efficiency … or Effectiveness?

Business Process ImprovementIn businesses or organizations, failure to worship efficiency is tantamount to criticizing “motherhood and apple pie.” Actually, I believe in efficiency because it represents an ideal that we value. However, in this article, I will highlight effectiveness. One of the main reasons for emphasizing effectiveness, is that we must consider the question; what’s more important, doing things right (efficiently) or doing the right things (effectiveness)?

Achieving efficiency may be a pyric victory. What are the consequences if we are efficient at doing the wrong things?

The Pitfalls of Efficiency
Efficiency is a ratio of output per unit of input. Mathematically, it seems straightforward, as if there was an agreed-upon definition of the numerator and denominator.

If we are dealing with lawn mowers, we could calculate the costs of materials, labor, facilities, financing and production time, etc., and this would give us a measure of the efficiency of our manufacturing methods and processes. However, none of this would help us determine or value the final product. It’s much easier to analyze data than to measure the effectiveness of the lawn mowers.

For example, I read this comparison or analogy; “The efficiency of charities is measured by the ratio of dollars going to the cause divided by total donations. Yet if the Salk Institute spent three-fourths of its donations on overhead and cured polio, is it efficient?” In reality, when the outcome is what we hoped it would be, we tend to consider the effort successful.

The Focus on Efficiency
Companies have learned that costs are easier to compute than benefits, so they cut the costs in the denominator to improve the efficiency of their processes. But this isn’t always a good thing. What if Walt Disney, in an effort to cut costs, produced Snow White and the Four Dwarfs? Mathematically, this could qualify as efficiency because there are labor cost savings by using three fewer Dwarfs. However, in my opinion, this would not be effective.

Economists theorize that efficiency cannot be meaningfully defined without regard to your purpose, desires, preferences and the price you’re willing to pay. One example they use is the automobiles. Technically, they are quite inefficient because they are parked a significant portion of the time. However, when we want to go somewhere, they’re very effective. So, there is more emphasis on efficiency because it is more easily measured, whereas effectiveness requires judgment.

I am not suggesting that companies or organizations abandon any of their productivity tools, such as machine tools, computer aided design, document management, faster computers, other software, printers, mobile devices, etc. The key point is that we can be efficient with things, but not people. Also, efficiency in an organization is not generally a competitive advantage. It is the equivalent of having windows in the building: every business has them. The actionable competitive advantage is based on effectiveness, not efficiency.

Focus on Effectiveness
Leaders should carefully reflect on effectiveness. Better yet, focus on efficaciousness: the power to produce a desired effect. This requires unleashing the power of the mind, giving people time to reflect, tinker and create the desired future. If we continue to combine efficiency with effectiveness, results, value and meaningful impact will suffer. A constant quest to improve mathematical efficiency is counterproductive to excellence, innovation and dynamism. In our economy, which depends heavily on intellectual capital, in which wealth is created by using the power of the mind as opposed to the brawn of the body, effectiveness will always trump efficiency.

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James E. McClain is the author of Successful Career Development: A Game Plan, the book upon which some of our training programs are based. He has over 30 years' experience as a corporate HR executive, small business owner with ongoing experience in career development and as a college instructor. His educational background includes a B.S. and Masters degrees Education and Certification in Financial Planning. Our promise is that "you can pay more for training but you can not buy better training." The mission is to deliver the most effective and cost effective training and development programs.

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Posted in Business Process Improvement, Decision Making, Leadership

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