Efficiency vs Effectiveness

Efficiency vs Effectiveness

Which would you rather be – efficient or effective?

by Andrew Cooke, Growth & Profit Solutions

Efficiency is doing things right; Effectiveness is doing the right things.The focus for many businesses today is on the short-run, getting more for their dollar and squeezing more out of their resources.  Productivity is the name of the game.  Although this is laudable it has focused businesses on the short-term and distracted them from the long-term.

Efficiency & Effectiveness

Efficiency and Effectiveness are two competing yet complementary approaches to business.  For the purpose of this article these are defined as:

Efficiency

This is ‘doing things right’ and concentrates on tactics focusing on achieving short-term results.  It means doing things better and quicker.

Effectiveness

This is ‘doing the right things’ which is critical to the success or survival of any organisation. Strategy is the key, not just any strategy, but one that is well constructed and then executed.

How these two factors interact impact the business and an overview of these interactions can be seen in the Efficiency/Effectiveness matrix below.

Efficiency/Effectiveness Matrix Efficient vs Effective Matrix

THRIVE: Highly Effective & Highly Efficient

Businesses that pursue the right strategy efficiently thrive. They can meet strategic targets earlier than anticipated, and can go on to meet more challenging strategic targets, so as to sustain their ability to thrive.

SURVIVE: Highly Effective & Inefficient

Many businesses ‘survive’, they show potential but never attain the growth that they should be capable of.  This can be due poor management or inefficient practices.

DIE SLOWLY: Ineffective & Inefficient

The business lacks a clear vision of what it is trying to achieve, and so lacks the right strategies or has weak strategies on which to execute. The lack of clear strategies means that the short-term plans and tactics are lacking.  As such the business delivers poor results for several years and are in a state of steady decline before the business eventually ‘dies’.

DIE QUICKLY: Ineffective & Highly Efficient

Here the business is executing very well, but on the wrong strategies which drive it into a state of rapid decline.   The business leaders are not learning from their mistakes, or are not aligned with the market’s realities, and by doing so negatively compound the effects of their wrong strategies.
What Do You Do Next?

For businesses to thrive they need to get both their efficiencies (tactics) and effectiveness (strategies) aligned – have the right direction and the right actions to help you bridge the gap between where you are now and where you want to be.  Look at what you are doing and where you are going  – review your assumptions, get an objective perspective, and continually review and improve to reflect the realities  of your business, marketplace and the business environment.

So what are you going to do? And will it take you in the right direction? And are you effective and efficient in what you do?

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