Is efficiency or effectiveness more important?

by on January 31, 2013

Companies have long been preoccupied with efficiency; that is, the ratio of outputs to inputs, for example, how many wine bottles were sold relative to the cost of producing them. While it is easier to count sales dollars to costs, the ratio fails at measuring its resulting benefit or value. We know what it costs to produce the wine, but how does one describe the wine? Did it deliver the desired taste or experience to the consumer?

Effectiveness doesn’t readily lend itself to a balance sheet. Instead, it must be assessed by leaders who are adept at judging whether the desired effect was produced. Without that, measurements of efficiency have little meaning. Remember, innovation is inherently inefficient. Effectiveness should be evaluated based on the business’s purpose, preferences and desires relative to what management is willing to spend.

Source: Linked in: Stop Worrying About Efficiency

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