Do ‘efficiency’ and ‘effectiveness’ conflict? Eli Goldblatt, author of the 1983 book ‘The Goal’, which led to the theory of constraints, believes that they do. Goldblatt was a physicist who applied his scientific thinking to manufacturing. (Incidentally, Deming was also a physicist.) In ‘Beyond the Goal’ Goldblatt argues that the objective of every manager is to manage well, but what does it mean to manage well?
“To manage well”, he says, “we have to satisfy two different and necessary conditions. One is we must control costs. If we don’t control costs, costs will go too high and we are bankrupt. This is true for a ‘for profit’ organisation and for a ‘not for profit’ organisation. On the other hand, we must protect sales. Sales are the things (products/services) that we promise to the external world. In business, it is the service or product, if you are in the army, then it is what you promise – defence. Do one without the other, you have done nothing.
To control costs where do you start? Where the costs are drained. In every department! So in order to control costs you must judge according to the local impact. But now look at sales, your impact on the wider world. This is not done by one person, because if it was, you wouldn’t need an organisation. If you look at a for profit organisation, for example, you have people who are designing the product, those who are producing, those who are shipping, those who are billing and receiving the money, those who are marketing and getting the customers. If any one of these links drops the ball, sales fall. Sales are achieved through the synchronised effort of all links.
That means that if you want to protect sales, that is, what you are promising to the external world, you can no longer just look at the local impact, because what may be good for one department may be disastrous for another. So to manage well, I must control costs and to control costs I must look to local impacts, but I must also protect my sales and to protect sales there is no way I can just look at local impacts”. – hence conflict.
Now ‘controlling costs’ is what we mean by efficiency, and ‘protecting sales’ is what we understand by effectiveness. So, in business – and in government – we have a conflict.
TWO QUESTIONS TODAY:
Does a similar conflict arise in infrastructure decision making?
If so, how can it be resolved?