Effective Vs efficienct.doc

7/29/2019 Effective Vs efficienct.doc

http://slidepdf.com/reader/full/effective-vs-efficienctdoc 1/4

Effective Vs. Efficient: Do You Know the

Difference?

Effective and efficient are very common business/marketing terms. However, most of ustend to mix their meanings and usage occasionally (including myself), and that is why I

decided to write on the topic.

First of all if you look for both terms in most dictionaries you‟ll find very similar

definitions (which make the matter even more confusing). Some dictionaries get it right,

however. Here is the definition from Dictionary.com, which I like:

Effective (adj.): Adequate to accomplish a purpose; producing the intended or expected

result.

Efficient (adj.) Performing or functioning in the best possible manner with the leastwaste of time and effort.

If you want an easier way to memorize the difference, remember this sentence: “ Being

effective is about doing the right things, while being efficient is about doing the things inthe right manner.”

Let‟s use a practical example to illustrate the concepts. Suppose that two guys, Mark and

John, are trying to change a flat tire on their cars (each one has his own car).

Mark starts by taking out the jack and placing it under the car. He quite doesn‟t know

where to position it, so he goes by trial and error and wastes a lot of time doing it. After 20 minutes he finally manages to fix it, so he proceeds to lift the car and change the tire.

As you can see Mark was doing the right thing, but he was doing it poorly. We can say

that he was being effective, but not efficient.

John, on the other hand, starts by grabbing a towel and cleaning the tire. He wants to

make the thing shiny before he changes it. And mind you he is very good and fast atcleaning every little detail of the tire.

We can say that John is being efficient, because he is cleaning the tire fast and throughly,

but he is not being effective, because cleaning is a step that is not required at all whenchanging a flat tire.

Now if we had a third person, Peter, who could change the flat tire using the right steps

and doing it quickly, we could say that he was both effective and efficient.

Efficiency and effectiveness are both commonly used management terms. Yet, while they

sound similar and start with the same letters, they both mean different things.

http://www.differencebetween.net/business/difference-between-leadership-and-management/






Efficiency refers to doing things in a right manner. Scientifically, it is defined as the

output to input ratio and focuses on getting the maximum output with minimum

resources. Effectiveness, on the other hand, refers to doing the right things. It constantlymeasures if the actual output meets the desired output.

Since efficiency is all about focusing on the process, importance is given to the „means‟

of doing things whereas effectiveness focuses on achieving the „end‟ goal.

Efficiency is concerned with the present state or the „status quo‟. Thinking about the

future and adding or eliminating any resources might disturb the current state of efficiency. Effectiveness, on the other hand, believes in meeting the end goal and

therefore takes into consideration any variables that may change in the future.

In order to be efficient time and again, discipline and rigor is required. This can build

inflexibility into the system. Effectiveness, on the other hand, keeps the long term

strategy in mind and is thus more adaptable to the changing environment.

Since efficiency is about doing things right, it demands documentation and repetition of the same steps. Doing the same thing again and again in the same manner will certainly

discourage innovation. On the other hand, effectiveness encourages innovation as itdemands people to think, the different ways they can meet the desired goal.

Efficiency will look at avoiding mistakes or errors whereas effectiveness is about gainingsuccess.

In the earlier days of mass production, efficiency was the most important performance

indicator for any organization. However, with consumers facing an increasing number of

choices, effectiveness of an organization is always questioned. In order to be a successful

organization, there needs to be a balance between effectiveness and efficiency. Only being efficient and not meeting the requirements of the stakeholders of the organization is

of little use to anybody. And effectiveness may result in success but at what cost?

Summary:

1.Efficiency means doing the things right whereas Effectiveness is about doing the right

things.

2. Efficiency focuses on the process or „means‟ whereas Effectiveness focuses on theend.

3. Efficiency is restricted to the present state whereas effectiveness involves thinking

long term.

4. Organizations have to be both effective and efficient in order to be successful.

http://www.differencebetween.net/language/difference-between-aim-and-goal/





Efficiency vs. Effectiveness: How

Companies Can Accomplish Both Goals

Often, when a company has a stated goal of improving performance, their target is to

enhance efficiency. However, a valuable opportunity is sometimes missed by not takingan overall look at the effectiveness of their business processes. Many companies can

achieve a higher level of effectiveness through understanding current processes, and

redesigning those processes to take advantage of advances in technology, elimination of wasted work, better alignment of human resources and improved internal controls.

Efficiency is doing things right, but effectiveness is doing the right thing. An example isif you visualize an automobile coming down an assembly line, (sparks flying as the

robotic arms of the automated welding machines do their work), these robots are far moreefficient at welding than any human could ever be. However, if the robots are welding the

door shut, the process is still efficient, but certainly not effective.

The situation is similar when many companies evaluate, select and implement newinformation technology systems. When you implement a new solution, it is likely tomake processes more efficient. However, if you do not redesign the processes to properly

align your people, the processes and the technology, you are unlikely to make the

business more effective.

As an example, a client in need of a new financial system asked us to find a solution that

was very efficient in creating journal entries, as they processed up to 2,500 a month. As part of our requirements analysis, we evaluated the business process and determined that

the reason they were making such a high number of journal entries was coding errors in

purchasing and accounts payable that required numerous reclassification entries.

The solution was to redesign the process and implement an automated requisition and

purchasing system in which the requestor codes the requisition to the appropriate costcategories. The system automatically checks the budget for sufficient finances, and the

cost categories flow through the purchase order to accounts payable. With this process,

there are no invoice coding issues. The combination of the new system and the refined

process significantly reduced the number of journal entries, allowing the company to become more efficient and effective.

Depending on the goals of the company, there are a wide variety of drivers for business process reengineering and systems evaluation, selection and implementation projects.

However, the most common fall into two categories:

Growth: A business has expanded – either organically or through M&A, or

perhaps plans to go public – and their current systems cannot keep pace with



requirements. As a part of the process to evaluate, select and implement new

systems, a company should utilize this opportunity to examine and redesign their

business processes to make sure they are efficient and effective given the new and projected demands of the company.

Contraction: Especially in a difficult economy, many companies must do more

with less as business has decreased, funding sources have dried up andheadcounts have shrunk. Here, companies want to look for wasted work andwhere processes can be streamlined. Each process should add value to the

business and make it more effective. Technology can then be applied to make the

remaining processes more efficient.

So how does a company determine whether they are truly operating effectively? There

are several key indicators that, if not addressed, could be damaging to a business‟ health,image and bottom line:

Customer service: A high number of complaints, returns and orders that are not

shipping on time, or overall poor customer satisfaction Compliance: Difficulty in meeting filing and regulatory requirements, bank

covenants and trade agreements

Budget to actual variances: Departments, programs or business units that

consistently miss budget

Cost containment: Difficulty in minimizing costs and remaining competitive

Turnover: High unplanned turnover

A company that has any concerns regarding the effectiveness of their processes should

consider contacting an experienced advisor. An examination of current processes canhelp to eliminate non-value added activities and identify opportunities to redesign and

streamline the processes. Changes in the organizational structure may strengthenefficiency and effectiveness and result in enhanced control from a compliance perspective.

Implementing new technology can often solve several problems and make a businessmore efficient. However, evaluating current processes in conjunction with the system

implementation to make sure that the right people are doing the right things, enabled by

the right technology can help ensure that a company is truly effective

Documents

Effective Vs efficienct.doc