> Michael Porter and Operational Effectiveness
Organizational Success, Strategy, and Operational Effectiveness
According to Michael E. Porter, Harvard Business School professor and world-renowned expert on management and strategy, organizational success requires both the right strategy and ‘operational effectiveness.’ Porter argues that there are clear differences between operational effectiveness and strategy. He points out that operational effectiveness is a necessary but not sufficient condition for organizational success, and that the same can be said as well for strategy. Consequently, both are essential elements in contributing to the overall performance and success of an organization. He maintains that the operational agenda is the proper place for continual improvement, flexibility, and relentless efforts to achieve best practice. On the other hand, the strategic agenda is the right place for defining a unique position, good direction, and meaningful purpose. Therefore, strategy and operational effectiveness mutually complement each other as equal partners in the pursuit of organizational success.
Porter’s Concept of Operational Effectiveness
For Michael Porter, operational effectiveness refers to that domain of organizational activity that is about having functions that work well. These functions must fit together and work in conjunction with each other to implement strategy. Operational effectiveness involves any number of practices that enable an organization to (i) better utilize its resources, (ii) better implement its processes, and (iii) achieve its mission and goals. In other words, operational effectiveness is about continuously improving functional performance. In order to accomplish this, managers lead and control the functional activities within the organization, measure and improve the processes for which they are responsible, and then close the loop by leveraging those improvements for enhanced functional effectiveness. It is then the role of strategy to mold these functions into a coherent organizational whole that will succeed in the marketplace.
The IACBE’s Assessment Process and Operational Effectiveness
Since the quality of an academic business unit’s overall performance depends in part on its ability to manage its resources and educational processes efficiently and effectively, the IACBE’s accreditation criteria require the academic business unit to develop and implement a comprehensive quality assessment and advancement system in which the unit assesses not only student learning but also the extent of its operational effectiveness.
So, how does the IACBE define ‘operational effectiveness’? For the IACBE, operational effectiveness refers to utilizing human and other resources in the most effective ways to achieve the goals and objectives of the organization. In other words, operational effectiveness is defined as follows:
Operational effectiveness requires the academic business unit to identify resource- and process-related critical success factors (CSFs) or key performance indicators (KPIs) that are important in contributing to its organizational and functional success.
Consequently, the IACBE’s definition of operational effectiveness corresponds to Porter’s idea of the term in that it relates to effective functional performance and to effective utilization of resources and implementation of processes.
Furthermore, as Porter notes, since operational effectiveness complements and informs strategy and is necessary for organizational success, the IACBE’s accreditation criteria also require the academic business unit to integrate its assessment process, including the assessment of operational effectiveness, into its strategic planning process for the future.
For information on assessing the operational effectiveness of an academic business unit, see Key Content Areas of an Outcomes Assessment Plan.