What is the difference between efficiency and effectiveness? Which is more important for performance? Can an organization succeed in both simultaneously?.
Effectiveness is the degree to which the organization achieves a stated goal. Efficiency is defined as the use of minimal resources- raw materials, money, and people- to produce a desired volume of output. Performance is the organization's ability to attain its goals by using resources in an efficient and effective manner (Daft, 2003, p. 9).
If effectiveness is the degree of achieving an organizational goal then efficiency is the amount of resources used to achieve that goal. The difference is that effectiveness is evaluated on the finished goal while efficiency is measured on what was used to accomplish the goal. Neither one can be considered more important for measuring performance. Performance is measured on whether an objective has been accomplished and what resources were used to accomplish this. If resources are used efficiently but the final objective is not complete then the company's performance has gone down. For example, ACME Corp., a furniture manufacturing company uses wood to build desks for college students, successfully budgets resources so it can make 100 desktops out of 50 sheets of plywood. However the company does not reach its quota of manufacturing 250 desks by the end of a quarter. Therefore this company has not performed with expectations. On the other hand if ACME had manufactured the 250 desks by the end of the quarter, but used 200 sheets of plywood, then the company has wasted resources and therefore has not met company expectations. The bottom-line suffers in either case and performance is ultimately measured by the profit/loss statement. .
Most companies must succeed in both in order grow or in some cases avoid collapsing. Dell Computers is an excellent example of managing both efficiency and effectiveness.
