1.2 Effective and Efficient

Good managers guide their organizations to superior results by being both effective and efficient. Effectiveness has to do with how well the stated objectives or goals of the firm are met. If a sales manager is given the goal of increasing sales by $1,000,000 for any given period and she increases sales by $1,100,000, she has been effective at reaching the sales goal. The skills she used to motivate her team to achieve the objective are part of what made her an effective manager. But managers must be efficient as well. Efficiency has to do with the prudent use of resources. An efficient manager will do more with less. In the above example, the sales manager may have been effective in achieving her sales goals, but if she did so by hiring 10 extra sales people with their corresponding costs she wasn't very efficient. In fact, sales may have been up but profits may have been down. A manager must be effective and efficient. It is often a balancing act. A manager must know how and when to be efficient to meet objectives (effective). For example, suppose a company, as a strategy, wants to focus on customer service. Their goal is to maximize the customer experience. They periodically conduct customer satisfaction surveys. However, all managers should also be interested in maximizing profits. Suppose the front office manager decides to save money by replacing two receptionists with an automated phone answering machine. That may be an efficient use of resources but it is not very effective at maximizing the customer experience. The vast majority of people would prefer to talk to a person rather than a machine. Knowing how to be effective while being efficient with resources is a skill that every manager must develop.