The authors of this study aim to compare the organizational efficiency indicators used by Qatari organizations and with international best practices to understand and reveal the root-causes of perceptional inefficiencies clearly and systematically.
In order to accomplish the determined research objective and to answer the research question systematically and scientifically, the research approach followed was to conduct a comprehensive exploratory literature review to understand the organizational (in)efficiency; its impacts; efficiency metrics and indicators; and best practices and management tools to improve organizational efficiency in Qatari organizations.
The oil and gas organizations in Qatar can be seen as the leading organization in Qatar that focus in increasing the efficiency level of their organizations by following and implementing different tools and methods. Similarly, the performance of Shell PLC and Qatar Petroleum was compared to find average productivity per FTE. Average productivity per employee of Shell was 14586.95 BOE (Barrel oil equivalent). In case of Qatar petroleum, average productivity per employee was 4195.73 BOE.QP, average productivity per FTE lagged by around 10,391 BOE per year.
Efficiency represents ability to optimally manage its resources and is tracked by indicators like cost of production per unit and headcount [
3]. In the case of the steel industry, productivity per employee is considered as a standard indicator, which is calculated by dividing total production in tons by the total number of employees. POSCO’s average productivity per head was 1553.14 tons per FTE, whereas Qatar Steel’s average productivity per head during the same period was 1101.88 tons—a difference of over 450 tons of steel per employee per year which is significant as Qatar Steel operates in a limited market [
4]. Qatar Steel has been making efforts for ensuring effective and efficient deployment of existing resources for capability maximization. Some of the key avenues of internal resource optimization include process re-design for efficiency, technology up-gradation, workforce planning, role clarification, goals cascading, skill alignment, cross functional/departmental communication, organization de-layering, and team based governance [
5]. The following sections of this paper explore the efficiency parameters of Qatari organizations in comparison with their peers internationally to benchmark the efficiency indicators and identify improvement areas.
1.2. Measuring Organization Efficiency in the Qatari Context
Few researchers have investigated a direct correlation between organizational efficiency and corporate performance. “The greater the organizations’ efficiency and effectiveness, the higher are its chances for continued (sustained) economic survival” [
10]. Some of the researchers identified seven dimensions for measuring the efficiency of an organization:
Organizational strategy;
Organizational structure;
Buildup of management and business systems;
Development of the corporate and employee culture;
Employee motivation;
Training of employees;
Goal-setting for employees.
Conventionally, these dimensions cover a wide range of organizational functions, such as leadership, governance, human development and engagement, corporate citizenship, business, and operational excellence, and supply chain management [
11].
Measurement of organizational efficiency primarily depends on tracking the performance of the organization within the following scopes:
Monitoring progress of operational processes: Operational processes can be tracked to measure the throughput, process cycle time to deliver the output along with the quality of the output. This measure shows the health of the process;
Monitoring implementation of the strategy: Implementation of strategy depends on establishing clear goals, timelines, resource requirements, and responsibilities. Once KPIs are identified, tracking the implementation of the strategy becomes easy.
Organizational effectiveness was considered a construct throughout the 1980s but is now considered more of a concept [
12].
The concept intends to understand how an organization accesses its resources and processes and produces results to achieve its operational and strategic goals within specified periods [
13]. One of the prominent researchers of organizational effectiveness, Cameron (1978), asserted that organizational effectiveness is the proficiency of the organization to access essential resources [
14]. McCann (2004) defined organizational effectiveness as the criteria for the organization’s successful fulfillment of the purposes through its core strategies.
The author posits that organization efficiency could be measured by tracking both the effectiveness and efficiency-related parameters of an organization. These parameters could be grouped as external factors such as customers, suppliers, and competition and internal factors such as leadership, strategy, quality, performance management, and employee satisfaction, use of IT, innovation, and corporate governance. Using relevant metrics to track these parameters would be the impetus for the measurement of organization efficiency [
15].
Qatari organizations follow the best practice processes for most business operational domains, but in some areas such as human resources, the processes deviate from the norm because of the inequitable nature of its prevailing traditions, customs, and organization culture, which are also practiced in the Arabian Gulf in general.
Fundamental differences with assessments using either effectiveness or efficiency measures ties to the fact that effectiveness is a broad topic, covering innovation, quality of goods or services, employee satisfaction, customer satisfaction, and organizations interaction with the surrounding community, its social and economic environment. However, efficiency measures the relationship between inputs and outputs or how maximum output is generated with minimum inputs. The findings of various studies reveal that effective yet inefficient organizations might continue to survive, while ineffective yet efficient ones will move toward bankruptcy sooner or later. Explicit references in literature to a Middle Eastern context were missing.
Balduck and Buelens (2008) asserted that organization effectiveness could be assessed through one of four approaches: The system resource approach, the goal approach, the strategic constituency approach, and the internal process approach [
16]. These models are discussed in the subsequent sections. Various models have been developed to map organizational efficiency. A few of the prominent models are discussed as follows:
The Kilman and Herden Model of organizational effectiveness proposed the paradigm of integrating psychological and social dimensions of well-being as a parameter for measuring success of organizations. They define corporate efficiency as a multiple of internal efficiency (maximum output for minimum input); internal effectiveness (maximum motivation of stakeholders including employees), external efficiency (maximized bargaining positions in exchanges), and external effectiveness (maximize societal satisfaction). The parameters that reflect the internal and external dimensions of corporate efficiency are shown in
Figure 1. Notably, this list is a representative example to show the significance of each quadrant of corporate performance, and not an exhaustive list [
17].
An example of the Kilman–Herden model of organizational efficiency is shown in
Figure 2. The model calculates organizational efficiency as multiple of averages ratings obtained by parameters evaluated in each quadrant, as explained in the previous section.
Organizational Efficiency = (Internal Efficiency X External Efficiency X Internal Effectiveness X External Effectiveness).
Process approach model: The process approach model focuses on the transformation processes and extent of resources employed to turn the inputs into goods and services. In this model, efficiency is measured based on the performance of the business and operational processes systematically tracked and reported through appropriate performance indicators. The success of such models primarily depends on the relationship between various stakeholders and the flow of information in vertical and horizontal reporting lines. The links between processes within one department and across multiple departments may successfully drive organizational transformation. This model is mostly employed with organizations that produce goods and services and may not be completely fit for organizations operating in the “nonprofit” domain because the output may not be quantified and cannot always be linked to business and operational processes. Strategic Constituency Model: The strategic constituency model aims to approach the ability and effectiveness of an organization to fulfill the interests of various stakeholders or influence groups [
19].
The effectiveness of an organization, according to the strategic constituency model, mainly relies on the minimum satisfaction of all the strategic constituencies of an organization. The strategic constituency of an organization includes all the individuals linked with the organization in various capacities, for example, the investor community, suppliers and partners in the supply chain, employees, regulators, government, customers, and environment [
20].
The strategic constituency model could apply to organizations where the relation between the stakeholders could not be quantified in a cost–benefit relationship, such as corporate social responsibility (CSR). The model is particularly helpful to understand the expectations of society and benefits generated for society, which are difficult to capture in other models. Notably, various strategic constituencies may not always agree with each other on common interests, namely, the expectations may sometimes be exactly the opposite from one constituency to another. For example, for an organization in the manufacturing sector, increased production generates more profits for investors and management but also can cause an increase in waste and pollution generated from the manufacturing operations. In this type of conflicting scenario, organizational efficiency, according to this model, ensures the minimum satisfaction level of the opposing strategic constituencies [
20].
An alternative model to monitor organizational efficiency was proposed by Bernard Bass. In this model, an organization’s performance or worth could be assessed based on three key parameters [
21]:
Degree of productivity, profitability, and self-maintenance;
Degree to which an organization adds value to its member and stakeholders;
Degree to which an organization and its members are a value to the society.
Sink and Tuttle (1989) proposed a similar framework for measuring organizational performance and efficiency through six parameters:
Effectiveness: The bottom line of organizational performance and efficiency;
Efficiency: Resource consumption versus output generation;
Quality: Internal quality (fulfilling internal process requirements) and external quality (fulfilling customer requirements and expectations);
Timeliness: Three key time parameters to establish organizations’ efficiency—cycle time (time to complete one iteration of an operational process), waited time (time lag experienced by the customer to receive a product or service), and completed on time (tasks completed on time considering internal or external timelines);
Finance: Profitability and spending according to budgets are two critical criteria of organizational efficiency from finance perspective;
Workplace environment: Physical amenities for employees and organizational culture constitute workplace environment [
22].
In a comparison of the aforementioned models, two models standout for their direct approach and ease of implementation:
The Bass model measures three key parameters: (a) Profitability, (b) value creation for stakeholders, and (c) value creation for society; and
Sink and Tuttle’s model signifies the importance of measurable parameters such as timeliness, quality, efficiency and effectiveness, profitability, and employee satisfaction in establishing organization efficiency.
To benefit from both models, a combination of these two models is used to establish indicators for measuring organizational efficiency
1.3. Factors Affecting Organization Efficiency
Many factors influencing successful organizational transformation improve the efficiency level within that organization (
Figure 3).
Three key resources that affect an organizations’ performance are human resources, financial resources, and physical and infrastructure resources [
24]. The organization’s performance is directly dependent on its human resources as enablers to achieve its objectives. Human capital plays an essential part in strategic planning to create a competitive advantage. A firm’s human capital has two dimensions: Value and uniqueness. Resources are valuable when they allow the firm to improve effectiveness, capitalize on opportunities, and reduce threats. In the context of effective management, value focuses on increasing profits compared with the associated costs [
25].
Research analyzed the relationship between human capital and organizational performance in software companies and revealed a positive correlation. The key features of human capital development they highlight include trainings attended and teamwork practices [
26]. Some researchers stated that efficiency of an organization is not related to authoritarian leadership but to the culture of the organization, which is responsible for employee satisfaction, motivation, and high performance [
27]. An organization’s success heavily depends on the number of human efforts in an organization and its organizational structure—assisted by efficient use of its hardware/software resources to achieve the objectives. Hence, maintaining a highly motivated and satisfied workforce and the optimal organizational structure is essential for successful organizations [
28].
The literature on factors affecting organization efficiency lists varied factors from diverse spheres within the organization’s operation and governance. However, most of the factors are linked to Human Resources which signify the single most important factor in the success of any organization. The factors discussed in the literature talk about organizational flexibility to address employee concerns and provide a minimum level of employment security as few important factors affecting organizational efficiency.
Organization structure is a bridge between human resources and the organization by rationalizing the distribution of jobs, power, and compensation based on the specialization of skills required to deliver the expected results. The most critical factor affecting the productivity of human resources within an organization is the organization structure. While the organization’s success heavily depends on the number of human efforts in an organization, its organizational structure is aided by the efficient use of its hardware/software resources to achieve the objectives. Wrong organization structure could lead to disastrous results. The author feels that there are two facets to suboptimal organization structure: (i) Not providing the best suited designation/job role of an eligible employee thereby impacting his/her motivation, productivity, and satisfaction, and (ii) posting wrong candidates (candidates without the right skill sets for the job role) for a specific job would be tantamount to setting up the employees for failure as organizational structure is the means to distribute power, resources, and compensation fairly to the staff of an organization [
29].
If the roles, responsibilities, remuneration, and power are not rationally distributed, disgruntlement and dissatisfaction occur among employees, leading to a significant impact on productivity. By contrast, organizations with an optimal organization structure excel in productivity and have significantly high ratings for employee motivation and satisfaction. Thus, increased productivity in an organization has a direct economic impact on the stakeholders and the socioeconomic benefits offered to the community by the highly satisfied and motivated employees [
30].
Performance of an employee could be affected by many factors. The organizational culture, leadership styles, and corporate communication are few important factors that could impact organization efficiency. The author feels that these entire factors link to the human aspect linked to workforce psychology that eventually affects an employee’s motivation and, in turn, better or worse performance leading to impact organization’s efficiency in a positive or negative way. Organizational justice is a core factor that affects an employee’s morale and, thus, performance [
31].
The employees could be anxious or concerned about organizational justice being imparted. It also affects an employee’s motivation, satisfaction, and commitment to the organization. Employees prefer fair and equal treatment within their organization. The productivity and commitment of the employees toward their organization increase if they perceive the treatment they receive is equal and fair in relation to their work. Organizational justice is proportional to the staffs’ perception of fair treatment at work [
32].
Organization culture and an organization’s leadership are intertwined topics because of the high degree of interdependency and impact on an organizations’ performance. Because an organization typically intends to improve its operational performance, the leadership styles of its managers should be critically analyzed to understand any flaws and coached to adapt to situations requiring a turnaround of organizational performance. The authors defined leadership as “the art of motivating a group of individuals to act toward achieving a common goal.” William Cohen 2010 stated that “leadership is all about results.” Measuring the effectiveness of the leadership as effective leadership is difficult because the assessment is based on many variables and facets of personality. Some key factors associated with leadership are ethics, personal values, intellect, creativity, knowledge, confidence, communication skills, courage, and leader’s charisma [
33].
In summary, a good leader must have all these basic traits in varying degrees and should be emotionally intelligent to make the best out of any situation presented without compromising on the sense of purpose and motivation to achieve the goals set. A good leader shares the credit of success with subordinates and takes responsibility for failure. The management literature has listed many leadership styles, for example, autocratic, bureaucratic, charismatic, democratic/participative, laissez-faire, people-friendly leadership/relation oriented leadership, transformational leadership, task-oriented leadership, servant leadership, and transactional leadership. Different styles of leadership have different impacts on organizational performance. Notably, few of these leadership styles help organizations succeed, transform, and achieve goals, and some leadership styles hinder an organizations’ development and are thus a source of employee demotivation and dissatisfaction [
34].
The autocratic leadership style has the most negative impact on an organization’s performance. In this form of leadership, a leader exercises immense power over the staff of an organization and offers little to no opportunities for the staff to voice their opinions or be involved in decision-making processes. In most organizations, autocratic leaders produce dismal performance. Contrary to the autocratic style, transformational leadership is one of the most successful leadership styles: The leader is a role model who inspires staff by challenging them to reach their true potential through increased commitment to the organization. Transformational leaders assess the strengths and weaknesses of their staff and delegate responsibilities according to strengths to balance the workload and responsibilities and optimize the organization’s performance and productivity. Leadership style is also related to the organization’s culture.
In summary, the failure or success of an organization is heavily dependent on the leadership style and its culture, including the beliefs, values, opportunities, and constraints of an organization at any given point in time. The importance of a leader is observed, for example, when the leader successfully navigates the organization through challenging market conditions [
34].
Employee training and corporate communication also figures as few of the important factors affecting organization efficiency. Training is one of the most important functions of human resources management in an organization. This area is one of the few areas where the interests of an organization’s management and its employees converge. From an organization perspective, upskilling employees so that they can perform to their highest potential benefit the organization’s efforts to increase and sustain its productivity. In a similar manner, training opportunities for employees help them advance in their careers and realize better compensation and opportunities [
26]. Research on health services sector organizations across South Asian countries revealed that training was a prominent factor that affects employee motivation and job satisfaction [
35]. Although employee performance is linked to many facets such as job satisfaction, compensation, and benefits, a strong positive correlation was observed between the performance of an organization and their learning development (i.e., training) budget. Training budgets have widely been observed to be one of the first to get reduced in the case of cost reduction. However, other results revealed that organizations should invest in training as a tool to improve employee motivation and satisfaction, which increased employee productivity [
35].
The importance of human capital development for organizational efficiency is critical to the extent that Adam Smith, the father of modern economics, included human capacities in his conception of capital stock in 1776. Notably, in the late 1950s and 1960s, the importance of human capital began to be featured prominently in the literature. Schultz considered the investment in education and training to build up a stock of skills and abilities (human capital) in the population that can benefit national economies and fuel economic growth. Moreover,, Schultz proposed a five-fold strategy for investment in human resources: Improve health facilities and services to increase life expectancy, strength, and stamina; in-service or on-the-job training; formal education at the primary, secondary, and tertiary levels; adult literacy programs for individuals who missed formal education; and migration of individuals and families to adjust to changing job opportunities [
36].
Harbison (1962) argued that human resources establish the ultimate basis for the wealth of nations. He described financial capital and natural resources as passive factors of production and human beings as active agents that use these passive resources to build economic, social, and political organizations and promote national development [
37].
In addition, evidence showed that the relevance of human capital to a firm’s performance has become prevalent among the technology-based new ventures, and the use of human capital tools (emphasizing quality of employees) in small technology-based new ventures tend to have a significant impact on firms’ success. Another visible element in the success of an organization is the ability of its leadership to foresee changes proactively and prepare the organization to absorb the changes [
38].
The leadership obtains its moral license to steer and transform an organization to a sustainable path through its relationship with the employees. The values and culture of an organization develop a relationship of trust among the two parties that results in highly motivated and engaged staff. The leadership uses various channels to convey its vision across the board [
39].
One of the modern tools that have been adopted to improve communication within organization is blogging. Organizations are increasingly encouraging employees to communicate with their supervisors and leadership through blogging. Providing employees with the opportunity to express themselves through a blog allows them to actively contribute to the operation of the organization, share their opinions, and ask questions. This process improves internal communication and offers employees a sense of ownership—”we are being heard” [
40].
Process management, innovation, and efficiency in operations are important factors affecting organizational efficiency from a business process perspective. Implementation of tools like six sigma and lean would help improve efficiency. However, these initiatives and tools are not always successful in maintaining productivity while initiating process changes. Researchers Ahire et al. (2000) state that results of research on the impact of process management efficiency while maintaining productivity has been dismal. Authors agree to this, as the process changes impacts workforce and there exists a learning curve to accept and imbibe process changes, leading to temporary productivity losses throughout the learning curve [
41].
As stated earlier, the authors feel that the key factors affecting organization efficiency are directly or indirectly linked to workforce psychology and affects employee motivation and satisfaction significantly, which would make or break any organizational transformation initiatives.