Effectiveness and Efficiency

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 executives. Inefficient processes are costly in terms of dollars, waste, rework, delays, resource utilization, and so on. Ineffective processes are costly as well because they are not reliable. They don't do what they are supposed to do. 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. The greatest risk is that stakeholder loyalty will diminish.

In order to make processes more efficient, more effective, and more capable of rapid adaptations, people should ask themselves what, who, where, when, where, and how questions.

Perhaps the first question about a process is, why do it at all? Many steps exist simply because of organizational inertia ("We have always done it that way"). The second question might be, 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. These questions, and the concepts of efficiency and effectiveness, apply to all processes, all jobs, all types of organizations, all industries.

Some process efficiency measures are:

cycle time per unit, transaction, or labor cost; queue time per unit, transaction, or process step; resources (dollars, labor) expended per unit of output; cost of poor quality per unit of output; percent of time items were out of stock when needed; percent on-time delivery; and inventory turns.

Some effectiveness measures are:

how well the output of the process meets the requirements of the end user or customer;

how well the output of the sub process meets the requirements of the next phase in the process (internal customers); and

how well the inputs from the external suppliers meet the requirements of the process.

By contrast, measures of ineffectiveness include:

defective products; customer complaints; high warranty costs; decreased market share; and percent of activities that customers perceive to be non-value-added.

Some measures of adaptability are:

the average time it takes to respond to special customer requests compared to routine requests;

the percent of time special customer requests are denied compared to the denial of routine requests;

the percent of special customer requests that have to be escalated to higher levels of management compared to the escalation of routine requests; and

the capability to respond to product changes versus process changes.

Organizations should establish baselines for efficiency, effectiveness, and adaptability metrics. In other words, they should determine their current performance levels. Then they should benchmark best-in-class or world-class organizations and set aggressive goals or targets for improvement. Finally, they should determine root causes of problems and eliminate them or minimize their impact.

Generally, management and non-management employees have not had experience with the concepts and tools that will help them evaluate the processes which they own. In this case, training and opportunities to apply the concepts and tools should be provided. Examples of concepts and tools are:

statistical process control, which measures variability in a process; trend charts, which measure performance over time; pie charts, which depict measurements compared to each other; process flow charts, which allow staff to quickly identify serial versus simultaneous

processes, items which do not add value (like too many signatures, unnecessary travel and handling, long queues, etc.), and sub-processes that do not meet the needs of internal customers.

In addition to process concepts and tools, 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.

Efficiency and effectiveness are often considered synonyms, but they mean different things when applied to process management. Efficiency is doing things right, while effectiveness is doing the right things. A third related concept is adaptability, which is flexibility or the capability to respond fast. In some respects, it is this capability for an organization to reinvent itself that ensures its long-term survival and success.

Organizational leaders can't comprehend the extent to which their organizations and processes are efficient, effective, and flexible unless they choose and use the right metrics. Of course, the results of those measurements should be fed back to the process owners so that they can improve the organization and the processes. This includes management processes as well as lower-level work processes. By their very nature, 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.

Answers to who, what, where, when, and how questions can be used to determine if the work should be done at all, who should do it, where and when it should be done, and how the work should be done. If these questions are answered truthfully, many activities in a process will be eliminated because they do not add value. Sometimes, entire processes will be eliminated.

Employees need to learn about and use various concepts and tools which will help them and their processes to be more efficient, effective, and flexible. For example, flow-charting the

curriculum process mentioned above would have highlighted the need to replace serial sub-processes with sub-processes that were simultaneous and the need to eliminate duplications of effort and long waiting times. In addition, workers should learn interpersonal and leadership skills in order to be able to refine relationships as well as processes and organizations.

Mildred Golden Pryor

Revised by Deborah Hausler

"Efficiency or Effectiveness?" Hindu (20 January 2000).

Hammer, Michael. Beyond Reengineering. New York: HarperBusiness, 1996.

Pryor, Mildred Golden, J. Chris White, and Leslie A. Toombs. Strategic Quality Management: A Strategic Systems Approach to Quality. Houston, TX: Dame Publications, 1998.

Timothy, Allen. "Address Call of Effectiveness not Efficiency." Precision Marketing (17 October 2003): 18.

What is the difference between efficiency and effectiveness marketing measures?by Dave Chaffey on January 24, 2011

Efficiency and effectiveness definition & explanation

I think many would think efficiency and effectiveness are similar terms for measures. If so, think again, since you really need both types of measures when identifying the most suitable goals and measures to assess your marketing or business effectiveness. It’s fine to say the difference doesn’t matter especially, 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.

Definition of efficiency

The simple, often used, definition of efficiency is (“doing the thing right“).

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, i.e. we are keeping our costs low. In digital marketing, for example, efficiency involves increasing conversion rates and reducing costs of acquisition.

Within digital marketing, common efficiency measures across the areas of the digital marketing activities of the RACE framework are:

Reach

Cost of acquisition (CPA) Clickthrough rates on Ads or Adwords

Act

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“).

In digital marketing, effectiveness involves supporting broader marketing objectives and often indicates the contribution of the online channel.

Across the digital marketing activities of the RACE framework, examples of effectiveness measures are:

Reach

Revenue or goal value per visit Audience share compared to competitors gap analysis of total search demand

Act

Average order value Number of items per order

Convert

Margin Customer satisfaction with site experience

Engage

Hurdle rate of percentage active online customers, 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, but for the main thing is to review that you have a good coverage of each.

An example of efficiency and effectiveness measures

I’ve create this example based on the balanced scorecard, popularised in a Harvard Business Review article by Kaplan and Norton (1993).

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, through measurement, assessing whether the strategy and its implementation are successful.

Balanced scorecard sector Efficiency Effectiveness

Financial results (Business value)?

Channel costs? Channel profitability

Online contribution (direct) Online contribution (indirect)? Profit contributed

Customer value Online reach (unique visitors as % of potential visitors)

Cost of acquisition or cost per sale (CPA/CPS)

Customer propensity

Sales and sales per customer New customers Online market share Customer satisfaction ratings Customer loyalty index

Operational processes Conversion rates Average order value List size and quality E-mail active %

Fulfilment times Support response times

Operational processes Conversion rates Average order value List size and quality E-mail active %

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, as indicated by innovation, customer satisfaction and employee development.

In addition to financial data, the balanced scorecard uses operational measures such as customer satisfaction, efficiency of internal processes and also the organisation’s innovation and improvement activities including staff development.

Summary

It is useful to identify efficiency and effectiveness measures separately, since online marketing and web analytics often tend to focus on efficiency. 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, but these measures can be applied across all four areas as we have shown.

References

Hasan, H. and Tibbits, H. (2000) Strategic management of electronic commerce: an adaptation of the balanced scorecard, Internet Research, 10(5), 439–50.

Kaplan, R.S. and Norton, D.P. (1993) Putting the balanced scorecard to work, Harvard Business Review, September–October, 134–42.

FOUNDATIONS OF ORGANIZATIONAL THEORY  "Management is the science of which organizations are but experiments" (John Constable) 

    Everyone belongs to organizations, but what do we really know about them?  Not the social kind, where people simply get together to do whatever comes to mind, but the enduring kind where people deliberately try to get organized to accomplish something.  Clearly there is much that is different about these kinds of organizations (Blau & Scott 1962).  We know that such organizations traditionally form along lines of a pyramid shaped hierarchy based on a military model.  We also know that in order to be "formal," an organization must have a mission statement, goals, objectives, tasks, as well as a roster of personnel or members.  We further know that in order to be "rational," 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, unity of command, span of control, and channels of communication.  What we don't know is why and how informal organizations develop inside of formal organizations.  An informal organization almost always develops and can either help or hinder mission accomplishment.  We also don't know much about how managers are supposed to obtain accountability for the tasks and adherence to the rules.  For example, how is authority to be delegated?  Can responsibility even be delegated?  There is further the problem of size.  As organizations become larger, the units within them tend to become more specialized.  Specialization can enhance effectiveness and efficiency, but overspecialization can seriously impede the mission.  Specialization requires a high degree of coordination, and coordination is critical for any organization, large or small, specialized or not.  By design, most organizations have the following components:

MISSION|

GOALS|

OBJECTIVES|

BEHAVIOR

    The mission is the organization's reason for existence, 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.  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.  Objectives are specific, measurable outcomes related to goals, such as a 30% improvement or reduction in something, and they are usually time-specific, but more importantly are designed to be what employees can relate to.  Behavior refers to the ordinary task productivity of employees.  Accountability of behavior to objectives is a personnel function, and of behavior to goals an oversight function.  Communication channels normally exist between behavior and goals in most organizational designs.  Organizations can accomplish amazing wonders when, by design, they concentrate on a limited number of functions in a systematic way to achieve coherent goals and objectives.

    All organizations have managers, but few people know what they really do or are expected to do.  At all levels, managers are supposed to have authority and power, which implies the ability to coerce compliance by making subordinates carry out orders.  Basic management skills include technical skills, administrative skills, conceptual skills and people skills.  At the top levels of management are found the administrators or executives who typically carry out the responsibilities of planning, budgeting, public relations, and the discipline of key employees.  At the lower and middle levels of management are normally found the leaders who typically motivate other employees to accomplish organizational goals.  The basic difference between managers and leaders is that managers focus on tasks, whereas leaders focus on people.  A leader in the purest sense of the term is one who influences others by example.  Classic theories about leadership have involved the study of traits which make a good leader, and modern (participative) management theories have focused on teams, which involve characteristics such as shared responsibility, alignment by purpose, high communication, future focus, task focus, creative talent, and rapid response.  In the end, what managers do is synonymous with management (the act of getting people together to accomplish desired goals via planning, organizing, leading, coordinating, and controlling, these being the five functions of management according to Fayol 1949).  However, there are controversies over definitions and conceptual approaches, and the following is offered along those lines: 

Distinguishing Key Concepts of Management

ADMINISTRATION

     The universal process of efficiently organizing people and directing their activities toward common goals and objectives.  Administration is always a headquarters function. It is primarily concerned with stewardship of any property that the organization has already accumulated and long-range planning for the acquisition of more property, "property" being broadly defined here as anything the administrator deems valuable for the organization to pursue as a matter of social policy.

MANAGEMENT

     Sometimes seen as a subtype of administrative responsibility associated with the day-to-day operations of various elements within the organization; but often used synonymously with administration in profit-seeking organizations. Management is frequently defined as the process by which elements of a group are integrated, coordinated, and utilized so as to effectively and efficiently achieve organizational objectives (Carlisle 1976). Objectives are usually the most doable things in organizations, and for this reason, some people think that management is not a function of "office" but a responsibility that permeates the entire organization.

ORGANIZATION      The coordination of groups or entities consisting of two or more persons (a collectivity) which has an identifiable boundary, and internal structure (offices), and engages in activities related to some complex set of goals. An organization always has three characteristics: structure,

purpose, and activity (Stojkovic, Kalinich & Klofas 1998), and the most interesting question one can ask about organizations regards synergy, or whether the organization acts in ways beyond the mere sum total of activities by its members. The word "goals" usually implies something that cannot be accomplished by individuals working at it alone or in separate ways, so in this sense, goals require synergy and synergy requires organization.

SUPERVISION

     Also called leadership, supervision involves day-to-day direction over the activities of employees, usually implying a one-on-one relationship. Supervision, like "leadership" is always a tribal function (Dupree 1989) which means that it accomplishes its purpose (to motivate and inspire) through manipulation of cultural symbols, such as the organization's vision, subcultural rituals, and formal and informal rites of passage. Supervisors are often seen as by necessity the most futuristic individuals in an organization, but they are also carriers of the cultural "code," values, beliefs, and attitudes for the organization.

    It is often assumed that principles exist to facilitate something called "work," but indeed, "work" or "job" may be the most difficult phenomena to study because of all the judgmental difficulties in assessing status and wages, quantity versus quality, complexity versus routine, job change over time, multiple job titles and responsibilities, and the weight of work, to name a few conceptual complications (Elliott 2001).  The ability to make money by working within organizations is not a principle, and neither is the subjective perception of unpleasantness or pleasantness.  Status and payment disputes are never-ending in organizations.  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.  Work is therefore best defined as something which needs to be done (Auerbach 1996).  Work, like management (and organizations as well), is what we tolerate as necessary to tell us what to do, how to do it, and when to do it.  In short, work inherently provides us with rules, mainly economic rules.  It is, in fact, the whole basis of economic life, which merits a brief discussion of that dismal science of economics.

    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).  Of course, capitalism isn't the only economic system around, but its principles of work are the most common.  A "secondary" capitalist institution in economics is one which provides alternatives to the limitations of a totally free marketplace.  You see, most economists assume that if everybody just bought and sold what they wanted in an unregulated marketplace, then people would only buy and sell what they needed for survival.  No new markets would expand; nothing would change; and nobody would really want to work harder for bigger and better things.  Understanding this is basic Economics 101, and if you grasp that administration, organization, and management exist to orchestrate bigger and better things than mere survival, then you have grasped an important insight into what capitalism and the Industrial Revolution were all about.  Of course, numerous fads and fashions have

existed before and after the Industrial Revolution, as the following table illustrates: 

The History of Organizational Management

ANCIENT TIMES

     The Sumerians (circa 5000 B.C.) invented "script" (first money) and record-keeping, and taxes; the Egyptians (~2000 B.C.) engineered vast projects (pyramids, irrigation), experimented with decentralized government and a form of participatory management ("get it off your chest"); the Babylonians (~1800 B.C.) put supervisor responsibility(vicarious responsibility) into Hammurabi's Code, and Nebuchadnezzr experimented with color as coding system and with wage incentives; the Hebrews (~1500 B.C.) had Moses' father-in-law, Jethro who invented the Scalar Principle (hierarchy principle, that all organizations ought to be pyramidial) and the Exception Principle (only bring big matters to your administrator); the Chinese (~1100 B.C.) glorified militarism, established system of grading workers into classes, and invented merit exams; the Greeks (~400 B.C.) invented job rotation, work to tempo of music, had a division of labor (based on superstitions about mixing wood, metal, etc), held famous debates over generic vs. distinct management styles in the dialogue between Socrates and Xenophon, and created the staff principle (adjutants or aide-de-camps); the Romans (~200 B.C.) organized the world's largest empire, engineered vast projects, created job descriptions, and debated over the traits of good leaders.

MEDIEVAL PERIOD

     Feudalism (600-1500 A.D.) 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"); Mercantilism expressed economic self-protection, the accumulation of resources (bullion), managing colonies and a spirit of trade, and a concern for esprit-de-corps of workers; Physiocracy expressed the idea that land (real estate) is the greatest wealth, and developed laissez-faire (hands off) principles of management; the Venetians (~1400 A.D.) became shipbuilders to the world, invented the assembly-line technique, employee evaluations (each March & September), and the ever-popular "wine breaks" 5 or 6 times a day for workers; Sir Thomas More (1500 A.D.) argued in his book, Utopia, for leaders to set the moral climate of organizations; Niccolo Machiavelli (1525 A.D.) argued in his book, The Prince, that leaders need to be shrewd, calculating, greedy, designing, practical, daring, and of unscrupulous character.

INDUSTRIAL PERIOD

     Capitalism (1765-present) instituted a free market system of production and distribution with principles based on the idea of profit and reinvestment; James Watt (1765) invented the steam engine and established employee Christmas parties and end-of-year bonuses; James Stewart (1766) - invented the piecework (incentive) system, quotas and rates for workers; Richard Arkwright (1776) created the 8-hour work shift; Thomas Jefferson and Eli Whitney (1785) came up with idea of interchangeable parts (one size fits all); Robert Owen (1810) practiced leadership through moral persuasion along with cross-training (job rotation); James Mill (1820) was an early originator of human motion and time studies; Charles Dupin (1831) focused on integrity and honor among managers; Charles Babbage (1832) invented the computer, foreshadowed scientific management (specialization), and brought back the ancient idea of using colors for efficiency; Andrew Ure (1835) had the idea of putting ventilating fans in factories; Henry Poor (1855) created information communication systems (switching data banks) for the U.S. railway system; Daniel McCallum (1856) created the way we still do organization charts (tree design); the "Robber Barons" or tycoons, such as the Vanderbilts, Rockefellers, Carnegies, Schwabs, Armours, Morgans, Edisons, and Fords, all practiced ruthless monopolization and anti-labor policies while pursuing other management initiatives.

20th CENTURY

     The 1950s saw:  computerization - computers and associated gobblygook were the prophets of progress; theory X and Y - McGregor's theory of participatory management; quantitative management - the trust in numbers and

cybernetic modeling; and management by objectives - Peter Drucker's idea of management by negotiation.     The 1960s saw:  T-groups - sensitivity groups/encounter seminars to teach interpersonal skills; matrix management - people reporting to different superiors according to task; and the managerial grid - an instrument for determining a manager's concern for people as opposed to a concern for task.     The 1970s saw:  zero-based budgeting - the idea of starting all over again from scratch each fiscal year; and the experience curve - using past experience to cut prices and gain market share.     The 1980s saw:  theory Z - adoption of Japanese management techniques; demassing - trimming the workforce and demoting managers; restructuring - sweeping out old practices and taking on new debt; cultural climate - attending to the moral examples set by top management; and management by walking around - leaving the office to visit the workers.     The 1990s saw: reorganization/restructuring - reorganization that changes lines of authority or restructuring that involves moving, adding, or eliminating organizational units; downsizing - streamlining, tightening, shrinking, or laying off a number of personnel; reengineering - changing the way work is carried out, to better serve the customer, client, or citizen, usually with technology; rightsizing - reducing the workforce, expenses, and redesigning policies, but can also involve upsizing (increasing the workforce) in certain areas considered vitally important; rethinking - strategically identifying and refocusing the core mission; delayering - removing one or more of the layers of management between the head and the front or operational lines; and deregulation - clearing away rules, regulations, paperwork requirements, or approval processes that affect the performance of public servants.

    Structure (how something is held together via the relationships between its parts) is perhaps the most important concept in organizational theory.  Structure is the basis of every large administration, and the structural approach tends to concentrate on top-down delegation of authority.  Almost all the well-known theories in organizational science (such as Max Weber's bureaucratic model) are examples of the structural approach, which usually justifies hierarchical arrangements or at least a way to tweak them into becoming more efficient or humane.  The structural approach is not limited to large organizations but can be used to describe systems of all kinds.  According to Kettl & Fesler (2005), there are four contenders to the dominance of the structural approach in organizational theory.  These alternative theories include: (1) the humanist approach which focuses on the life of individual workers within the organization; (2) the pluralist approach which focuses on how interest groups can shape an organization; (3) the third-party approach which maintains that with more organizational contracting-out, the less it fits structural models and so new ways of integrating third parties are necessary; and (4) the formal approach to model-building which views bureaucracies as networks of contracts, built around systems of hierarchy and authority.  An additional structural approach is systems theory which sees structure as not so much an anatomical thing, but the patterned, purposive ways people act inside organizations, or in other words, with structure being the same as the functions people carry out.  In an approach known as structural-functionalism, the functions always constitute the structure.   

THE STRUCTURE OF SYSTEMS

    It is considered conventional wisdom that the more executive functions of an organization should operate according to principles, theories, and rules.  If there are none, then you have a situation that administrative science calls "muddling through" which is another term for "flying by the seat of one's pants."  What it usually involves is

a method with no basis in theory.  Probably the number one rule in such an amorphous environment is that the organization should try to meet all its goals.  How this can best be accomplished is the subject of many theories.  It's in the nature of goals that any sizeable organization with have complex, multiple, and sometimes conflicting goals.  Often, there are parameters in the external environment (laws, for instance) that place limitations on goal accomplishment.  Sometimes, because of complex goals, organizational pursuit of a goal seems to create more trouble than it's worth, and the goals just keep getting more and more complex and unattainable.  Another common occurrence is when the internal environments (the employee subcultures or informal organization) interfere with goal attainment.  As a general executive principle, successful goal accomplishment often means that any organization worth its salt will change employees before employees are successful at changing the organization.  This is a primary characteristic of an OPEN organization, one which places priority toward external market forces, as opposed to a CLOSED organization which prioritizes the needs and interests of employees in hopes of achieving internal harmony.  Managers have to find the right balance between structuring an open and closed organization.  Open and closed organizations differ significantly in the way they deal with internal and external affairs, and most organizations are a mix of the two types.  The dichotomy of open-closed can also be used to examine organizational culture and leadership (Schein 1987).  More importantly, the dichotomy of open-closed gives rise to the first truly scientific theory of organizations -- OPEN SYSTEMS THEORY. 

    It may seem strange to present open systems theory as the first truly scientific theory, but as Munro (1974) points out, the approach has been around since the 1920's and 30's.  Open-system theory consists of the idea that some organizations are constantly interacting with their environments.  A business, for example, 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.  An open-system organization is not passive.  It reaches out, draws energy from the environment, and tries to shape the environment, but yet at times, is at the mercy of the environment.  Rules and principles typically found in this kind of organization include intensive training of recruits and stringent selection of employees.  Job descriptions might be very detailed, and discipline might be harsh.  Decision-making might weigh some factors as more important than others.  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 -- throughput -- output, 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).  It's unfortunate that many people oversimplify open-system theory to just mean customer service because the theory is much more than that.

    There is no closed-system theory, but any system taken in a large enough context can be considered a closed system, which is to say that every system is a subsystem of some larger system, and there exist certain subsystems for which it is unnecessary to understand their linkages to the environment.  All systems are both subsystems of larger systems and composed of subsystems at the same time.  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, of course, parasitic organizations which essentially subsist off other organizations.  Some aspects of scientific management, another organizational theory, 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).  In this view, closed-system organizations tend to "have their act together" in terms of having all the elements of the organization well-connected.  For example, communication flow in a closed-system always follows the lines of hierarchy; power and authority are always a function of office; and change is only implemented when it improves harmony in the socioeconomic dimensions of the organization.

SCIENCE, ART OR CRAFT?

    Administration is both an art and a science (albeit an inexact and soft science, but it is also a craft because administrators are not judged by their education or training, but by their performance on the job.  Some craft characteristics include the fact that administrators come to enjoy their authority and power, having no fear of it (i.e., "power will not corrupt").  Administrators usually believe their skills are GENERIC (transferable across organizations), but there is a debate between MPA- and MBA-educated administrators on this matter.  Administrators never feel guilty about their (higher) salaries ("it's my value to the organization").  Administrators also often "satisfice" rather than try to be efficient or effective, satisficing being a term that abbreviates and combines the words satisfactory and sufficient.  In the end, craft is the same as art, so the choice comes down to whether administration is an art or science.

Examples of the Art and Science of Administration

ART: Nine Normative Principles:

1. State clear objectives2. Align individual & organizational interests3. Act as final arbitrar (the buck stops here)4. Identify reward paths for employee performance5. Be creative, individualizing rewards paths6. Reward performers7. Punish nonperformers8. Take risks & make reasonably risky decisions9. Set an example for moral conduct and climate

SCIENCE: The POSDCORB Functions:

Planning - advance determination of objectives and methods for achieving themOrganizing - establish a structure of authority through which work gets doneStaffing - recruiting, hiring & training workers; maintaining favorable working conditionsDirecting - make decisions, issues orders & directives; aka leadershipCOordinating - interrelate the parts of the organizationReporting - keep those above you informed, via reports, records, research, and inspectionsBudgeting - fiscal planning, accounting, and control

MODERN ORGANIZATIONAL SCIENCE

    Today, a separate field of study called organizational science exists, 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).  The study of organizational behavior tends, for the most part, to be characterized by the study of how people act and make decisions in organizations. 

There are four models of organizational behavior (OB) which have evolved over time with no one being the "best" model, as below:

Autocratic - This is a model based on the structure and reactions to managerial power and authority, and behavior in such organizations is seen in terms of obedience, disobedience, dependence, and independence.

Custodial - This is a model based on the distribution of economic resources, primarily money, and behavior is such organizations is seen in terms of security and insecurity, cooperation and non-cooperation.

Supportive - This is a model which focuses upon leadership, primarily in terms of how supportive management is, and behavior in such organizations is seen in terms of status, participation, and recognition.

Collegial - This is a model based on partnership and teamwork, with behavior in such organizations seen in terms of self-discipline and self-actualization.

    The study of organizational development (OD) tends, for the most part, to be characterized by normative (or moral) concerns for the quality of work-life, the adaptability or flexibility of organizations, and the ways that attitudes, behaviors, and values can be changed to help an organization adapt to a fast-paced environment.  In the typical intervention which is organizational development (OD), change agents are either brought in or created to help stimulate, facilitate, and coordinate change.  Also typical are attempts to redesign jobs, and there are two models for job redesign which have generated the most theoretical interest, as below:

Job Enlargement - This model entails adding more variety to the job so it does not become monotonous, and it is typically accomplished thru job rotation, but anything which gives a job more "breadth" is also said to work. 

Job Enrichment - This model entails adding more motivators while keeping job tasks the same, and it is typically accomplished by tweaking the control, responsibility, and discretion aspects of the job.

    Besides the above theoretical models, there's no escaping the fact that organizational science (or theory) tends to be quite heavily informed by systems thinking, or the notion that any problem tends to be best understood when its component parts are analyzed in relation to the whole.  In other words, the parts of something are believed to operate quite differently when viewed in isolation or independently.  No independent part can ever constitute a system.  All systems have interdependent parts, and when they operate together, the systemic interaction is toward some goal or end state.  Noise (entropy) and specialization (differentiation) can exist in a system, but these, like unpredictability, can all be regulated by feedback mechanisms (some portion of an output signal is passed back to the input).  All systems have inputs and outputs.  In a closed system, inputs are determined once and constant; in an open system, additional inputs are admitted from the environment.  The following chart should help illustrate systems thinking:

    The systems model above incorporates Lewin's (1958) three phases of change, making this an organizational development (OD) model, or a model for what Lewin called it - action research.  The first phase (unfreezing) involves awareness of a need to change; the second phase (changing) involves the exploration and testing of new ways of doing things; and the third phase (refreezing) involves applying the new behavior if it is evaluated well.  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.  There is no way for students in public management to avoid dealing with the academics of systems theory eventually.  Systems thinking (or the systems framework) extensively permeates the whole field of organizational science via many influential thinkers, like Ludwig von Bertalanffy (1901-1972), Talcott Parsons (1902-1979), Kenneth Boulding (1910-1993), Jay Forrester (1918-), Russell Ackoff (1919-), Edgar Schein (1928-), and many others.  Further, many management consultants like Peter Drucker (1909-2005), Stephen Covey (1932-), Tom Peters (1942-), and Peter Senge (1947-) have made profitable livings out of turning academic systems thinking into digestible products for business applications.

ORGANIZATIONAL THEORIES AND PRINCIPLES

Systems Theory    It has been said systems theory is the dominant paradigm in administrative science (Harmon & Mayer 1986).  It can also be said that Katz & Kahn (1978) represent the most influential work in systems theory.  Not only did Katz & Kahn (1978) emphasize negative entropy in order for organizations to survive, but they also emphasized "equifinality" (the achievement of various goals by a variety of approaches) in order for organizations to grow.  According to Katz and Kahn (1978), managerial systems require four subsystems to work properly:  a support subsystem; a maintenance subsystem; a production subsystem; and an adaptive subsystem.  Further, three factors influence the manner in which these subsystems work:  the authority structure; the ideology; and the pattern of formal roles.  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, so they never really developed their social psychology.  Other theorists have focused their attention on other components, and for the most part, systems theory is still far from fully exploited in organizational science.

Contingency Theory    What is called "contingency theory" rests upon an understanding of uncertainties an organization faces in its environment; uncertainties being variables the organization can neither control nor predict.  For instance, Thompson (2003) claimed that most organizations are a mix of open and closed types, and often have goals that are unclear or conflicting.  These are problems that the bureaucratic and scientific management approaches have a hard time dealing with.  Employees differ in their tolerance for risk and ambiguity.  Threats to an organization can come from both inside and outside the organization.  Organizations can be attacked by elected officials, interest groups, the news media, individuals, and its own workers.  Management must deal with these attacks in order for the organization to achieve rationality, survival, and stability, but management must also protect the core of the organization.  The core of any organization is typically a technical (or technological) core (that is what gives organizations their high performance), 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.  Hence, the technical core of an organization should always be structured in a closed-loop fashion.  In contingency theory, uncertainty determines structure.  It depends upon threats and attacks.  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).  

Expectancy Theory    In what is called "expectancy theory" (Vroom 1964), the focus is on choices that individuals make, and it is assumed that all workers expect a positive correlation between performance and reward.  Organizations are believed to run on the principle that the desire to satisfy the need will always make the effort worthwhile.  Motivation is the product of three components:  valence (how emotional people are toward rewards); expectancy (expectations or levels of confidence in one's abilities); and instrumentality (perceptions one will get what they deserve).  Expectancy theory is very similar to another theory, called "equity theory" as developed by Homans, other social exchange psychologists and strain criminologists.  Expectancy theory, however, tends to be measured at the level of need while equity theory tends to be measured at the level of want; i.e., realistic expectations rather than unrealistic aspirations.  Sometimes it's the desire to perform a behaviour rather than the need to perform a behavior that matters.  Most systems thinkers, however, would say it's outcomes which matter.  In any event, with Vroom (1964) one can see how the study of personality factors makes inroads into organizational science. 

The Managerial Grid    In 1964, Blake & Mouton developed a theory known as the "Managerial Grid" which can be classified as a kind of expectancy theory, although some academics regard it as a human relations theory since it is based largely on McGregor's (1960) Theory X and Theory Y.  It is based on two variables: focus on task (production) and focus on relationships (people). The grid includes five possible leadership styles based on concern for task or concern for people. Using a specially designed testing instrument, people can be assigned a numerical score depicting their concern for each variable. Numerical indications, such as 9,1 or 9,9 or 1,9 or 1,1 or 5,5 can then be plotted on the grid using

horizontal and vertical axes. Although their work is frequently classified as a leadership theory, it can be useful for a number of purposes, most particularly when it comes to organizational design or the study of organizational conflict.  Hersey & Blanchard (1993) extended the model by expanding upon the leadership implications of the relationship and task dimensions and adding a readiness dimension.  Clearly, the managerial grid was extremely popular for many years, 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, and the worst style is 1.1 or the impoverished style where a manager simply tries to hide out and not be noticed. Style 1.9 or the country club style makes for a comfortable place to work, but little productive work gets done. Style 9.1 is dictatorial management or Theory X (employees always need to be told what to do). Style 5.5 or the middle of the road style produces suitable or satificing performance only.  Style 9.9 or the team style is the best style and is generally synonymous with Theory Y (most employees want to do well and there is an untapped pool of creativity in every workforce).

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.  He argued that organizations are distinguishable on the basis of "compliance mechanisms" they rely upon to control workers.  Compliance, along these lines, is synonymous with power, and power within organizations can be coercive (threat driven), remunerative (reward driven), or normative (symbolic reward driven).  A key assumption of compliance analysis is that when organizations emphasize more than one type of power, over the same time and over the same group, the different kinds of power tend to neutralize each other.  Compliance structures should be congruent, 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.  In other words, when managers are forced to employ more than one kind of power, the system usually fails.  Further, when interorganizational subsystems are put together into one system, and each subsystem relies on a different compliance mechanism, the larger system will likewise fail, this being a common theoretical explanation of interorganizational ineffectiveness in the literature.  Etzioni (1975) has also characterized the orientations of workers toward power as one of three kinds:  alienative (intensely negative); calculative (low intensity);

and moral (high positive intensity).  When these three kinds of orientations are combined with the three kinds of power, the result consists of nine possible compliance relationships, as illustrated below:

The Nine Types of Compliance RelationshipsAlienative Calculative Moral

Coercive 1 2 3Remunerative 4 5 6

Normative 7 8 9

Gulick and Urwick    Among those who advocated that management principles ought to be generic and have universal applicability, the names of Gulick and Urwick (1937) stand out.  These are the pioneers who invented the acronym POSDCORB to describe the eight essential, daily tasks of a manager.  POSDCORB stands for Planning, Organizing, Staffing, Directing, Coordinating, Reporting, and Budgeting.  They are the eight things that a manager must exercise power and responsibility over, and they are to be accomplished primarily by putting the right people in the right places of the organization.  Gulick and Urwick (1937) were big believers in division of labor, as well as many other principles which have become associated with administrative science since that time, as follows:

Hierarchy -- This refers to a pyramid of control and a vertical ordering of superior-subordinate relationships in a defined chain of command. In this defined chain of command, higher-level officials supervise lower-level officials inside the organization. This involves, in addition, the allocation of skills, authority, and financial rewards inside the organization.

Unity of Command -- This refers to the principle that each employee must have one and only one immediate superior. This superior coordinates the activities of his or her subordinates. Unity of command reduces employee uncertainty, because he or she has no confusion or ambiguity about whose orders to obey. Therefore, direction is given to subordinates by a single individual at every level of the chain of command.

Functional Specialization -- This means that various organizational subdivisions, such as personnel, finance, and purchasing should be grouped together by function to facilitate having each component part of the organization contribute to the organization's overall objectives. Specialization of jobs and tasks would thus help to achieve this overall goal. To help achieve this goal, there must be division of labor along the lines of subject matter specialization.

Span of Control -- This refers to the number of subordinates that are supervised by any one manager. The most appropriate span of control exists when a superior supervises the actions of a limited number of subordinates. Thus, the span of control should be as narrow as possible if the organization is to maximize efficiency andeffectiveness in carrying out its predetermined goals.

Rational Organizational Design -- By this is meant that the organization should be set up along the lines of purpose, client served, place, and process. For example, if the purpose of an organization is law enforcement, the client served would be offenders specifically and the public more generally, the place would be the city or county, and the process served would be protecting the public. In addition, they argued that the organization should be designed to maximize effective communication.

    Gulick and Urwick (1937) provided no shortage of principles.  Another list of all the management principles they advocated includes the following which is sometimes cited as a comprehensive set of organizational principles:

    1. Principle of the Objective (Organizations must have a common purpose)    2. Principle of Correspondence (Organizations must have fairly coequal systems of authority and responsibility)    3. Principle of Responsibility (Supervisors must be responsible for the work of their subordinates)    4. Scalar Principle (Organizations must have a pyramidal-shaped organizational structure, or hierarchy)    5. Span of Control (The best span of control for most organizations should be about 5 or 6)    6. Principle of Specialization (Work should be limited to one function only for most workers)    7. Principle of Coordination (Administrators should always look for ways to creatively realign the organization)    8. 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.  They mostly came to the same conclusions as Gulick and Urwick (1937), but offered the following as generic organizational principles:

Unity of Command -- conceived in the same way as Gulick & Urwick's formulation Functional Specialization -- conceived in the same way as Gulick & Wrwick's

formulation Scalar Principle -- This refers to the vertical division of labor within an organization

and the flow of authority and responsibility in a clear, unbroken line from the top of the organization's hierarchy to the bottom.

Line-Staff Distinction -- 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. Line employees perform the primary or core functions of the organization. Staff employees perform secondary or support activities in support of the organization's core functions and assist line employees. Managers should always keep this distinction in mind for the purpose of keeping personnel resources concentrated upon performing the primary or core functions of the organization.

Henri Fayol    The "grandfather" of all administrative science is, of course, Henri Fayol (1841-1945), 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, and in comparison to other theorists, his principles amounted to essentially the same thing as Gulick and Urwick's (1937) POSDCORB except that Fayol added commanding and controlling.

commanding -- Fayol argued that managers must regulate the activities of employees so that these activities proceed towards accomplishing the ultimate goal of the organization.

controlling -- it is the duty of the manager, according to Fayol, to force or to otherwise see to it that all employees comply with the organization's formal rules and procedures.

    Fayol's (1949) suggestions for turning companies around also provided some interesting principles.  His advice in this regard was to:  (1) start at the top and reorganize the upper management echelons, including the Board of Directors; (2) teach everybody in the organization management theories and administrative thought; (3) eliminate as much red tape as possible in the organization; and (4) establish lines of lateral communication.  Here's a detailed analysis of these ideas: 

    1. Start at the top -- Fayol believed that most problems of management stemmed from management people being too far removed from an appreciation of the lifestyles and concerns of the average worker. He desired that managers should come from the ranks of workers rather than from an elite class in society. He believed that no formal education or training was necessary for the generic skills of administration; even parents by virtue of having raised children would make good managers. Today's "Executive-for-a-day" programs are a Fayolian tradition.    2. Teach everybody management theory -- Fayol started trade schools and college courses in the factories he supervised, not so much to afford workers a chance to move up, but to bring management and labor together in the workplace of ideas. Regular line-staff conferences and meetings were held periodically in the organization to discuss the ideas of management thinkers, and the purpose of these debates and discussions was intended to increase morale and esprit-de-corps.    3. Eliminate red tape -- Paperwork and mathematics were considered unnecessary by Fayol. What was needed instead of planning was careful forecasting (guesswork), concentration upon the vision and long-term (10-year) goals of the organization. Fayol even advocated periodically changing the organizational charts, for no reason at all but to shake things up a bit.     4. Lateral (sideways or horizontal) communication -- Although Fayol did not sacrifice the Scalar Principle, he advocated a rather narrow span of control, no more than 4, which resulted in rather tall organizations. This created the problem of "middle management", ranks of people in the middle of the organization acting as buffers for vertical (up & down) communication. Since there was little to be done about innovating vertical communication (it would go on anyway), Fayol concentrated on horizontal (lateral) communication, inventing the now-famous gang-plank principle, 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, even if different departments are involved.

The Full List of Fayol's 14 Management Principles    1. Division of work (specialization of labor)    2. Authority (and responsibility commensurate with authority)    3. Discipline (based on respect rather than fear)    4. Unity of Command (people cannot bear dual command)    5. Unity of Direction (one head and one plan for each unit of management)    6. Subordination of individual interests to the general interest (no individual should ever prevail, or try to prevail,

over the organization)    7. Remuneration (a wage system that is fair, reasonable, and rewarding)    8. Centralization (subordinate roles must be less important than superior roles)    9. Scalar principle (a hierarchy of communication but using the gang-plank principle)    10. Order (a place for everything and everything in its place)    11. Equity (employee relations based on kindliness and justice)    12. Stability of tenure of personnel (provisions to replace human resources)    13. Initiative (display of zeal and energy in all efforts)    14. Esprit de corps (build harmony and unity within the firm)

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