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Organizational performance refers to the real returns from the various enterprises or units of a firm/company/organization when compared with the projected ones (Sederbaum, 2001). This is usually measured on three fronts which are the firms performance in monetary terms, market performance of the firms products as opposed to those of the competitors and Returns attained by the equity owners (shareholders) per share held (Harney, 2004).
The meaning of the statement in question is that how an organization fairs, either well or badly, is because of three major determinants namely environment, organization and strategy. Below therefore, I will enumerate the role each of them plays in achieving the full goal of the intended business performance (Harney, 2004).
Strategy refers to the action plan by a firm, which shows what it has set out to achieve or fulfill within a given period and how it will go about it (Danco, 1980). For example, a company may have a five-year plan to be the market leader in one of its segments of operations. In this case, the strategy may involve sacrificing profits for that period and have that segment only break even for the time being .This is done in the hope that after the five years, that product or product line will have taken much of their rivals' market share. Therefore, due to economies of scale in output and sales the firm will make huge profits after that period at the expense of their much smaller output competitors.
Organization refers to how people in a firm are arranged in a systematic manner and given specific roles which to carry out within the firm's structure. Various firms have different organizational structures and hence different titles for those at various levels within the structure. For example, a company may have the top most people being referred as the Company president while in the other one this person may carry the title of managing director or chairman. However, it is important to realize some firms have very simple while others have very complex structures.
Environment refers to those forces outside the control of the business and which ultimately will affect its decision making and performance. These forces include technology advances, economy, politics, and changes in consumer trends and so on. Where these factors reign supreme, the business can do little about them. Nowadays many firms are investing greatly in market intelligence and are much concerned with the political stability of the markets in which they operate in lest they be caught wrong footed (Harney, 2004).
Linkage of strategy, organization, and environment in organizational performance
A company must ensure that all the three tenets above work in tandem with each other in order to achieve its objectives. For example, company 'A' has a very good five-year strategy and perfect environment but then it neglects its organization. What may result in this scenario is that we might have unmotivated employees who are too bored and dissatisfied by their jobs to fulfill the company's vision in the strategy. In addition, the organizational structure might be too rigid hence; decision-making may take too long. In this way, the company may loose out on some very lucrative business opportunities in cases where a quick decision needed to be made but such a decision may have needed the approval of a board which sits only twice per year (Sederbaum, 2001).
To put things in the right perspective, Roberts (1998) takes us sometimes back to early 20th century when a group of managers invented a new way of organizing and managing the businesses, the multidivisional form. This new method, led to emergence of values, norms, which marked management as a profession (Roberts, 1998).This, brought about serious changes to the business environment, and some of the results of this include mergers, acquisitions, and spinoff activities. This results when companies recruit result-oriented people who are willing to take responsibility and initiative and then give them the leeway to act on their knowledge and creativity. This has helped avoid cases like that of Hudson Bay Company whose centralized rule almost destroyed it. This gives a lesson well learned that linkage between strategy and organization matters a lot.
The act of North Western Company to eliminate middlemen and getting close to the customer plus the backing of an organization to implement this, soon overcame a 50 percent cost disadvantage and over 100 years experience. Change of strategy is also very expensive and at times comes at a serious cost. The managers ought to be charged with the responsibility of organizational design. As explained later, performance is because of organization, environment, and strategy when these are linked well. The resulting harmony culminates in success as shown in figure 1.
The following figure illustrates the explanation above.
Figure 1: maximal performance in environmental context (Roberts, 1998, p. 19).
The above figure shows a designer or a manager involved in activities meant to come up with the best Strategy and organization. These two are part of a company or a firm and the firm has a control over them, however, environment is external and often firms have to cope the best way they can with the environment by choosing a good strategy and Organization method.
THEORIES OF ORGANIZATION
Theory X and Theory Y
According to these two theories, which were put forward by a management consultant called Douglas McGregor, the managers viewed their junior employees in a very pessimistic manner as less motivated and people who needed constant supervision. However, he saw this theory as very pessimistic (X) hence he replaced it with theory Y. in the new theory, he argues that workers are very inventive, self motivated and responsible people .Therefore if only shown that they are appreciated, they are people capable of decision making who Could work well with little or no supervision. These theories greatly shaped the working environments in companies in the early 19th and 20th centuries (Harney, 2004).
Another theory on organization is the theory of scientific management; Fredrick Tailor forwarded it. It aimed at increasing efficiency in the manufacturing industries through synthesized workflows. He explained that when production is arranged in an organized manner with a direct flow from one worker to the other, the workers were more efficient (Sederbaum, 2001). For instance, a company has a very good environment on which it is operating as well as a very good organization. Unfortunately, it may fail on the part of strategy. The likely scenario here is that it will use many of its resources in implementing its strategy that by the time it will realize its strategy is a failing one it will be too late (Danco, 1980). One example that ropes in failure in strategy as well as poor reading of the environment in which they were operating is GTV. During the turbulent times of the world financial crisis, this company went on a spending spree clinching a deal to help its subscribers in 22 countries in Africa watch 80 percent of the English premier league matches. They had bought these rights at the extreme price, which was 600 percent the price they had been bought the previous year. In doing this, they failed to take note of the financial crunch through out the world and realize that most families were trying their hardest possible to cut their costs. Therefore, by neglecting signs that the environment their company was operating in was not favorable, they chose the wrong strategy leading to the eventual collapse of this company.
In some other instances, environment has been purely to blame and however keen the companies might have been in forecasting, it might not have helped. This is usually the case in situations where by governments have been toppled hence leaving the companies and the surrounding infrastructure in ruins (Harney, 2004). For example, the toppling of the Somalia government by the clan leaders led to infrastructure worth millions of shillings destroyed and several companies virtually out of production (Sederbaum, 2001).
In conclusion, therefore, the organizational performance of any firm goes hand in hand with the three main tenets, namely: Environment, Organization, and Strategy. A weakness in any of them affects negatively the whole organization and vice-versa. Therefore the overall productivity of any firm will depend on how well these factors are handled (Roberts, 1998).