What Does It Mean That an Enterprise Is Effective

Fundamentally, an enterprise is effective when it is able to reach its goals and satisfy its objectives. Its goals and objectives must be realistic and reachable and in line with the enterprise’s purpose. From more practical perspectives and in detail, for an enterprise to be effective requires that its functions be executed efficiently in close support of its intent and desired direction. It also requires that the enterprise innovate and renew itself from top to bottom.

A basic goal of any enterprise —be it public or private —is to achieve its objectives. Ideally, this goal is best attained when all individual and aggregated actions are in full support of the desired direction. That ideal is not easily achieved; it may not even be possible. In reality, most actions result from decisions that are far from simple and straightforward. Complex conditions may lead to inappropriate choices. Conflicts between objectives require tradeoffs. Internal political pressures result in biased decisions. Lack of understanding — insufficient knowledge —leads to inappropriate evaluations of situations and impaired judgments of outcomes. Uncertainties from inadequate information must be addressed, and too often wrong actions are pursued by mistaken expectations.

Nevertheless, in this complex environment, it is important that each action contributes maximally to satisfy the enterprise goals. Actions must be effective relative to the desired objectives. Small individual actions aggregate into consolidated group and enterprise actions. For consolidated actions to provide the desired results, such as delivering valuable services to customers or creating high-quality products at reasonable cost, the smaller actions need to help achieve the desired enterprise goals. Ideally, all actions must deal appropriately and effectively with the conditions of the target situation —by making tradeoffs, avoiding undesirable biases, dealing with uncertainties, and so on.

The effective enterprise is an organization that acts intelligently in the present and is capable of dealing effectively with the challenges of the future. It meets its objectives by implementing its visions and strategies through the actions of individual employees and through its systems, policies, and organizational structure. It makes tradeoffs between short-term and long-term requirements, and it meets the objectives of both the enterprise itself and its stakeholders. Management teams of effective enterprises recognize that to be viable in the longer term, they must acknowledge that they have broad responsibilities.

For many organizations, these responsibilities surpass conventional and narrow operating perspectives to include concerns for the environment, local and larger economies, society-at-large, and other stakeholders that are directly or indirectly affected by the enterprise’s actions. The concerns also include attainment of the long-term objectives of the enterprise —the reasons for its existence. The breadth of responsibilities results from the understanding that the enterprise is an integrated element in the complex societal and environmental system and that the effects of its actions on other parts of the system will directly influence its medium and longer term viability.

All parties are affected —owners, employees, customers, suppliers, society as a whole, and its physical environment —as well as the enterprise itself. The value of consistent effective behavior can be large. When employees —and the enterprise overall —do the right thing, the enterprise can tackle challenges with great effectiveness and enjoy success and durable viability.