Ibonio D’ Souza
Efficiency and effectiveness are both commonly used management terms. Yet, while they sound similar and start with the same letters, they both mean different things. According to the famed management guru, Peter Drucker: “Efficiency is doing things right. Effectiveness is doing right things”. Efficiency refers to doing things in a right manner. Scientifically, it is defined as the output to input ratio and focuses on getting the maximum output with minimum resources. Effectiveness, on the other hand, refers to doing the right things. It constantly measures if the actual output meets the desired output. Since efficiency is all about focusing on the process, importance is given to the ‘means’ of doing things whereas effectiveness focuses on achieving the ‘end’ goal.
Efficiency is concerned with the present state or the ‘status quo’. Thinking about the future and adding or eliminating any resources might disturb the current state of efficiency. Effectiveness, on the other hand, believes in meeting the end goal and therefore takes into consideration any variables that may change in the future. In order to be efficient, time and again discipline and rigour is required. This can build inflexibility into the system. Effectiveness, on the other hand, keeps the long term strategy in mind and is thus more adaptable to the changing environment.
Efficiency will look at avoiding mistakes whereas effectiveness is about gaining success. If business owners were to ask themselves whether efficiency or effectiveness is more important, the answer should be effectiveness. This is how goals (and ultimately profits) are measured. When efficiency is of itself seen as a goal, the company’s results and profit will suffer in the long term. In the days of mass production, efficiency was the most important performance indicator for any organisation. However, now with consumers facing many choices, effectiveness of an organisation is always questioned. In order to be a successful organisation, there needs to be a balance between effectiveness and efficiency.
How do I balance efficiency and effectiveness? Entrepreneurs need to question the purpose of the business. Why does the business exist? Am I strategically working in the right areas? Efficiency needs to be tempered with effectiveness to organically grow the business. When a small business owner loses sight of the purpose of the organisation, efficiency takes over as the predominant theme. Efficiency alone produces less than with effectiveness combined. Efficiency needs to work in harmony with effectiveness form and function. The lesson from here is that we can also use the same strategy, albeit with certain modifications, to successfully manage our personal lives too!
