The 3 Primary Factors That Impact Organizational Effectiveness

What is it that makes some organizations more effective than others? Is it a unique product? Stellar customer service? Something else? The truth is, it could be any or all of these things, but true organizational effectiveness comes from ensuring that the appropriate organizational systems are in place to support managers in their work. The most fundamental of these systems is an accountability and authority framework that creates the ability for organizations to be clear about who is accountable for doing what, and the authority that they have to do it.
Without a commonly understood accountability and authority framework this clarity is extremely difficult to establish. So what are the three primary factors that impact the effectiveness of an organization with respect to this framework?

1. The Board of Directors

Different types of organizations are formed for different purposes. Not-for-profit organizations are established to benefit the community. Government organizations are established to serve the population. Private sector organizations are established to provide products and services and create profit. In each case, although the mechanisms are different, the organization is formed by a group of people: members, voters, or shareholders. These people, in a very real sense, are the organization, for they establish its mission, its vision, and are put in place (typically) by an Annual Meeting of members who elect a Board of Directors to oversee the work of the organization.

The Board, then, is the body that is accountable for the overall workings of the organization, and has the authority to establish how business will be carried out. The Board governs the organization by creating policies, setting strategy, and as the organization reaches a certain size, engaging a CEO to carry out the operations of the organization. The CEO is delegated accountability and authority for the operations of the organization, while the Board maintains the accountability and authority for governing the organization.

The role of the Board is very important because all of the accountability and authority in an organization begins there. While the Board cannot directly task anyone in the organization aside from the CEO, it must ensure that the CEO has an appropriate accountability and authority framework in place to be successful in implementing the organization’s strategy.

2. The CEO

While the Board of Directors may have the accountability and authority for governing the organization, it is the CEO who is delegated the accountability and authority for implementing the organization’s strategy. The CEO is therefore at the top of the management accountability and authority framework within the organization. The CEO has the single most significant impact on the effectiveness of the organization simply by being the person that is accountable for translating the organization’s strategy into deliverables.

Some of the work in the attainment of a strategy needs to be carried out by the CEO directly. Other work needs to be delegated to the next level down and so on until everyone in the organization has been delegated work that they are accountable for carrying out. Without this framework, the clarity of this delegation becomes muddied the further away an individual is from the CEO. As a result, the CEO significantly impacts organizational effectiveness by ensuring there is accountability and authority framework in place for all levels of the organization.

3. Manager Clarity

Managers are required to use the resources (people, money, equipment, information) that have been delegated to them to produce results. Managers impact organizational performance by how well they “manage” their resources. They must be clear about delegation of budgets, equipment, and work that needs to be done.

  • Exactly what are their subordinate managers accountable for?
  • What is the time frame for delivering the results?
  • What is the level of quality that is expected?
  • What is the quantity of output that is expected?
  • What are the authorities that have been delegated to allow for the achievement of these accountabilities?

Effective managers are clear and consistent, with the ability to translate goals into results, both for themselves and for their subordinate managers and their teams.

Organizations can be impacted by a variety of things. Delegating to the right people in a way that is consistent with organization’s strategic goals (and thus the CEO’s strategy and goals) impacts the overall effectiveness of the organization. Remember, nothing has more impact than the accountability and authority framework as assured by the Board of Directors, developed and implemented by the CEO and carried out by the managers.