Importance of Efficacy and Effectiveness for Managers

The modern business world is that of high saturated markets, more and more enthesis on innovation and differentiation and of high competitiveness. Recognising this, managers must perform and delegate at their absolute optimum to be able to increase organisational performance and be market relevant. This can be achieved by implementing and understanding the difference between effectiveness and efficiency, recognising which concept – if either – is more important or relevant in a situation and analysing how this can affect performance. Another relevant topic this essay aims to explore is ethics and corporate social responsibility in today’s environment, how sometimes it can be an effective approach to heightened performance and why some may view it as a diminishing initiative.

Efficiency and effectiveness are such ubiquitous terms in management that when asked “what is management?” we would use these terms to describe just that. So, what is management? It is usually described as the process of getting things done, effectively and efficiently, with the use of other people (Fundamentals of Management, Robbins, S. Coulter, M., DeCenzo, D. p29). Thus, it is important we understand both terms to actually understand the meaning of management.

Peter Drucker, a well-known American management consultant, described “Efficiency is doing things right; effectiveness is doing the right things.” Both efficiency and effectiveness are an integral part of a successful organisation and management strategy. The theory of efficiency and effectiveness is not a new concept, though both are applied in today’s working environment. Originally an industrial engineering concept introduced by management theorists Frank and Lillian Gilbreth and Fredrick Taylor, their studies in time and motion studies helped shape the industrial work environment and can also be applied to today’s working world (Fundamentals of Management, Robbins, S., Coulter, M., DeCenzo, D. p.50).

Theoretically, an efficient manager may achieve the same tasks faster or with less resources, say complete a project status meeting in 30 minutes rather than the standard 1-hour time frame. An effective manager, however, will take a step back and analyse how to improve outcomes, perhaps by changing the whole approach to work. Although an efficient manager will save time and capital for the organisation by not utilising as much resources, and effective manager would usually produce high-quality results (Chron, Miksen C. 2019).

Both terms can easily be confused, coupled by sounding so similar, they are very interrelated in the management world. Successful managers are concerned with both attaining goals – effectiveness – and doing so efficiently. It is not uncommon, however, that these concepts are not brushed upon enough, especially since 26% of new managers feel they are unprepared and 58% did not receive any training to help do so. (Fundamentals of Management, Robbins, S., Coulter, M., DeCenzo, D. p.36)

With the ever competitive, environmentally and purchase conscious business environment, it is more than crucial that the main focus of every organisation is to build a positive and lasting relationship with its consumer base. When we explore corporate social responsibility (CSR), what we are exploring is a firm’s intentions, beyond its economic intentions and legal obligation, to do the right thing for the good of the environment and society (Management, Boddy, D. p.145). A business can do this in many ways, big or small, for example re-design packaging and making it biodegradable, recyclable or as environmentally friendly as possible, improve working conditions both in the business and when outsourcing, making use of electric company cars and general philanthropy activities. Although not a written rule for some organisations, it is fair to say that most consumers expect organisations to adapt to ethics and corporate social responsibility and it has now become the norm (Business Ethics, Robins, R. 2015). It can be an important marketing tactic to try attracting new and existing consumers. Being ethically and environmentally responsible could be a make or break it purchasing decision for some customers and with such a competitive and saturated market it is important that organisations stand out to attract sales and profit (Business Ethics, Robins, R. 2015).

A refreshing example of corporate social responsibility is TOMS shoes. For every pair of shoes sold, one pair is donated to children who need them the most. Founder of TOMS, Blake Mycoskie discovered whilst in Argentina that lots of kids had no shoes and therefore suffered from injuries to their feet. Moved, Blake Mycoskie knew that he wanted to do something and improve lives. This initiative, that was purely due to good motive, and not an initiative to increase profits, saw TOMS selling 35 million pairs of shoes and has been core to TOMS success (Fundamentals of Management, Robbins, S., Coulter, M., DeCenzo, D. p.89). This initiative can easily influence consumers to purchase TOMS, instead of other competitor brands, and can increase consumer loyalty – as well as treating your feet, you are helping change lives, a huge and inspiring motive for many. As well as improved attention and consumer loyalty, it also boosts the organisations reputation and leads to more and more people finding out about the initiative through word of mouth. The theory of an organisation’s CSR initiative could go both ways, however. Some consumers may see CSR as a firm genuinely doing good for society and the environment, however some view organisations being ethically responsible only as a marketing campaign and a way to maximise profits and could put them off the business altogether. (Fundamentals of Management, Robbins, S., Coulter, M., DeCenzo, D. p.89)

Being corporate socially responsible may not be for some organisations though… a recent and relevant example involves German car manufacturer Volkswagen. Volkswagen made claims for years that its diesel engines emitted less pollution, less greenhouse gasses, and were far more environmentally friendly than traditional competitor petroleum models. Volkswagen heavily promoted and targeted environmentally conscious consumers. However, in fact, the “clean diesel” vehicles emitted up to 4,000 percent more than the legal limit of NOx — a dangerous pollutant that contributes to environmental harm. To add salt to injury, Volkswagen installed “’defeat devices’ aimed to mask the true emissions output and pass vehicle emission tests. Thousands of Volkswagen owners needed to endure the inconvenience of car recalls and repairs, and in return Volkswagen received a tidal wave of negative press (Needle Consultants, 2017).

Corporate socially responsible and ethical organisations are ever more important in todays damaged environment. Time and time again, it has been demonstrated that responsible organisations differentiate themselves from competitors, at times experience sales spikes and higher profits, cleaner and improved reputations, whilst also attracting the best talent, have less employee absenteeism and garner more market share (Needle Consultants, 2017). Although some organisations have not succeeded, or cannot financially afford to be ethically responsible, if done correctly and effectively, it can only be beneficial for the organisation.

At its core, managers represent organisational efforts and are key to achieving goals. Successful organisational performance is often linked to its employees, however strong management and delegation is a critical component of employee success. “The productivity of work is not the responsibility of the worker but of the manager.” (Peter Drucker). A strong and successful manager can distinguish between being efficient or being effective, and at times can apply both concepts if the situation suits and can adapt to both. For example, strong manager performance in recognizing employee performance increases engagement by almost 60 percent according to Towers Watson (TLNT, Suleman, R. 2013). Management may take a step back and by being effective can analyse how to do things differently. This is where CSR may come into play as the manager recognises the vast benefits of being ethically and environmentally responsible – increase reputation, scope, market share and much more. However, it may not always be successful as shown by Volkswagen. Furthermore, an important study by Cristiana Manescu, “Economic Implications of Corporate Social Responsibility and Responsible Investments,” at the University of Gothenburg’s School of Business, Economics and Law, Sweden, found that CSR activities generally do not have a negative dent on profitability, but very few cases they have a positive effect on profitability, and if there is it was rather small.

References:

• Robbins, S., Coulter, M. and DeCenzo, D. (2017). Fundamentals of management. 10th ed. Pearson, pp.29-30, 36, 91-96.
• Boddy, D. (2017). Management. 7th ed. Pearson, pp.7-9, 145-151.
• Borwick, J. (2013). Effective vs. efficient – HEIT Management. [online] Heitmanagement.com. Available at: http://www.heitmanagement.com/blog/2013/12/effective-vs-efficient/ [Accessed 8 Nov. 2019].
• Mikson, C. (n.d.). What Is the Difference Between Efficiency and Effectiveness in Business?. [online] Smallbusiness.chron.com. Available at: https://smallbusiness.chron.com/difference-between-efficiency-effectiveness-business-26009.html [Accessed 9 Nov. 2019].
• Business Ethics. (2015). Does Corporate Social Responsibility Increase Profits?. [online] Available at: https://business-ethics.com/2015/05/05/does-corporate-social-responsibility-increase-profits/ [Accessed 9 Nov. 2019].
• Highpeak. (2017). When CSR goes bad:  Davita & Volkswagen. [online] Available at: https://www.needleconsultants.com/news/when-csr-goes-bad-davita-volkswagen [Accessed 9 Nov. 2019].
• Richasaking.com. (2016). [online] Available at: https://www.richasaking.com/peter-drucker-is-it-better-to-be-effective-or-efficient/ [Accessed 10 Nov. 2019].
• Suleman, R. (2013). Why Managers Are So Important to Business Success. [online] TLNT. Available at: https://www.tlnt.com/why-managers-are-so-important-to-business-success/ [Accessed 10 Nov. 2019].