enhancing organisational performance argues that managers in organisations have the noble task of serving the followers rather than just focusing on improving effectiveness and efficiency.

For instance, servant-leader relationship is significant in enhancing the performance of an organisation. Phipps (2011) supports this argument by maintaining, “Servant leadership is an ideal type of leadership for embracing workplace spirituality, particularly since a main premise of this approach focuses on listening and understanding” (p.272).

The question that emerges here is whether investing only in building good relationships with workers irrespective of the associated costs would translate into direct productivity of the organisations. In fact, employees need to be rewarded for work done, but not rewarding them for doing the work. This means that the effectiveness and efficiency in accomplishing organisational tasks are a significant determinant of the design and implementation of reward systems.

Management scholars inclined to the school of thought of the need of an organisation to consider the welfare concerns of employees rather than maximising profits by seeking to increase organisational effectiveness and efficiency believe it is impossible to increase profitability of an organisation without compromises. In fact, different stakeholders have different needs to be catered for by an organisation.

This implies that organisations need to consider other alternatives that deliver utmost good to all organisational stakeholders instead of just focusing on maximising profits. In this endeavour, managers need to make decisions, not necessarily pegged on optimal benefits, but rather on ethical rules such as consequential rules, legal, social contract, and moral rules while integrating CSR approaches.

Directly congruent with this line of thought, Schwartz (2007) reckons that the first step for organisation’s success is “for the corporation to consider the demands made by society on the enterprise both at present or likely to be made within the near future as may affect the attainment of the corporation’s objectives” (p.49). One of the objectives of an organisation is the establishing of strategic plans that would ensure its long-term performance and existence.

Indeed, this objective cannot be achieved in an inefficient or ineffective organisation. The funds channelled towards the improvement of the welfare of the community in which an organisation is established through CSR are derived from profit margins. Hence, a more effective and efficient organisation would imply more funds that can be committed to welfare improvements.

Conclusion

Based on the expositions made in the paper, the subject of performance in organisations remains a key pillar. In an effort to gain remarkable profits, organisations’ management toil to guarantee effectiveness and efficiency of its services to clients. Such organisations are solely in place to achieve different purposes, including increasing returns on owners’ investments and serving the needs of other parties having a stake in the operations of an organisation.

This includes employees and communities within areas where an organisation is established to enhance their welfares. The paper argued that, for optimal delivery of this welfare, it is essential for an organisation to make optimal profits. For optimal benefits to be made, organisations must operate both effectively and efficiently.

Consequently, the paper invalidates the claims that management’s pursuit of efficiency and effectiveness has been at the expense of labour’s welfare. The paper analysed this claim based on the crucial roles that organisations have played in terms of enhancing their efficiency and effectiveness as central parameters that boost their performance.

References

Bowey, A 2005, ‘Motivation: The Art of Putting Theory into Practice’, EBF, vol. 20 no.1, pp. 17-20.

Caldari, K 2007, ‘Alfred Marshall’s critical analysis of scientific management’, European Journal of History of Economic Thought, vol.14 no.1, pp. 55-78.

Phipps, S 2011, ‘Mary, Mary, quite contrary: In a male-dominated field, women contributed by bringing a touch of spirituality to early management theory and practice’, Journal of Management History, vol.17 no. 3, pp. 270-281.

Schwartz, M 2007, ‘The “business ethics” of management theory’, Journal of Management History, vol.13 no.1, pp. 43-53.

Sikula A, Olmosk, K, Kim, C & Cupps, S 2001, ‘A New Theory of Management’, Ethics and Behaviour, vol.11 no.1, pp 3-21.

Waddell, D, Jones, R & George, M 2011, Contemporary Management, 2^nd edn, McGraw-Hill Australia Pty Limited, Sydney.

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