Page 208 - Managing Change in Organizations

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Efficiency and effectiveness
Developing the knowledge base from which people operate takes time and
energy. Once accumulated, a knowledge base has multiple uses. If a retail com-
pany develops an excellent reputation for merchandising high-quality goods
then it can use this reputation to promote products in new sectors, e.g. financial
services. The reputation will attach to new stores, and this may help the com-
pany attract high-quality staff. Invisible assets are both inputs and outputs.
Having attracted high-quality staff to aid its development of a new market,
these staff bring in new ideas to the company. This enables the company further
to improve its operations and therefore enhance its reputation; thus being more
effective as an organization is both an input to and an output of organizational
change. More effective firms are more capable of handling change. Handling
change effectively helps to sustain and create effectiveness in the future.

Efficiency and effectiveness

Most people distinguish between efficiency and effectiveness. Efficiency com-
prises achieving existing objectives with acceptable use of resources.
Effectiveness means efficiency plus adaptability. The effective organization is
both efficient and able to modify its goals as circumstances change. It can solve
one of the dilemmas of organization: ‘When we are doing well, why change?’
‘Why break a winning streak?’ ‘Why upset a winning team?’ These are everyday
expressions which capture the dilemma. If we are doing well people will find it
hard to justify change with all its potential costs and disruption. Yet in a chang-
ing world we must continue to adapt, and when better than while we are doing
well? Doing well provides us with the resources, the time and the confidence to
accept change.
Consider a company manufacturing electromechanical weighing equipment
in Europe in 1970. To be efficient it needed to manufacture its products at eco-
nomical costs. It needed to market its products with competitive pricing and
service support. Above all, it needed to achieve ‘acceptable’ profits (although we
must define what we mean by ‘acceptable’). To be effective that company would

also need to be developing electronic technology. In the 1970s electromechani-
cal weighing machines were replaced by electronic designs which were more
accurate, more reliable and smaller in size. To be effective in its market sector the
company needed to be looking to electronic designs in 1970, indeed before then.
It needed to be training people in the design, manufacture, sales and servicing of
such equipment. The technology was available and would be applied to secure
specific product improvements. Thus competitive advantage would be secured
through this technology. Effectiveness implies the ability to recognize and
respond to changing market or other environmental circumstances.
In looking at effectiveness, Argyris (1962) focuses on the following three core
activities relevant to any organization:
1 Achieving objectives.
2 Maintaining the internal system.
3 Adapting to the external environment.

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