Manycompanies fail to achieve their targeted levels of success anddistinction by focusing on efficiency while neglecting effectiveness.Chester Irving Barnard, author of Functionsof the Executive,in which he focused on the short life cycles of organizations(Barnard, 1968). According to Chester Barnard (1968), this happensbecause organizations do not meet the two criteria necessary forsurvival: effectiveness and efficiency. The link between performanceand success are the inputs and outputs of efficiency andeffectiveness.  All organizations whether large or small arediverse and however an organization measures success, in order tocontinually achieve it they must ask themselves how they cantransform or improve upon their current state. The use ofeffectiveness and efficiency answers this question. Effectiveness andefficiency are two measures managers should use in equal measure toaid in the growth and success of their organization (Bridges, 2009).
Inevery organization, a manager needs to ensure the success of theorganization. This means a manager will focus on keeping thecompany’s profitability high and expenditures low. For managers,being efficient means having internal and external processes thatlead to success and having the means to produce their desiredeffects. An inefficient or ineffective organization means that notonly has the organization failed, but the management and leadershipin the organization have failed. Depending on the organization,failure can carry different implications. The prominent author andProfessor of Marketing and Strategy, Stefano’s Mouzas emphasizethe significance and use of the concepts of effectiveness andefficiency in the evaluation and assessment of business performancein his work EfficiencyVersus Effectiveness in Business Networks.According to Mouzas (2009), many companies fail to achieve theirtargeted levels of innovation and differentiation by focusing onefficiency while neglecting effectiveness (Bridges, 2009).
Asa manager in the Air Force, there is an import and the necessarybalancing act that must take place in order to utilize this conceptfor the achievement of strategic military goals. Without the abilityto adjust based on efficiency and effectiveness, the capacity of thenation’s military to achieve its goals is drastically reduced. Thisspeaks to my ability as a manager to be able to align my unit’sbudget and budget cuts with its mission and avoid degrading ourcapabilities (Kaplan & Norton, 1993). Maintaining the rightbalance between efficiency and effectiveness, as a military leader, Imust pay attention to operations, support and readiness and stillallocate the right amount of resources so that each aspect of ourmission remains strong and equally balanced. Ignoring effectivenessand efficiency could prevent my unit from achieving the optimalcombinations of saving time and money while upholding performance andsuccess (Jobber, 2007).
Thepredominate thought amongst theorists is echoed in David Jobber’sbook Principlesand Practice of Marketing(Jobber,2007). In it the author wrote that another perspective on businessphilosophy can be gained by understanding the distinction betweenefficiency and effectiveness.  Efficiency is concerned withinputs and outputs.  An efficient firm produces goodseconomically: it does things right.  However, to be successful,a company needs to be more than just efficient – it needs to beeffective as well.
InOrganizationTheory & Design, Daftbelieves that an organization may be highly efficient, but fail to beeffective and achieve its goals because it makes a product, for whichthere is no demand (Daft, 2013). A simple way to look at theimbalance the concept can have on the success of an organization isthis:
Acompany that is both inefficient and ineffective will go out ofbusiness quickly because it is a high-cost producer of products thatconsumers do not want to buy.  A company that is efficient andineffective may last a little longer because its low cost base maygenerate more profits from the dwindling sales volume it isachieving.  Organizations that are effective and inefficient arelikely to survive because they are operating in attractive marketsand are marketing products that people want to buy, but they are notbenefiting from a low cost base. It is the combination of bothefficiency and effectiveness that leads to optimum business success. Such organizations do well and thrive because they are operating inattractive markets, are supplying products that consumers want to buyand are benefiting from a low cost base (BusinessLeadershipManagement,2014).
Theuse of effectiveness and efficiency is not the only way to helpmanagers focus on the company’s success. There is a myriadoperational and physical measures organizations can use, one of whichis the balanced scorecard, first proposed in the January-February1992 issue of Harvard Business Review and it provides managers with aframework that translates the company’s strategic objectives into aset of performance measures. The scorecard’s measures are groundedin an organization’s strategic objectives and require managers toselect a limited number of indicators within each of the fourperspectives to help focus a strategic vision. The balanced scorecardis not a template that can be applied to businesses in general oreven industry-wide. Different market situations, product strategies,and competitive environments require different scorecards.
Managementwill often try to implement new methods or tactics in order to becomemore efficient, but do so at the expense of effectiveness. Thedesired result of success will be a learning process and balancingact. Efficiency and effectiveness forces a manger to be bothdisciplined and flexible. Discipline is necessary for the sake ofefficiency and the ability to stay consistent and maintain themission. The counterbalance to this is flexibility for the sake ofeffectiveness and having the capability to respond and adjust basedon the environment. I agree with the prevailing arguments that bothefficiency and effectiveness must be a manager’s focus(DeferenceBetween.net, 2014).
Barnardalso emphasized the importance of an individual`s behavior in theoverall success of an organization. That a manager’s key tasks areto set up systems to motivate employees towards the organization’sgoals, individuals working to a common purpose rather than byauthority (Mouzas, 2006). This highlights that efficiency andeffectiveness is not the only tools a manager can utilize, butwithout these tools, managers are ignoring potential business growth.
Efficiencyand effectiveness should be used in equal measure to gage the currentcondition of the organization and leverage those findings against thecompany’s goals and the external environment. This balancing act isa continuous process that managers will need to evaluate and adjustbased on their organization. William Bridges suggests in his book,ManagingTransitions: Making the Most of Change,which interventions will be made in different step of an organizationlife span and it is vital to understand the structure and themanagement style correspondent to the environment, moment,objectives, and available resources.
Barnard,C. (1968). The functions of the executive, Cambridge, Mass. : HarvardUniversity
Press, xxxvi,334 p. 22 cm.
Bridges,W. (2009). Managing transitions: making the most of change, (3rded.). Philadelphia,
PA:Da Capo Press
Daft,R. (2013). OrganizationTheory & Design.Scarbrough, ON: Nelson Education, Ltd.
Jobber,D. (2007). Principles and practice of marketing. McGraw Hill HigherEducation 7th
Kaplan,R. S. and D. P. Norton. (1993). Putting the balanced scorecard towork. Harvard
Mouzas,S (2006) Efficiency versus effectiveness in business networks.Journal of Business
Research,59(10-11). pp. 1124-1132.
DeferenceBetween.net,Differencebetween Efficiency and Effectiveness. Retrievedon 28thNov 2014,from:http://www.differencebetween.net/business/difference-between-efficiency-and-effectiveness/BusinessLeadership Management.Article extract: Efficiency versus Effectiveness: Finding the balancein between for optimal marketing effect. Retrievedon 28th Nov 2014, From:https://businessleadershipmanagement.wordpress.com/2013/07/12/article-extract-efficiency-versus-effectiveness-finding-the-balance-in-between-for-optimal-marketing-effect/