Application of Structural Equation Modeling in Evaluation of Organizational Effectiveness

The contribution of the service sector in the global economy is rising nowadays and organizations are the key elements of this economical sector. The customer-orientation and attempting to enhance the performance are playing a fundamental role in the organizations success and effectiveness. The present study assesses the organizational effectiveness, using the structural equation modeling (SEM) statistical approach. As the main dependent variable, the organizational effectiveness has considered as a function of customer satisfaction and objectives attainment scales. Data was gathered from two customers population and managers population of the governmental banks of Dezfoul township, using two separate questionnaires. Based on the SEM approach, the 5 and 4 sub-scales of the customer satisfaction and objectives attainment scales were considered as observed variables. The same scales and the main dependent variable, effectiveness, were also defined as unobserved or latent variables and their interrelationship was then analysed constructing a second-order confirmatory factor analysis (CFA) model. Results confirmed the fitness and validity of all two measurment models for customer satisfaction and objectives attainment scales and also the second-order CFA for assessment of effectiveness, based on the gathered data. The precedence of the magnitude and significance of direct and indirect effects of the customer satisfaction and its sub-scales compared to the objectives attainment and its sub-scales on the organizational effectiveness is another part of results.