Efficiency & Effectiveness – How to Sort Out the Confusion

Efficiency & Effectiveness - How to Sort Out the Confusion

How to both do things right – and do the right things

It’s been said that, in order to do your job really well, you have to be both efficient and effective. It’s not enough to do things right (efficiency), you also need to be doing the right things (effectiveness).

But what does that really mean…?

Effectiveness – doing the right things

To be effective, you must have access to a flow of key external data. This will help you shape your strategic thinking. It’ll also give focus to any tactical actions which may be required. You’d be flying blind without it.

Effeciency – doing things right

To be efficient in making things happen, you also need to be actively generating, and plugged into, key internally generated information flows, systems, and communication channels.

Efficiency is about doing things right, that is, about maximising outputs from inputs, smooth running and things happening when and how they should.

An engine which gives higher power output or lower fuel consumption is efficient.

For example, you may consider yourself being efficient if:

  • You handle all the necessary detail to launch a product / service on time
  • You are accurate in your sales forecasts or manage to run your product on lower back-up stocks
  • You do things when various company systems require them, e.g. submitting quarterly reports.

Effectiveness is different. It means that you ensure you are doing the right things and thus demands an external focus, covering areas like:

  • Ensuring your new strategy is launched at the right time to capitalise on latent demand, that it is based on a platform of careful research and analysis to ensure its winning position
  • Applying your company’s limited resources selectively where you will achieve the greatest return
  • Consistently making the right choices between winner and loser options in your competitive actions.

Radio-tube manufacturers may have been efficient in their production but not effective since they were passed by transistors. The same thing happened to sail-ship manufacturers at the advent of steam-ships. Or look at Nokia; only a few years ago the leader in mobile telecoms devices and smartphones.

You can consider yourself effective if your product sells extremely well – if you significantly improve the position or performance of an existing product. Most of your effectiveness measures will be related directly to your overall business performance and the soundness of your strategy.

Oddly, in spite of the fact that your efficiency only might affect your results, and your effectiveness certainly will, many companies put the emphasis on monitoring and recognising the former rather than the latter. It’s not uncommon to find that efficiency measures, not effectiveness, are dominant in how marketers are appraised.


Efficiency alone is not enough

However, you need to know that in the changing market for your products, efficiency alone is not enough by far. How many highly efficient manufacturers of vinyl LP records are still in business?

The good news is that, providing you are basically effective in your business strategy, you will stand a greater chance of surviving.

So, you do need both sides of the figure above to achieve job success. You need to be on top of the key internal information flows to be efficient, and have at least a minimum flow of key external data to remain effective.

Once you have the right external information handy, you can ‘navigate’ your product effectively through difficult waters and safely reach your destination.

The very basic external information you need

Whatever your own industry of product situation, the basic message is that, to fulfil your external role effectively, you must ensure you have fairly complete answers to at least the following basic questions:

  • How is the market for your product changing (size, value, trends, by product segment, region, etc.)?
  • How are customers and their needs changing (customer profiles, segmentation, targeting, etc.)?
  • Do you know what is happening competitively (profiling of key in/direct competition, share, strategy, etc.)?
  • What are the three strongest arguments for using you as a supplier?
  • Who are your three most important rivals — and how do you differ from them?

Armed with this overall understanding, you can start reviewing the various basic aspects of your own strategy, positioning and performance, and identifying how and where you can improve.

Don’t just gather this information for your annual plan and budgeting. You’re far better of collecting it on an ongoing basis. Often, you’ll find that you have a lot of it more or less within reach already.

However, it pays to be well prepared, so conducting analysis and research can significantly strengthen your business position.

Get more info now

At Clarity, we help businesses apply practical, sustainable improvements in strategy, business processes and strategic marketing.

If you’d like to know how we do this, and how we may be able to help you, let’s arrange a meeting without obligation.

  • Get an impartial view on your business matters.
  • Realise untapped potential, using Clarity as catalysts.
  • Professionalise the process: prevent it becoming a series of expanded staff meetings.
  • Decrease the learning curve, using Clarity’s dedicated strategic planning process.
  • Resolve conflict, bring out the best in your team, think outside the box.
  • Ensure cost efficiency: move the project along in a timely, effective manner.

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