Efficiency vs. Effectiveness

William A. Sterling, P.E.
Director of Recreation
City of Port Angeles, Washington
Chair, APWA Leadership and Management Committee

Efficiency: accomplishment of or ability to accomplish a job with a minimum expenditure of time and effort. Efficiency focuses on how something is done in order to avoid waste; it is a yield-based measure.

Effectiveness: producing a decided, decisive or desired result. Effectiveness focuses on what is done in order to maximize the contribution gained from people resources; it is a results-based activity.

Much confusion exists around the terms efficiency and effectiveness. This article is written to try to clarify their meanings as we examine their usage.

To paraphrase a quote from Warren Bennis: Efficiency is doing things right...Effectiveness is doing the right thing.

Effectiveness is not the same as efficiency. Effectiveness is getting the job done and reaching objectives; efficiency is doing the job at the lowest cost. But because we must start with limited resources, we must know how much an action will cost, including the benefits or opportunities that have to be set aside to achieve the goal.

For the purpose of this article, efficiency is defined as the ratio of outcome to inputs and describes the cost per activity to achieve a given outcome; for example, the cost of sweeping a lane mile, the cost per transit passenger or the cost per installation of a traffic sign. It can also be used to determine how you did in reaching your goals. The term effectiveness is defined as the level of outcomes (goals); for example, the miles of lane miles swept, the number of transit riders or the number of traffic signs installed.

Effectiveness is often of paramount importance in the public sector. The public (and thus elected officials) expect streets to be passable during snow storms, traffic signals to work (and to be coordinated), water to be safe, and 911 emergency services to respond quickly. Although efficiency is important, it is often less important than effectiveness. Indeed, many citizens are more concerned with effectiveness of providing municipal services than with the efficiency of those services (e.g., the cost of timely response or availability). Indeed, the lack of attention to effectiveness can bring severe repercussions to public agencies. Public agencies that are perceived to have low levels of effectiveness often encounter pressure to increase their workloads.

This does not mean that efficiency is unimportant in public agencies; public agencies that are able to stretch their resources further can be more effective. The efficient process of maintaining streets means that a faster response or additional services can be provided for the same level of resources. Efficiency improvements are important because they result in cost savings that directly contribute to effectiveness. Efficiency can measure the effectiveness with which the agency uses its resources to accomplish its goals or objectives. It should be noted that some situations cause efficiency to be an important concern in the public sector: when budgets are tight, or when the private sector competes for service delivery (park maintenance, street maintenance, custodian services, etc. and growth revenues do not keep up with growth expenditures such as annexations or new development).

In the United States, resistance to taxation and to flattening of the public share of the national income has historically been strong—stronger than in most other advanced industrial nations. How that limited share is spent has been and continues to be critical.

The drive for efficiency has produced campaigns for cost cutting, reengineering, outsourcing (privatization) services, reduction in service levels, and performance measurements. Measuring the efficiency of traffic police officers by the number of tickets they issue, or mechanics by the number of vehicles they service and the number of miles of pavement markings completed, submerges agency objectives (such as traffic safety, extending service life of vehicles and the reduction of traffic accidents) under an avalanche of statistics of dubious meaning. The performances measured or subjected to quotas are not supposed to be ends in themselves, but means to accomplishing the agency's objectives. If one argues that spending and manpower are indexes of effectiveness, then higher salaries, larger staffs and better equipment indicate higher effectiveness. However, effort does not equal effectiveness.

The effectiveness of a public agency really ought to be measured, many people feel, not by the money it spends, the programs it administers, the services it delivers, the regulations it enforces or even the goals it achieves, but by whether the programs, services, regulations and goals have the desired effect on the right people.

A need can be a measure of effectiveness. Need can be expressed both objectively (by an impartial observer) and subjectively (by the user of the service). How much is enough? How many more highways do we need? Do we need more playgrounds or more golf courses? How much do we need to spend on street maintenance or facility maintenance? Who decides whether the agency is effective?

A very simplistic (and extreme) example of efficiency vs. effectiveness that I sometimes use is in the education system. To be efficient, I could delete grades 3, 5 and 7. Or I could increase teacher workloads at the expense of student graduation rates. Would I be efficient? Maybe. But would I be effective? Most likely not; especially if my goal is to educate and prepare a younger generation for higher education, and a more productive and higher quality of life. To cite an example in the public works area: If I only replace stop signs every 10 years rather than a recommended 7 years, am I efficient? Maybe, but most definitely not effective if traffic accidents increase because of my policy to be more efficient. Think deferred maintenance in any area of public work. By deferring maintenance, I may be efficient in the short term, but certainly not effective if the facilities start to fail or considerable costs are incurred to fix them. In the long run, where has the short-term efficiency turned into a major liability?

Managers must balance efficiency with effectiveness, without which managers may fail to satisfy their citizens. There is no greater waste of resources than spending them efficiently on the wrong thing.

Efficiency is based on the important assumption that the goal of government isn't simply to do things well (effectiveness) but also to do those things at some reasonable cost. It's one thing to have a world-class water treatment plan; it's quite another if that plant's water is being delivered to you at a per-gallon price that renders it more valuable than a vintage bottle of wine. Isn't it interesting that our society will spend $1.00 for a bottle of water (equivalent to $8.00 per gallon), but complain if municipal-produced water rates exceed a pre-conceived cost. Again, it's effectiveness not efficiency, if the general public wants convenience.

It's easy to be effective when you've got tons of money and staff to throw at the problem. The question is whether you're really getting your money's worth when you do that. But getting at efficiency is tricky. It requires that governments analyze all the major costs associated with accomplishing certain tasks, and that can be complicated. Not all public works activities can be accurately cost out. However, using specifically designed performance measurements for specific activities, you may be able to answer the question, what does it cost to fill a pothole or seal the cracks in a mile of road? It at least sets the stage to determine how more efficiently you are performing the services in a more effective manner.

We have a saying in public works, "We have been asked to do more and more with less and less, until we now can do everything without anything." While we have to be efficient and effective, you have control on efficiency; you may not have control on effectiveness. It's a perception issue.

Effectiveness encompasses both quantity and quality of a service. For example, public transit effectiveness depends not only on the number of people who use it, but also on whether these people have safe, comfortable, rapid, convenient, timely and reliable services. A specific relationship between service, quantity, quality and effectiveness needs to be established. If you don't have quantity (more) you don't have effectiveness; if you don't have quality (better) you also don't have effectiveness. Quality is taking on increased importance with new customer service orientation in management. It is important to be aware that client satisfaction with services may not correlate with success in reaching its goal. Quality alone may not be enough. The intended purpose of the service may be more important. Thus effectiveness = (output quantity) x (output quality).

While there is some attention being paid to providing services efficiently, in the public sector is effectiveness sometimes better than efficiency?

When you use the term effectiveness when measuring work (i.e., measurement of input to output) usually in terms of man-hours or costs, and then match the results against a standard, you may determine a percentage or measure of effectiveness, say 85%. Strictly speaking, you should say that your agency is 85% efficient, which may have nothing to do with effectiveness. To distinguish between the two terms, so as to prevent misunderstanding, I would prefer to use the word effectiveness as an evaluation of how well an organization is carrying out its assigned mission and program goals...long-range and short-term.

On the other hand, I would like to apply the term efficiency to a situation where I can measure input and output, then match them against a defined standard. Effectiveness is a "result oriented concept" (i.e., how well an organization accomplishes its goal) but without particular emphasis for the cost. Efficiency, on the other hand, is a "process oriented concept" that centers on how well an agency uses its resources to convert input to output. It also does not regard the value or the worth of the output. A manager should be aware of the danger of overreliance on either effectiveness or efficiency to the exclusion of the other. Peter Drucker and Brent Davis agree that effectiveness comes ahead of efficiency. They emphasize effectiveness is doing the right things and efficiency as a measure of doing things right, and efficiency as a measure of doing things right or doing better what one is already doing and focuses on costs.

We need to understand the difference in the two terms, efficiency and effectiveness. In Alice through the Looking Glass, Humpty Dumpty famously pours scorn on word definitions. When Alice challenges him that the word "glory," which he has just defined as "a nice knock-down argument," doesn't actually mean "a nice knock-down argument," he replies, "When I use a word it means just what I choose it to mean—neither more or less." This is a quirky perspective, which Humpty Dumpty then plays out into a theory that you must be the master of your words before they master you. Efficiency and effectiveness are interchangeable to many people.

William A. Sterling, P.E., a past Top Ten recipient, can be reached at sterling@publicworksmanagement.com.

References:

Management Essentials for Public Works Administrators, by F. Burke Sheeran
Performance in American Bureaucracy, by Robert C. Fried
Improving Public Sector Productivity, by Ellen Doree Rosen
Measuring Up, by Jonathan Walters
Productivity in Public and Non-profit Organizations, By Evan M. Berman