Effectiveness And Efficiency
I’ve been looking at a case of a UK National Health Service (NHS) Foundation Trust that has suffered severe problems resulting in a higher than expected number of deaths. The main problem seems to be that the Trust is pursuing efficiency as opposed to effectiveness.
The best definitions I’ve found for effectiveness and
efficiency are:
Effectiveness: getting
the right results.
Efficiency: doing it
with minimal wastage.
As you can see, effectiveness and efficiency may well be
opposed to each other (the pursuit of effectiveness can be more expensive). One example of effectiveness can be found in how
banks used to check signatures on all cheques (certainly when I started my
career as a banker in 1985). Now they do
it only for cheques over a certain amount, as general experience has shown that
cheques are correctly signed. If they
miss a forged signature, or an incorrect one, it’s cheaper to refund the amount
that shouldn’t have been paid.
When people look to “streamline processes”, what they’re
doing is looking to remove wasteful or duplicated steps – in other words to
improve efficiency. Nowadays, banks check signatures on cheques
over certain values only as it would cost too much to review signatures on the
millions of cheques that pass through the system every day.
Going back to the start of this article, health services
exist to make us better – they are about effectiveness. Curing someone is about just that: you either
cure them or you don’t. There’s no
“halfway house”. Other products/services
may well be about efficiency. Britain’s
NHS’s changes are to save costs (to be more efficient).
Once companies reach a certain size, they look to do things efficiently to control costs. This is perfectly natural (and even
sensible). The risk is that it may be to
the detriment of the high quality product or the effective customer service which got them there in the first place. The problem is that those who are in
charge of operations and cost control tend to forget this. If they fail to understand that certain costs
are necessary to secure revenues,
they may well end up destroying what made a business unique.
Remember...
Effectiveness is:
·
Providing excellent products or services
·
Getting it right first time
·
Focussing on the end product to the exclusion of
everything else
Efficiency is:
·
Cutting costs
·
Streamlining processes
·
Removing things that customers may like but
which either add to costs or processes
Low-cost airlines are great example of effectiveness/efficiency
management. They understand that
travellers want cheap flights and will put up with a lot to get rock-bottom
prices (e.g. departures at uncivilised hours, delays, lost/delayed luggage,
paying to check luggage into the hold, flying to “out of the way” airports). They know to the last cent/penny how much it
costs to fly a plane from A to B and eliminate any costs that might increase
that or discourage passengers from behaving in ways that increase, for example,
fuel costs.
When you start looking to reduce costs and/or streamline processes,
ask yourself if, in the name of efficiency,
you're sacrificing the effectiveness
that secure your organisation’s revenues and make it the success it is. The questions are:
·
Why are we here (what do we exist to deliver)?
·
What makes us unique?
·
What do our customers like about us? / Why do
they keep coming back to us?
·
What complaints do we hear about our
competitors?
·
What other things don’t our customers like?
·
What do customers say that we do well?
·
What do they say that we don’t do well?
·
What will/won’t they tolerate?
·
Will we feel better about ourselves?
·
Will this change destroy our “uniqueness”?
Is your organisation about effectiveness or efficiency?
I have spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in the world financial services industry running different service, operations and lending businesses, I started my own Performance Management Consultancy and work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Customer Care, Financial, Productivity, Strategy
posted by William Martin @ 16:24
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