Effectiveness v Efficiency

• Effectiveness and efficiency are words 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

• 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

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

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

• Efficiency thus measures existing 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