What is the major problem? It is fundamentally the confusion between effectiveness and efficiency that stands between doing the right things and doing things right.
– Peter F. Drucker –
Confusing Effectiveness And Efficiency Can Be Costly
The seminal management author, Peter Drucker, first explained the Effectiveness vs. Efficiency challenge in his book ‘The Effective Manager’ in 2006. Most management teams interchange the terms and mistakenly assume that being efficient is also being effective.
How often do you see a company seemingly thrive as they have a smart manager, or team of managers, be highly efficient in doing things well. Then, when the key manager (or managers) leaves, the good times for the company seem to be a distant past. How often have you heard – “we used to have a terrific manager but he left”. This situation repeats itself endlessly in contemporary management.
Recognising Effectiveness And Efficiency
Now consider that an organisation ignores being efficient – seemingly crazy some would say – but focuses its time and energy of getting a structure and processes in order so that, when efficiencies are delivered, they occur within an effective organisation. To quote Drucker, an Effective organisation is “Doing the Right Things”.
An effective organisation has the following attributes (not an exhaustive list)
- Organisation structure is unambiguous
- Business Plan written, and reviewed in the last 6 months
- Included in the business plan is a workforce plan
- Marketing campaigns are explained with targets
- Sales plans are in place
- Reviewed with budget variations
- Performance measurement process exists
- Job Descriptions reviewed in the last 12 months
- Career Planning forms part of the review
- Delegations and Authority approved and clearly articulated.
- Communication plan in place
- Know how movements in the industry will affect the organisation
In an effective organisation when a change in personnel occurs Intellectual Property retention is stronger, customers remain loyal to the organisation, staff are trained and perform within a structured and sound environment.
Quoting Drucker again – Efficiency is “Doing things right”. Efficiency means an organisation measures its outputs against inputs. Are these outputs maximised? An example would be measuring how many hours it takes to complete any task – clearly the lower number of hours the better. Metrics are a cornerstone of efficiency.
The Business Outcomes Of Effectiveness And Efficiency
This grid can identify the possible outcome for an organisation given its positioning in regards to Effectiveness and Efficiency.
- An Effective and Efficient Organisation will Thrive
- An Effective but inefficient organisation will Survive
- An Ineffective but efficient organisation will Die Slowly
- An ineffective and inefficient organisation will Die Quickly
During a presentation provided to The Network of Consulting Professionals in March 2016, the members attending were asked to position 1 to 3 clients on the Effectiveness v Efficiency grid when the member was first engaged.
The results represent a good sample (49 companies) and the dominant themes were that most companies were either Surviving or Dying Slowly. 14% of companies in the sample were dying quickly. This has significant ramifications to the urgency and nature of the work members perform for clients.
You are welcome to add your thoughts experiences to this blog post.