Effectiveness is not the same as efficiency

Efficient VERSUS EffectiveDo you want to do things well, or do the right things?  The difference between efficiency and effectiveness is exactly this difference.

Today, I came across this interview with Keivan Zokaei of the Lean Enterprise Research Center from last year where he says the same thing. Moving from efficiency to effectiveness using adaptive systems thinking.

Doing things efficiently is pointless if they are the wrong things. Here, we interview Keivan Zokaei of the Lean Enterprise Research Centre about how the best organisations, such as Toyota and Tesco, are adaptive to the market's needs whilst maintaining both quality and efficiency within their business processes.

Effectiveness is all about doing the right things.  Doing things that help bring money to the bottom line of the organization - or to help the organization achieve what it wants to achieve. 

But isn't "being efficient" a good thing?  Of course it is.  the problem is that most organizations focus on being efficient under the assumption that if everyone is efficient, then we must be successful in the end.  It should be obvious that this isn't true - but it isn't.  Organizations are complex beasts.  Doing things really well in one area might actually degrade the ability of the entire organization to do well.  

If you don't believe me, check around your organization for the way it is measured.  Is your plant equipment measured on "uptime?"  How does uptime everywhere relate to selling more product?  (No, not MAKING more product.  SELLING more product.)  Are you project team members measured by how well they are able to hit internal milestones?  Does that translate into projects finishing on time?  Are the sales people measured (rewarded) when they hit their targets?  Are they rewarded even more by exceeding targets?  Are they punished if they don't hit the targets?  I wonder how high their targets would be if these reward schemes weren't in place?  And how much does the organization suffer in lost sales because of it?

The best organizations know what the right things are, and then they have focused efforts on improving the efficiency of those things.  All the while, monitoring their business to check for other things that may get in the way of overall effectiveness. 

I'm looking forward to reading more of Bob Sproull's new blog on this topic, Focus and Leverage.  [Both this link and the link to the article above were mentioned by @Kallokian.]

[Photo: Excellent descriptive graphic, "Efficient VERSUS Effective" by Laura Dantonio]

1 Comment(s)

Bob Sproull Author Profile Page said:

Jack, this is the first time I've read your blog and I have to tell you I loved it. You've really hit on some very key points that are missed by so many people. I am a huge opponent of cost accounting metrics because they simply take us in the wrong direction. I especially don't like the metric efficiency because of the negative effects it creates throughout the organization. One metric, efficiency, creates excess inventory, extended cycle times and late or missed shipments. Why? Because of the focus on local optimization rather than system optimization. I am really looking forward to reading future postings.

Bob Sproull

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