The Efficiency vs. Effectiveness – customer focus is the key | LinkedIn Reply

The Efficiency vs. Effectiveness Debate Continues | LinkedIn.

efficiency versus effectiveness. targetEfficiency is a key enabler of effectiveness.  Effectiveness goes towards value whereas efficiency goes towards cost.  Ask the question:  “if the enterprise was less efficient would it still be effective?’  The answer will give you an idea of just how important effectiveness is to the enterprise (i.e. government or corporate).

Efficiency is more critical depending on how far removed the task/issue is from the customer.  The customer does not care one jot how efficient your processes are.  The customer has not the slightest concern whether your systems are efficient.  Whether a corporate customer or recipient of government services, they want effectiveness.  Whether they will pay a premium for that will determine the price.

For back-office functions, however, efficiency is critical.  In the treasury-2-cash process the result should always be the same.  In procure-2-pay the result should always be the same.  Effectiveness is not an issue:  it must be effective and therefore efficiency is critical.

In a recent project with the good folk at Glentworth the team looked at Disaster Management and concluded that the key failing of disaster management was not the efficiency of the Emergency Services but rather the effectiveness of the function across the entire value chain.  Efficiency was the critical attribute of emergency response but that effectiveness was the missing ingredient in the current approach to Disaster Management.  In the 2010 floods in Queensland, the Interim Report by the Floods Commission Inquiry made (inadvertently) a good distinction between effectiveness and efficiency.  To paraphrase the Commission, they noted:

‘. . . of the 37 people who died, 22 of them would still be dead even if the Emergency Services had been as efficient as possible.’

VALUE CHAIN ANALYSIS

Efficiency is critical but as the above quote demonstrates it must work in tandem to deliver what Peter Drucker noted was the real purpose – Value.  Efficiency should be pursued where business units can be structured as modular units and deliver repeatable processes which are removed from the customer.  In customer facing activity it is vital, however, to ensure that effectiveness is the key.

ORGANISE INFORMATION FUNCTIONALLY NOT STRUCTURALLY

In order to achieve this businesses and government services need to manage activities right across their Value Chains (and possibly across their extended value nets as well).  Much like Disaster Management, it is good for businesses to achieve operational efficiency but fairly pointless if the product or service is ineffectively delivered or ineffective in the hands of the customer.   The structure of government highlights this point.  Government departments, like most businesses, act structurally not functionally.  Teams and departments are forced into ineffective outcomes through rigid structures which enforce inefficient workflows.

In days of yore this has not mattered but with the ubiquity of smart devices and with easier access to a more competitive array of services the need for a greater focus on effectiveness is becoming more apparent.  Recent articles on the move to a customer-centric focus highlights this.  In order to achieve the best possible blend of effectiveness and efficiency governments and businesses need to manage customer interactions functionally to achieve the best possible outcomes.  Both types of enterprise should structure their delivery business units modularly and manage workflows using experienced caseworkers.  This does not mean that work should be managed on a costly case-by-case basis but rather by exception.  

There should be no debate between effectiveness and efficiency.  Both are critical but to paraphrase Drucker it is only with the right blend that enterprises can achieve value.

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