Efficiency vs effectiveness in an example - isn't it wrong?

  • I have just read an example: Consider there are sales representatives whose weekly goal is to make 70 calls. That reflects the effectiveness. Then the amount of these calls leading to successful deals is the efficiency.

    Well, isn't effectiveness about doing the right thing and producing the result? I would say that a sales rep. is only effective if he actually sells (that is the desired outcome). So if he makes 70 calls a week, then I would say he is efficient enough (he could maybe do more but also less, and that reflects resources - time) but if he sold nothing, then he is not effective at all. He is probably not doing the right thing (selling) even though he does it right (fast enough).

    Or is my understanding incorrect, did I miss something?

  • Effectiveness is doing the right things.

    Efficiency is doing things right.

    This is something I heard from Scott Hanselman. The larger quote goes like this:

    Effectiveness is doing the right things, but efficiency is doing things right. That means effectiveness is picking a direction and efficiency is running really fast in that direction.

    One is goal oriented, one is process oriented.

    This stuck with me because I'm not a native English speaker and I used to use the words interchangeably until I encountered the quote. If you look up the dictionary definitions of the two words, you get the same explanation, although not as catchy :).

    So, if you make 70 calls but no sale, then you are efficient (i.e. you have a good process in place), but not very effective (i.e. you missed your goal). So, yes, your understanding is correct.

    I would argue that in any process, effectiveness is more important than efficiency, because the whole point is to reach a goal, or a result, or an outcome. Even the most efficient process in the world won't help you if you are running thoward the wrong goal.

    So it's easy to mess things up if you confuse your goal with what you are doing to reach that goal. In your example with the sales representatives, the goal is to make succesfull deals, not make 70 calls a week. And you rightly noticed that, and that's why you asked this question.

    There are solutions to increase effectiveness and efficiency. Of the top of my head I can think of:

    • making more calls per week. If they make 100, 200 or 300 calls per week, you get a better chance of making deals. It's like in a lottery: the more tickets you buy, the more chances you have of winning. Making more calls means increasing efficiency, but it might not necessarily mean you will get better results if the representatives aren't convincing. They might even become less effective because their incentive now becomes to make more calls not necessarily make more deals (i.e. that is to say, be careful what you measure because you are going to get it). This gets me to the next bullet point.

    • find a better speech or offer better deal conditions. You can keep your 70 calls per week for example, but try to be more convincing. This solution works on increasing effectiveness. If you can be more successful in producing the desired result (i.e. deals) then you might even notice you can make less calls. You might now say you have a less efficient process (making less than 70 calls) but with a more effective result.

    • prioritize the calls (as you mentioned in the comments). Maybe you want to call larger clients first, or clients with whom you have a better relation, or clients you managed to convince before. This way you improve efficiency because you are not wasting time with calls that have a low chance of resulting in a succesfull deal. You might improve effectiveness if past indicators of succesfull deals prove to be a good predictor of future deals, but just as well it's possible to have no impact at all and you would still need to make the rest of the less important calls.

    What I'm trying to say is effectiveness and efficiency don't always get affected by the same thing. It depends a lot on the context. There are solutions that work on both dimensions (effectiveness and efficiency), some that work on one dimension which in turn affects the other dimension in a positive or negative way (or even not at all), and solutions that might not do anything at all regardless. And people can always look at the same solution from different perspectives and some to see an improvement in effectiveness and others an improvement in efficiency. Just remember what the goal is.

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