The Business Case for Organization Development and Organizational Effectiveness

It is increasingly common for larger companies to expand their training and development function to include organization development (OD). Similarly, many companies have formed internal organizational effectiveness (OE) teams that provide OD consulting services throughout their enterprises. Clearly, these establishments see the value of ongoing efforts to improve organizational performance effectiveness. More specifically they believe that OD/OE provides benefits in areas like process improvements, employee productivity, organizational adaptability, and strategy execution.

Central to both OD and OE are organizational improvements based on behavioral science research. They focus on the people or human side of organizations, but utilize structures, processes, procedures, systems and policies to shape and direct essential behaviors. A core belief of OD and OE is that a deep understanding and respect for the value of individuals is the key to unlocking their full potential. Consequently, organizational systems that are focused on the value of their members are much more likely to tap their potential and obtain better individual and organizational performance.

At the heart of the business case for OD and OE is that investment in systematic, research- based, people-focused activities provides a positive return. The claim is that OD and OE initiatives sufficiently improve individual and organizational performance so that they justify the costs associated with them. The challenge is whether OD and OE can provide ample performance enhancements (through techniques such as work design, selection and assessments, training and management development, organization design, and succession planning) to make these activities worthwhile.

It is evident that the tools and techniques for performance improvement are not always completely effective. For example, training, surveys, selection tests can be poorly designed or executed and have little or no positive impact. But when these same techniques are used within an OD or OE initiative, the probably of favorable results is significantly enhanced for a number of reasons. By definition OD and OE are research based endeavors, the specific tools and techniques must have an established history of success in similar circumstances; planning is also a critical aspect of OD/OE improvement activities: the various tools and techniques are used with a specific purpose; similarly OD/OE efforts are targeted and, so their design and execution are clearly focused on particular objectives. This more rigorous, disciplined approach in applying performance improvement methods greatly enhances their likelihood of success and makes the case for a positive return for OD/OE more credible.

The rationale for using OD/OE depends upon the value it provides for you and your company. Assessing this value must be based on the overarching purpose of OD/OE which is improved organizational effectiveness. That is, we can only judge how valuable OD/OE is in terms of how well or how much it enhances effectiveness. Ultimately then, the case for using OD/OE depends on how we view organizational effectiveness and how we measure its impact on organizational performance.

The difficulty we encounter is that organizational effectiveness is defined in a variety of ways such as operational efficiency, organizational adaptability, employee engagement, and process coordination. We can only overcome this issue if we can agree that OD/OE can improve effectiveness in all of these ways through its focus on managing the human forces at work in organizations. The business case comes down to this: OD/OE is a powerful approach for leveraging the people factors that drive performance improvement through greater organizational effectiveness. Whether we measure effectiveness in terms of efficiency, productivity, customer service, product quality, innovation, organizational learning or financial metrics, is not relevant. The key is to show that there is a strong positive connection between improved effectiveness and the behaviors the OD/OE initiative proposes to change.