Tag Archive | Peter Drucker

Effective vs. Efficient

Hare, tortoise and eco efficiency

Efficiency and effectiveness are two terms widely used in operational excellence and Lean. They are used indistinctly many times, but their meaning is really different:

Efficiency is doing the thing right. Effectiveness is doing the right thing.

Peter Drucker

Effectiveness is related with the Critical Quality Attributes of the product: those features and characteristics that your customer expects and is willing to pay for. A process is effective only if it provides what the customer wants. Efficiency is linked to Performance: how work is done and how well are the available resources used.

All combinations of effective/ineffective – efficient/inefficient are possible, even the counter-intuitive “efficient & ineffective” (well, some people think that effective is a prerequisite for efficient. This means that a process not doing the right things – therefore, ineffective – can not be considered efficient. It’s a valid point but I’ll consider effectiveness and efficiency independent from now on). Let’s see an example. Imagine I want a portion of pizza for dinner. Four things can happen:

  • The taste and temperature of the pizza is perfect (effective) and I get it very quick (efficient)
  • The taste and temperature of the pizza is perfect (effective) but I have to wait too long (inefficient)
  • I get a cup of coffee instead of pizza (ineffective) but very quick (efficient)
  • I get cold pizza (ineffective) and I have to wait too long (inefficient)

Effective vs Efficient pic

Please note that in this example we are assuming that a quick process is an effective process. This is not necessarily true for several reasons. First, speed can be accomplished assigning excessive resources to do a job. This would lead to high speed but also to high costs, which is absolutely not efficient. Second, speed is often a Critical Quality Attribute, more related with effectiveness than with efficiency. However the “speed = efficiency” assumption is a fair simplification for this example.

Efficiency is important; effectiveness is absolutely critical. Ineffective processes are constantly producing things your customers will not buy: this destroys the company reputation and economy. Always solve effectiveness problems immediately. Then, when you know you are doing the right things, it’s time to start thinking how to improve them.

There is nothing quite so useless, as doing with great efficiency, something that should not be done at all.

Peter Drucker

People who don’…

risk-show-poster

People who don’t take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.

Peter Drucker

One of the basic concepts of PDCA (Plan-Do-Check-Act) is that you should plan your improvement work before you actually start doing it. In many cases taking baseline data, talking to experts and, of course, going to the gemba is needed for a good “plan” phase.

But unfortunately some people stop here and data is taken as if having a check sheet or an excel file is enough. It is NOT. The plan phase has to be done looking for subsequent action. In other words, get the data you need to move to action in a meaningful way with a controlled level of risk.

Two notes on this:

  1. “Meaningful” does not mean “be sure that you will be right”. It means “be sure that you’ll learn something”. Don’t do useless tests just because you forgot to measure a critical parameter. Sometimes you are lucky enough to prove the root cause of your problem. Hurrah! But proving some hypothesis wrong can be even more important.
  2. Every change has a certain level of risk. There is not such a thing as “no risk”. I’m serious. The good thing (?) is that doing nothing can be even more risky. Not being scared of trying (controlling risk, of course) is key. Creating an environment for safe testing is fundamental.

Once the Plan-Do is done, it’s time to Check and Adjust as needed!