Business Studies Part I
Business Studies Part II

Effectiveness vs Efficiency

EFFECTIVENESS VERSUS EFFICIENCY

Effectiveness and efficiency are two sides of the same coin. But these two aspects need to be balanced and management at times has to compromise with efficiency.

For example, it is easier to be effective and ignore efficiency i.e., complete the given task but at a high cost. Suppose, a company’s target production is 5000 units in a year. To achieve this target the manager has to operate on double shifts due to power failure most of the time. The manager is able to produce 5000 units but at a higher production cost.

In this case, the manager was effective but not so efficient, since, for the same output, more inputs (labour cost, electricity costs) were used.

Therefore, it is important for management to achieve goals (effectiveness) with minimum resources i.e., as efficiently as possible while maintaining a balance between effectiveness and efficiency. Usually, high efficiency is associated with high effectiveness which is the aim of all managers. But the undue emphasis on high efficiency without being effective is also not desirable. Poor management is due to both inefficiency and ineffectiveness.