Effectiveness and Efficiency

AuthorMildred Pryor, Deborah Hausler

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Efficiency and effectiveness were originally industrial engineering concepts that came of age in the early twentieth century. Management theorists like Frederick Taylor and Frank and Lillian Gilbreth designed time and motion studies primarily to improve efficiency. Work simplification efforts again focused primarily on questions like "How fast can we do this task?" Work simplification also led to terminology like streamlined processes and efficiency experts, but the emphasis was still on time and motion. The concept of effectiveness, which takes into consideration creating value and pleasing the customer, became popular in the United States in the early 1980s when Americans perceived Japanese products such as cars and electronics to offer greater value and quality.

The words efficiency and effectiveness are often considered synonyms, along with terms like competency, productivity, and proficiency. However, in more formal management discussions, the words efficiency and effectiveness take on very different meanings. In the context of process reengineering, Lon Roberts (1994: 19) defines efficiency as "to the degree of economy with which the process consumes resources-especially time and money," while he distinguishes effectiveness as "how well the process actually accomplishes its intended purpose, here again from the customer's point of view."

Another way to look at it is this: efficiency is doing things right, and effectiveness is doing the right things. For example, think of a company that was successfully making buggy whips as automobiles became the mode of transportation. Assume that the processes used to make buggy whips were perfect. The relationships of internal and external suppliers and customers were perfect. The suppliers and customers teamed together to make perfect buggy whips. The buggy whips were delivered on or ahead of schedule at the lowest possible cost. This company was very efficient. However, the company and its strategists were not very effective. The company was doing the wrong things efficiently. If they had been effective, they would have anticipated the impending changes and gotten into a different market.

Let's consider a surgery example. A surgeon is very skilled, perhaps the best in the country. The impending job is to operate on the patient's left knee. However, the surgeon doesn't perform all the steps of the process leading up to the surgery. Someone else marks the right knee for surgery. However skilled this surgeon is, however fast he performs the surgery (i.e., however efficient he is), this process will not be effective. When the patient awakens from the surgery, he will not be a happy camper. And what about the HMO?

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Who will pay for a surgery performed on the wrong knee?

Efficiency and effectiveness can both improve speed, on-time delivery, and various other process baselines. A travel application which has six signatures (as opposed to two) causes the travel application process to be inefficient and ineffective. Many of the people who sign the application are not effective in their job because they waste their...

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