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1 INTRODUCTION
Organizational effectiveness is critical to the
management of an organization since it
measures how thoroughly and efficiently a
company achieves its business goals. It is al-
so an indication factor of the success of the
organization’s leader, who demonstrates the
ability, potential, leadership, and responsi-
bility in the administration (Jones 2002).
Organizational effectiveness has no standard
definition. Traditionally, this concept has
been viewed as productivity. Sometimes, or-
ganizational effectiveness is called “organi-
zational success or organizational worth”
(Georgopoulos & Tannenbaum 1957) or or-
ganizational performance (Lee & Choi
2003). Generally, it refers to goal-attainment
or mobilization of human and other re-
sources to achieve the organization’s collec-
tive goals and purposes. This is consistent
with the opinion of Fallon & Brinkerhoff
(1996), who define organizational effective-
ness as “a company’s long-term ability to
achieve its strategic and operational goals
consistently.” Seashore & Yuchtman (1991)
define organizational effectiveness as the
organization's ability to bring in limited and
valuable resources from the environment to
support and benefit an operation of the or-
ganization. Georgopoulos & Tannenbaum
(1957) reveal a broader definition of organi
Organizational Effectiveness: A Second-order
Confirmatory Factor Analysis
Waiphot Kulachai1, S. Vuttivoradit2, A.P. Tedjakusuma3 & P. Homyamyen4
1Suan Sunandha Rajabhat University, Bangkok, Thailand
2Suan Sunandha Rajabhat University, Bangkok, Thailand
3University of Surabaya, Surabaya, Indonesia
4Rajamangala University of Technology Suvarnabhumi, Suphanburi, Thailand
*Corresponding author. Email: waiphot.ku@ssru.ac.th
ABSTRACT
Organizational effectiveness has caught the attention of scholars for decades since it indicates
the efficiency and achievement of an organization. However, measuring organizational effec-
tiveness is quite difficult and controversial since there are various approaches to measure it.
Recently, there are four popular approaches employed by researchers: goal-attainment, sys-
tem, strategic constituencies, and competing-values. Some scholars recommend multiple ap-
proaches to measure organizational effectiveness. In this study, the organizational effective-
ness measure (OEM) was developed based on a competing-values approach and Kareem
(2019). The OEM then was tested whether measures of a construct are consistent with theo-
ries. After conducting second-order confirmatory factor analysis, the findings indicate two
dimensions: resource optimization and stability that can measure organizational effectiveness
well. However, to use and apply this measurement, the organization’s context and environ-
ment should be considered. In addition, multiple approaches are recommended for private or-
ganizations.
Keywords: organizational effectiveness, resource optimization, stability.
Advances in Economics, Business and Management Research, volume 180
Proceedings of the 18th International Symposium on Management (INSYMA 2021)
Copyright © 2021 The Authors. Published by Atlantis Press B.V.
This is an open access article distributed under the CC BY-NC 4.0 license -http://creativecommons.org/licenses/by-nc/4.0/. 245
zational effectiveness as “the extent to which
an organization as a social system, given
certain resources and means, fulfills its ob-
jectives without incapacitating its means and
resources and without placing undue strain
upon its members.” In this study, organiza-
tional effectiveness is defined as the extent
to which an organization can achieve its
goals.
Measuring organizational effectiveness is
quite controversial. Eddy (1981) says that
there should be three levels of measuring or-
ganizational effectiveness: individual, man-
agerial, and organizational. Robbins (1990)
proposes four approaches to measuring or-
ganizational effectiveness: goal-attainment,
system, strategic-constituencies, and com-
peting-values.
According to the goal-attainment ap-
proach, organizational effectiveness can be
measured by the ability of the organization
to achieve the organizational goals. This ap-
proach assumes that the organization must
have real goals that can be seen and under-
stood, the number of goals is not too high,
and the organization members should agree
on the goals. However, Cameron (1981)
suggests that the organization will achieve
its goals, but the organization may be inef-
fective if the goals are too low, displaced, or
detrimental to the organization.
The system approach places importance
on the ability of the organization to find in-
puts, convert inputs into output, survive in a
changing environment, and have an interde-
pendent relationship among different parts
of the organization. The advantage of this
approach is its emphasis on long-term goals
of the organization, relationships among dif-
ferent parts of the organization, and other
indicators to evaluate organizational effec-
tiveness could be applied if the organiza-
tion's goals are ambiguous. This approach
also has some throwbacks since some varia-
bles, such as the organization's ability to
adapt to a changing environment, are diffi-
cult to measure. This approach also makes
scholars more interested in studying the
means than the ends of an organization.
The strategic-constituencies approach be-
lieves that if an organization can know
which group or any person is important to
the organization and win the heart of that
group or that person would avoid those indi-
viduals and groups from taking any action
against the organization. Thus, to survive,
the organization must be able to respond
well to the needs of those individuals and in-
terest groups. The limitation of this concept
is difficulty identifying who or which group
is more critical to the organization. In addi-
tion, finding accurate information about the
needs of individuals and interest groups can
be quite difficult.
According to the competing values ap-
proach, organizational effectiveness is
measured based on who the assessors and
what their values are. Individuals who make
decisions on an organization’s goals have
different values. Managements, production
managers, and others all have different ideas
on the criteria for evaluating organizational
effectiveness. This approach measures or-
ganizational effectiveness by considering the
conflicting values of the people in the organ-
ization on three dimensions. The first di-
mension is flexibility or control of the or-
ganization. The second one is focusing on
people or organizations. The third one is
looking at the internal processes and the or-
ganization's methods and goals.
Mott (1972) measures organizational effec-
tiveness in terms of productivity, adaptabil-
ity, and efficiency. Sharma & Samantara
(1995) also apply this concept in their study.
Gibson et al. (1982) describe five major in-
dicators for measuring organizational effec-
tiveness: production, efficiency, satisfaction,
adaptiveness, and development. Gold et al.
(2001) propose three dimensions of organi-
zational effectiveness: innovation, coordina-
tion, and rapid commercialization of new
products. Shoo (2016, as cited in Kareem
2019) argues that multi-approach should be
applied in measuring organizational effec-
tiveness. This idea has influenced the study
conducted by Kareem (2019), who employs
three approaches in his study: goal attain-
ment, system, and competing-values. Based
Advances in Economics, Business and Management Research, volume 180
246
on these three approaches, he measures or-
ganizational effectiveness with four items
for each approach, as illustrated in Table 1.
Table 1. Measurement of organizational effectiveness
Item
Statement
Goal-attainment approach
GA1
Our university\institute ensures goal
achievement
GA2
Our university\institute has an effective
strategic planning
GA3
Our university\institute encourages the in-
novation
GA4
Our university\institute makes efforts to
improve the quality
System resource approach
SRA1
Our university\institute has the ability to
acquire resource
SRA2
Our university\institute has good physical
infrastructures and equipment
SRA3
Our university\institute ensure the ac-
creditation
SRA4
Our university\institute encourages the
organizational health
Competing values approach
CVA1
Our university\institute makes efforts to
improve the productivity
CVA2
Our university\institute adapts to the
changing environment
CVA3
Our university\institute makes efforts to
the optimization of resources
CVA4
Our university\institute makes efforts to
the stability
Source: Kareem (2019)
In this study, the authors apply the compet-
ing values approach to measure organiza-
tional effectiveness, replicating Kareem’s
(2019) study. In Kareem’s study, he
measures organizational effectiveness in
four aspects, productivity, ability to adapt to
the changing business environment, optimiz-
ing resources, and stability and flexibility
with a single item for each aspect. In this
study, the authors adjusted the scale by add-
ing four items for each dimension.
Hence, there are five items for each di-
mension, as illustrated in Table 2. Then, this
organizational effectiveness measure (OEM)
was tested whether measures of a construct
are consistent with theories reviewed by the
authors.
Table 2. Organizational effectiveness measure (OEM)
Item
Statement
Productivity
PRO1
Your organization is making efforts to
improve production efficiency
PRO2
Your organization can produce products
and services on time
PRO3
Internal and external customers are satis-
fied with the services of the organization
PRO4
Your organization can produce products /
services to meet the needs of customers
PRO5
The production of products/services of
your organization provides good results
Adaptation
ADA1
Your organization can adapt to the envi-
ronment well
ADA2
Your organization has adjusted the image
of the organization all the time
ADA3
Your organization has to adjust according
to the needs of customers
ADA4
Your organization has adapted to meet
technological changes
ADA5
Your organization has adjusted marketing
strategies regularly
Resource Optimization
RO0
Your organization endeavors to optimize
most of its resources (Excluded)
RO1
Your organization focuses on the savings
by reducing costs
RO2
Various departments within the organiza-
tion have integrated the use of resources
RO3
Your organization attaches great im-
portance to the use of resources for the
greatest benefit
RO4
Your organization can reduce unnecessary
expenses
Stability
STA1
Your organization has made great efforts
to provide stability to the organization
STA2
Your organization is stable and able to
compete with competitors
STA3
You feel stable while working here
STA4
Your organization has the ability to de-
velop products and services to create
business security for the organization
STA5
Executives have the potential and the abil-
ity to create business security for the or-
ganization
2 RESEARCH METHODS
2.1 Participants
The participants of this study were 380 em-
ployees of a private company in Bangkok.
Most of them were female, accounting for
Advances in Economics, Business and Management Research, volume 180
247
51.58 percent. The majority was in the age
group of 31-40 years old. Approximately
55.79 percent were single. More than 50
percent of them has bachelor’s degree, about
35.53 percent have been working in the
company for 11-15 years, and over 32.37
percent earn a monthly income of 20,001-
30,000 Baht.
2.2 Measures
Organizational effectiveness measure
(OEM) is created based on the competing-
values approach and the study conducted by
Kareem (2019). Organizational effectiveness
is divided into four dimensions, namely
productivity, adaptation, resource optimiza-
tion, and stability.
Productivity refers to an organization's ef-
fort to improve its efficiency, produce prod-
ucts and services on time, satisfy both inter-
nal and external customers, provide products
and services that meet customers’ needs and
obtain good production results. This dimen-
sion is measured by a five-point Likert scale
survey question anchored by strongly agree
and strongly disagree. The measurement
shows alpha reliability of 0.954. The sample
items are “your organization is making ef-
forts to improve production efficiency,”
“your organization can produce products and
services on time,” and “internal and external
customers are satisfied with the services of
the organization.”
Adaptation is an ability of an organization
to adapt to the environment, such as custom-
ers’ needs, technological changes, and mar-
keting competition. This dimension is meas-
ured by a five-point Likert scale survey
question anchored by strongly agree and
strongly disagree. The measurement shows
alpha reliability of 0.950. The sample items
are “your organization can adapt to the envi-
ronment well,” “your organization has ad-
justed the image of the organization all the
time,” and “your organization has to adjust
according to the needs of customers.”
Resource optimization is associated with
the organization's effort to optimize limited
resources by reducing unnecessary costs and
integrating the use of resources. Firstly, this
dimension is measured by a five-point Likert
scale survey question anchored by strongly
agree and strongly disagree. However, one
item was excluded, so the measurement
shows alpha reliability of 0.853. The sample
items are “your organization focuses on the
savings by reducing costs,” “various de-
partments within the organization have inte-
grated the use of resources,” and “your or-
ganization attaches great importance to the
use of resources for the greatest benefit.”
Stability is associated with an effort of
the organization to provide stability and se-
curity for the organization so it can gain
competitive advantages. This dimension is
measured by a five-point Likert scale survey
question, anchored by strongly agree and
strongly disagree. The measurement shows
alpha reliability of 0.894. The sample items
are “your organization has made great ef-
forts to provide stability to the organiza-
tion,” “your organization is stable and able
to compete with competitors,” and “your or-
ganization has the ability to develop prod-
ucts and services to create business security
for the organization.”
2.3 Data Analysis
A second-order confirmatory factor analysis
was employed to analyze the collected data.
This technique is very important to test
whether measures of a construct are con-
sistent with theories. Chi-square goodness-
of-fit statistic and degree of freedom, two
absolute fit indices (GFI, RMSEA), one in-
cremental fit index (CFI), and one parsimo-
ny fit index (AGFI) are examined to check
whether the model fits with the empirical da-
ta. (Hair et al. 2010).
3 RESULTS AND DISCUSSIONS
The results reveal the model chi-square of
807.097 with 149 degrees of freedom. The
p-value is significant. The values of GFI and
RMSEA, the absolute fit index, are 0.820
and 0.108 in that order. These values indi-
Advances in Economics, Business and Management Research, volume 180
248
cate the model does not fit with the empiri-
cal data. The normed chi-square is 5.417
which is over 2.00, indicating unfit for the
CFA model. According to the incremental fit
indices, the CFI, an incremental fit index,
has a value of 0.669, which is below the
suggested cut-off values. In addition, the
AGFI, a parsimony fit index, has a value of
0.771, which reflects an unfit model. All in-
formation of goodness-of-fit statistics is il-
lustrated in Figure 1 and Table 3.
Table 3 The CFA Goodness-of-fit statistics
Goodness-of-fit statistics
Value
Chi-square
807.097
Degree of freedom
149
p-value
.000
Normed chi-square
5.417
GFI
.820
RMSEA
.108
CFI
.669
AGFI
.771
The authors also check model diagnostics
since they may suggest a way for improving
the model. The authors allow the errors of
estimation to covariance in accordance with
the modification indices. The CFA model is
then re-estimated. The overall model fit sta-
tistics of the analysis are illustrated in Figure
2 and Table 4.
Figure 1. CFA model of organizational effectiveness
The results reveal the model chi-square of
220.298 with 135 degrees of freedom. The
p-value is insignificant. Hence, the chi-
square goodness-of-fit statistic indicates that
the observed covariance matrix matches the
estimated covariance matrix within sampling
variance.
Table 4 The CFA Goodness-of-fit statistics (Revised)
Goodness-of-fit statistics
Value
Chi-square
220.298
Degree of freedom
135
p-value
.000
Normed chi-square
1.632
GFI
.943
RMSEA
.041
CFI
.957
AGFI
.919
The values of GFI and RMSEA, the abso-
lute fit index, are 0.943 and 0.041 in that or-
der. This value indicates a good fit for the
model. The normed chi-square is 1.632,
which is below 2.00, indicating a good fit for
the revised CFA model. According to the in-
cremental fit indices, the CFI, an incremen-
tal fit index, has a value of 0.957, which ex-
ceeds the suggested cut-off values. In
addition, the AGFI, a parsimony fit index,
has a value of 0.919, which reflects an excel-
lent model fit.
Figure 2. CFA model of organizational effectiveness
(Revised)
Advances in Economics, Business and Management Research, volume 180
249
Figure 2 also reveals that the four dimen-
sions of organizational effectiveness have
factor loading of 0.11 for productivity, 0.14
for adaptability, 0.76 for resource optimiza-
tion, and 0.74 for stability. These indicate
that only two dimensions (resource optimi-
zation and stability) contribute enormously
to the organizational effectiveness construct.
However, productivity and adaptability do
not contribute strongly to this construct. The
standardized factor loadings, an average
convergent validity, and the construct validi-
ty are illustrated in Table 5.
According to Table 5, the lowest loading
obtained is 0.16 productivity (PRO) to item
“PRO1.” Only five-factor loadings are
greater than the 0.70 standard. The average
variance extracted estimates, and the con-
struct reliabilities are shown at the bottom of
the Table. The AVE estimates range from
82.0% for adaptability to 86.8% for stability.
All exceed the 50% rule of thumb. The con-
struct reliabilities range from 0.945 for
productivity construct to 0.968 for the stabil-
ity construct. These exceed the 0.70 stand-
ard, which indicates adequate reliability.
Productivity (PRO) has five items with
factor loadings range from 0.16 – 1.00. The
lowest factor loading obtained is 0.16 link-
ing PRO to PRO1 “your organization is
making efforts to improve production effi-
ciency.” The highest factor loading obtained
is 1.00 linking PRO to PRO3 “internal and
external customers are satisfied with the ser-
vices of the organization.” The results show
an average variance extracted (AVE) of
0.824 suggesting adequate convergence. Ac-
cording to the CR of 0.945, which greater
than 0.70, it suggests good reliability.
Adaptability (ADA) has five items with
factor loadings range from 0.25 – 0.98. The
lowest factor loading obtained is 0.25 link-
ing ADA to ADA5 “your organization has
adjusted marketing strategies regularly.” The
highest factor loading obtained is 1.00 link-
ing ADA to ADA3 “your organization has to
adjust according to the needs of customers.”
The results show an average variance ex-
tracted (AVE) of 0.820 suggesting adequate
convergence. According to the CR of 0.947,
which greater than 0.70, it suggests good re-
liability.
Table 5. Standardized factor loadings, average vari-
ance extracted, and reliability estimates
Dimension/Item
Standardized factor load-
ings
Productivity (PRO)
PRO1
.16
PRO2
.49
PRO3
1.00
PRO4
.59
PRO5
.21
Adaptability (ADA)
ADA1
.26
ADA2
.55
ADA3
.98
ADA4
.49
ADA5
.25
Resource optimization (RO)
RO1
.36
RO2
.66
RO3
.77
RO4
.59
Stability (STA)
STA1
.30
STA2
.41
STA3
.58
STA4
.70
STA5
.72
Average variance ex-
tracted (AVE)
.824
.820
.858
.868
Construct reliability
(CR)
.945
.947
.958
.968
Resource optimization (RO) has four
items with the factor loading range from
0.36 – 0.77. The lowest factor loading ob-
tained is 0.36, linking RO to RO1 “your or-
ganization focuses on the savings by reduc-
ing costs.” The highest factor loading
obtained is 0.77 linking RO to PRO3 “your
organization attaches great importance to the
use of resources for the greatest benefit.”
The results show an average variance ex-
tracted (AVE) of 0.858 suggesting adequate
convergence. According to the CR of 0.958,
which greater than 0.70, it suggests good re-
liability.
Stability (STA) has five items with the
factor loading range from 0.30 – 0.72. The
lowest factor loading obtained is 0.30 link-
ing STA to STA1 “your organization has
made great efforts to provide stability to the
organization.” The highest factor loading ob-
tained is 0.72 linking STA to STA5 “execu-
Advances in Economics, Business and Management Research, volume 180
250
tives have the potential and the ability to
create business security for the organiza-
tion.” The results show an average variance
extracted (AVE) of .868 suggesting adequate
convergence. According to the CR of 0.968,
which greater than 0.70, it suggests good re-
liability.
4 CONCLUSION
Organizational effectiveness is an indicator
that reflects the ability of an organization to
achieve its goals. However, there is a con-
troversy on measuring organizational effec-
tiveness. Hence, the authors try to develop
an organizational effectiveness measure
(OEM) based on the competing-values ap-
proach and the study conducted by Kareem
(2019). In this study, four dimensions of or-
ganizational effectiveness were tested. The
findings reveal that only two dimensions (re-
source optimization and stability) have fac-
tor loadings greater than the 0.70 standard.
However, the factor loadings of productivity
and adaptability are relatively low (0.11 and
0.14, respectively). According to our analy-
sis, the OEM demonstrates a very good va-
lidity, but some items should be excluded
since their factor loadings do not meet the
minimum standard. There are some limita-
tions to this study. Firstly, this study applies
a single approach (competing-values ap-
proach) to measure organizational effective-
ness. Secondly, the authors apply organiza-
tional effectiveness based on Kareem’s
study, which focuses on the public universi-
ty context, whereas the authors emphasize a
private organization. Hence, measuring or-
ganizational effectiveness should be meas-
ured by multiple approaches. In addition,
prior to using the OEM, the reliability and
validity of the measurement should be exam-
ined according to similar organizational con-
texts and environments.
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