Organizational Analysis

The process of appraising the growth, personnel, operations, and work environment of an entity

Over 1.8 million professionals use CFI to learn accounting, financial analysis, modeling and more. Start with a free account to explore 20+ always-free courses and hundreds of finance templates and cheat sheets.

What is Organizational Analysis?

Organizational analysis is the process of appraising the growth, personnel, operations, and work environment of an entity. Undertaking an organizational analysis is beneficial, as it enables management to identify areas of weakness and then find approaches for eliminating the problems.

Organizational Analysis

Characteristics of Organizational Analysis

Important aspects of organizational analysis include the assessment of external elements that can influence the performance of an organization. An organizational analysis also includes strategically evaluating an organization’s potential and resource base.

Internal weaknesses and strengths, together with external threats and opportunities, determine the success of an entity. For this reason, SWOT analysis is an important part of organizational analysis. It is used by businesses to assess their performance and establish goals or objectives.

1. Strengths

The competitive edge that an organization enjoys over its competitors is an advantage that defines its success. Assessing the strengths of an organization involves evaluating management, workforce, resources, as well as current marketing goals. In general, an internal analysis looks at an entity’s core competencies and resources.

Defining the capability of an organization helps the management team to make sound decisions as they formulate long-term objectives. Other important aspects of an internal analysis include looking at financial objectives, strategic planning, and operational structure.

2. Weaknesses

Weaknesses are obviously an aspect of an organization that can affect its performance. Recognizing weaknesses is important, as it enables the organization to locate problems and implement beneficial changes. In addition, the organization is able to develop appropriate choices in its strategic planning process, especially when results are not satisfactory.

Potential weaknesses include low morale, poor leadership, poor financials, obsolete technology, and inefficient functions. An example of a turnaround would be an organization, which previously experienced poor cost control, working hard to manage costs.

3. Opportunities

Generally, an external analysis weighs the threats and opportunities that are present outside of an organization. An external assessment includes sizing up the competition, analyzing market trends, and evaluating the impact of technology on the performance of an organization. When looking at external opportunities, an organization needs to identify current trends in the market, as well as weaknesses and gaps in the market that it can come in and fill.

An entity also needs to consider technological changes as an opportunity. Innovation helps to create opportunities for business. Therefore, organizations that set themselves apart in terms of their efficient use of available technology are capable of becoming leaders in their respective industries.

4. Threats

Not all threats are detrimental to the success of a business. For instance, labor can be a threat or an opportunity, depending on the prevailing economic conditions. Legislation and regulations set by the government also exert an effect on how well an organization performs in its industry.

To succeed in a competitive environment, an organization needs to learn to cope and embrace change as it happens.

Models of Organizational Analysis

Organizational analysis helps businesses succeed in a dynamic business environment. For that reason, an entity needs to understand its model. Business modeling is a key parameter in the process of organizational analysis. Models explain how a business functions and the changes they experience, so that they can reach their desired level of performance.

There are four different models that organizations commonly work with. The first model is the rational model. Its philosophy is that there is only one logical way to perform tasks. An alternative model is the natural model, which believes that a business not only wants to achieve its own goals, but also positively influence its external environment.

Socio-technical is the third model. According to the socio-technical model, businesses are evolving on a continuous basis. Change is made each time employee expectations are altered because of collaborating with fellow employees.

The last one is the cognitive model. This model places great emphasis on tasks done by the business team. A lot of attention goes toward the division and coordination of tasks among employees.

Benefits of Organizational Analysis

Organizational analysis offers many benefits to a business. For one, it helps businesses improve on their weaknesses. Understanding how a business functions helps to shed light on areas of weakness that may only require simple changes to spur growth. An organizational analysis helps businesses find innovative ideas, such as new ways to structure objectives so that employees are more productive.

Final Word

Businesses seeking a competitive edge can benefit from undertaking an organizational analysis. The information generated from an organizational analysis will help an entity understand what it needs to do in order to turn itself into a more successful, profitable venture. Whether the business is new or old, an organizational analysis can help owners and managers achieve a better understanding of their business.

Additional Resources

CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)® certification program, designed to help anyone become a world-class financial analyst. To keep learning and advancing your career, the additional CFI resources below will be useful:

0 search results for ‘