Durda Y.V.

Bukovyna State Finance Academy, Ukraine

Relationships among Effectiveness, Productivity, and

Performance

 

Strategic control is a process of implementing strategy and monitoring the organization's performance as it attempts to execute that strategy. Three key elements of strategic control are effectiveness, productivity, and performance.

This problem has been discussed by many Ukrainian and foreign scientists such as Al-Darrab I., Bernolak C., Moseng B., Rolstada S. and others [1,2,3].

On the basis of their researches we can make a conclusion that process for integrating effectiveness, performance, and productivity flows from the goal set through the management functions and performance and productivity to the assessment of effectiveness.

Each of these is a distinct area, they can also be integrated in such a way as to provide a general framework for facilitating strategic control.

The first step in using this framework is to determine the organization's goal set. Organizations typically establish financial goals (such as a target rate of return or a certain increase in productivity), environmental goals (such as growth or market share) and participant goals (such as lower turnover or employee satisfaction). Survival is generaly an implied goal.

The organization then attempts to achieve these goals in an optimal fashion. That is, it tries to balance goals that are contradictory and inconsistent by nature.

 Goals are pursued through the basic management functions of planning and decision making, organizing, leading and controlling. These functions are not discrete, sequential activities but interacting dimensions of the typical manager's job. That is, managers are usually performing multiple functions simultaneously.

As a result of the performance of these functions, the organization achieves certain levels of performance and productivity. Performance reflects the ways in which the organization attempts are effective. Productivity represents the level of outputs achieved by the resources of the organization.

 Management should assess the extent to which the organization is effective. The framework suggests that one method for assessing effectiveness is to ask the four basic questions. Those questions focus on whether the goals at the organization are understood, whether interrelationships among these goals are known, whether proper time frames for the goals have been established, and whether the organization's environments are being adequately monitored and evaluated.                              

    If the organization can answer “yes” to each question, it is evidently achieving an appropriate level of effectiveness (assuming, of course, that proper goals were established to begin with). If this is the case, the organization can proceed on course with its existing goal set or modify those goals to meet new and different circumstances. This process directly affects both the basic managerial functions and subsequent levels of performance and productivity.

 If the answer to one or more of the questions for assessing effectiveness is no, however, the manager must evaluate the situation and take appropriate action. If a "no" answer has performance consequences, several actions are possible: the management audit and man resource accounting. A management audit can answer several questions about the organization (such as probing executive effectiveness and production efficiency), whereas a human resource accounting can help the organization determine the distribution pattern of strengths and weaknesses among its human resources.

If a negative assessment of effectiveness indicates problems with productivity, different kinds of action may be needed. They include investing in research and development, emphasizing manufacturing, changing incentive for employees enhancing cooperation with labor, increasing employee participation, tightening controls, and attempting to change government policies.

    Finally, a "no" answer to a question about effectiveness may reveal other problems. If this is the case, managers must evaluate the seriousness of the problem and its implications for the organization and its goal set. Appropriate changes can then be made. If the error is a failure to monitor the prices of a small, relatively insignificant competitor, the organization may choose to do nothing. But if the organizations very survival is in danger, a drastic overhaul of the goal set may be necessary.

So, we have presented a framework interrelating organizational effectiveness, performance, and productivity. The primary value of this framework is its potential usefulness as a technique for overall organizational control. This framework, however, encompasses the total organization. As such, it can help managers monitor all of their activities and successfully carry out the control function at the organizational level.

References:

1. Al-Darrab I., “Relationships between productivity, efficiency, utilisation, and quality” – 2008, Work Study: Vol. 49 No. 3,  pp. 97-103.

          2. Bernolak C., “Productivity gainsharing” – 2008, Working Paper: No. EMD/16/E, International Labour Organisation, Geneva, available at: http://oracle02.ilo.org/dyn/empent/docs/F111PUB98_01/PUB98_01.htm

3. Moseng B., and Rolstada S., “Success factors in the productivity process” – 2007, 10th World Productivity Congress, available at: www.catriona.napier.ac.uk/resource/wpc10th/moseng.htm