↑ Return to Productivity

Effectiveness v Efficiency

 

  • Effectiveness and efficiency are often confused

 

  • Effectiveness measures how well a supplier’s present efforts and methods meet its customers’ needs – what customers think of what a supplier offers them

 

 

Effectiveness  Customers’ ratings of actual outcomes  =  60% say

                                   Customers’ requirement (= 100)

 

 

  • Customers’ views may be surprisingly different to what suppliers think they are

 

  • They may also be very different to suppliers’ views on what they offer them

 

  • And, if customers don’t want what a supplier offers, whether because of price, quality or service levels, something has to change, and fast 

_____________________________________________________________________

 

  • ·           Efficiency measures how well present methods are being carried out – how close a supplier is to getting the most out of one or more existing resources

 

 

Efficiency   =         Actual output volume           =   80% say

                            Maximum output volume    

 

  • Efficiency thus measures capacity usage and possible operator training or capital investment needs

 

  • The more efficient a supplier is, the lower its unit costs will be – this increases profit margin headroom in the private sector and releases extra funds to deal with more customers in the public sector

 

  • NB1 – In the private sector, a supplier can be very efficient but still go bust if the customers don’t want what it offers them

 

  • NB2 – In the public sector, most service units are expected to improve their efficiency levels each year – the problem has been that targets set were only for 1% or 2% improvements per annum which is well below what is needed or possible

 

 

1 comment

  1. Tamsin Stanley

    Very interesting explanation. Thanks.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>