Efficiency & Effectiveness

A managers role within an organization is to supervise and co-ordinate the use of available material and human resources to achieve the organizations goals. Efficiency and effectiveness are both measures with which the performance of the organisation and in turn, the success of the manager can be determined. Although both factors are important for an organisation, focusing

on one usually leads to a decline in the other. As mentioned by Chapman, Merritt and Norris (2000), a manager must balance both the efficiency and effectiveness of their decisions. Therefore, in order for a manger to be successful they must identify and create the optimal balance between the two.

Efficiency is described by Jones and George (2006 p.5) as being 'a measure of how well or how productively resources are used to achieve a goal'. Robbins et al. (2006 p.9) states that it is 'getting the most output from the least amount of inputs.' The resources an organisation has at its disposal are finite and often scarce. Managers are therefore concerned with making the most efficient use of these resources as possible. Braue's article (2006) gives an example of an organisation taking steps to improve its efficiency. It describes how the South Australian Department for Transport, Energy and Infrastructure implemented an online registration renewal system. This system is now used by 60 percent of vehicle owners who renew their registration online. This has resulted in reduced queue time in their offices and has dramatically streamlined their operations.

Effectiveness is given the simple definition by Bartol et al. (1998 p.11) as being 'the ability to choose appropriate goals and achieve them'. When a manager chooses the right goals for an organization to pursue and ensures that they are achieved to the desired degree, it can be said that the organization is effective. An example of effectiveness is given in an article by Woodhead (2006). He describes how Centrelink was given just 12 months to implement a system that could accommodate the federal government’s $3.6 billion welfare-to-work program. Through making changes to the organizations management structure and the way projects were implemented, Centrelink was able to effectively achieve its goal of meeting the 12 month deadline.

In order for a manager to be deemed successful, they must achieve the greatest possible level of performance for the organization. Efficiency and Effectiveness together are described by Robbins et al. (2006) as 'doing things right' and 'doing the right things' respectively. A high performing organization fulfils both of these criteria. Successful managers are 'those who choose the right organizational goals to pursue and have the skills to utilise resources efficiently' Jones and George (2006). However it is not enough to merely say that achieving peak efficiency or effectiveness will make an organization and manager successful. It is possible to overcompensate in one area to the detriment of the other.

Caruso and Novak in their article (2006) describing Telstra's automated directory assistance service, gives an example of a company’s strive for efficiency having adverse consequences on its effectiveness. It describes how, in an effort to increase efficiency through reducing the amount of staff needed to man directory switchboards, Telstra implemented a computerised voice recognition service. However the inability of the system to correctly recognise the voice instructions given to it has resulted in a mere fifteen percent accuracy rate and left many customers frustrated. Although the system more was efficient for the company to run, its effectiveness was certainly not as good as when directory calls were handled by human operators. Another example of efficiency forsaking effectiveness is given in the article Faster than a Locomotive (2006) appearing on the Railpage Australia & New Zealand website (www.railpage.com.au). It outlines how the New South Wales State Government made changes to Sydney's rail timetable in order to decrease the number of passenger services that were constantly running late. Although punctuality was improved to about ninety percent, the length of the trips was also increased, by as much as fifteen minutes in some cases. The point about the new system's lack of effectiveness was driven home when veteran marathon runner Steve Moneghetti was able to outrun one of the morning metropolitan services along its route and beat it to its destination.

It is certainly also possible for an increase in an organizations effectiveness to have an adverse effect upon its efficiency. Bildstein's article (2006) describes how a proposition put forward following a national inquiry into electricity retailer performance would affect the company AGL. It was