Business owners are very busy people. There is always an endless list of tasks to be accomplished. Many times their leadership style forces them to choose between being effective vs efficient. These terms of what is effective vs efficient are commonly misunderstood and misused.
But what do effective and efficient mean? Effective means adequate to accomplish a purpose; producing the intended or expected result. For example, one selling method can be more effective than another; that is, it produces more sales.
In contrast, efficient means performing or functioning in the best possible manner with the least waste of time and effort; having and using requisite knowledge, skill, and industry; competent; capable. For example, one method of shipping products can be more efficient over another because it takes less time.
The late and renowned management consultant Peter Drucker has his own definition of effective vs efficient. He wrote that efficiency is doing things right while to be effective is doing the right thing. When growing a company, efficiency can support profit, but effectiveness drives long-term growth.
How does a business leader choose between being effective vs efficient?
Efficiency Over Effectiveness
Some people finish a task as soon as possible—maybe even before thinking of a solution. To them, the most important thing is to complete it in a short period of time regardless of whether it's the most effective way to do it. Over time, they may end up working harder and longer to make up for this method's lack of effectiveness.
While efficiency may get things done at a lower cost and higher profit today, companies are only sustainable if they can effectively solve their customers' problems long term.
Personally, I answer all my emails efficiently right away with a word or a fragment of a sentence in order to delete it and move on to the next task. This keeps a small inbox and I never waste time by reading the same email twice. While I find this efficient, sometimes it is not always effective. I get a lot of complaints from senders that my answer was incomplete and they still have more questions. I then need to go back and answer the email again and now it becomes much less efficient.
Balancing my business checking accounts has become easier with automated tools that match transactions in my electronic check register with transactions on the bank statement. While this is efficient, since it cuts reconciliation time, the process can match the wrong transactions and make it ineffective.
Another example is when a company has a very efficient process for posting and monitoring social media content. They can quickly respond to all inquiries. That's all well and good, but if they are engaging with the wrong prospects—people who will never buy their product or service—then it may not be the most effective process for their social media channel.
Effectiveness Over Efficiency
What is effectiveness? People who choose effectiveness over efficiency tend to procrastinate. To be effective, they typically wait until they have it all perfectly planned out and organized down to the most minute details before beginning anything. They may not get it done quickly, but they can accomplish the task's goal very well.
To be effective, avoid useless work that shouldn’t be done in the first place. Leaders must decide what to focus on, but it's just as important to know what not to do. We all have “to do lists,” but what about a “not to do list”? This will enable you to focus on the tasks that make you most effective and make a difference in the company.
Being effective can lead to increased productivity since it involves identifying the most important tasks and doing them first. Efficiency (doing these tasks quickly) doesn’t necessarily lead to productivity because you could be doing the wrong tasks.
For example, to be effective, a company wanted its hiring process to include a candidate coming back to interview three times to talk to 10 people in the company. Candidates may also be asked to take a personality test and submit to a background check. The team then convenes for hours to discuss if they should hire this person.
What is effectiveness to a company if they can’t hire the best-fitting person? Their process may not be very efficient since it takes up so many people's time and many days before an offer is made. The candidate may have offers from other companies and could go work somewhere else before this company makes their offer. In this case, the company’s hiring process did not hire the person they chose (since they took another job) and therefore is not effective.
A Case for Balancing the Two
Are you effective or efficient as a leader? It typically is not possible to be effective and efficient simultaneously inside a business. Many companies struggle with making a process effective vs efficient. That is because there is a constant trade-off where the organization focuses on one method and then shifts to focus on the other.
Balance both by taking any action that has been effective and successful before. Once completed, go back and make changes to make it more efficient. Why is efficiency important? You can iterate on this over and over again by making a series of small decision and then make changes by evaluating the results.
Once you do that, you can make another small decision and analyze the outcome again. This can help you find the most effective and efficient solution over a longer period.
A version of this article was originally published on October 26, 2017.
Photo: Getty Images