As I mentioned in my last post, focusing on efficiency when it comes to human endeavors leads to dehumanizing one’s subordinates. This is because the ideally efficient worker is a slave, or including non-humans, a robot. Why? Because efficiency only measures quantity of work, not quality.

The mistake in business-land is the belief that increased efficiency means increased effectiveness. For a robot, this is pretty much true only because the quality of the work it performs is fixed. People are much more dynamic than robots though, and the result is that quality output cannot be expected. This is why measuring effectiveness is so important.

In nutshell, measuring efficiency is about quantity of output while effectiveness is about the quality of outcome.

Here are examples of measures of efficiency (math folks call them measures of performance):

-hours worked

-customers served

-widgets created

-tasks performed

-growth rate or profit margin

-wasted time / non-billable hours

What did you do while you logged your hours, did you tick off all your customers or make crappy widgets? How did you achieve growth? Is it sustainable? These questions can’t be answered by measures of performance. And they are the ones we really want answered.

Instead, measures of effectiveness are usually harder to determine and measure:

-defect rate of widgets produced

-% of demand met by supply

-customer satisfaction

-sustainability of a course of action

Often, effectiveness could be measured with a tiny bit more effort by leaders. But it’s not taught or understood. Measures of effectiveness are often not a single number, and we all know how much people like to have a single indicator to rule them all. Instead a measure of effectiveness may be a set of indicators with room for interpretation and a leader’s intuition.

At the end of the day, we can’t be slaves to numbers. They can only inform us; sometimes they are misleading, sometimes they aren’t measuring the right thing. That’s why decision making will always need a thinking mind – you need the intuition and experience.