Tuesday, January 17, 2012

Discussion Question 2 : Efficiency and Effectiveness

Which is more important for an organization performance: efficiency or effectiveness? Can an organization succeed in both simultaneously?

14 comments:

  1. For me effeciency is "doing things right" while effeciveness is "doing the right thing" so effeciency will Weight more in scarecely resourced world

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  2. as to me, the effectiveness is more important for the organization performance since the goal of every organization is to achieve what they have planned. i.e. whether they hit there target or not but through this process they may achieve efficiency. therefore, there are a lot of organization who plan to achieve both but few of them succeed.

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  3. I do agree the rational u raised but the goal of an organization can be achived in what so ever the way might be but we should ask ourselves how much we used(resource) for the given output.

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  4. In my opinion, i believe that both are equally important for organization success so that i can't say that efficiency is more of important than effectiveness and vice versa.Efficiency is attainment of goals at minimum possible resources where as effectiveness is achievement defined goals irregardless of amount resource employed. what the trouble here is that both can't be attained at the same time because the ways we follow to achieve efficiency might affect our effectiveness as long as we follow different strategies to attain them.

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    Replies
    1. yes both efficiency and effectiveness are important to the organization. as it is already mentioned efficiency means attaining once organizations intended course of action (objective) with minimum cost. when we come to effectiveness it is simply attaining organizational objective with out considering the cost because the intention of effectiveness is simply organizational objective not cost minimization.
      as per my understanding yes an organization can attain efficiency and effectiveness at the same time but it is too rare. regarding to obtaining efficiency and effectiveness i have one question dears. let say that one organization has planned to perform some task and the organization has budgeted physical resources and human resources. at the end of the task the organization has successfully attained his objective by saving some amount of resources which is first assigned to carry out the planned activity (objective).know can we say that the organization is efficient or effective or both? why?

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    2. I think, if an organization achieve its objectives with less resource, its has become both efficient and effective.In the word of the effectiveness-efficiency matrix , it means it thrives!! The link below explains the four quadrants related to the efficiency - effectiveness matrix http://www.seedgen.com/2by2.htm

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  5. Group B (AZMERAW,FEYISSA & ALEMAYEHU)January 20, 2012 at 7:04 PM

    2. Which is more important for an organization performance: efficiency or effectiveness? Can an organization succeed in both simultaneously?
    Solution
    Efficiency is more important for an organization performance , because, effectiveness is a matter of goal attainment.
    One organization can be successful simultaneously in both effectiveness and efficiency. we can say an organization is efficient if a large proportion of resources contribute to productivity and effective if an organization reaches intended goals and not wasting resources. For further understanding it is advisable to see effectiveness and efficiency matrix.

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  6. I found the efficiency effectiveness matrix posted here to be helpful for vivid understanding of the four possible strategic/operational moves organizations may undertake in various circumstances. I recommend to read at http://www.seedgen.com/2by2.htm in case you have not.

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  7. At the outset, let we have the definition:

    Effectiveness: is the degree to which the organization achieves a stated goal, or succeeds in accomplishing what it tries to do. Organizational effectiveness means providing a product or services that customer’s value.
    Efficiency: refers to the amount of resources used to achieve an organizational goal. It is based on how much raw materials, money, and people are necessary for producing a given volume of output. Efficiency can be calculated as the amount of resources used to produce a product or service.

    Then: before, I am going to decide whether effectiveness or efficiency is best, let me provide you with one elementary example.

    Please, have a look at underneath:

    Let us assume ‘BEBI’ is the manufacturing company which has been producing men shoes for 25 years. For our case, let us take the 2010 and 2011 the company’s work performance. In 2010 G.C. the company had the main objective:

     ‘To produce 5000 shoes with the cost of $150 per shoe.’

    By the end of that year the company had produced 5000 shoes and began to sell it by the price of $250. However, due to the demand for the shoes have been not that much, the company sold only 4000 shoes out of 5000 and finally the company has made a little profit even if the customers are not satisfied.

    At this juncture, Mr. Benjamin C., the manager of the company raised questions like that; why my company able not satisfied the customer? Why we couldn’t make a significant profit? And so on… then, he tried to investigate the problem behind this. Eventually, after the investigation the manager said that, if we had produced quality shoes based on the customers need, we could have been made a substantial profit assuredly. So that, by the next year, 2011 he has amended the goal as:

     To produce 4000 quality shoes with the cost of $300 per shoe. Here he added the word quality, what did it shows? Please, think about it!

    And astonishingly, the customers have got the shoes are very interesting and eye catching so that, all the produced shoes are sold by the price of $525 as it was planned.

    Now let us compare the work performance of the company in the two years:
    1. In year 2010:
    The total cost of shoes = 5000 x $150 = $750,000 + $50,000(fixed cost)
    The revenue = $250 x 4000 = $1000, 000
    Profit = $1,000,000 – $800,000 = $20,000
    We can infer that including the fixed cost when we calculate the profit for this year the company made a little profit.
    Here, the company has been efficient but not effective because, it had given an immense attention for doing the right thing /producing the planned shoes within the given financial range/ just to achieve the goal however, it doesn’t worried about the customers need and the extent of the goal achievement (the extent of the profit to be gained).
    So that:
     In this year the company was efficient as, it had achieved the goal, within the given financial range/cost effective manner/.
    2. In year 2011:
    The cost of shoes: $5000 X $300 = $1,200,000 + $60,000(fixed cost)
    In contrast, in this year the company is not efficient as it has added more $460, 000 to produce fewer amounts of shoes compared to the previous year.
    The revenue: $4000 x $525 = 1,312,500
    Profit = $2,100,000 - $1,260,000 = $840,000, there is a substantial profit.
    Unlike in year 2010, here the company had made more profit and it also got good reputation as it has provided quality shoes, in other words the company was effective.


    At this moment, I think it is elementary to say whether effectiveness or efficiency is better, so what do you say?

    As it is depicted from the above example effectiveness without efficiency is better than efficiency without effectiveness.

    Therefore, I hereby, want to declare that for me effectiveness is better than efficiency! However, if it is possible be effective and efficient simultaneously has hold the lion share.


    By: Biniyam Negash

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    1. Bini thumbs up!I think this is the right explanation why effectiveness is better than efficiency.
      Take another example like non profit organizations who work hardly to bring a social impact which one is more important? We can take an example 'Zero tolerance to Maternal death' or 'polio eradication', what ever you pay today for the effectiveness of these goals it isn't worth enough!
      By the way I am not against the simultaneous achievement.

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  8. I also found the Matrix very interesting, thank you Ananymous for the post. I think as to the meaning of both enough has been said and most agree that organizations should strive for both at the same time,but the question that at which stage of an organizational cycle that it it can most probably achieve both effectiveness and efficiency? needs to be thought of because it is evident that firms give priority to one at different stage of the life cycle?

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  9. One question for all ;how do the concept of organization come to existence??? I know you will say "it is the question of effeciency". Because enterpereners in the old times can't achive thire gola doing all the functions so the need to be effecient put the corner stone for the existence of organaization

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  10. Both efficiency and effectiveness are vital components of the management of any construction project.
    An efficient manager is one who achieves higher outputs (results, productivity, performance) relative to the inputs (labor, materials, money, machines and time) needed to accomplish the desired targets.
    Thus the effective managers select the ‘right’ things to do and the ‘right’ methods for getting them done

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