Opinion: The Management Goldmine of ‘Efficiency’ and ‘Effectiveness’

By Arosha Jayasundera

According to the Hakett Group, USA, there is a strong correlation between consistent use of business best practices and the ability to operate at lower cost and deliver greater value. In fact, World Class Organizations are notable by their high level of “Efficiency” and “Effectiveness.” These are not measures that can be taken for granted, but involve a consistent, disciplined management approach to achieve, and require constant references to competing products and degrees of innovation.

Additional efficiency can be achieved through a focus on processes through Operational Excellence techniques such as Lean, Kaizen, Six Sigma, Business Process Management, etc. This permits the organization to consistently look for wasteful techniques and practices and to maintain given standards in all areas of the organization.

Top companies continually stress on cost and speed, and their focus on international benchmarks for processes from HR, Admin, Marketing, Finance etc also assists them to stay on top. Notable international class companies include Federal Express, Amazon, Google, Walt Disney, etc. This also enables them to reap tremendous benefits – in terms of profits, costs, market share and speed to the market, to name a few. It enables them to be world class and consistently offer and meet customer expectations by adding great value.

hackett grid efficiency effectiveness

Effectiveness can be broken down into components such as strategic decision making, accurate forecasts and analysis, quality metrics, operating profit volatility and day’s payables and sales outstanding. The selection and use of data and quality KPIs plays a huge role in making companies not only successful, but world class.

It is important to note that efficiency and effectiveness is not limited to manufacturing companies only but also to companies in the service sector. If Sri Lanka wishes to improve its export base, it needs to focus on both effectiveness and efficiency.

According to the Central Bank, the percentage of exports has dropped 2-5% in January 2016 compared to 2015. Exports of gems, diamonds and jewellery, tea, and spices significantly contributed for this decline (from 12 – 35%) despite these all being products being sourced in Sri Lanka. Hence this means, that there are significant gaps in both our efficiency of production and our effectiveness in meeting customer needs and demand. Sadly, the export of services, is so negligible that it is not even mentioned in the report.

On a very positive note, export earnings from textiles and garments, which contributed nearly 52% to the total exports, improved by 13.3% year-on-year in January 2016. Interestingly, garments are a sector where all the raw materials have to be completely sourced from overseas, and hence all value addition is created in Sri Lanka.

It is notable that certain Sri Lankan companies in the garments sector are world class in efficiency and effectiveness in the organization, process, people, and technology and the brands they produce are international, because of this dedicated effort.

( — Arosha Jayasundera is a specialist in service excellence and is the founder of the Asian Institute of Excellence www.asianiexcellence.com –)