The effectiveness of an enterprise is shaped mainly by its internal structure, human resources, and capital; in short – the entire internal architecture of a company.
The notion of organization
The internal organization of every company consists of material resources as well as human resources. Every business activity of this kind is, therefore, an intricate and functional organism. Its role is to ensure a given company’s superiority over competition on the market in which it operates. Internal architecture is a network of various contacts within a company, and it is formed by relations between individual employees and management as well as by relations between employees of the same organizational level.
A well-structured organization of a company has the biggest influence on the shaping of such relations. We can point out several different types of organizational structure. If we deal with a relatively flat structure, such a situation surely favors the creation of informal relations within a company. This will result in increased effectiveness of the enterprise as a whole. Such a situation appears because every member of the organization feels responsible for the decisions that were made in his presence. Though a flattened structure does not stimulate creativity and employee commitment, it is far less harmful in this matter than the traditional hierarchical structure. The latter makes it easier to avoid responsibility for decisions and actions. Low-rank employees receive orders and assignments from their subordinates or the company management. They consider such decisions as alien to them, and they do not think they concern them at all. Therefore, little commitment can be observed, and, moreover, employees do not feel responsible for results, especially the negative ones. Nobody is willing to admit that he made a mistake claiming that the wrong decisions that were made were not his own.
Private virtual trading companies which deal only with selling help improve the effectiveness of an enterprise. In such a case, company employees are occupied by actions related to commerce while different organizations deal with finances, logistics, and management. Such monothematic companies have a very flat and informal structure because employees do not require too much supervision.
The financial capital of a company
This is another factor that influences the effectiveness of an enterprise and shapes the internal structure of an organization. The capital at company’s disposal depends on the company’s division. If it is only a trading point, it does not need large amounts of money because there is no need to rent offices or buy equipment. Usually, the higher the savings are, the bigger the company’s effectiveness is.
Human resources
Undoubtedly, employees are the most important element of every enterprise and its internal structure. These people determine the quality of their company’s results. In every enterprise, there are people of different levels of skill and qualifications. Management is usually left to experienced company owners or qualified economists, while people of lower qualifications deal with the most basic matters like transport. The better the preparation of employees is, the higher the enterprise’s overall effectiveness becomes. Employees have to know what they have to do; they should be aware of the aims of their own actions and the goals of the entire organization as well. Only in such conditions we are able to stimulate commitment and, at the same time, increase the overall effectiveness of our company. However, we cannot be 100% certain that well-qualified people with extensive knowledge in a given field will positively influence our enterprise’s effectiveness. Our employees simply have to possess certain qualities that will help them properly do their work on a given post and, moreover, they have to be aware of the goals they pursue.
In order to increase company effectiveness, it is not enough to employ people with higher education. In the case of most companies, practical skills, experience, and confidence are far more valued than theoretical knowledge. Even the best employees make mistakes, but fewer problems occur as experience is gained. Wrong decisions decrease the effectiveness of an enterprise, therefore, young employees who have just finished their studies but have never worked in their field of expertise will not influence the overall company effectiveness in a positive way. In the cases when important decisions have to be made promptly and when there is no room for mistakes, experienced employees prove to be invaluable.
Organizational culture
The term organizational culture functions within every company. It is a set of certain rules and qualities shared by all members of a given workforce. The culture should be formalized, i.e., it should be determined by a company’s owner, however, it is usually created independently of his directives. Obviously, proper organizational culture positively influences the effectiveness of a company.
A modern enterprise culture should be founded on several important rules. First, every member of an organization deserves respect because every employee is a potential benefit to his company. We have to approach our work with enthusiasm; we should draw pleasure from it and socialize with our coworkers and integrate with the company as a whole. Everyone should pursue the best possible solutions to problems and, at the same time, should encourage others to do the same. While doing this, we should speak openly about problems related to the development of our company and its effectiveness – even if our opinion is different than that of our superiors or workmates. At the same time, superiors should encourage their employees to present personal opinions. This means that there should not be any negative consequences for expressing personal views. It is natural that employees do not talk openly about what they do not like or what they would like to change in their organization if there is the possibility to lose their job for speaking openly.
If the abovementioned rules are not respected in a company, the organization is not prone to changes. In the face of dynamically evolving surroundings this approach equals the loss of lead over competition on the market. People who work at such a place have no perspectives of development. In consequence, they leave their job sooner or later. As a result, the organization loses the possibility to increase its own effectiveness and is unable to successfully compete with other companies.
The external conditions that positively influence effectiveness
Among the external conditions which increase the effectiveness of an enterprise we can name: the system of distribution, the competition, the company’s image on the market, and innovations. The choice of an optimal system of distribution influences the effectiveness of a company in this particular field. The method of distribution should be adjusted to the type of the target group of clients and should be chosen with accordance to the type of distributed goods. An enterprise can choose between exclusive distribution, selective distribution, and intensive distribution.
Exclusive distribution entails a small number of dealers who sell the goods or services of a given producer. It is applied when a company wants to tightly control the whole process of distribution.
Selective distribution allows for the distribution of a producer’s goods or services to a wider range of distributors. Of course, not every company that exists on the market participates in this kind of activity. Such distribution is based on cooperation with selected companies which can ensure that the products reach their target group of clients. The choice of appropriate companies is essential to increase the effectiveness of an enterprise in the field of distribution. Over average commitment to selling and distribution should be a major condition in making such choices.
Intensive distribution involves the supply of goods or services via a wide channel – it reaches everyone who is interested. The bigger the number of clients we have, the higher the company’s distributional effectiveness becomes. Unfortunately, in this case we have very little control over the distribution of our goods or services.
Competition
External architecture consists of companies which compete with our enterprise. Their activity is a result of the barriers of introducing a new economic entity to the market – the necessity to accumulate appropriate capital and human resources. In this case, market effectiveness is a result of the intellectual potential and the creativity of the people who work at a given organization.
The company’s image
This is the most important element in passing information to clients and, at the same time, it is an easy way to solve problems with the evaluation of product features which a client cannot easily check for himself. As time passes, clients begin to trust a given brand of products – much depends on reputation. Therefore, if a company works on establishing a good reputation in the eyes of its clients, it automatically increases the popularity of its products and services. This, in consequence, boosts the overall company effectiveness. A company’s image depends on such things as: the prices of products, the availability of goods and services, the speed of deliveries, the way in which complaints are solved, the quality of customer service, etc.
Innovations
Innovations are an effective way to increase a company’s lead over its competition in every field, such as: products, advertising, distribution, customer service, etc. This is the last of the external conditions that has a significant influence on the effectiveness of an enterprise.
An effectively functioning company is a company which achieves success on the market – so an organization highly valued by any entrepreneur. Therefore, it is important to carefully consider all the conditions of effectiveness, both external and internal, and to implement them into our own business activity.