Monday, May 12, 2014

Efficiency vs. Effectiveness

Leaders focus on effectiveness, and managers focus on efficiency.

Effectiveness and Efficiency are two fundamental goals all businesses over the world are pursuing, however, more often, there is a lack of clarify upon their true means and how to achieve them accordingly.

Effectiveness is doing the right things, and efficiency is doing things right: Business must ensure both efficiency and effectiveness, and with agility, if you are to be successful. Efficiency is doing things right with minimum inputs and resources (do it right the first time) and effectiveness is doing the right thing by following the principles and leading in the right directions. Leaders focus on effectiveness, to ensure business having the vision and well-defined goals to reach it; while managers focus on efficiency, “efficiency" is the relationship between how much time (or labor) you expected or planned to expend, versus what the actual was. If you expend less time or labor than expected, you were efficient.

Quality (Efficiency + Effectiveness = Q) is doing the right thing right, the first time: It is with no backlog and wastage and highest customer satisfaction rate. Generally, you have to have effectiveness first, and then make the effect more efficient. Efficiency means a way to measure how good you are in what you are doing in terms of available resources. Then it is a good way to measure the effectiveness and bottom line is the economy. Efficiency is to do what is effective, achieve high customer satisfaction with less operating cost, and achieve productivity and satisfaction for employees using good teamwork.

Agility (Efficiency, Simplicity, flexibility): Most of the organizations think of efficiency as the most beneficial (profitable) means of doing business. Distributing workloads and delegating is often necessary, but many business practices add complexity that inevitably leads to losses, through additional expenses, waiting, bureaucracy,  etc. Often such unnecessary complexity becomes an obstacle for businesses to achieve agility to response to the changes, or lack of flexibility to make alternative options to do the work. At the higher mature level, agility is the ultimate goal for business to respond to change with speed and out-beat competitors with capacity.  

At some point in the enterprise evolution, business effectiveness and efficiency are also correlated specifically when the organization reaches its capacity. At this point trying to improve effectiveness brings down efficiency and vice versa. The corollary is true as well. Accordingly, the next level should be on the effectiveness of improving effectiveness, which could implicitly involve efficiency of improving effectiveness, and ultimately reach the enterprise agility. 


En espaƱol: Eficiencia versus efectividad 


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