Academic journal article IUP Journal of Management Research

Organizational Effectiveness in Banks and Insurance Companies: A Comparative Study of Public and Private Sectors

Academic journal article IUP Journal of Management Research

Organizational Effectiveness in Banks and Insurance Companies: A Comparative Study of Public and Private Sectors

Article excerpt


Over the years, definitions of organizational effectiveness have generated considerable debate. The available literature on organizational effectiveness reveals that there is little agreement concerning the construct. A major contributor to the controversy appears to be the fact that organizational effectiveness has come to be regarded by many as synonymous with goal attainment (Etzioni, 1964). Organizational effectiveness means different things to different people and the variable depends on who explains it (Cameron and Whetten, 1983). Quinn and Cameron (1988) found that organizational effectiveness has no objective reality of its own but depends on who defines it. An organization is formed by groups of individuals working together to achieve organizational goals, and if the goals are achieved on time with efficiency the organization becomes effective. Cameron and Whetten (1983) are of the view that organizational effectiveness is the extent to which an organization achieves its goals and objectives. It is the measure of how successful organizations achieve their goals through their core competencies and strategies. Organizational effectiveness studies are concerned with the unique capabilities that organizations develop to assure success (McCann, 2004). The success of an organization also revolves around the behavior and performance of people within the organization and can also be considered as an important part of organizational effectiveness (Chelladurai and Haggerty, 1991). Academicians, researchers and consultants are rapidly developing ways to assess and guide alignment to enhance organizational effectiveness. Many studies have been conducted to integrate human resource practices with financial performance of the firm and the notion has been that the human resources in the organizations can build competitive advantage resulting into good financial performance. Huselid (1995) analyzed business performance in terms of human resource work practices. The study provides a test of the prediction that the impact of work practices on business performance depends on the degree of best fit.

From the 1950s, numerous studies in the literature of organizational theory have focused on understanding the concept of effectiveness (Hopper and Powell, 1985). As a field of research, several researchers have shown interest to integrate performance measurement with organizational effectiveness and the relation between the two. Against this backdrop, the present study analyzes the difference in organizational effectiveness between the public and private sector banks, between two types of organizations the banks and insurance, and at two levels of organizational hierarchy, front line and managers.

Literature Review

Several models have been developed from time to time to understand the importance of organizational effectiveness construct. The traditional model on effectiveness relies on a vision of the organization as a set of organizational activities oriented towards the achievement of goals (Goodman et al., 1977). Effectiveness is measured in terms of achievement of goals, objectives, targets, etc. (Etzioni, 1960). The system model emphasizes on achievement of specific ends in terms of inputs, acquisition of resources and processes without ignoring the importance of output (Yuchtman and Seashore, 1967).

Effectiveness can also be measured in terms of strategic-constituencies model. This model focuses on the scope of expectations of shareholders. The shareholders are the owners, employees, customers, suppliers, creditors, community and government that must be satisfied in order to ensure the effectiveness of the organization (Connolly et al., 1980). The organization is perceived as a set of internal and external constituencies that negotiate a complex set of constraints, goals and referents (Goodman et al., 1977).

The competing-values model constitutes an extension of the previous models (Quinn and Rohrbaugh, 1983). …

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