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Relationship Between Performance, Effectiveness & Efficiency
The Relationship Among
Effectiveness, Efficiency & Performance
East West University
Md. Rezaul Kabir 2011-3-10-086
Date of Submission
26 June 2016
This report is all about the relationship among performance, efficiency &
effectiveness. But separate knowing about these three things should be known.
The action or process of carrying out or accomplishing an action, task, or function is
performance. The degree to which something is successful in producing a desired
result; success is effectiveness. The ratio of the useful work performed by a machine
or in a process to the total energy expended or heat taken in is efficiency.
The details information and discussion are provided later in. That will provide vast
idea about these three variables.
The relation is explained on the basis of two examples of admirable & high-
performing corporations which will justifies the expected relationship.
And last a flowchart provides the overall discussion & impact in the most simple
Hopefully this research-paper will be able enlighten the reader about the connection
among performance, effectiveness & efficiency in a very simple language without
The title includes four key terms i. e. relationship, effectiveness, efficiency &
performance. First of all, meaning of these key terms is discussed in the literature
review. Then there is separate & details discussions on performance, effectiveness,
performance but relationship.
Finally, after that relationship among them is explained in the analysis & findings
Also the importance of this study will be realized after completion of reading this
For the selected topic, not many topics & discussions found online. So the limitations
were mainly finding the fragmented data, analyze & combine after screening &
reading a lot of relevant & irrelevant topics. Which led to draw a theoretical
Another obstacle or limitation was hot weather & Ramadan month where working
on a project with energy & focus is very tough indeed.
(4) Literature Review
Performance means just the act of doing or completing a job or a task or something.
In this report performance is meant by job activities by the employees of an
organization. More precisely meaning, good job performance. In other word, Doing
the right activities with Getting the right results Using the right intentions is called
And according to Peter Drucker who was a renowned author, educator &
management consultant, “Effectiveness is doing the right things & Efficiency is doing
things right”. Effectiveness is only goal oriented & Efficiency is not only goal but also
effort, process & time oriented.
And Relationship means the state if being connected, how multiple person, object,
or works etc are related to each other.
Relationship among Effectiveness, Efficiency & Performance means the connected
status among them. Like Ralph Marston said, “Don’t lower your expectations to
meet your performance, raise tour performance level to meet your expectations.”
Here, expectation means nothing but effectiveness & efficiency.
Obviously efficiency & effectiveness depend on performance. Performance is
independent variable; efficiency & effectiveness are dependent variables.
Expectations of efficiency & effectiveness depends on good performance.
So the relationship is mainly based on dependency.
The objective of this research as well as study is to identify, establish, analyze &
discuss the connection among these three things i. e. Performance, Effectiveness, &
All the data collected for this term-paper are from only secondary source. No data is
collected from primary source. So this research did not get any support from primary
source. All data are secondary data from online.
PDF-articles, e-books, ewu-library, google-books, online-journals & internet are the
sources used for this term-paper.
In very general & common perspective, Efficiency signifies a level of performance
that describes a process that uses the lowest amount of inputs to create the greatest
amount of outputs. Efficiency relates to the use of all inputs in producing any given
output, including personal time and energy. Efficiency is a measurable concept that
can be determined by determining the ratio of useful output to total input. It
minimizes the waste of resources such as physical materials, energy and time, while
successfully achieving the desired output.
Historical techniques, Breakthroughs in efficiency have often coincided with the
invention of new tools that contribute to labor. Early examples include the wheel
and the horse collar, which redistributes the weight on a horse's back so the animal
can carry large loads without being overburdened. The advent of tools such as the
steam engines and motor vehicles during the Industrial Revolution allowed people to
move farther in shorter periods of time, and contributed to efficiency in travel and
trade. The Industrial Revolution also introduced new sources of power, such as
burning fossil fuels, that were cheaper, more effective, and able to be used more
Movements such as the Industrial Revolution also brought efficiency in time. For
example, the factory system, in which each participant focuses on a specific task in
the factory line, allowed operations to move along much more quickly increasing
output while also saving time. Many scientists have also developed practices for the
most efficient ways to perform specific tasks. A famous example in popular culture
of the quest for efficiency is the biographical novel "Cheaper by the Dozen." Frank
Gilbreth, the author and patriarch of the family in the book, develops systems to
maximize efficiency in even the most mundane tasks, such as brushing your teeth.
The impacts of efficiency, an efficient society is better able to serve its citizens and
operate in a healthy manner. When goods are produced efficiently, they are often
able to be sold at a lower price. The advances that have been made in efficiency
have also allowed those affected to maintain a higher standard of living, including
living in homes with electricity and running water and getting around more quickly.
Efficiency results in a sharp drop in hunger and malnutrition, as goods are able to be
moved farther and more quickly. Also, advances in efficiency have allowed the work
week to decline considerably. More work can now be performed in a shorter amount
of time, so it is no longer necessary to spend those extra hours laboring.
Efficiency is an important attribute because all inputs are scarce. Time, money
and raw materials are limited, so it makes sense to try to conserve them while
maintaining an acceptable level of output or a general production level.
Being efficient simply means reducing the amount of wasted inputs
And if we consider efficiency from the organizational & HR point of view, efficient
means nothing but getting better organizational performance with less number &
amount of organizational resources including manpower & also minimum wastage as
Determined by comparing what a process or installation can produce with what they
actually produce; therefore, effectiveness does not tell anything about the efficiency
– the amount of resources that have to be committed to obtain that output. If we
are successful in manufacturing more good product in the same time period,
effectiveness will increase. A valuable discussion could be whether ‘good product’
should be seen as ‘Good product with customer demand’ to prevent over-
Organizational effectiveness has a very broad and often vague definition, so much so
that most sources explain the concept by example rather than definition. Basically,
the effectiveness of a business constitutes its ability to perform a function with
optimal levels of input and output. Companies use organizational effectiveness to
measure any number of things, from the relationship between employee
performance and company profits to the correlation between manufacturing
processes and production volume. No set parameters exist for organizational
effectiveness and it follows no definitive mathematical formula -- each organization
creates its own method of measuring effectiveness. Measuring effectiveness can
help a small business without the ability to absorb ineffective processes modify its
approach to avoid loss.
Effectiveness oriented companies are concerned with output, sales, quality, creation
of value added, innovation, cost reduction. It measures the degree to which a
business achieves its goals or the way outputs interact with the economic and social
environment. Usually effectiveness determines the policy objectives of the
organization or the degree to which an organization realizes its own goals (Zheng,
2010). Meyer and Herscovitch (2001) analyzed organizational effectiveness through
organizational commitment. Commitment
in the workplace may take various forms, such as relationship between leader and
staff, employee’s identification with the organization, involvement in the decision
making process, psychological attachment felt by an individual. Shiva and Suar
(2010) agree that superior performance is possible by transforming staff attitudes
towards organization from lower to a higher plane of maturity, therefore human
capital management should be closely binded with the concepts of the effectiveness.
According to Heilman and Kennedy – Philips (2011) organizational effectiveness
helps to assess the progress towards mission fulfillment and goal achievement. To
improve organizational effectiveness management should strive for better
communication, interaction, leadership, direction, adaptability and positive
environment. Back in 1988, Seiichi Nakajima has introduced the concept of Total
Productive Maintenance, which has been widely applied in the plants and covered
the entire life of the equipment in every department including planning,
manufacturing, and maintenance (Fu-Kwun Wang, 2006; Muthiah and Huang, 2006).
The systemallowed assessing overall performance of the plant, since it covered: 1.
Total effectiveness (productivity, quality delivery, safety, social responsibility and
morals); 2. Total maintenance system (maintenance prevention system,
maintainability improvement); 3. Total participation of the employees (the increase
of the effectiveness of the plant depends on the involvement of the staff, regardless
of the department they belong to). According to Porter (1996), Total Productive
Maintenance systemcould be applied as a tool not the strategy for managers to
ensure operational effectiveness. The author stressed out the fact that effectiveness
management tools and techniques such as benchmarking, time based competition,
outsourcing, partnering are slowly taking the place of the strategy. It is a result of
organizations’ frustration of their inability to translate goals into sustainable
Effectiveness and efficiency are exclusive, yet, at the same time, they influence each
other; therefore it is important for management to assure the success in both areas.
Pinprayong and Siengthai (2012) suggest that ROA is a suitable measure of overall
company performance, since it reveals how profitable organizations assets are in
generating revenues. Organizational performance = effectiveness x efficiency; Total
asset turnover ratio measures the ability of a company to use its assets to efficiently
generate sales; therefore it can be treated as efficiency. Profit margin ratio is an
indicator of a company's pricing strategies and how well it controls the costs, also it
is a good measure for benchmarking purposes; therefore it could be treated as
effectiveness. As a result, overall performance can be measured by quantifying the
efficiency and the effectiveness
Good performance benefits both employees and organizations. When employees are
performing at their best they are most likely to feel motivated, engaged and
confident and generate new ideas that will benefit the organization and the people it
serves. A high-performing workplace is an enjoyable place to work!
Create a well-disciplined organization, the manager has two primary responsibilities:
1. To recognize and reinforce good performance. 2. To confront and correct poor
There are three main situations in which it is appropriate to recognize and commend
good performance: 1) The employee has done something "above and beyond the call
of duty. 2) The employee has performed competently and diligently over a time
period. 3) The employee has improved his or her job performance.
Characteristics of good performance includes, Timely, Give recognition as soon as
possible after the performance takes place. Immediate recognition is best. The closer
the recognition to the good performance, the easier it will be for the employee to
remember what he or she did, thus making it easier to duplicate in the future. The
passing of time tends to reduce the effectiveness of recognition. Specific,
Recognition should be directed at specific behavior(s). What specifically did the staff
member do that you are recognizing? To merely say "good job" doesn't say much.
Being specific lets the staff member know what behaviors they should repeat in the
future. Sincere, Insincere recognition is meaningless and will usually do more harm
than good. Your employees probably know you better than you think, and they will
Also includes, Individual, Recognition should be directed toward individual rather
than groups, Not everyone makes the same contribution. If all share the same glory,
the hardest working staff members may resent the fact that everyone was treated
the same, and that you didn't notice the difference in their performances. If you give
group recognition, it should be followed by individual recognition for specific
achievements. Personal, All people are different. Adjust the style and method of
your recognition to the individuals being recognized. For example, some individuals
may like public praise, while others would appreciate a private discussion.
Proportional, Match the amount and intensity of recognition to the behavior being
recognized. Overdoing recognition for "small stuff" will make people question your
motives. All good performance should be recognized, but in varying degrees.
(7) Analysis & Findings
Establishing the Relationship Among Them
The connection or relationship or dependency among effectiveness & efficiency &
performance can be clearly established by real life examples. Two reports by two
well renowned magazines about admiring & high performing organization in USA
Management Professor “Ricky W Griffin” of Texas A&MUniversity mentioned in his
book titled “Management” that,
Based on various models & perspectives on organizational effectiveness & efficiency,
it is not uprising that even the experts do not always agree on which companies are
most effective & efficient.
For example, for years Fortune has compiled an annual list of the “most admired”
companies in USA. Based on large survey of leading executives, the ranking
presumably reflect – the organizational innovativeness, quality of management, long
term investment value, community & environmental responsibility, quality of
products & services, financial soundness, use of corporate assets, & ability to attract,
develop & keep talented people. The 2006 list of Fortune’s 10 most admired firms is
shown in the following table.
Also shown in the table another list published in same year by Business Week,
represents the 10 best performing companies in USA as determined by revenue &
profit growth, return on investment, net profit margins, & return on equity over
Interestingly, there are more differences than similarities between the two lists.
Given that “admiration” & “performance” would each seemto be highly related to
“effectiveness & efficiency”, a stronger correspondence between the two lists might
have been expected.
It is important to note that, of course, that different variables & methods are used to
develop the two lists, & every firm included on one list but not the other is still a very
well-managed company. The disparities in the lists also underscores the difficult-ties
& judgment calls that are involved when trying to evaluate the effectiveness &
efficiency of any given organization on the basis of their performance.
Many variables are used to make these lists. This variables change over time &
situations. But for making the list of high performing organizations, two variables are
always considered i.e. effectiveness & efficiency.
So there is no doubt that, there is relation between performance, effectiveness &
Managers need to remember that the performance of their organization is best
evaluated & considered from a multifaceted & dynamic point of view. No one single
measure or calculation can be used to judge effectiveness & efficiency. Instead
effectiveness & efficiency must be approached from several perspectives including
Moreover managers should also keep in mind that even experts may disagree about
what constitutes effectiveness & efficiency. Whether it includes & consider
performance or not. And how different organizations compare to one another.
The people solutions sourcebook, Neil Thompson , Page 82, Palgrave
Macmillan, second edition, 2012
Key competencies for improving local governance, the local elected
leadership series, volume three: concepts & strategies, page 350,
Internal performance consulting, Catherine Mattiske, 2011, TPC the
performance company publication.
The business of love: Nine best practices for improving bottom line, Dr. John
curtis, page 113, IOD press, 2006
Management, Ricky W Griffin, twelfth edition, page 93, 2012, cengage
About efficiency http://www.investopedia.com/terms/e/efficiency
How to build a high performance organization: A Global Study of Current
Trends and Future Possibilities 2007-2017, 2007, American Management
Association, http://www.gsu.edu/ images/HR/ HRI-high-
Management : a total quality perspective, G. M. Bounds, G.H. Dobbins, O. S.
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