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EFFICIENCY VS EFFECTIVENESS

Tim Millett
Published by Tim Millett
08 October 2013

The psychologist and author Abraham Maslow once wrote, “You will either step forward into growth or you will step back into safety.” Organisations and the individuals who are participants at all levels are often defined by their ability to embrace the future in pursuit of established goals. It comes down to an organisation that is merely efficient and able to achieve results with precision, but not necessarily adaptability, or one that is effective and can embrace a changing future for the health of the organisation.

In its simplest terms, being efficient means having internal and external processes that lead to the desired end result. Efficiency refers to having the means to produce the desired effects. For example, a sales team may have a weekly sales goal and it is met 90% of the time. The team is considered to be efficient in that the desired amount of sales is produced with the least amount of waste or overtime.

An Adaptable Organisation

But is being able to meet a weekly sales goal an indication of an effective sales team? Could the goal or the sales figures be higher? Effectiveness in an organisation is doing the right things which leads to an adaptable environment capable of competing in the future. An effective sales team does not just meet sales goals without question. An effective sales team will manage relationships with people and organisations that can prove to be the foundation for new business in the future. The effective sales team can create a viable customer base that includes high rates of retention and customer satisfaction.

An efficient sales team meets its goals, but what if the goals change or are expanded? How easily can the sales persons adapt to the new environment? If new products are introduced, how quickly can the team use established customer relationships to jumpstart sales?

Instead of just focusing on making sales efficiently, the sales team should also be constantly evaluating each of its actions and procedures looking for ways the organisation can be more adaptable, cost efficient, productive, innovative and customer oriented.

Effectiveness and Quality

The concepts of efficiency and effectiveness are important for every organisation because they go right to the heart of output and quality. An organisation that is efficient is able to achieve its goals, but there is not necessarily a relationship to quality. You can sell 50 widgets in a week, but is the customer satisfied and willing to repurchase the widgets next week? Or is the method of salesmanship and the quality of the widget so low that it is a one-time sale?

Efficiency and effectiveness are applicable to all organisational functions including management or leadership, team building and employee performance, sales, production, innovation, and all internal processes including those in the business office. For example, an efficient accounts payable department pays company bills on time. An effective accounts payable department has a system in place which enables the company to take advantage of discounts for early payment and is able to integrate payment information with purchasing data in order to insure the least cost is incurred at all times. It is accounts payable that often becomes the information source for trending prices.

More Than What is Expected

There is another way to look at efficiency and effectiveness. An efficient organisation or process will perform as expected and operates in the short term. An effective organisation asks if the performance meets the mission of the organisation and contributes to long term success and sustainability. An efficient organisation spends the expected amount of money to produce results. An effective organisation measures whether the money spent improved its ability to meet future goals.

An efficient organisation can produce immediate results by relying on “safety” in the words of Maslow. The facts and figures supporting the efficient production of output are safe. The effective organisation looks beyond the facts and figures and builds a quality organisation that is prepared for future growth. An organisation should be both efficient and effective, but if there had to be a choice made between the two…effectiveness is more important.

In short efficiency is about doing things right, whereas effectiveness is about doing the right things!

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