The relations between organizational effectiveness and strategic management areas of organizational theory are the general focus of this study. Organizational effectiveness is defined as the extent to which an organization by the use of certain resources fulfills its objectives without depleting its resources and without placing undue strain upon its members and/or society. Strategic management is defined as an array of processes which leads to the development of an effective approach to achieve the organization's objectives. Little agreement appears to exist on how to evaluate organizational effectiveness and to what extent strategic management impacts on organizational effectiveness. This is the problem this study addressed.
This study presents an extensive review of the literature, formulates some syntheses and utilizes questionnaires to gather pertinent data. The sample of respondents consisted of a group of directors from twenty-one contractors, mostly located in Jakarta. All are members of the Indonesian Contractors Association (AKI). The age in years of operation of the construction firms participating in this study ranges from 10 to 42. In terms of size, the average number of annual work contracts in the last five years ranges from a low of just two to a high of 160. Of those twenty-one participating contractors, five are government-owned construction firms.
The Chi-square analysis revealed a significant relationship between the operationalized variables relating the organizational effectiveness concepts of planning and goal setting and the strategic management process of establishing the mission and stating goals and objectives. This is an important conclusion insofar as establishing the mission and stating goals and objectives process is significantly related to the organizational effectiveness concepts through operationalized statements.
The results also indicated that construction firms can possibly operate with separate external and internal emphasis and yet fall within a broad range of effectiveness levels. This is of importance insofar as it is somewhat contrary to generally accepted management principles in the for-profit sector that emphasize a relationship between the external and internal factors (Glueck and Jauch, 1984).
Finally, it was also shown that there is a significant relationship between a need for flexibility and external environmental changes. This is an important conclusion insofar as construction firms apparently do derive any degree of effectiveness through organizational effectiveness concepts that relate flexibility.