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.

Improving Contract Management: manage the deal not the database 1

The guys at Selectica have some great points but to make expensive enterprise software work it’s important to work a system and not to work the software:

  1. Don’t try and put all your contractual information in one single database at once.  Not only do individuals have different ways and systems (what I call the e-Hub of someone’s daily life) from which they manage their data they may also run into legal issues around probity and confidentiality (by cross-contaminating case management with archival material).  Businesses do not need to invest in costly customisation but do need to strike a financial balance between customisation and counter-intuitive vendor processes.  One neat tool is to create  a visual model of the deal (its structures, functions and concepts) and provide hyperlinks to the various file systems.  This removes the need to develop a common taxonomy as workers now have a visual reference point (rather than a word) for their own understanding.
  2. With process automation it is critical to ensure that the business doesn’t  codefy its culture.  This will only calcify bottlenecks.  A firm needs to make sure that it re-engineers its CLM process before it creates a workflow from it.  Remove non-tasks and automate simple clerical work and approvals.
  3. The business also needs to make sure that experts are not only notified but they are also edified  and contextualised.  When pushing workflows out to experts, such as in-house counsel, outside counsel etc then these people must have a clear view of the dependent components of the deal’s architecture.  Businesses can speed this process and reduce its costs by linking their own systems to online legal databases such as Thomson Reuters (Westlaw AU, FirstPoint), Lexis Nexis or CCH.

In summ, good contract management needs a highly cross-functional and multi-disciplinary approach if it is not only to be successful but also if it isn’t going to add additional cost and friction to business operations.  Enterprise products such as Selectica’s are a great start but customers must be careful to make sure that the software supports their own system otherwise they will spend all their money and time working the software.