Effectiveness x Efficiency = Results.

Effectiveness x Efficiency = Results.

The above formula which is usually used for high performance always baffled me. I often get confused with both the terms as to what these words mean & hence extremely curious enough to know as to what these words actually mean in management parlance. After going through some of the texts, books I could really gather what these words stands for and what is the exact meaning of this particular word in the context of the management. If both these words are understood the way it has to be understood & if you as a manager could percolate / trickle the instructions down to the people with whom you are working with, the results achieved shall be amazing.

"Effectiveness" means doing the right things. "Efficiency" means doing them right. Effectiveness and efficiency both require that you set goals, analyze your work carefully, determine your priorities, and always focus on the highest-value use of your time.

An organization which fails to achieve desired goal cannot be called either efficient or effective. Goal achievement may be stated as an objective index of effectiveness of an organization. But, goals (ends) with taking into account the process (means) will forfeit the very purpose of goal achievement. It is not, for instance, sufficient for an organization to have attained the desired level of production but equally necessary with what level of cost and quality. If the cost of production increases due to wastages and the quality deteriorates, the goal achievement will not reflect effectiveness of organization. It may be a case of rather ineffectiveness.

Thus, effectiveness is a continuous or an ongoing process in an organization. The effectiveness is brought about by the manager in the context of ever-changing organization goals by restructuring available resources, altering technologies, modifying climate and developing goal-oriented strategy of performance of employees.

On the other hand, efficiency, implying elimination of wastages is an important variable of organizational effectiveness. It will depend on proper management of man, material, machine, methods and money. All these resources being limited in supply, it is the manager prerogative as to how he utilizes these resources to optimal use in the least possible time. Needless, to mention that, Management of man requires proper selection, development, compensation, direction apart from proper structural design. Leadership may also pay the role of both direction and motivation. Materials management and machine maintenance are separate important areas of management which dictate the level of organization efficiency.

Effectiveness or otherwise of an organization is related to the efficiency with which the organization has carefully and skillfully studied its environment setting. Its programs and policies and strategies for growth and development are intimately related to the economic, technological, social and psychological environments. The organization is required to have an in-depth knowledge of the market forces, monetary, fiscal and other policies of the Government, the position of factor supply, the state of national economy, international economic milieu and such other factors which have an important bearing on the effectiveness of an organization. Here, I would like to narrate a best-seller's definition of organizational effectiveness.



One of the most successful management books of all times is Tom Peters & Robert Waterman's In Search of Excellence, published in 1982. The book has sold more than five million copies!

After studying 42 companies that Peters & Waterman described as well-managed, highly effective, or "excellent" – these included firms like IBM, Du Pont, 3M, McDonald's & Procter & Gamble – they found 8 common characteristics that these companies had in common.

They had a bias for action & getting things accomplished.

They stayed close to their customers in order to fully understand their customers' needs.

They allowed employees a high degree of autonomy & fostered entrepreneurial spirit.

They sought to increase productivity through employee participation.

Their employees knew what the company stands for, and their managers were actively involved in problems at all levels.

They stayed close to the businesses they knew and understood.

They had organization structures that were elegantly simple, with a minimal number of people in staff support activities.

They blended tight, centralized controls for protecting the company's core values with loose controls in other areas to encourage risk-taking & innovation.

Any business organization in order to achieve their results has to follow the principle of economy. Economy in business means that you achieve business goals at the lowest possible expenditure of time and resources. Economy in your personal life means organizing your activities so that you achieve more and more of the things you want and need at a lower and lower cost in terms of time and energy.

In order to achieve organizational effectiveness, manager need to continuously pose himself the following questions on a regular basis.

  1. What I am doing that I should be doing more often?
  2. What am I doing that I should be doing less of?
  3. What am I not doing that I should start doing if I want to achieve results?
  4. What am I doing today that I should stop doing altogether?

In other words, as a Manager you start doing those jobs which you should do more often in a day & simultaneously start doing those jobs which you have not been doing regularly along with your other employees in terms of results in your work place. Conversely, you stop doing those jobs altogether which you are doing today & start doing less of what you have been doing.


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