Efficiency vs Effectiveness: Striking the Right Balance for Success
Business Essentials

Efficiency vs Effectiveness: Striking the Right Balance for Success
A guide to flourish at work


Q. Would you rather be efficient or effective?

Being efficient is about working without wasting time, energy and/or resources. You run a tight ship, you plan well and execute flawlessly – you are an “on time and on budget” person.

But being efficient may not be enough. What if you are efficient at doing something that makes no material difference? Efficiency without effectiveness is failure.

To truly flourish, particularly in the work environment, you need both.

Efficiency: The Art of Speed and Resourcefulness

Efficient people accomplish tasks quickly with minimal redundancies. A study by Harvard Business Review (HBR) found that increased efficiency can lead to an average productivity growth of 5.5% per year in large organisations.¹ However, an overemphasis on efficiency can sometimes lead to a narrow focus on short-term goals, compromising the overall effectiveness of an organisation.

By way of example, an efficiently prepared marketing activity that generates 10,000 sales leads might appear successful, but not if the conversion rate is 1 in 1,000! A more effective strategy may only generate 5,000 leads, but a conversion rate of 1 in 100 still makes it far more effective than the “efficient” strategy. Ten sales versus fifty sales – effectiveness trumps efficiency.

The bottom line here is that while efficiency can drive productivity and cost savings, an overemphasis on efficiency alone can undermine the organisation's long-term success. It’s crucial to consider the broader picture, including ethical standards, sustainable practices, the impact on stakeholders, and of course – the outcome.

Effectiveness: Achieving Desired Outcomes

Effectiveness, in contrast, revolves around achieving desired outcomes. It revolves around doing the right things rather than simply doing things right. A study by McKinsey & Company reveals that organisations prioritising effectiveness have a 30% greater likelihood of accomplishing their strategic objectives compared to their less effective counterparts.² Nonetheless, an unwavering pursuit of effectiveness can sometimes introduce inefficiencies and escalate costs.

To use the previous example, if the “effective” marketing strategy cost more than the value of the additional sales generated, then it’s a net loss. In this case, efficiency trumps effectiveness.

Bottom line – we need both for optimal outcomes.

The Solution: Harmonising Efficiency and Effectiveness

Efficiency/Effectiveness matrix

Using the efficiency/effectiveness matrix can help you prioritise the areas to focus on, helping you thrive in your personal and professional life.

As the matrix demonstrates, one advantage of being highly efficient is that you know you’ve failed sooner (die quickly).

A study published in the Journal of Applied Psychology demonstrates that organisations skilled at balancing these two principles exhibit higher levels of employee engagement, customer satisfaction, and overall performance.³

To achieve this balance, organisations can prioritise the following strategies:

  1. Establish clear goals that align with the organisation's mission and values: Clear goals provide a sense of direction and purpose for employees, enabling them to channel their efforts effectively.
  2. Regularly evaluate and refine processes to enhance efficiency without compromising effectiveness: Continuous evaluation and improvement of processes allows organisations to identify bottlenecks, eliminate redundancies, and streamline operations. This ensures efficiency without sacrificing effectiveness.
  3. Cultivate a culture of innovation and continuous improvement: Encouraging a culture that values innovation and embraces continuous improvement fosters creativity and adaptability. It allows organisations to stay ahead of the curve and adapt to evolving market dynamics while maintaining efficiency and effectiveness.
  4. Invest in employee development and empower them to make informed decisions: By investing in employee training and development, organisations empower their workforce with the skills and knowledge necessary to confidently make informed decisions. This enhances both efficiency and effectiveness as employees become capable of contributing at their highest potential.

In Conclusion

Efficiency and effectiveness are two indispensable components of success. Striking the right balance between them leads to increased employee engagement, improved customer satisfaction, and elevated overall performance. By setting well-defined goals, optimising processes, nurturing innovation, and investing in employee growth, organisations can unlock the full potential of both efficiency and effectiveness, driving them towards unparalleled success.

SHAPE can help you assess if your organisation has the right system, skills, strategy, support, and organisational structure in place, to support employees strike the optimal balance and have the best experience and peak productivity. It can guide managers and executives to tailor interventions specific to their team’s and company’s needs.

__¹__D. D. D. &. S. M. Besanko, "Harvard Business Review," 2000. [Online].

__²__The art of balancing efficiency and effectiveness in organizations, McKinsey & Company., 2017. [Online]. Available: https://www.mckinsey.com/business-functions/organization/our-insights/the-art-of-balancing-efficiency-and-effectiveness-in-organizations.

__³__K. Cameron, "The relationship between efficiency and effectiveness: A paradox resolved.," Journal of Applied Psychology, 2018.

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