Management Effectiveness and Efficience

BHP Billiton Limited Annual Report 2003. (2003). Retrieved March 19, 2004, from http://www.bhpbilliton.com/bb/investorCentre/annualReports.jsp

Bergman, Coulter, Robbins and Stagg (2003) state that efficiency is a vital part of management. An efficient organisation is one that can achieve the same or better output from a minimized input. Management is interested in minimising resource costs while maximizing profit. The 2003 BHP Billiton annual report shows evidence of this. The report states that between December 2002 and June 2003 cost savings of US$310 million were achieved while profit before borrowing and tax was up 15.6% on the previous period. This is exactly what an efficient organisation aims for according to Bergman et al (2003), getting the most output from the least amount of inputs. It could be said that BHP Billiton is doing the right things. While BHP is being efficient they are also being quite effective as well. Bergman et al (2003) describes effectiveness as completing activities in order to attain organisational goals. BHP completed around 300 specific projects in this period. By completing these activities they were able to obtain their organisational goals. BHP predicts that the number of completed projects will grow to 1000 in the 2004 year while by 2005 they will have made efficiency gains of US$770 million. BHP is doing the right things and doing things right according to Bergman et al (2003). By achieving both effectiveness and efficiency they should be able to be successful in an increasingly competitive and global business world (Bergman et al, 2003).

Sumit, R. (1999). Those golden and red pastures of management: application of efficiency-effectiveness matrix. Quality Congress. ASQC ... Annual Quality Congress Proceedings, 342-356. Retrieved March 19, 2004, from Proquest (all databases) database.

Sumit (1999) uses the idea of golden and red pastures to explain his theory of efficiency and effectiveness. He explains how golden pastures may represent effectiveness and how red pastures can represent inefficiency. If an organisation wanted to improve effectiveness and efficiency they must explore the golden pastures of prosperity and eliminate the red pastures of losses. This is one of the theories put forward by Bergman et al (2003). They state that management must strive for high efficiency and high effectiveness or in Sumit’s (1999) terms they must strive for a high use of golden pastures and a low use of red pastures. Sumit (1999) supports Bergman’s et al (2003) theory that an organisation can be efficient yet ultimately ineffective by doing the wrong things well. Sumit (1999) states that when an organisation is efficient yet ineffective their efforts are normally directionless and inappropriate activities are completed efficiently. Bergman et al (2003) and Sumit (1999) both agree that poor efficiency and/or poor effectiveness are most often the fault of poor management. The management must look at the gap between the organisation’s actual effectiveness and its goals and try to close that gap (Sumit, 1999).

Conger, J,. & Gettler, L. (2003). Jay Conger: Why Chief executives Fail [Electronic version]. Management Today.

Conger and Gettler (2003) provide an example of how organisations can be efficient and yet not effective. Bergman et al (2003) provides the example