Thursday, May 3, 2007

Effectiveness vs. Efficiency

The administrative job of the manager involves increasing the yield from the organization's resources. This, we are told means 'efficiency' - doing better what is already being done. But, the optimizing approach, rather, should focus on effectiveness. It fo cuses on opportunities to produce revenue, to create markets and to change the economic character of existing products and markets.
Effectiveness does not ask "How can we do this better?". It asks "Which of our products are producing extra-ordinary economic results or are capable of producing them? Which of the end users/markets are capable of producing extra-ordinary results?" Following from this, then is the n
next logical question "To what results should existing resources and efforts of the business be put in order to achieve these extraordinary results instead of the ordinary results that efficiency is capable of producing?"
This does not deprecate efficiency. It deprecates being efficient in doing the wrong things. Effectiveness is the foundation of success. Efficiency is the minimum requirement for survival after success has been achieved. Effectiveness is about doing the right things. Efficiency is about doing things right.
Efficiency is concerned with doing everything optimally. Effectiveness is recognizing that in business, as elsewhere, 10-15% of the phenomena lead to 85-90% of the results. The other 85-90%, however efficiently taken care of produce nothing but the most ordinary results.

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