Efficiency vs. Effectiveness: Defining the Difference

Almost every organization, be it a corporation, non-profit or government strives to be more effective and more efficient. Organizations often make important strategic and operational decisions based on how different alternatives will increase or decrease efficiency or effectiveness. But many organizations and managers struggle to understand the difference between efficiency and effectiveness and often get â€Å"wrapped around the axle† debating semantics rather than actually evaluating the alternatives at hand.These concepts are often used interchangeably and with little consistency, and in some cases improvements to efficiency or effectiveness can appear to be interdependent. For example, an organization that is seeking to invest in its call center would likely face alternatives that would deliver both increased efficiency and effectiveness improvements.Implementing an automated call distribution system can reduce resolution time and allow lower staffing levels in the call ce nter, delivering against the efficiency criteria. Alternatively, providing call center operators better insight into customer profiles can promote cross selling and allow agents to identify and satisfy unmet customer needs. This alternative addresses the effectiveness criteria. Projects typically favor one criteria or the other, but they are not always mutually exclusive.Investments can occasionally deliver on both the efficiency and effectiveness criteria, these (rare) projects allow an organization to do more with less. An example of this type of project is a transaction system that provides better customer analytics and increases productivity. However, in those cases where a project is touted as impacting both criteria it is important to ask critical questions to ensure outcomes are not being confused.For example, if an organization invests in automated sales reporting solution expecting an increase in efficiency and effectiveness, the solution may simply replace a manual process with an automated one, improving only efficiency. If the solution does not provide additional data or insight it is not likely to drive revenue growth, or effectiveness. More consistent application of these definitions should help align expectations around outcomes of your most important decisions. For more information contact:Ted Schneider Principal, SwitchPoint LLC [email  protected] Brian Leslie Principal, SwitchPoint LLC [email  protected] Increases Efficiency Improves Effectiveness Definition Allows organizations to do the same amount of work with fewer resourcesAllows organizations to generate higher revenues, independent of resources requiredExamplesï‚ § Automation of manual processes ï‚ § Organizational restructuring / outsourcing ï‚ § Expansion of online presence ï‚ § Increased insight into customer behavior / preferences