Organizational theory is extended to develop a method for administrators to assess hospital effectiveness in a competitive environment. First, the literature pertaining to organizational effectiveness and survival is synthesized to show the lack of consideration for the effects of competition. Second, the article integrates the effects of competition on organizational effectiveness through a competitive constituency model. A step-by-step procedure is proposed to apply the theory in an organizational setting. The model explicitly addresses differences in power relations between hospitals, their competition, and their stakeholders. The relative nature of effectiveness is explored by comparing the hospital to its competition using criteria developed through specific goals of stakeholders. The distinction between managerial and organizational effectiveness constructs is clarified. Finally, the practical application of this model is demonstrated by assessing the effectiveness of a hospital in the competitive environment of Seattle, Washington, where two hospitals have recently closed.
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