In management terms, efficiency is "doing things right" and effectiveness is doing the right things"
Effectiveness relates the input or the output to the final objectives to be achieved (the outcome)
- efficiency=quality/Input quantity
- Effectiveness=objectives/Input Quantity
In management, effectiveness relates to getting the right things done. Peter Drucker reminds us that effectiveness is an important discipline which “can be learned and must be earned.”
The effectiveness is more difficult to assess than efficiency, since the outcome is influenced political choice. The effectiveness shows the success of the resources used in achieving the objectives set.
When deploying a transport service, efficiency and effectiveness both comes together to complete the task successfully. In this scenario, effectiveness could be identified by "buying/hiring" vehicles. It means the management should understand the use of the vehicles before buy/hire them. If the management buy wrong type of vehicles to use them for transport service, will lead to bankrupt because some vehicles will not meet the requirements well and will not provide the service which has expected. Some vehicles will not enough for passengers and will make to hire more vehicles. Then it will lead to increase the staff and will make more expenses (vehicle expenses/ salaries to the staff)
Then shall we talk about the efficiency. If the transport service provide the services at unneeded times that less number of passengers using the service, the service will not make profits. So, using a timetable is a must when thinking about the efficiency. It means "doing things right".
2. Which is more important for performance? and Can managers improve both simultaneously?
Efficiency and effectiveness both comes together because both of them are connected to each other. We can't think about the effectiveness without efficiency and we can't think about the efficiency without effectiveness.
Efficiency alone will put the company on the fast track to bankrupt .
Effectiveness (efficacy) alone *may * allow the company to survive. How ever the company will not reach it's maximum potential if it is inefficient.
- Low Efficiency / High Effectiveness
- there is a right goal, but less/poor usage of resources. (leads to expansive result)
- High Efficiency / Low Effectiveness
- Inappropriate goals but right usage of resources. (leads to deliver unwanted products at lower price)
- Low Efficiency / Low Effectiveness
- Works on a wrong target and less/poor usage of resources. (leads to deliver expensive, unwanted products)
- High Efficiency /High Effectiveness
- Works on a Right goal using right resources in a right way. (delivers good/useful products at affordable price)
So, effectiveness & efficiency relates to each other by connecting inputs, outputs and outcomes.