Management and Ethical Issues What is the difference between efficiency and effectiveness?

When companies brainstorm about how to get employees to be more effective and more efficient they are trying to make their business more successful. But the two concepts are quite different and often times they are confused as being the same. According to the Small Business section in the Houston Chronicle, an effective worker "produces at a high level" while an efficient worker "…produces quickly and intelligently" (Miksen, 2012). And when an employee is both efficient and effective, a company can produce "better products faster and with fewer resources" (Miksen, p. 1).

Basically, effectiveness is defined by business as the results from the "…actions of employees and managers," and employees and managers that are effective in the workplace generally produce "high-quality" results, Miksen writes on page 1. For example, in a retail situation, the worker on the sales floor who is effective will make "sales consistently," but if he is ineffective, he will have a struggle to get customers to pull out their credit cards and wallets and make purchases, Miksen continues.

Most companies take stock of an employee's effectiveness when they conduct "performance reviews," which can show managers how well the person is doing. The reputation of a company depends on the employees being effective, after all, so it is easy to understand why strict attention is paid to workers' effectiveness in carrying out their duties and responsibilities.

Meantime, efficiency on the job simply means the time it takes to finish a given task. When an employee is efficient he or she can finish tasks "…in the least amount of time possible with the least amount of resources necessary" (Miksen, p. 1). The way an employee demonstrates efficiency is by using "…time-saving strategies," and an example of that would be when a communication needs to go out, sending an email rather than writing letters to each person is the efficient way to do it, Miksen continues (1).

In order to improve effectiveness a business has to take the initiative to carefully examine an employee's weakness and provide helpful, constructive criticism to that employee. Training is important, but an HR director should be able to spot an inefficient candidate at the hiring level, well before he or she is employed. Improving efficiency is a matter of taking steps that require less time and resources, and teaching workers how to do that.

Meantime, an article in Insight Squared points out that efficiency and effectiveness are "commonly misused and misinterpreted" both in daily use and in business environments (Goh, 2013). To be "effective" one needs to be "…adequate to accomplish a purpose"; being effective means producing "…the intended or expected result," Goh explains. "Efficient" means "performing or functioning in the best possible manner with the least waste of time and effort" (Goh, p. 1). To make it short and sweet, and succinct: the two are different because being effective "is about doing the right thing" while being efficient is about "doing things right" (Goh, p. 1).

Which is more important for performance? That is hard to say because it depends on the particular company, but Goh says companies generally seek first to "improve efficiency of their operations and sales processes"; the right goals and the right employees can contribute to an efficient operation albeit to overlook effectiveness in the interest of efficiency is a mistake, Goh says on page 2. Can a manager improve both at the same time? Ideally, a company can improve efficiency and effectiveness simultaneously by making best use of technology, by saving not wasting time, through good leadership, and by having what Goh calls "…better alignment and collaboration between employees" (p. 2).

Identify one company in the business news that is handling ethical and socially issues in a responsible manner. Also, identify one company that is unethical and irresponsible.

Forbes magazine sites a study by the "Reputation Institute," which is a private global consulting firm (located in New York) that researches and reports on what people look for in a company before they buy that company's product or use its services. Sixty percent of a consumer's willingness to buy is based on "perceptions of the company -- or its reputation," which includes their ethical activities and their images as a fair, socially responsible company. Just 40% of consumers' decisions to buy, according to the Reputation Institute, is actually based on the products or services it offers (Smith, 2013).

Meanwhile, several companies were given high marks for corporate social responsibility...

The company that best demonstrates "good citizenship" is the Walt Disney Company, because it is viewed by the public and by foundations as "…a good corporate citizen that supports good causes and protects the environment" (Smith, p. 2).
The executive vice president and chief communications officer for Disney is Zenia Mucha, and she says that her company "…constantly strives to be one of the most admired companies" as well as among the best known companies in the world (Smith, p. 2).

As for workplace ethics and Google, they have developed an ethical and social reputation of "caring" in many places in the world -- and moreover, they are ranked number one in "workplace" ethics. The executive partner at Reputation Institute, Kasper Nielsen, says that Google is viewed as a company that "treats their people well" and the logic behind this kind of approach to employees is, "if you treat your own people well you are open, honest, and a caring company" (Smith, p. 3). Google has a program of investing in "social entrepreneurs who are using technology to crack the code on the world's toughest problems," and last year Google invested in technologies and technicians who are working on providing clean water for people in third world countries.

Google also is generous when it comes to helping their employees participate in a meaningful way with local community organizations and nonprofits. Google gives employees time off (and provides resources) for nonprofit activities. The company has allowed its employees to put in 150,000 hours to support nonprofits (that is 6,200 total days of commitment by employees). Google has donated over $353 in grants around the world in the past three years, helping stop human trafficking, reducing poverty and aiding efforts to stop illegal wildlife poaching, Smith writes on page 4.

As for BMW motor company, it has a top spot because "it is a responsibly-run company that behaves ethically and is open and transparent in its business dealings," Smith continues (p. 4). The BMW management believes that they are "citizens of our communities in the 140 countries" where they do business around the world.

One company that seems unethical is Chevron, the enormous oil and gas company, which has been found to have committed tax evasion and has been responsible for "a number of environmental infractions" (Kiser, 2011). Chevron had to pay millions of dollars to Ecuadorean indigenous peoples after environmental damage was done to the Sucumbios Province in 2005. Chevron has paid $8 million in fines for violating the Clean Water Act; has paid $1.1 million for violating safety regulations on offshore drilling platforms; in 2002 Chevron was fined $2 million by the government of Angola for "environmental damage"; and Chevron agreed to spend $275 million to "reduce airborne emissions from five refineries in the U.S. (Mattera, 2012).

Why does an organization in an uncertain environment require more 'horizontal' relationships than one in a certain environment? Use examples.

Basically a horizontal businesses has better communication between levels of management; this is true because there are "…fewer layers of management in the chain of command and less bureaucracy," according to Frank Rappa with Demand Media. This opens up the door to easier decision making; clearly, if there are a long list of layers to climb through to make a point or meet with an executive about a problem, it is going to be problematic to get someone of authority to listen to a person at the bottom rung of the ladder. On the other hand a vertical organization has "many layers," which results in a "redundancy and delay in communications" and basically retards a company's ability to progress (Rappa, 2012). .

That having been said, the organization with an environment that is not yet on solid ground should consider developing a horizontal approach because, as was explained in the paragraph above, the smaller number of layers of bureaucracy result in lower the costs to the organization. And an organization that is in an uncertain environment certainly needs to control costs, among other concerns. A "better team spirit" is also more likely with fewer layers of management, because workers can interact, collaborate on projects, and feel more like a family when the managers are not holed up in window offices several floors above the average worker.

"The essential relationships are no longer vertical relationships contained within corporate silos," according to Charles Green, writing in Trusted Advisor. Instead, Green writes that the good relationships are the "horizontal…